Annual report pursuant to Section 13 and 15(d)

Note 6 - Income Taxes

v2.4.0.6
Note 6 - Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Text Block]
6.  INCOME TAXES

The components of income before income taxes consist of the following (in thousands):

   
Year Ended December 31,
 
   
2011
   
2012
 
             
Domestic
  $ (1,226 )   $ (2,824 )
Foreign
    3,353       5,430  
Income before income taxes
  $ 2,127     $ 2,606  

The components of the income tax benefit consist of the following (in thousands):

   
Year Ended December 31,
 
   
2011
   
2012
 
             
Current foreign taxes
  $ (268 )   $ 32  
Deferred taxes
    (30 )     (56 )
Income tax benefit
  $ (298 )   $ (24 )

A reconciliation of the reported income tax benefit to the provision that would result from applying the domestic federal statutory tax rate to pretax income is as follows (in thousands):

   
Year Ended December 31,
 
   
2011
   
2012
 
             
Income tax at federal statutory rate
  $ 723     $ 886  
Effect of permanent differences
    3       8  
Increase (decrease) in valuation allowance
    (109 )     672  
Foreign rate differential
    (485 )     (1,576 )
True up of foreign tax balances
    (424 )     1  
Change in enacted foreign rates
    10       –  
Other reconciling items
    (16 )     (15 )
Income tax benefit
  $ (298 )   $ (24 )

Deferred income taxes consist of the following (in thousands):

   
December 31,
 
   
2011
   
2012
 
             
Deferred tax assets:
           
Net operating losses
  $ 14,955     $ 15,081  
Stock-based compensation
    377       352  
Accrued expenses
    120       104  
Tax credits
    501       501  
Impairment of long-lived assets
    76       76  
Other
    91       75  
Total deferred tax assets
    16,120       16,189  
Valuation allowance
    (16,055 )     (16,141 )
      65       48  
                 
Deferred tax liabilities:
               
Intangible assets
    (43 )     (43 )
Accrued expenses
    (148 )     (91 )
Prepaids
    (15 )     –  
Other
    (7 )     (6 )
Total deferred tax liabilities
    (213 )     (140 )
Net deferred tax liability
  $ (148 )   $ (92 )

The Company increased the valuation allowance to equal its net deferred tax assets during 2005 due to the uncertainty of future operating results.  The valuation allowance will be reduced at such time as management believes it is more likely than not that the deferred tax assets will be realized.  Any reductions in the valuation allowance will reduce future income tax provisions.

At December 31, 2012, the Company has net operating loss carryforwards of approximately $32.7 million that begin to expire in 2021, if not utilized.  The Company also has foreign net operating loss carryforwards totaling $18.9 million in various jurisdictions with various expirations.  The Company has not provided for U.S. federal and foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2012.  Such earnings are intended to be reinvested indefinitely.