Note 7 - Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

7.             INCOME TAXES

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

	June 30,			December 31,
	2014			2013
Deferred tax assets:
Net operating loss carryforwards	$	11,551		$	12,074
Inventory		1,866			1,856
Other liabilities		3,195			3,051
Fixed assets		2,274			2,069
Other temporary differences		845			751
		19,731			19,801
Less: valuation allowance		(19,655	)		(19,745	)
Total deferred tax assets		76			56
Deferred tax liability:
Intangibles		(2,019	)		(1,453	)
Other temporary differences		97			(13	)
Net deferred tax liability	$	(1,846	)	$	(1,410	)
As reported:
Non-current deferred tax assets	$	76		$	56
Current deferred tax liability	$	(296	)	$	(271	)
Non-current deferred tax liability	$	(1,626	)	$	(1,195	)

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. At June 30, 2014, the gross deferred tax balance was $19.7 million and includes the $11 million tax effect of $32 million in U.S. Federal net operating loss carryforwards ("NOLs") expiring between 2018 and 2032. The Company has not recorded a deferred tax asset of approximately $1.3 million related to the NOLs resulting from the exercise of disqualifying stock options and restricted stock units which will be accounted for as a credit to additional paid in capital when realized as a reduction to income taxes payable.

Sections 382 and 383 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the net operating loss and tax credit carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the net operating loss carryforwards that the Company may utilize in any one year may be limited.

There are no undistributed net earnings for the Company's foreign subsidiaries, and accordingly no related deferred taxes.

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 June 30, 2014 and December 31, 2013, using that standard, the Company concluded that a full valuation allowance was required for its U.S. and state deferred tax assets. As of June 30, 2014 the unreserved balance of $76 thousand 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.

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

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2014			2013			2014			2013
Current:
State and foreign	$	25		$	(37	)	$	(151	)	$	(48	)
Deferred:
Federal		(11	)		(23	)		(23	)		(23	)
Foreign		23			(33	)		299			(33	)
		12			(56	)		276			(56	)
Income tax benefit (expense), net	$	37		$	(93	)	$	125		$	(104	)

The difference between the Company's effective income tax rate and the federal statutory rate is primarily due to the mark to market adjustment for our contingent liability that will not be deductible for tax purposes, the amount of expense associated with the Company's share-based payment arrangements which is also not deductible and international tax rate differences.