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Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Taxes [Abstract]  
Income Taxes

9. Income Taxes

The components of current and deferred income tax expense included in the Consolidated Statement of Operations as determined in accordance with ASC 740, Income Taxes (“ASC 740”), are as follows:

 

         

Current:

        

Federal

   $ —  

State and local

     —  
   

 

 

  
      —  
   

 

 

  

Deferred:

        

Federal

     —  

State and local

     —  
   

 

 

  
      —  
   

 

 

  
   

Income tax expense from operations

   $ —  
   

 

 

  

The Company has recorded its non-income based taxes as part of other liabilities and other expenses.

At December 31, 2012 and 2011, the Company had total net operating losses carry forwards of $136,515 and $106,939, respectively. Due to an ownership change on November 10, 2004, this carry forward includes a Section 382 (of the U.S. Internal Revenue Code) limited net operating loss of approximately $14,049 at December 31, 2012, which expires at various dates through 2024, and the annual utilization of which is limited to $524 in future years. In 2012, $3,487 of these losses have been deemed to be worthless and written off. The NOLs before the writeoff will expire as follows:

 

         

Year Ending December 31:

        

2018

   $ 5,819  

2019

     5,101  

2021

     579  

2023

     608  

2024

     1,942  
   

 

 

  
    $ 14,049  
   

 

 

  

The Company has determined that a second Section 382 change in ownership occurred on November 12, 2012. Accordingly, the NOLs incurred between the two ownership changes (detailed below) are also subject to an annual limit as currently estimated of $58,888. Approximately $4,300 of the 2012 losses are allocable to the post change period and therefore not subject to limitation.

 

         

Year Ending December 31:

        

2024

   $ 388  

2025

     3,239  

2026

     15,560  

2027

     24,655  

2028

     19,754  

2029

     14,218  

2030

     6,385  

2031

     6,052  

2032

     32,215  
   

 

 

  
    $ 122,466  
   

 

 

  

 

At December 31, 2012 and 2011, the composition of the deferred tax asset is summarized as follows by applying a 45.22% and 45.13% tax rate to the deferred tax items:

 

                 
    December 31,  
    2012     2011  

Deferred tax assets:

                

Net operating losses

   $ 37,571     $ 39,977  

Stock-based compensation

     6,471       8,998  

Fixed assets

     286       236  

Deferred rent liability

     68       132  

Other

     82       79  
   

 

 

    

 

 

  

Total deferred tax assets

     44,478       49,422  

Less: valuation allowance

     (44,478 )      (49,422 ) 
   

 

 

    

 

 

  

Net deferred tax assets

   $ —       $ —    
   

 

 

    

 

 

  

$49,946 of the available NOLs (total NOLs excluding those written off) has been generated from excess stock compensation deductions that cannot be recognized under ASC 718. Accordingly, a deferred tax asset related to this amount has not been set up.

At December 31, 2012 and 2011, the deferred tax asset has been offset by a valuation allowance of $44,478 and $49,422 respectively.

A reconciliation between the statutory federal income tax rate of 35% and the Company’s effective rate is as follows:

 

                         
    December 31,  
    2012     2011     2010  

Federal statutory rate

     35.00 %      35.00 %      (35.00 %) 

Permanent differences

     (119.37 %)      (105.65 %)      2.02 % 

State income tax rate, net of federal benefit

     9.44 %      21.28 %      (0.33 %) 

(Decrease)/increase in valuation allowance

     (44.82 %)      (89.25 %)      5.59 % 

Worthless Net Operating Losses per Section 382

     0.00 %      0.00 %      32.89 % 

Change in effective rate

     0.00 %      0.00 %      7.85 % 

NOL adjustment

     119.74 %      138.22 %      0.00 % 

Other differences, net

     0.01 %      0.40 %      (13.02 %) 
   

 

 

    

 

 

    

 

 

  

Effective rate

     0.00 %      0.00 %      0.00 % 
   

 

 

    

 

 

    

 

 

  

As of December 31, 2012, the Company determined that it has no uncertain tax positions, interest or penalties as defined within ASC 740-10. The Company does not have unrecognized tax benefits. The Company does not believe that it is reasonably possible that the total unrecognized benefits will significantly increase within the next 12 months. The Company is not currently under audit by any taxing authority. Tax returns filed with each jurisdiction remain open to examination under the normal three-year statute of limitations.