NOTE 12 - INCOME TAXES

The components of pre-tax loss for the years ended December 31, 2016 and 2015 are as follows:

	2016			2015
Domestic	$	(865	)	$	(1,404	)
Foreign		82			(134	)
Total	$	(783	)	$	(1,538	)

The components of the provision for income taxes attributable to continuing operations for the years ended December 31, 2016 and 2015 are as follows:

	2016		2015
Current:
Federal	$	-	$	-
State		16		25
Foreign		-		6
Total current		16		31

Deferred:
Federal		155		165
State		18		23
Foreign		-		-
Total deferred		173		188

	$	189	$	219

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred taxes at December 31, 2016 and 2015 are as follows:

	2016			2015
DEFERRED TAX ASSETS:
Current deferred tax assets
Deferred revenue	$	393		$	382
Accrued expenses		388			85
Other		-			51
		781			518
Valuation allowance		(781	)		(518	)
Net current deferred tax assets		-			-

Noncurrent deferred tax assets
Net operating losses		39,560			40,389
Research and development credit carryforwards		4,188			4,490
Minimum tax credit carryforwards		161			161
Acquired intangibles		-			183
Share based compensation		10			11
Other		102			22
		44,021			45,256
Valuation allowance		(42,736	)		(44,496	)
Net noncurrent deferred tax assets		1,285			760

Noncurrent deferred tax liabilities
Acquired intangibles		(525	)		-
Fixed assets		(765	)		(764	)
Goodwill		(812	)		(640	)
Total noncurrent deferred tax liabilities		(2,102	)		(1,404	)

Net current deferred tax asset (liability)		-			-
Net noncurrent deferred tax liability	$	(817	)	$	(644	)

At December 31, 2016, we had federal net operating loss carryforwards of approximately $115,738, research and development credit carryforwards of approximately $5,113 and alternative minimum tax credit carryforwards of approximately $161. The net operating loss and research and development credit carryforwards will expire in varying amounts from 2018 through 2036, if not utilized. Minimum tax credit carryforwards carry forward indefinitely.

As a result of various acquisitions by us in prior years, we may be subject to a substantial annual limitation in the utilization of the net operating losses and credit carryforwards due to the “change in ownership” provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses before utilization.

Due to the uncertainty surrounding the timing of realizing the benefits of its favorable tax attributes in future tax returns, we have placed a valuation allowance against our net deferred tax assets, exclusive of goodwill. During the year ended December 31, 2016, the valuation allowance decreased by approximately $1,497 due primarily to operations, including expiration of tax carryforwards. Approximately $8,251 of the valuation allowance relates to tax benefits for stock option deductions included in our net operating loss carryforward which we will allocate, if and when realized, directly to contributed capital to the extent the benefits exceed amounts attributable to book deferred compensation expense.

We consider undistributed earnings of our foreign subsidiaries as permanently reinvested and, accordingly, we have made no provision for U.S. federal or state income taxes thereon.

Our provision for income taxes attributable to continuing operations differs from the expected tax expense (benefit) amount computed by applying the statutory federal income tax rate of 34% to income before income taxes as a result of the following:

	For 2016			For 2015

Computed at statutory rate	$	(266	)	$	(521	)
State taxes, net of federal benefit		(34	)		109
Permanent items and other		189			188
Credit carryforwards		(59	)		(1	)
Foreign income taxed at different rates		(45	)		118
Tax carryforwards not benefitted		404			326
	$	189		$	219

Under ASC 740-10, Income Taxes, we periodically review the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions. We use a “more likely than not” criterion for recognizing an asset for unrecognized income tax benefits or a liability for uncertain tax positions. We have determined we have the following unrecognized assets or liabilities related to uncertain tax positions as of December 31, 2016. We do not anticipate any significant changes in such uncertainties and judgments during the next twelve months. To the extent we are required to recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability. The reconciliation of our unrecognized tax benefits is as follows:

Balance at January 1, 2015	$	1,288
Additions based on tax positions related to the current year		28
Additions for tax positions of prior years		(26	)
Balance at December 31, 2015	$	1,290
Additions based on tax positions related to the current year		25
Additions for tax positions of prior years		(96	)
Balance at December 31, 2016	$	1,219

As of December 31, 2016, we had $1,219 of unrecognized tax benefits, which would affect the effective tax rate if recognized. The Company’s assessment of its unrecognized tax benefits is subject to change as a function of the Company’s financial statement audit.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the twelve months ended December 31, 2016, we recognized $2 of interest and penalties in our income tax expense.

We file tax returns in the U.S. federal jurisdiction and in several state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years ending before December 31, 2013 and are no longer subject to state and local or foreign income tax examinations by tax authorities for years ending before December 31, 2012. We are not currently under audit for federal, state or any foreign jurisdictions.