Note 7 - Income Taxes

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

7.             INCOME TAXES

The components of deferred income taxes are as follows (in thousands):

	September 30, 2013			December 31, 2012
Deferred tax assets:
Net operating loss carryforwards	$	13,431		$	14,491
Inventory		1,795			1,769
Other liabilities		3,569			3,055
Fixed assets and other capitalized assets		2,061			440
Other temporary differences		682			589
		21,538			20,344
Deferred tax valuation allowance		(21,229	)		(20,344	)
	$	309		$	-

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In accordance with accounting standards the Company has not recorded a deferred tax asset of approximately $1.0 million related to the net operating losses that resulted from the exercise of disqualifying stock options. If the Company is able to utilize this benefit in the future it would result in a credit to additional paid in capital.

Accounting standards require that the Company continually assess the likelihood that its deferred taxes will be realizable. All available evidence, both positive and negative, must be considered in determining whether it is more likely than not that the deferred tax assets will be realized. In making such assessments, significant weight is given to evidence that can be objectively verified. A company's current or previous losses are given more weight than its future outlook. As of September 30, 2013 and December 31, 2012, using that standard, the Company concluded that a full valuation allowance was required for its U.S. and state deferred tax assets. As of September 30, 2013 the unreserved balance of $0.3 million relates to certain foreign deferred tax assets. The Company will continue to assess the likelihood that its deferred tax assets will be realizable, and its valuation allowance will be adjusted accordingly, which could materially impact its financial position and results of operations in future periods.

At September 30, 2013, the Company had approximately $40 million in U.S. Federal net operating loss carryforwards ("NOLs") expiring between 2018 and 2032. The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. It may be subject to examination by the Internal Revenue Service ("IRS") for calendar years 2009 through 2012 under the normal statute of limitations. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. Generally, for state tax purposes, the Company's 2008 through 2012 tax years remain open for examination by the tax authorities under a four year statute of limitations, however, certain states may keep their review period open for six to ten years.

The components of the provision for income tax benefit (expense), net for the periods ended are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Current:
State and foreign	$	3		$	(4	)	$	(45	)	$	(27	)
Deferred:
State		(5	)		13			5			44
Federal		502			293			841			882
Foreign		45			-			12			-
		542			306			858			926
Valuation allowance		(513	)		-			(885	)		-
Income tax benefit (expense), net	$	32		$	302		$	(72	)	$	899

The difference between the Company's effective income tax rate and the federal statutory rate is primarily due to the transaction costs associated with the Business Combination that will not be deductible for tax purposes and the amount of expense associated with the Company's share-based payment arrangements and the portion thereof that will give rise to tax deductions. Furthermore, share-based payments may result in tax deductions that do not result in a tax benefit in the accompanying financial statements because it will not result in the reduction of income taxes payable, due to the existence of net operating loss carryforwards.