Note 5. Income Taxes

The tax effects of temporary differences that give rise to significant portions of net deferred tax assets (liabilities) at December 31, 2011 and 2010 are summarized below:

	2011			2010
Deferred tax assets attributable to:
Accounts receivable	$	58		$	115
Accrued expenses		706			634
ESOP compensation expense		1,151			1,067
Deferred compensation		340			413
Stock compensation expense		295			295
Intangibles		136			187
Net operating loss carryfowards		11,875			10,707
Asset retirement/environmental obligations and other		384			621
Inventories		576			-
Total deferred tax assets		15,521			14,039

Deferred tax liabilities attributable to:
Property, plant and equipment		(87	)		(133	)
Inventories		-			(23	)
Total deferred tax liabilities		(87	)		(156	)
Net deferred tax asset before valuation allowance		15,434			13,883

Valuation allowance		(15,434	)		(13,883	)

Net deferred tax balance after valuation allowance	$	-		$	-

Components of income tax (benefit), expense in the Consolidated Statements of Operations for the years ended December 31, 2011 and 2010 were as follows:

	2011			2010
Current:
Federal	$	-		$	-
State		-			-
		-			-
Deferred:
Federal		(918	)		(1,812	)
State		(633	)		(119	)
Change in valuation allowance		1,551			1,931
		-			-
Income tax (benefit) expense	$	-		$	-

A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended December 31, 2011 and 2010 is as follows:

	2011			2010
Statutory federal income tax rate		(34.0	) %		(34.0	) %
State taxes, net of federal benefit		(9.6	)		(1.1	)
Cash surrender value of officer's life insurance		(1.0	)		(0.5	)
Employee stock ownership plan		(4.1	)		(2.5	)
Effect of beginning of year federal deferred tax adjustments before valuation allowance change		-			(0.1	)
Expiration of unused net operating loss		10.6			10.3
Deferred tax asset valuation allowance change		35.6			27.8
Other, net		2.5			0.1
Effective income tax rate		0.0	%		0.0	%

At December 31, 2011, the Company had federal net operating loss (NOL) carryforwards of approximately $28,246 with expiration dates ranging from 2012 through 2031. After consideration of the relevant factors, including recent operating results, the likelihood of the utilization of net operating loss tax carryforwards and the ability to generate future taxable income, the Company maintained a full valuation allowance against the entire net deferred tax asset balances at December 31, 2011 and 2010.

The Company follows the accounting standards related to the accounting for uncertainty in income taxes. At December 31, 2011 and December 31, 2010, the Company had $175 and $248 of unrecognized tax benefits, respectively, all of which would affect the effective tax rate if recognized.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2011			2010
Unrecognized tax benefits balance at beginning of year	$	248		$	285
Gross increases for tax positions of prior years		-			-
Gross decreases for tax positions of prior years		-			-
Settlements		-			-
Lapse of statute of limitations		(73	)		(37	)
Unrecognized tax benefits balance at end of year	$	175		$	248

The Company files federal and various state income tax returns. The Internal Revenue Service has completed an examination of the Company's U.S. income tax returns through 2002. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2007.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense in the consolidated financial statements. As of December 31, 2011 and December 31, 2010, the Company had approximately $44 and $55 of accrued interest and penalties related to uncertain tax positions, respectively.