Note 8.

Income Taxes

Deferred tax assets and liabilities result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31.

	2013		2012
Deferred tax assets
NOL carryforwards	$	1,376,000	$	1,398,000
General business credits carryforwards		199,000		182,000
Stock based compensation		80,000		80,000
UNICAP		94,000		19,000
Allowance for doubtful accounts		6,000		16,000
Reserve for obsolete inventories		49,000		36,000
Reserve for asset retirement		18,000		15,000
Property and equipment		(134,000)		(88,000)
		1,688,000		1,658,000
Valuation allowance		(1,688,000)		(1,658,000)
Net	$	-	$	-

A valuation allowance has been recorded against the realizability of the net deferred tax asset such that no value is recorded for the asset in the accompanying financial statements. The valuation allowance totaled $1,688,000 and $1,658,000 at December 31, 2013 and 2012, respectively.

The Company has net operating loss carryforwards available for federal and state tax purposes of approximately $ 3,900,000 and $ 4,000,000, at December 31, 2013 and 2012, respectively, which expire in varying amounts through 2032.

For the years ended December 31, 2013 and 2012, a reconciliation of the statutory rate and effective rate for the provisions for income taxes consists of the following:

	Percentage
	2013		2012
Federal statutory rate	(35.0)	%	(35.0)	%
State/city tax	0.0		(8.4)
Non-deductible expense	12.9		11.3
Valuation allowance	22.1		23.7
Effective rate	0.0	%	(8.4)	%

Components of income taxes are as follows:

	2013		2012
Current	$	-	$	(27,348)
Deferred:
NOL utilization/expiration		21,000		37,775
General business credits		(17,000)		(56,664)
Other temporary differences		(34,000)		(16,824)
Change in valuation allowance		30,000		35,713
Total	$	-	$	(27,348)

The Company follows guidance issued by the Financial Accounting Standards Board (“FASB ASC 740”) with respect to accounting for uncertainty in income taxes. A tax position is recognized as a benefit only if it is “more-likely-than-not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than fifty percent likely of being realized on examination. For tax positions not meeting the “more-likely-than-not” test, no tax benefit is recorded.

The Company has no unrecognized tax benefits under guidance related to tax uncertainties. The Company does not anticipate the unrecognized tax benefits will significantly change in the next twelve months. Any tax penalties or interest expense will be recognized in income tax expense. No interest and penalties related to unrecognized tax benefits were accrued at December 31, 2013 and 2012.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company is open to federal and state tax audits until the applicable statute of limitations expire. There are currently no federal or state income tax examinations underway for the Company. The tax years 2010 through 2012 remain open to examination by the major taxing jurisdictions in which the Company operates.