XML 73 R20.htm IDEA: XBRL DOCUMENT v2.4.0.6
13. INCOME TAXES
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
INCOME TAXES

There was no Federal income tax expense for the years ended December 31, 2012 and 2011 due to the Company’s net losses. Income tax expense represents minimum state taxes due. During 2011, in addition to the $1,600 minimum taxes disclosed below, the Company had to repay previous years’ erroneous State refunds relating to fiscal years 2008 and 2009, along with some local taxes resulting in a total income tax expense of $13,160.

 

The blended Federal and State tax rate of 39.83% applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 34% to loss before taxes), as follows:

 

   Year ended December 31, 
   2012   2011 
Computed “expected” tax expense (benefit)  $(843,193)  $(866,148)
State taxes, net of federal benefit   (180,827)   (203,167)
Goodwill impairment and other non-deductible items   (155,420)   (219,135)
Change in deferred tax asset valuation allowance   1,181,188    1,290,050 
   $1,748   $1,600 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31 are as follows:

 

   2012   2011 
Deferred tax assets:          
Accrued vacation  $12,430   $54,360 
Accrued salaries   27,386    143,030 
Charitable contributions   2,731    2,333 
Reserve for bad debt   18,684    29,288 
Stock options   4,237,988    3,932,565 
Other   3,751    – 
Net operating loss carryforward   5,193,118    4,162,918 
Total gross deferred tax assets   9,496,088    8,324,494 
Less: Deferred tax asset valuation allowance   (9,480,641)   (8,299,453)
Total net deferred tax assets   15,447    25,041 
           
Deferred tax liabilities:          
Depreciation   (15,447)   (25,041)
Total deferred tax liabilities   (15,447)   (25,041)
Total net deferred taxes  $–   $– 

 

The valuation allowance at December 31, 2012 was $9,480,641. The increase in the valuation allowance during 2012 was $1,181,188.

 

At December 31, 2012, the Company has a net operating loss carry forward of $13,036,768 available to offset future net income through 2032. The NOL expires during the years 2014 to 2032. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.