Note 3 - Income taxes

Income tax benefit for the year ended December 31, 2013 was $3,576,000 compared to an income tax provision for the year ended December 31, 2012 of $1,395,000. The income tax benefit of $3,576,000 was for federal and state income tax at statutory rates applied to the pre-tax loss for the year ended December 31, 2013 of $9,418,000.

During the year ended December 31, 2012, the Company recognized $5,395,000 in federal and state income tax expense at statutory rates offset by the release during the fourth quarter of 2012 of $4,000,000 of the Company’s deferred tax asset valuation allowance. In future periods, the Company will be subject to federal and state income tax expense at statutory tax rates.

The following summarizes the (benefit) / provision for income taxes:

Years Ended December 31,	2013		2012
(in thousands)

Current:
Federal	$	(1,904)	$	1,846
State and local		(224)		585
		(2,128)		2,431
Deferred:
Federal		(1,295)		(927)
State and local		(153)		(109)
		(1,448)		(1,036)
(Benefit) / Provision for income taxes	$	(3,576)	$	1,395

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

Years ended December 31,	2013			2012
Income tax rates
- Statutory U.S. federal rate		34	%		34	%
- States, net U.S. benefits		4	%		4	%
- Reduction of valuation allowance		0	%		(28)	%
Total		38	%		10	%

As of December 31, 2013, the Company had NOL's of approximately $16,000,000 expiring through 2033, of which $10,600,000, are subject to an annual limitation of $1,300,000.

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

December 31,	2013		2012
(in thousands)
Deferred tax assets (liabilities)
- Depreciation & amortization	$	(542)	$	(112)
- Reserves for doubtful accounts		86		86
- Inventory reserve		120		148
- NOL		5,906		4,000
Total	$	5,570	$	4,122

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.