9. INCOME TAXES

Income tax expense (benefit) is determined using the asset and liability method. Deferred income taxes are recognized at currently enacted tax rates for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial reporting purposes. Deferred taxes are provided for the undistributed earnings as if they were to be distributed. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has not recorded any liability for unrecognized tax benefits.

The Company is no longer subject to examinations by income tax authorities in most jurisdictions for years prior to 2010.

Due to its losses and the valuation allowance recorded against it deferred tax assets related to its net operating losses carryforwards, the Company has not recorded any income tax benefit or expense for the years ended December 31, 2013, 2012 and 2011.

The domestic and foreign components of pre-tax (loss) income, including discontinued operations, are as follows:

	Years Ended December 31,
	2013			2012			2011

Domestic	$	(3,161	)	$	11,425		$	(15,790	)
Foreign		—			(1,882	)		(1,294	)
Pre-tax (loss) income	$	(3,161	)	$	9,543		$	(17,084	)

				Years Ended December 31,
	2013			% of Pretax			2012			% of Pretax			2011			% of Pretax

Tax at Federal statutory rate	$	(1,106	)		(35.0	)%	$	3,340			35.0	%	$	(5,979	)		(35.0	)%
Increase (decrease) in: Valuation allowances		1,281			40.5			3,179			33.3			6,353			37.2
Capital loss carryforward		—			—			(7,086	)		(74.2	)		—			—
Permanent differences		8			0.3			11			0.1			16			0.1
State and local taxes - net		(183	)		(5.8	)		556			5.8			(390	)		(2.3	)
Income tax (benefit) provision	$	—			—	%	$	—			—	%	$	—			—	%

The components of the net deferred tax assets (liabilities) are as follows:

	December 31,
	2013			2012
Deferred Tax Assets:
Accounts receivable allowances	$	91		$	87
Net operating loss carryforwards		44,926			48,046
Capital loss carryforwards		—			2,428
Restricted stock/Stock options		42			—
Contributions		102			102
Deferred rent		17			—
Property and equipment		59			48
Gross deferred tax assets	$	45,237		$	50,711

Valuation allowance	$	(45,237	)	$	(50,711	)

Net deferred tax asset	$	—		$	—

A reconciliation of activity for the Company’s deferred tax asset valuation allowance is provided as follows:

	Years Ended December 31,
	2013			2012			2011

Beginning balance	$	50,711		$	57,282		$	51,046
(Reductions) additions to provision		(5,474	)		(6,571	)		6,236
Ending balance	$	45,237		$	50,711		$	57,282

The expiration terms and amounts for which an allowance has been provided with respect to the loss and credit carryforwards reflected in the gross deferred tax assets above are comprised as follows:

Loss Carryforwards	Expiration	Gross Amount

Federal	2032	$	114,623
State and local	2016-2032		79,902

The Company records U.S. taxes on undistributed earnings of subsidiaries to the extent such earnings are planned to be remitted and not permanently reinvested. On August 16, 2012, the Company’s Board of Directors determined to discontinue the operations of its UK subsidiary, 4Kids International, effective September 30, 2012.

The Company has no unrecognized tax benefits recorded for the years ended December 31, 2013 and 2012.

When and if the Company were to recognize interest or penalties related to unrecognized tax benefits, they would be reported net of federal tax benefit in tax expense.

It is difficult to predict what would occur to change the Company’s unrecognized tax benefits over the next twelve months. The Company believes, however, that there should be no change during the next twelve months.