Income Taxes

Our effective tax rate was primarily comprised of our federal income tax rate of 35%, state and foreign income taxes, and permanent differences. Permanent differences relate to transactions that are reported for U.S. GAAP purposes but are not reported for income tax purposes in accordance with the Internal Revenue Code.

The U.S. and foreign components of income before income taxes and the provision for income taxes are presented in this table:



	For the transitional Twenty-Five Weeks Ended
	October 18, 2015
Income before income taxes:
Domestic	$	(6,596,512	)
Foreign	(732,054		)
	$	(7,328,566	)
Provision for current income tax expense:
Federal	$	2,902,214
State and local	535,967
Foreign	40,631
	$	3,478,812
Provision for deferred income tax expense:
Federal	$	1,813,513
State and local	95,180
Foreign	(43,891		)
	1,864,802
Total provision for income tax expense	$	5,343,614

The following is a reconciliation of the statutory federal income tax rate to our effective income tax rate expressed as a percentage of income before income taxes:



	For the transitional Twenty-Five Weeks Ended
	October 18, 2015
U.S. statutory rate	35.0	%
State and local tax provision, net of federal benefit	(6.3	)%
Foreign taxes	(8.7	)%
State research and development tax credits	2.9	%
Non-deductible merger costs, executive compensation and other permanent differences	(86.1	)%
Impairment of our investment in Cerbomed	(10.7	)%
Domestic manufacturing deduction	0.6	%
Other, net	0.4	%
Effective tax rate	(72.9	)%

Significant components of our deferred tax assets were as follows:



	October 18, 2015			April 24, 2015
Deferred tax assets (liabilities):
Foreign net operating loss carryforwards	$	1,940,719		$	1,906,364
State net operating loss carryforwards	68,170			70,129
Tax credit carryforwards	4,029,615			3,059,133
Deferred compensation	6,229,967			6,847,074
Accruals and reserves	1,705,728			3,003,760
Licensing income and expense	(164,972		)	(285,597		)
Property and equipment	(450,141		)	(630,789		)
Other	542,794			919,272
Total deferred tax assets	13,901,880			14,889,346
Deferred tax valuation allowance	(2,398,063		)	(1,612,766		)
Net deferred tax assets	$	11,503,817		$	13,276,580



	October 18, 2015			April 24, 2015
Current deferred tax asset	$	6,329,031		$	9,466,309
Current valuation allowance	(1,008,080		)	(799,990		)
Non-current deferred tax asset	9,761,355			8,384,241
Non-current valuation allowance	(1,389,983		)	(812,776		)
	13,692,323			16,237,784
Current deferred tax liability	(939,476		)	(1,467,593		)
Non-current deferred tax liability	(1,249,030		)	(1,493,611		)
	(2,188,506		)	(2,961,204		)
Net deferred tax assets	$	11,503,817		$	13,276,580

As of October 18, 2015, we had state tax credit carryforwards of $2.1 million, primarily related to R&D credits. We have gross capital loss carryforwards for federal income tax purposes of $5.6 million, subject to a full valuation allowance, expiring during fiscal year 2018 and 2019. During the twenty-five weeks ended October 18, 2015, we impaired our investment in Cerbomed. The impairment was not recognized for tax purposes and since the recognition of such loss would create a capital loss, we created a deferred tax asset for it with a full valuation allowance due to the lack of expected capital gains.

As of October 18, 2015, we had state and local NOL carryforwards of $2.1 million, which expire at various dates starting in fiscal year 2016 and foreign NOL carryforwards of $8.0 million with no expiration date. We believe it is more likely than not that future operating results will generate sufficient net taxable income to utilize these NOL carryforwards and tax credit carryforwards.

As of October 18, 2015, we had valuation allowances of $2.4 million against our capital loss carryforward, excess tax benefits from stock-based awards exercised or vested for state tax purposes and pre-operating expenses in Costa Rica.

We have not provided U.S. income taxes on our undistributed earnings from our foreign subsidiaries. These earnings, while not material to our consolidated statement of income, are intended to be permanently reinvested outside the United States.