INCOME TAXES

Significant components of our deferred tax assets and liabilities as of September 30 are as follows:

	2017		2016
Deferred tax assets:
Inventory	$	137	$	209
Accrued compensation and vacation		169		90
Accrued expenses and other		357		427
Domestic net operating loss carryforwards		5,142		5,365
Stock compensation expense		9		19
AMT credit carryover		76		55
Total deferred tax assets		5,890		6,165

Deferred tax liabilities:
Prepaid expenses		(128)		(64)
Unrealized gain/loss - warrant liability		—		—
Basis difference for fixed assets		(383)		(412)
Total deferred tax liabilities		(511)		(476)

Total net deferred tax assets		5,379		5,689

Valuation allowance for net deferred tax assets		(5,379)		(5,689)

Net deferred tax asset (liability)	$	—	$	—

Significant components of the provision (benefit) for income taxes are as follows as of the year ended September 30:

	2017		2016
Current:
Federal	$	21	$	(20)
State and local		3		6

Deferred:
Federal		—		—
State and local		—		—
Income tax expense	$	24	$	(14)

The effective income tax rate on continuing operations varied from the statutory federal income tax rate as follows:

	2017			2016
Federal statutory income tax rate		34.0	%		34.0	%
Increases (decreases):
State and local income taxes, net of Federal tax benefit, if applicable		0.2	%		(0.1)	%
Nondeductible goodwill impairment		—			(10.2)	%
Other nondeductible expenses		1.3	%		(0.8)	%
Valuation allowance changes		(32.9)	%		(22.5)	%
Effective income tax rate		2.6	%		0.4	%

In fiscal 2016, an impairment of goodwill in the amount of $971 was recorded that was not deductible for tax purposes. Therefore, no tax benefit was recorded.

Realization of deferred tax assets associated with the net operating loss carryforward and credit carryforward is dependent upon generating sufficient taxable income prior to their expiration. The valuation allowance for our domestic operations in fiscal 2017 and 2016 was $5,379 and $5,689, respectively. Payments made in fiscal 2017 and 2016 for income taxes amounted to $17 and $3, respectively.

At September 30, 2017, we had domestic net operating loss carryforwards of approximately $12,809 for federal and $17,566 for state, which expire from September 30, 2018 through 2031. Further, we have an alternative minimum tax credit carryforward of approximately $76 available to offset future federal income taxes. This credit has an unlimited carryforward period.

We may recognize the tax benefit from an uncertain tax position only if it more likely than not to be sustained upon regulatory examination based on the technical merits of the position. The amount of the benefit for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that we believe is more likely than not to be realized upon ultimate settlement of the position. At September 30, 2017 and 2016, a $16 liability remained for other uncertain income tax positions.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2017		2016
Balance at beginning of year	$	16	$	16
Additions based on tax positions related to the current year		-		-
Additions for tax positions or prior years		-		-
Reductions for tax positions of prior years		-		-
Settlements		-		-
Balance at end of year	$	16	$	16

As noted in the table above, there has been no change in our gross uncertain tax positions during fiscal 2017 based on a state tax position.

We are no longer subject to U.S. federal tax examinations for years before 2013 or state and local for years before 2012, with limited exceptions. For federal purposes, the tax attributes carried forward could be adjusted through the examination process and are subject to examination 3 years from the date of utilization.

We have assessed the application of Internal Revenue Code Section 382 regarding certain limitations on the future usage of net operating losses. No limitation applies as of September 30, 2017, and we will continue to monitor activities in the future.

Changes in Tax Laws Affecting Future Periods

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. In December 2017, new federal tax law has (or is expected to be) issued. We are currently evaluating the effects of the new tax laws. However, we don’t believe the changes will have a material effect on the consolidated financial statements.