Note 2 - Income taxes

Income tax expense (benefit) for the years ended December 31, 2015 and 2014 was $2,944,000 and ($906,000), respectively. The income tax expense (benefit) for each of the years ended December 31, 2015 and 2014 were for federal and state income tax at statutory rates applied to the pre-tax income (loss) for each of the periods.

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

Years Ended December 31,	2015		2014
(in thousands)

Current:
Federal	$	174	$	0
State and local		2		(49)
		176		(49)
Deferred:
Federal		2,460		(767)
State and local		308		(90)
		2,768		(857)
Expense (benefit) for income taxes	$	2,944	$	(906)

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

Years ended December 31,	2015			2014
Income tax rates
- Statutory U.S. federal rate		34	%		34	%
- States, net U.S. benefits		4	%		4	%
- Tax benefit from prior year		0	%		18	%
Total		38	%		56	%

As of December 31, 2015, the Company had NOL's of approximately $9,000,000 expiring through 2034. Approximately $6,750,000 of the Company’s $9,000,000 of NOL’s are subject to annual limitations of $1,300,000.

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

December 31,	2015		2014
(in thousands)
Deferred tax assets (liabilities)
- Depreciation & amortization	$	(412)	$	(428)
- Reserves for doubtful accounts		127		92
- Inventory reserve		250		305
- Non qualified stock options		108		215
- NOL		3,430		6,244
- AMT credit carryforward		160		0
Total	$	3,663	$	6,428

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.