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Income Taxes
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
Note 11. Income Taxes

Note 11: Income Taxes

 

At December 31, 2011 and 2010, we had a Federal net operating loss carry forward of approximately $6,000 and $564,000, respectively.  These loss carry forwards are available to reduce future taxable income and will expire through 2030 if not utilized.

 

The provision (benefit) for income taxes consisted of the following components for the years ended December 31:

 

   2011  2010
Current:  $—     $—   
Deferred:          
Federal   105,000    77,000 
State   19,000    13,000 
       Total Deferred   124,000    90,000 
Valuation Allowance   (102,200)   (310,800)
Total provision (benefit) for income taxes   21,800    (220,800)

  

Reconciliation between the statutory rate and the effective tax rate is as follows at December 31:

 

   2011  2010
Federal statutory tax rate   34.0%   34.0%
State tax rate   6.0%   6.0%
Permanent difference   7.1%   2.9%
Other   0.4%   0.2%
    47.5%   43.1%
Change in valuation allowance   (39.1%)   (149.0%)
    Total   8.4%   (105.9%)

 

Components of net deferred income tax assets, including a valuation allowance, are as follows at December 31:

 

Current:  2011  2010
      Net operating loss carryforward  $2,000   $103,000 
Deferred revenue   71,000    21,000 
Allowance for doubtful accounts   50,000    22,000 
Charitable contributions   4,000    4,000 
Accrued litigation expenses   52,000    —   
Prepaid Expenses   (44,000)   —   
Total current deferred income tax assets   135,000    150,000 
         Less: valuation allowance   —      (47,600)
Net deferred income tax asset - current   135,000    102,400 
           
Noncurrent:          
Net operating loss carryforward   —      123,000 
Stock options   29,000    7,000 
Basis difference in intangible assets   56,000    55,000 
Basis difference in fixed assets   (21,000)   (12,000)
Total noncurrent deferred income tax assets   64,000    173,000 
         Less: valuation allowance   —      (54,600)
Net deferred income tax asset - noncurrent   64,000    118,400 
           
Total net deferred income tax assets  $199,000   $220,800 

  

The valuation allowance for deferred tax assets as of December 31, 2011 and 2010 was $0 and $102,200, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. At December 31, 2010, management elected to only partially reserve the Company’s deferred tax asset.  However, at December 31, 2011, management determined that no valuation allowance was needed based on anticipated future profitability.

 

The Company has reviewed its tax positions and has determined that it has no significant uncertain positions as of December 31, 2011 or 2010.