Annual report pursuant to section 13 and 15(d)

15. Income Taxes

v2.4.0.8
15. Income Taxes
12 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
15. Income Taxes

 

The provision for income taxes for the years ending December 31, 2013 and 2012 consists of the following:

 

    2013     2012  
Deferred            
   Federal   $ (1,843,000 )   $ (1,148,000 )
   State     -       -  
      (1,843,000 )     (1,148,000 )
                 
Current                
  Federal     -       -  
  State     51,887          
      51,887       -  
                 
Change in valuation allowance     1,843,000       1,148,000  
                 
Tax Provision   $ 51,887     $ -  

 

The following reconciles the Federal statutory tax rate to the effective income tax rate for the years ended December 31, 2013 and 2012 :

 

    2013     2012  
    %     %  
Federal statutory rate     (34.0 )     (34.0 )
State net of federal tax     (2.9 )     (3.9 )
Other     1.6       15.9  
Change in valuation allowance     36.3       22.0  
      1.0       -  

 

 

The components of the Company's deferred tax assets and liabilities consist of the following at December 31, 2013 and 2012:

 

    2013     2012  
Deferred income tax assets:            
Net operating losses   $ 44,365,000     $ 44,144,000  
Allowance for doubtful accounts     52,000       102,000  
Derivative liability     1,728,000       405,000  
Accrued liabilities and other     999,000       398,000  
Intangible Assets     504,000       -  
Property and equipment     337,000       120,000  
      47,985,000       45,169,000  
                 
Deferred Income tax Liabilities:                
Debt discount     1,664,000       690,000  
      1,664,000       690,000  
Deferred tax asset, net     46,321,000       44,479,000  
                 
Less: Valuation Allowance     (46,321,000 )     (44,479,000 )
                 
Net Deferred Tax Assets   $ -     $ -  

 

At December 31, 2013 and 2012, the Company has net operating loss carry forwards of approximately $132.7 million and $129.2 million, respectively, that may be applied against future taxable income, and which expire in various years from 2015 to 2033.  Under the Tax Reform Act of 1986, the amounts of and benefits from net operating loss carry forwards and credits may be impaired or limited in certain circumstances.  Events which cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined, over a three year period.  The amount of such limitation, if any has not been determined.

 

The Company maintains a full valuation allowance for its net deferred tax assets, as the Company’s management has determined that it is more likely than not that the Company will not generate sufficient future taxable income to be able to utilize these deferred tax assets.