Annual report pursuant to Section 13 and 15(d)

Tax

v2.4.0.6
Tax
 12 Months Ended
Dec. 31, 2012
Tax  
Note 16. Tax

A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows for the years ended December 31:

 

    2012     2011  
                 
Computed tax at the federal statutory rate of 34%   $ (1,319,000 )   $ (3,229,000 )
Impairment of nondeductible goodwill     -       1,209,000  
Other     8,000       11,000  
Valuation allowance     1,311,000       2,009,000  
Provision for income  taxes   $ -     $ -  

 

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. Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31:

 

    2012     2011  
Deferred tax assets:            
  Accrued compensation   $ 1,360,000     $ 1,417,000  
  Net operating loss carryforwards     5,350,000       2,492,000  
                 
Deferred tax liabilities:                
  Property and equipment     (326,000 )     -  
                 
Valuation allowance     (6,384,000 )     (3,909,000 )
                 
Net deferred tax assets (liabilities   $ -     $ -  

 

For the years ended December 31, 2012 and 2011, the Company incurred net operating losses and, accordingly, no provision for income taxes has been recorded.  In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2012, the Company had approximately $15,736,000 of net operating losses. The net operating loss carryforwards, if not utilized, will begin to expire in 2025.

 

Section 382 of the Internal Code allows post-change corporations to use pre-change net operating losses, but limit the amount of losses that may be used annually to a percentage of the entity value of the corporation at the date of the ownership change. The applicable percentage is the federal long-term tax-exempt rate for the month during which the change in ownership occurs.