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General form of registration statement for all companies including face-amount certificate companies

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Dec. 31, 2012
Notes to Financial Statements [Abstract]  
13. Income Taxes

Note 13. Income Taxes


The components of income tax expense (benefit) are as follows:


                 

 

 

For the Year Ended

 

 

 

December 31,

 

 

 

2012

 

 

2011

 

Current:

 

 

 

 

 

 

Federal

 

$

-

 

 

$

-

 

State

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

Deferred:

 

 

 

 

 

 

 

 

Federal

 

 

-

 

 

 

-

 

State

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

Total Income tax expense (benefit)

 

$

-

 

 

$

-

 


Significant components of the Company's deferred income tax assets and liabilities are as follows:


                 

 

 

December 31,

 

 

 

2012

 

 

2011

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss

 

$

3,649,651

 

 

$

2,064,725

 

Allowance for doubtful accounts

 

 

261,946

 

 

 

17,637

 

Intangible assets

 

 

118,740

 

 

 

-

 

Deferred rent

 

 

7,883

 

 

 

9,473

 

Stock-based compensation

 

 

128,827

 

 

 

-

 

Contributions carryforward

 

 

93

 

 

 

-

 

Total deferred tax assets

 

 

4,167,140

 

 

 

2,091,835

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Intangible assets

 

 

-

 

 

 

(148,345

)

Property and equipment

 

 

(630

)

 

 

(805

)

Total deferred tax liabilities

 

 

(630

)

 

 

(149,150

)

 

 

 

 

 

 

 

 

 

Deferred tax assets, net

 

 

4,166,510

 

 

 

1,942,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Valuation allowance:

 

 

 

 

 

 

 

 

Beginning of year

 

 

(1,942,685

)

 

 

(1,152,977

)

(Increase) decrease during year

 

 

(2,223,825

)

 

 

(789,708

)

Ending balance

 

 

(4,166,510

)

 

 

(1,942,685

)

 

 

 

 

 

 

 

 

 

Net deferred tax asset

 

$

-

 

 

$

-

 


A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. The Company recorded a valuation allowance in 2012 and 2011 due to the uncertainty of realization. Management believes that based upon its projection of future taxable operating income for the foreseeable future, it is more likely than not that the Company will not be able to realize the tax benefit associated with deferred tax assets. The net change in the valuation allowance during the years ended December 31, 2012 and 2011 was an increase of $2,223,825 and $789,708, respectively.


At December 31, 2012, the Company had $9,849,068 of net operating loss carryforwards which will expire from 2029 to 2032. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2012, tax years 2004 and 2008 through 2011 remain open for IRS audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years.


A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows:


                 

 

 

For the Year Ended

 

 

 

December 31,

 

 

 

2012

 

 

2011

 

 

 

 

 

 

 

 

Statutory U.S. federal income tax rate

 

 

34.0

%

 

 

34.0

%

State income taxes, net of federal tax benefit

 

 

3.1

 

 

 

3.1

 

Other

 

 

(0.1

)

 

 

(0.1

)

Change in valuation allowance

 

 

(37.0

)

 

 

(37.0

)

Effective income tax rate

 

 

0.0

%

 

 

0.0

%