Income taxes

12 Months Ended

Dec. 31, 2011

Income taxes

Note 3 - Income taxes

During the year ended December 31, 2011, the Company recognized $634,000 in federal and state income tax expense. During the year ended December 31, 2010, the Company recognized $363,000 in federal and state income tax expense. In future periods, the Company may be subject to federal or state income tax expense due to limitations of the usage of the Company’s NOL’s.

The following summarizes the provision for income taxes:

Year Ended December 31,	2011		2010
(in thousands)
Current:
Federal	$	0	$	0
State and local		51		29
		51		29
Deferred:
Federal		522		299
State and local		61		35
		583		334
Provision for income taxes	$	634	$	363

Reconciliation of the Company's actual tax rate to the U.S. Federal statutory rate is as follows:

Years ended December 31,	2011		2010
Income tax rates
- Statutory U.S. federal rate	34	%	34	%
- States, net U.S. benefits	4	%	4	%
- Under accrual of prior period taxes	0		(7	%)
Total	38	%	31	%

As of December 31, 2011, the Company had NOL's of approximately $19,000,000 expiring 2018 through 2029. Approximately $19,000,000 of the Company’s NOL’s is subject to an annual limitations ranging from $1,300,000 to $2,500,000.

Elements of deferred income tax assets (liabilities) are as follows:

December 31,	2011			2010
(in thousands)
Deferred tax assets (liabilities)
- Depreciation & amortization	$	133		$	133
- Reserves for doubtful accounts		66			79
- Accrued payroll		166			198
- Inventory reserve		137			41
- NOL		7,014			7,648
Subtotal		7,516			8,099
- Valuation allowance		(4,430	)		(4,430	)
Total	$	3,086		$	3,669

The Company considered its projected future taxable income, and associated annual limitations, in determining the amount of deferred tax assets to recognize. The Company believes that given the extended time period that it may recognize its deferred tax assets, it is more likely than not it will realize the benefit of these assets prior to their expiration. The Company continues to reserve deferred tax assets relating to the utilization of NOL’s for periods that it cannot reasonably predict operating results.