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9 - INCOME TAXES
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Text Block]
9  -  INCOME TAXES

Income tax provision is summarized as follows:

   
Year Ended December 31,
 
   
2011
   
2010
 
Current:
           
Federal
  $ -     $ -  
State
    3,000       7,000  
      3,000       7,000  
Deferred:
               
Federal
    (170,000 )     (81,000 )
State
    (50,000 )     (21,000 )
Increase in valuation allowance
    220,000       102,000  
      -       -  
                 
Income tax provision
  $ 3,000     $ 7,000  

The actual income tax provision differs from the “expected” tax computed by applying the Federal corporate tax rate of 34% to the loss before income taxes as follows:

   
Year Ended December 31,
 
   
2011
   
2010
 
“Expected” income tax expense (benefit)
  $ (214,000 )   $ (93,000 )
State tax expense, net of Federal benefit
    2,000       2,000  
Foreign (income) loss
    -       -  
Increase in valuation allowance
    220,000       102,000  
Other
    (5,000 )     (4,000 )
Income tax provision
  $ 3,000     $ 7,000  


The tax effects of temporary differences which give rise to significant portions of the deferred taxes are summarized as follows:

   
December 31,
       
   
2011
   
2010
 
Deferred tax assets:
           
Inventory reserves
  $ 1,808,000     $ 1,585,000  
Section 263a adjustment
    89,000       82,000  
Allowances for bad debts and returns
    31,000       33,000  
Accrued expenses
    22,000       21,000  
Asset valuation reserve
    57,000       57,000  
State net operating loss carry forward
    241,000       239,000  
Other
    57,000       45,000  
Total deferred tax assets
    2,305,000       2,062,000  
Valuation allowance
    (2,127,000 )     (1,906,000 )
      178,000       156,000  
Deferred tax liabilities:
               
Deferred state taxes
    (178,000 )     (156,000 )
                 
Net deferred tax assets
  $ -     $ -  

As of December 31, 2011, we had approximately $439,000 and $1,172,000 in net operating loss carryforwards for federal and state income tax purposes, respectively.  In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  We consider the scheduled reversal of deferred tax assets, the level of historical taxable income and tax planning strategies in making the assessment of the realizability of deferred tax assets.  We have identified the U.S. federal and California as our "major" tax jurisdiction and generally, we remain subject to Internal Revenue Service examination of our 2007 through 2009 U.S. federal income tax returns, and remain subject to California Franchise Tax Board examination of our 2006 through 2009 California Franchise Tax Returns.

As a result of the implementation of ASC 740, we recognized no material adjustment to unrecognized tax benefits.  At the adoption date of January 1, 2007, we had $795,000 of unrecognized tax benefits, all of which would affect our effective tax rate if recognized.  At December 31, 2011 and 2010, we have $2,127,000 and $1,906,000 of unrecognized tax benefits, respectively.  We will continue to classify income tax penalties and interest, if any, as part of interest and other expenses in its statements of operations.  We have incurred no interest or penalties as of December 31, 2011 and 2010.