10. INCOME TAXES

6 Months Ended

Jun. 30, 2013

Income Taxes

Note 10. INCOME TAXES

The provision for income taxes as at June 30, are set forth below:

	2013		2012
	(Unaudited)		(Unaudited)
Current
Federal	$	707,000	$	485,000
State		212,000		163,000
Total Expense		919,000		648,000
Deferred
Federal		-		-
State		-		-
Total Deferred Taxes		-		-
Net Expense for Income Taxes	$	919,000	$	648,000

The components of net deferred tax assets as of June 30, 2013 and December 31 2012 are set forth below:

	June 30,			December 31,
	2013			2012
	(Unaudited)
Deferred tax assets:
Capital loss carry forwards	$	1,088,000		$	1,088,000
Section 1231 loss carry forward		86,000			86,000
Bad debts		315,000			282,000
Stock based compensation - options and restricted stock		509,000			506,000
Capitalized engineering costs		474,000			447,000
Account payable, accrued expenses and reserves		9,000			9,000
Deferred rent		438,000			423,000
Amortization - NTW Transaction		277,000			138,000
Inventory - 263A adjustment		747,000			569,000
Lease Impairment		67,000			85,000
Deferred gain on sale of real estate		202,000			209,000
Total deferred tax assets before valuation allowance		4,212,000			3,842,000
Valuation allowance		(2,770,000	)		(2,269,000	)
Total deferred tax assets after valuation allowance		1,442,000			1,573,000
Deferred tax liabilities:
Property and equipment		(896,000	)		(997,000	)
Goodwill - NTW Transaction		(4,000	)		-
Amortization - Welding Transaction		(542,000	)		(576,000	)
Total Deferred Tax Liability		(1,442,000	)		(1,573,000	)
Net deferred tax asset	$	-		$	-

Due to the uncertainty of realization of the net deferred tax assets, the Company has provided a valuation allowance. In assessing the realizability of it, management considers whether it is more likely than not that some or perhaps all of the deferred tax assets will not be realized. The valuation allowance will be reversed at such time that realization is believed to be more likely than not.  The valuation allowance at June 30, 2013 and December 31, 2012 amounted to $2,770,000 and $2,269,000, respectively.

The Company has a capital loss carry forward from the sale of Sigma of $2,719,000 which will expire in fiscal 2015.