13. INCOME TAXES:	The Company is subject to federal income taxes and files a consolidated U.S. federal income tax return. In addition to the federal tax return the Company files income tax returns in various state jurisdictions on a combined or separate basis. For the year ended December 31, 2013, the Company recorded a $2,252,000 deferred tax expense related to a full valuation allowance taken on its net deferred tax asset. The full valuation allowance was recorded as a result of the conclusion that the Company, more likely than not, will not generate sufficient future taxable income to utilize its net operating loss carryforwards and other temporary differences. This conclusion was based on the following: (i) pre-tax losses for the two most recent years, (ii) the challenging U.S. defense budget environment which has made it difficult to project revenue and profitability in future years with any degree of confidence, and (iii) the costs that will be incurred related to the TDL consolidation in 2014. At December 31, 2013 and 2012, the Company has an alternative minimum tax credit of approximately $573,000 with no limitation on the carryforward period. The Company also has federal and state net operating loss carryforwards of approximately $7,000,000 and $6,000,000, respectively, at December 31, 2013. The net operating loss carry-forwards expire from 2018 through 2033.

	The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is as follows:

December 31,	2013			2012
Tax at U.S. statutory rates		(34.0	)%		(34.0	)%
State income and federal minimum taxes		21.0	%		108.0	%
Change in valuation allowance		886.0	%		17.0	%
Permanent differences		-			2.0	%
Nondeductible expenses		4.0	%		15.0	%
		877.0	%		108.0	%

Deferred tax assets (liabilities) are comprised of the following:

December 31,	2013			2012

Alternative minimum tax credit carry-forward	$	573,000		$	573,000
Net operating loss carryfowards		2,755,000			2,211,000

Temporary differences in bases of assets and liabilities:
Accounts receivable and inventory		739,000			488,000
Accrued expenses		183,000			406,000
Stock-based compensation		26,000			4,000
Goodwill		1,285,000			1,502,000
Intangible assets		781,000			882,000
Property and equipment		12,000			(7,000	)
		3,026,000			3,275,000
Total deferred tax assets, net		6,354,000			6,059,000

Valuation allowance		(6,354,000	)		(3,806,000	)
Net deferred tax assets	$	-		$	2,253,000

The income tax provision consists of the following:

	2013		2012
Current income tax expense	$	55,000	$	70,000
Deferred income tax expense		2,252,000		-
Total	$	2,307,000	$	70,000

Deferred income taxes are included in the accompanying balance sheet as follows:

	2013		2012
Current asset	$	-	$	447,000
Long-term asset		-		1,806,000
	$	-	$	2,253,000

As of December 31, 2013 and 2012, the Company has no material uncertain tax positions. The Company is subject to routine income tax audits in various jurisdictions and tax returns from December 31, 2010 remain open to examination by such taxing authorities. The Company did not record any tax related interest or penalties.