Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 9.  Income Taxes

The income tax (expense) benefit is comprised of the following (in thousands):

	Year Ended December 31, 2014			Year Ended December 31, 2013
Current:
Federal	$	52		$	(37	)
State		(527	)		(294	)
Foreign		(55	)		(201	)
Total		(530	)		(532	)
Deferred:
Federal		(733	)		2,162
State		15			8
Total		(718	)		2,170
Total	$	(1,248	)	$	1,638

The income tax (expense) benefit differs from the amount computed by applying the statutory federal and state income tax rates to the net income before income tax.  The reasons for these differences were as follows (in thousands):

	Year Ended December 31, 2014			Year Ended December 31, 2013
Computed income tax expense at statutory rate	$	(828	)	$	(614	)
Increase in taxes resulting from:
Permanent and other deductions, net		(187	)		(70	)
State income taxes, net of federal benefit		(233	)		(191	)
Valuation allowance		-			2,513
Total income tax (expense) benefit	$	(1,248	)	$	1,638

The tax effect of significant temporary differences, which comprise the deferred tax asset and liability, is as follows (in thousands):

	2014			2013
Deferred tax asset:
Net operating loss carryforward	$	307		$	1,057
AMT credits		352			387
Accrued expenses		1,024			739
Allowance for doubtful accounts		263			220
Asset impairment		281			281
Stock-based compensation		77			-
Net deferred income tax asset		2,304			2,684
Deferred tax liability:
Property and equipment		(280	)		(44	)
Intangible assets-brand name		(1,798	)		(1,800	)
Goodwill		(547	)		(452	)
Other Intangible assets		(25	)		(16	)
Net deferred income tax liability		(2,650	)		(2,312	)
Net deferred tax asset/(liability)	$	(346	)	$	372

Generally, the Company’s combined effective tax rate is high relative to reported net income as a result of certain amounts of amortization expense and corporate overhead not being deductible or attributable to states in which it operates. Currently, the majority of taxes being paid by the Company are state taxes, not federal taxes. The Company operates in three states which have relatively high tax rates: California, New York and Florida. The Company’s combined (federal and state) effective tax rate would be even higher if it were not for federal net operating loss carryforwards available to offset current federal taxable income. As of December 31, 2014, the Company had federal income tax loss carryforwards of approximately $900,000, which begin expiring in 2019. A portion of the Company’s federal net operating loss carryforwards were utilized to offset federal taxable income generated during the year ended December 31, 2014.  Realization of the Company’s carryforwards is dependent on future taxable income. As defined in the Internal Revenue Code, ownership changes may limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income.

As of December 31, 2013, management determined that the deferred tax asset ("DTA") valuation allowance of approximately $2,500,000 should be reversed. The decision to reverse the DTA valuation allowance is based on the sustained profitability by the Company in recent years and management’s expectation of sufficient profitability in subsequent years to fully utilize the net operating losses. As a result of the DTA allowance reversal, net income for the year ended December 31, 2013 increased by approximately $2,170,000.