8.	Income Taxes

The provision for income taxes consists of the following:

	2011						2010
			State						State
			And						And
	Federal		Local		Total		Federal		Local		Total

Current	$	-	$	-	$	-	$	-	$	-	$	-
Deferred		-		-		-		-		-		-
Total tax expense	$	0	$	0	$	0	$	0	$	0	$	0

A reconciliation of the provision for income taxes computed at the Federal statutory rate to the reported provision for income taxes follows:

	2011			2010
Tax provision at Federal statutory rate		34.00	%		34.00	%
State income tax, net of federal benefit		6.00	%		6.00	%
Change in valuation allowance for deferred tax assets		(44.51	)%		(49.15	)%
Permanent differences		4.51	%		9.15	%
Total		0.00	%		0.00	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2011 and 2010 are presented below.

	2011			2010
Current Deferred Tax Assets:
Federal net operating loss carryforwards	$	0		$	0
Current Deferred Tax Assets	$	0		$	0
Non-current Deferred Tax Assets:
Federal net operating loss carryforwards	$	8,930,284		$	8,935,398
State net operating loss carryforwards		315,053			315,033
Allowance for doubtful accounts		334,639			327,042
Additional costs inventoried for tax purposes		456,616			441,156
Alternative Minimum Tax Credit Carryforward		49,436			49,436
Compensation		53,412			53,412
Rent		89,139			97,502
Goodwill		(129,164	)		(3,943	)
Depreciation		148,150			136,891
Non-current Deferred Tax Assets		10,247,565			10,351,927
Less Valuation Allowance		(10,247,565	)		(10,351,927	)
Net Non-Current Deferred Tax Assets	$	0		$	0

The change in the valuation allowance for the years ended December 31, 2011 and 2010 was $104,362 and $52,830, respectively.

As of December 31, 2011, the Company's net operating loss carryforwards for federal income tax purposes were approximately $26,265,000. Various amounts of net operating loss carryforwards will expire from 2020 through 2031.

Expiration Year	Net Operating Losses
2020	$	5,960,000
2021		2,737,000
2022		14,532,000
2028		1,010,000
2029		1,878,000
2030		134,000
2031		14,000
	$	26,265,000

Section 382 of the Internal Revenue Code (“Section 382”) imposes a limitation on a corporation's ability to utilize net operating loss carryforwards (“NOLs”) if it experiences an “ownership change.” In general, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. The Company has not had an ownership change under Section 382. If such a change did occur, a limitation could be placed on the Company's ability to utilize its NOLs.

One of the Company's subsidiaries is under examination for sales and use tax in the State of Massachusetts. The Company has concluded that there will be an immaterial assessment and has not provided for such liability. A prior year income tax examination related to one of the Company's subsidiaries in the State of New Jersey concluded during 2011 and resulted in a small refund.