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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Notes to Financial Statements |
Note 9 - Income Taxes | Provision (Benefit) for Income Taxes The provision for income taxes consists of the following:
|  | 2011 |  |  | 2010 |
Current tax provision |  | $ | - |  |  | $ | - |
Deferred tax (benefit) provision |  |  | - |  |  |  | - |
Total tax (benefit) provision |  | $ | - |  |  | $ | - |
A reconciliation of the expected Federal statutory rate of 34% to our actual rate as reported for each of the periods presented is as follows:
|  | 2011 |  |  | 2010 |
Expected statutory rate |  |  | (34 | )% |  |  | (34 | )%
State income tax rate, net of federal benefit |  |  | (4 | )% |  |  | (4 | )%
Permanent differences |  |  | 2 | % |  |  | 4 | %
Valuation allowance |  |  | 36 | % |  |  | 34 | %
|  |  | - |  |  |  | - |
Deferred Income Taxes Deferred income taxes are the result of timing differences between book and tax basis of certain assets and liabilities, timing of income and expense recognition of certain items and net operating loss carry-forwards. We assess temporary differences resulting from different treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in the consolidated balance sheets. We evaluate the realizability of our deferred tax assets and assess the need for a valuation allowance on an ongoing basis. In evaluating our deferred tax assets, we consider whether it is more likely than not that the deferred income tax assets will be realized. The ultimate realization of deferred tax assets depends upon generating sufficient future taxable income prior to the expiration of the tax attributes. In assessing the need for a valuation allowance we must project future levels of taxable income. This assessment requires significant judgment. We examined the evidence related to a recent history of tax losses, the economic conditions in which we operate, recent organizational changes and, our forecasts and projections. As a result, we were unable to support a conclusion that it is more likely than not that any of our deferred tax assets will be realized. We therefore have recorded a full valuation for the net deferred tax assets as of December 31, 2011 and 2010. We will continue to evaluate our deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of our deferred income tax assets satisfies the realization standard, the valuation allowance will be reduced accordingly. The 2011 net increase of approximately $3.5 million in valuation allowance related to deferred tax assets from operating loss carryforwards. The following is a schedule of the deferred tax assets and liabilities as of December 31, 2011 and 2010:
|  | 2011 |  |  | 2010 |
Deferred tax assets: |  |  |  |  |  |
Net operating loss carry forward |  | $ | 8,331,000 |  |  | $ | 5,871,000 |
Intangible assets |  |  | 5,499,000 |  |  |  | 4,984,000 |
Deferred rent |  |  | 177,000 |  |  |  | 381,000 |
Depreciation |  |  | 299,000 |  |  |  | 272,000 |
Allowance for doubtful accounts |  |  | 257,000 |  |  |  | 406,000 |
Accrued expense |  |  | 257,000 |  |  |  | - |
Stock based expenses |  |  | 942,000 |  |  |  | 324,000 |
Other |  |  | 220,000 |  |  |  | 214,000 |
Subtotal |  |  | 15,982,000 |  |  |  | 12,452,000 |
Less valuation allowance |  |  | (15,982,000 | ) |  |  | (12,452,000 | )
Total |  |  | - |  |  |  | - |
Less: current portion |  |  | - |  |  |  | - |
Non-current portion |  |  | - |  |  |  | - |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | - |  |  |  | - |
Intangibles |  |  | - |  |  |  | - |
Total |  |  | - |  |  |  | - |
Less: current portion |  |  | - |  |  |  | - |
Non-current portion |  |  | - |  |  |  | - |
Total deferred tax assets (liabilities) |  |  | - |  |  |  | - |
The net operating losses amounted to approximately $21.8 million and expire beginning 2022 through 2031. Under the Internal Revenue Code of 1986, as amended, these losses can be carried forward twenty years. We have approximately $2.5 million of carry forward deductions from 2006 relating to stock options exercised as of December 31, 2011. The adoption of provisions, required by ASC 740, did not result in any adjustments. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2007 through 2011. We and our subsidiaries state income tax returns are open to audit under the statute of limitations for the years ending December 31, 2007 through 2011. We recognize interest and penalties related to income taxes in income tax expense. We have incurred no penalties and interest for the years ended December 31, 2011 and 2010.

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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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: 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 3: 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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 Reference 6: 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 7: 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 8: 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 + Details
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