NOTE 8 - FEDERAL AND STATE INCOME TAXES

6 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Text Block]

NOTE 8 – FEDERAL AND STATE INCOME TAXES

As a result of the valuation allowance recorded against our deferred tax assets as of June 30, 2012, the effective income tax rates for the three and six month periods ended June 30, 2012 were not meaningful. The effective income tax rates for the three and six month periods ended June 30, 2011 were 61.6% and 31.8%, respectively. Our effective income tax rates in 2011 differ from the federal statutory rate primarily due to state income taxes.

ASC Topic 825, “Income Taxes” requires all available evidence, both positive and negative, be considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. During the quarter, based upon the Company's recent performance, management determined the realization of deferred tax assets is uncertain as the Company is unable to consider tax planning strategies or projections of future taxable income in its evaluation of the realizability of its deferred tax assets as of June 30, 2012. Under these circumstances, deferred tax assets may only be realized through future reversals of taxable temporary differences and carryback of net operating losses to available carryback periods. We have performed such an analysis and a valuation allowance of approximately $6.2 million has been provided against deferred tax assets as of June 30, 2012.