INCOME TAXES

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 11—INCOME TAXES

Income tax (benefit) for continuing operations in the consolidated statements of income consists of:

	Years Ended December 31,
	2011		2010
Current:
Federal	$	35,000	$	5,000
State and local		54,000		30,000
Total current		89,000		35,000
Deferred:
Federal		—		—
State and local		—		—
Total deferred		—		—
Totals	$	89,000	$	35,000

The Company recognized deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The impact on deferred income taxes of changes in tax rates and laws, if any, is reflected in the consolidated financial statements in the period enacted.

Under the direction of the authoritative guidance issued by the FASB pertaining to the accounting for income taxes, the Company recorded a valuation allowance equal to approximately 63% and 75% of the net deferred tax asset at December 31, 2011 and 2010, respectively. The recorded valuation allowance at December 31, 2011 and 2010 was $4,107,000 and $6,107,000, respectively. The Company believes that the valuation allowance is necessary as it is more likely than not that the entire net deferred tax asset will not be realized in the foreseeable future based on evidence available at this time.

The Company has Federal net operating loss carry forwards at December 31, 2011 of approximately $2,000,000, which expire in 2030.

In addition, the Company recorded a full valuation allowance for the state tax benefit related to deferred tax assets, including a state net operating loss carry forward of approximately $21,000,000, of which $18,000,000 has a full valuation allowance. The state net operating losses expire in 2027 through 2031. The Company believes it is more likely than not that the remaining tax benefits associated with these net deferred tax assets will not be realized in the foreseeable future based upon its ability to generate sufficient taxable income.

Deferred tax assets (liabilities) consist of:

	December 31,
	2011			2010
Deferred tax assets—current:
Bad debt reserves	$	83,000		$	82,000
Inventory reserves		994,000			780,000
Warranty and other reserves		302,000			335,000
Accrued wages		—			—
		1,379,000			1,197,000
Valuation allowance		(735,000	)		(842,000	)
		644,000			355,000
Deferred tax liabilities—current:
Prepaid expenses		(132,000	)		(122,000	)
Net deferred tax assets—current	$	512,000		$	233,000
Deferred tax assets—non-current
Intangibles	$	2,334,000		$	2,014,000
Goodwill		1,617,000			2,527,000
Federal net operating loss		1,177,000			2,920,000
State net operating loss		448,000			462,000
Other		364,000			221,000
		5,940,000			8,144,000
Valuation allowance		(3,372,000	)		(5,265,000	)
		2,568,000			2,879,000
Deferred tax liabilities—non-current:
Depreciation		(973,000	)		(1,005,000	)
Net deferred tax assets—non-current	$	1,595,000		$	1,874,000

A reconciliation of the Federal statutory rate to the total effective tax rate applicable to income from continuing operations is as follows:

	Years ended December 31,
	2011						2010
	$			%			$			%
Federal income tax computed at statutory rates	$	679,000			34.0	%	$	128,000			34.0	%
(Decrease) increase in taxes resulting from:
State and local taxes, net of Federal tax benefit		36,000			1.8			20,000			5.3
Change  in valuation allowance		(675,000	)		(33.8	)		(236,000	)		(62.6	)
Expenses not deductible for tax purposes		32,000			1.6			50,000			13.3
Increase in uncertain tax positions		15,000			0.8			11,000			2.9
Other		2,000			0.1			62,000			16.4
Income tax expense	$	89,000			4.5	%	$	35,000			9.3	%

 The Company adopted authoritative guidance issued by the FASB that pertained to the accounting for uncertain matters on January 1, 2007. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position or results of operations. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

Balance at January 1, 2011	$	286,000
Interest accrual		15,000
Balance at December 31, 2011	$	301,000

Interest and penalties, if any, related to income tax liabilities are included in income tax expense.

The Internal Revenue Service has completed examinations of the Company’s Federal tax returns through 2007. A refund claim based on the Company’s Federal tax return for 2009 is currently awaiting review by the Joint Committee on Taxation. The Company does not expect that this review will require any material changes to the refund claim as filed.

In addition, the Company and certain of its subsidiaries file tax returns in various U.S. state jurisdictions. With few exceptions, the years that remain subject to examination are December 31, 2008 through December 31, 2010.