INCOME TAXES

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

The provision for income taxes for the nine months ended September 30, 2016 and 2015 is set forth below:

	2016			2015
		(Unaudited)
Current:
Federal		-			117,000
State		13,000			14,000
Prior year (over)/under Accrual
Federal		30,000			-
Total current expense		43,000			131,000
Deferred tax (benefit) expense		(2,145,000	)		(650,000)
Total tax (benefit) expense		(2,102,000	)		(519,000)

The components of net deferred tax assets are set forth below:

	September 30,			December 31,
	2016			2015
	(Unaudited)
Deferred Tax Assets
Net operating losses		2,275,000			462,000
Bad debts		230,000			336,000
Accounts payable, accrued expenses and reserves		-			8,000
Inventory - 263A adjustment		1,035,000			919,000
Capitalized engineering costs		415,000			432,000
Deferred rent		413,000			410,000
Loss on extinguishment of debt		59,000			-
Deferred gain on sale of real estate		116,000			126,000
Lease impairment		-			-
Stock based compensation - options and restricted stock		132,000			79,000
Intangibles NTW		958,000			789,000
Capital loss carry forwards		-			-
Section 1231 loss carry forward		4,000			4,000
Inventory		725,000			680,000
Other		131,000			257,000
Total deferred tax assets before valuation allowance		6,493,000			4,502,000
Valuation allowance		(4,000	)		(4,000	)
Total deferred tax assets after valuation allowance		6,489,000			4,498,000
Deferred Tax Liabilities
Property and equipment		(1,996,000	)		(2,091,000	)
Amortization - Welding Transaction		(270,000	)		(313,000	)
Amortization - NTW Goodwill		(16,000	)		(13,000	)
Amortization - AMK Goodwill		(29,000	)		(18,000	)
Total deferred tax liabilities		(2,311,000	)		(2,435,000	)
Total Net Deferred Tax Assets		4,178,000			2,063,000

During the year ended December 31, 2015, the Company provided a valuation allowance on the deferred tax assets related to capital loss and section 1231 loss carryforwards. The valuation allowance at both September 30, 2016 and December 31, 2015 amounted to $4,000. Management believes that the remainder of the net deferred tax assets are more likely than not to be realized.

The Company received a notice dated August 8, 2016 from the Internal Revenue Service for examination of its corporate tax return for the year ended December 31, 2014.  Since the audit has not been completed, the Company cannot determine if any additional taxes, interest or penalties will be assessed.