INCOME TAXES

6 Months Ended

Jun. 30, 2014

Income Taxes

Note 9. INCOME TAXES

Note 9. INCOME TAXES

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

	2014			2013
	(Unaudited)			(Unaudited)
Current
Federal	$	871,000		$	707,000
State		14,000			212,000
Prior year (over) under accruals
Federal		10,000			-
State		(290,000	)		-
Total Current Expense		605,000			919,000
Deferred Tax Benefit		(746,000	)		-
Net (Benefit) Expense for Income Taxes	$	(141,000	)	$	919,000

The components of net deferred tax assets as of June 30, 2014 and December 31, 2013 are set forth below:

	June 30,			December 31,
	2014			2013
	(Unaudited)
Deferred tax assets:
Current:
Bad debts		390,000			313,000
Inventory - 263A adjustment		821,000			729,000
Account payable, accrued expenses and reserves		9,000			9,000
Total current deferred tax assets	$	1,220,000		$	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		507,000			521,000
Capitalized engineering costs		526,000			503,000
Deferred rent		468,000			453,000
Amortization - NTW Transaction		530,000			475,000
Lease Impairment		36,000			51,000
Deferred gain on sale of real estate		186,000			194,000
Total non-current deferred tax assets before valuation allowance		3,345,000			3,289,000
Valuation allowance		(1,092,000	)		(1,092,000	)
Total non-current deferred tax assets after valuation allowance		2,253,000			2,197,000
Deferred tax liabilities:
Property and equipment		(1,007,000	)		(1,497,000	)
Goodwill - NTW Transaction		(9,000	)		(7,000	)
Amortization - Welding Transaction		(475,000	)		(508,000	)
Total Deferred Tax Liability		(1,491,000	)		(2,012,000	)
Net non-current deferred tax asseta	$	762,000		$	185,000

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 net deferred tax assets is more likely than not to be realized.  The valuation allowance at both June 30, 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.