INCOME TAXES

3 Months Ended

Mar. 31, 2014

Income Taxes

Note 10. INCOME TAXES

Note 9. INCOME TAXES

The provision for income taxes as at March 31, are set forth below:

	2014	2013
	(Unaudited)	(Unaudited)
Current
Federal	$    536,000	$  376,000
State	156,000	113,000
Total Expense	692,000	489,000
Deferred Tax Benefit	(108,000)	-
Net Expense for Income Taxes	$    584,000	$  489,000

The components of net deferred tax assets as of March 31, 2014 and December 31 2013 are set forth below:

	March 31,	December 31,
	2014	2013
	(Unaudited)
Deferred tax assets:
Current:
Bad debts	$         356,000	$        313,000
Inventory - 263A adjustment	749,000	729,000
Account payable, accrued expenses and reserves	9,000	9,000
Total current deferred tax	$     1,114,000	$     1,051,000
Non- Current
Capital loss carry forwards	$     1,088,000	$     1,088,000
Section 1231 loss carry forward	4,000	4,000
Stock based compensation - options and restricted stock	523,000	521,000
Capitalized engineering costs	424,000	503,000
Deferred rent	460,000	453,000
Amortization - NTW Transaction	472,000	475,000
Lease Impairment	43,000	51,000
Deferred gain on sale of real estate	190,000	194,000
Total deferred tax assets before valuation allowance	3,204,000	3,289,000
Valuation allowance	(1,092,000)	(1,092,000)
Total deferred tax assets after valuation allowance	2,112,000	2,197,000
Deferred tax liabilities:
Property and equipment	(1,382,000)	(1,497,000)
Goodwill - NTW Transaction	(8,000)	(7,000)
Amortization - Welding Transaction	(492,000)	(508,000)
Total Deferred Tax Liability	(1,882,000)	(2,012,000)
Net deferred tax asset	$     1,344,000	$     1,236,000

During the year ended December 31, 2013, the Company determined that it no longer needed to provide a valuation allowance on the net deferred tax assets except for the capital loss and section 1231 loss carryforwards. This was based upon the fact that management believes that the realizability of the net deferred tax assets is more likely than not to be realized. The valuation allowance at both March 31, 2014 and December 31, 2013 was $1,092,000.

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