Note 6--

Taxes

The interim financial statement provision for income taxes (benefit) is different from the amounts computed by applying the United States federal statutory income tax rate of 34%. In summary, the reasons for these differences are as follows:

	Three months ended March 31
	2015		2014

Income taxes (benefit) at U.S. statutory rate	$	90,000	$	(62,000)
State income taxes, net of federal benefit		14,000		18,000
Higher / (lower) effective taxes on earnings/losses
in certain foreign countries		11,000		6,000
Foreign corporate income taxes		27,000		(5,000)
Other, net		6,000		11,000


	$	148,000	$	(32,000)

One of the company's foreign subsidiaries is presently under local country audit for alleged deficiencies (totaling approximately $800,000 plus interest at 20% per annum) in value-added tax (VAT) and withholding tax for the years 2004 through 2006. The Company, in consultation with its legal counsel, believes that there are strong legal grounds that it is not liable to pay the majority of the alleged tax deficiencies. As of December 31, 2010, management estimated and reserved approximately $185,000 in taxes and interest for resolution of this matter and recorded this amount within Selling, General, and Administrative expense in the 2010 Consolidated Statement of Income. In 2011, the Company made good faith deposits to the local tax authority under the tax agency's administrative judicial resolution process. As of March 31, 2015 and December 31, 2014, management's estimated reserve (net of deposits) for this matter is approximately $128,000 and $122,000, respectively. There has been no change in this matter during the first three months of 2015.