v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 11 - Income Taxes
 
Following is a summary of the components giving rise to the income tax provision (benefit) for the periods ended December 31:
 
   
Year ended
  
   
2011
    
2010
  
Current
  
$
–
    
$
–
  
Deferred
    
(1,398,479
)
    
(4,270,152
)
Less increase in allowance
    
1,398,479
      
4,270,152
  
Net deferred
    
–
      
–
  
Total income tax provisions (benefit)
  
$
–
    
$
–
  
 
Individual components of the deferred tax asset are as follows as of December 31:
 
   
Year ended
  
   
2011
    
2010
  
Net operating loss carryforwards
  
$
3,075,986
    
$
2,198,992
  
Stock based compensation
    
3,600,874
      
3,079,389
  
Depreciation and amortization
    
289,345
      
289,345
  
Other
    
820
      
820
  
Total
    
6,967,025
      
5,568,546
  
Less valuation allowance
    
(6,967025
)
    
(5,568,546
)
Net deferred tax assets
  
$
–
    
$
–
  
 
The Company has approximately $8,927,000 of net operating loss carryforwards (“NOLs”) available to reduce future taxable income.  These NOLs expire at various dates through 2031. Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in the future and utilize the NOLs before they expire, the Company has recorded a valuation allowance to offset the deferred tax assets.
  
Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses and other corporate tax attributes as ownership changes occur.  As a result of the transactions discussed in Notes 5 and 6, a Section 382 ownership change is expected and a study will be required to determine the date of the ownership change. The amount of the Company’s net operating losses and other tax attributes incurred prior to the ownership change may be limited based on the value of ownership change. A full valuation allowance has been established for the gross deferred tax asset related to the net operating losses and other corporate tax attributes available. Accordingly, any limitation resulting from Section 382 application is not expected to have a material effect on the balance sheet or statements of operations of the Company.
 
The differences between the United States statutory federal income tax rate and the effective income tax rate in the accompanying consolidated statements of operations are as follows:
 
   
Year ended
  
   
2011
    
2010
  
Statutory United States federal rate
  
$
(1,362,096
)
  
$
(4,151,824
)
State income taxes net of federal benefit
    
(36,383
)
    
(118,328
)
Permanent differences, primarily resulting from stock compensation
                
Change in valuation reserves
    
1,398,479
      
4,270,152
  
                 
Effective tax rate (%)
    
0
      
0
  
 
Actual cash payments for taxes in 2011 were $175 ($25 in 2010). In December 2011, the Company approved a Consent to Desk Audit Adjustment providing the Company with a New York State Qualified Emerging Technology Company tax credit of $159,395 for the year ended December 31, 2010.  The cash refund was received by and recorded as income by the Company in January 2012. During 2010, the Company received tax refunds of $162,944 associated with New York State Qualified Emerging Technology Company tax credits for the years ended December 31, 2009 ($132,002) and 2008 ($30,942).
 
In July 2006, the FASB released Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement 109” (“FIN48”), now ASC 740.  Effective for fiscal years beginning after December 15, 2006, FIN48 provides guidance on the financial statement recognition and measurement for income tax positions that we have taken or expect to take in our income tax returns.  It also provides related guidance on underecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted the provisions of FIN48 on January 1, 2007.  The adoption did not have a material impact on the Company’s consolidated results of operations and financial position, and therefore, the Company did not have any adjustment to the January 1, 2007 beginning balance of retained earnings.  In addition, the Company did not have any material unrecognized tax benefits at December 31, 2011 or 2010.
 
The Company recognizes interest and penalties related to unrecognized tax benefits in general and administrative expense. During the years ended December 31, 2011 and 2010, the Company recognized no material interest and penalties.
 
The Company files income tax returns in the U.S. federal jurisdiction and applicable states. The tax years 2007 through 2010 remain open to examination by major taxing jurisdictions to which the Company is subject.