Income Taxes

As of June 30, 2014, the Company had a Federal net operating loss (“NOL”) carry-forward of approximately $1.4 million. The net operating losses expire by June 30, 2024 and are subject to review by the Internal Revenue Service, and are subject to U.S. Internal Revenue Code Section 382 limitations. As of June 30, 2014, state NOLs were $9.7 million and foreign NOLs were $0.8 million. The income tax expense for the years ended June 30, 2014, 2013, and 2012 consists of the following (in thousands):



	2014			2013			2012
Income / (Loss) Before Income Taxes:
Domestic	$	13,894		$	11,250		$	14,556
International	2,761			(97		)	116
	$	16,655		$	11,153		$	14,672
Current Taxes:
Federal	$	2,010		$	4,087		$	3,758
State	72			383			1,121
Foreign	1,018			(33		)	47
Total Current Income Tax Provision	$	3,100		$	4,437		$	4,926
Deferred Taxes:
Federal	2,299			(706		)	(2,110		)
State	83			(77		)	(601		)
Foreign	(210		)	(109		)	(12		)
Total Deferred Income Tax Provision	$	2,172		$	(892	)	$	(2,723	)
Net Income Tax Provision	$	5,272		$	3,545		$	2,203

The effective income tax rate for the years ended June 30, 2014, 2013, and 2012 differs from the U.S. Federal statutory income tax rate due to the following:



	2014		2013		2012
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	1.9	%	1.8	%	5.5	%
Tax return to provision true-up	(3.0	)%	(2.5	)%	(1.0	)%
Permanent differences:
— change in derivative liability	0.0	%	0.0	%	16.1	%
— stock based compensation	1.3	%	0.8	%	0.3	%
— domestic production activities deduction	(1.8	)%	(2.7	)%	0.0	%
— credit for increasing research activities	(1.5	)%	(0.7	)%	0.0	%
— other	(0.5	)%	0.0	%	(0.4	)%
Change in valuation allowance	0.1	%	0.0	%	(39.5	)%
Net income tax provision	31.5	%	31.7	%	16.0	%

The components of the deferred tax assets and liabilities as of June 30, 2014 and 2013 are as follows (in thousands):



	2014			2013
Deferred tax assets:
Federal, state, and foreign net operating loss carryovers	$	1,016		$	1,768
Stock option compensation	1,353			1,212
Accrued vacation, allowance for returns, bonuses & other	572			2,493
Gross deferred tax asset	$	2,941		$	5,473

Deferred tax liabilities:
Patents and trademarks	(500		)	(536		)
Change in tax accounting methods	(198		)	(297		)
Property & equipment	(583		)	(824		)
Gross deferred tax liabilities	(1,281		)	(1,657		)
Less: valuation allowance	(217		)	(201		)
Deferred tax assets, net	$	1,443		$	3,615

The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit. We believe the Company has no material uncertain tax positions and do not expect significant changes within the next twelve months in the amount of unrecognized tax benefits. Accordingly, we have not reserved for interest or penalties. The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2011 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2010 through present. In addition, the IRS and state tax authorities may examine NOLs for any previous years if utilized by the Company.

The total recognized tax benefit from settlement of stock-based awards for the period ending June 30, 2014 was $1.0 million.

The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2010 through June 30, 2013.