NOTE 9 - FEDERAL AND STATE INCOME TAXES

9 Months Ended

Sep. 29, 2012

Income Tax Disclosure [Text Block]

NOTE 9 – FEDERAL AND STATE INCOME TAXES

As a result of the valuation allowance recorded against our deferred tax assets as of September 29, 2012, the effective income tax rates for the three and nine month periods ended September 29, 2012 were not meaningful. The effective income tax rates for the three and nine month periods ended September 30, 2011 were 25.6% and 26.1%, respectively.

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 September 29, 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 $10.4 million has been provided against deferred tax assets as of September 29, 2012.