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Income Taxes | 3 Months Ended
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Mar. 31, 2013
Income Taxes [Abstract] |
INCOME TAXES | NOTE F – INCOME TAXES As of March 31, 2013, the Company had consolidated income tax net operating loss (“NOL”) carryforwards for federal tax purposes of approximately $126 million. The federal NOL carryforward from 1997 of $564,000 will expire beginning with the 2013 tax year. The federal NOL carryforwards from 1998 forward will expire in various years beginning in 2018 and ending through the year 2032. From 2018 through 2022, approximately $7.5 million of the NOL will expire, from 2023 through 2028, approximately $80.5 million of the NOL will expire, and from 2029 through 2032, approximately $45.0 million of the NOL will expire. As of March 31, 2013 we utilized $7.5 million of the federal NOL carryforwards. For Alternative Minimum Tax (AMT) purposes, a limitation is imposed on the allowable amount of the NOL carryforward, this limitation resulted in a current federal tax expense. The AMT rate applied is 20%. The components of the provision for income tax (benefits) are attributable to continuing operations as follows:
|  | March 31, 2013 |  |  | March 31, 2012 |  |  | March 31, 2011 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 150,742 |  |  | $ | — |  |  | $ | — |
State |  |  | — |  |  |  | — |  |  |  | — |
|  | $ | 150,742 |  |  | $ | — |  |  | $ | — |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  |  | — |  |  |  | — |  |  |  | — |
|  | $ | 150,742 |  |  | $ | — |  |  | $ | — |
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
Deferred tax assets: |  |  |  |
Net operating loss and tax credit carryforwards |  | $ | 44,514,698 |
Capital loss carryforward |  |  | 395,868 |
Accrued expenses |  |  | 98,594 |
Deferred revenue |  |  | 1,020,308 |
Reserve for accounts receivable |  |  | 2,146,815 |
Reserve for inventory |  |  | 133,617 |
Start-up costs |  |  | 110,125 |
Excess of book over tax depreciation |  |  | 1,314,230 |
Stock option and restricted stock award expense |  |  | 1,594,793 |
Investment in unconsolidated entity |  |  | 3,800,928 |
Less: valuation allowance |  |  | (54,940,552 | )
|  | $ | 189,424 |
Deferred tax liability: |  |  |  |
Property and equipment basis |  | $ | 71,234 |
Prepaid expenses |  |  | 118,190 |
|  | $ | 189,424 |
Net deferred tax asset |  | $ | — |
As reflected above, we have recorded a net deferred tax asset of $0 at March 31, 2013. As required by the Accounting for Income Taxes topic in the ASC, we have evaluated whether it is more likely than not that the deferred tax assets will be realized. Based on the available evidence, we have concluded that it is more likely than not that those assets would not be realized, i.e.: without the recovery and rights of ownership or salvage rights of high-value shipwrecks, and thus a valuation allowance has been recorded as of March 31, 2013. The decrease in the valuation allowance for March 31, 2013 is due to the utilization of $7.5 million of our net operating loss carryforward. The net taxable income is a result of a $15 million dividend from Odyssey Marine Enterprises, Ltd. (a wholly owned Bahamas company). The change in the valuation allowance is as follows:
March 31, 2013 |  | $ | 54,940,552 |
December 31, 2012 |  |  | 57,901,529 |
Change in valuation allowance |  | $ | (2,960,977 | )
Income taxes for the three-month periods ended March 31, 2013 and 2012 differ from the amounts computed by applying the effective federal income tax rate of 34.0% to income (loss) before income taxes as a result of the following:
|  | March 31,2013 |  |  | March 31,2012 |
Expected (benefit) |  | $ | (3,235,669 | ) |  | $ | (1,869,034 | )
U.S. income tax expense at the AMT 20% rate |  |  | 150,742 |  |  |  | — |
State income taxes net of federal benefits |  |  | 140,868 |  |  |  | (74,736 | )
Nondeductible expense |  |  | 4,669 |  |  |  | 4,094 |
Stock options and restricted stock awards |  |  | 118,912 |  |  |  | 240,763 |
Controlled Foreign Corporation dividend income |  |  | 5,100,000 |  |  |  | — |
Derivatives |  |  | 459,593 |  |  |  | 188,191 |
Change in valuation allowance |  |  | (2,960,977 | ) |  |  | 1,308,861 |
Effects of: |  |  |  |  |  |  |  |
Change in apportionment estimate |  |  | 400,938 |  |  |  | 35,026 |
Change in net operating loss estimate |  |  | 2,240 |  |  |  | 860,527 |
Change in capital loss carryover estimate |  |  | — |  |  |  | (682,459 | )
Other, net |  |  | (30,574 | ) |  |  | (11,233 | )
|  | $ | 150,742 |  |  | $ | — |
During the three-month periods ended March 31, 2013 and 2012 the Company recognized certain tax benefits and (liabilities), prior to any valuation allowances, related to stock option plans in the amounts of $349,792 and $249,256, respectively. If we did not have a full valuation allowance, such benefits would be recorded as an increase to the deferred tax asset and increase in additional paid in capital. We have not recognized a material adjustment in the liability for unrecognized tax benefits and have not recorded any provisions for accrued interest and penalties related to uncertain tax positions. The earliest tax year still subject to examination by a major taxing jurisdiction is 2009.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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