Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
Income Taxes

Note 8. Income Taxes

 

Net deferred tax asset includes the following components as of December 31, 2011 and 2010:

  

    2011     2010  
Deferred tax assets (liabilities):                
Net operating loss carryforward   $ 26,458,000     $ 27,488,000  
Allowance for doubtful accounts     291,000       267,000  
Book / tax difference in depreciable assets     15,000       121,000  
Stock option expense     775,000       668,000  
Accrued expenses     161,000       63,000  
Deferred revenue     25,000       28,000  
Subtotal     27,725,000       28,635,000  
Valuation Allowance     (27,725,000 )     (28,635,000 )
Net deferred tax asset (liability)   $ -     $ -  

 

The income tax provision differs from the amount of income tax determined by applying the statutory federal income tax rate to pretax loss for the years ended December 31, 2011, and 2010 due to the following:

 

    2011     2010  
Compted Federal "expected" tax benefit   $ (411,000 )   $ (343,000 )
Increase (decrease) in income taxes resulting from:                
Benefit from state taxes     (72,000 )     (60,000 )
Nondeductible expenses     -       10,000  
Expiration of net operating loss carryforwards     1,401,000       -  
Other timing differences     (8,000 )     -  
Increase (decrease) in valuation allowance     (910,000 )     393,000  
Income tax provision   $ -     $ -  

 

As of December 31, 2011, the Company had available federal net operating loss carryforwards of approximately $66,100,000 for future tax purposes that expire from 2012 to 2029. The Company believes that Section 382 of the Internal Revenue Code and the associated U.S. Treasury Regulations will significantly limit the amount of net operating loss carryforward that the Company will be able to utilize in any tax year. All losses incurred prior to the Company’s change of ownership event on June 27, 2005 totaled approximately $48,000,000. The utilization of these losses is limited (by Internal Revenue Code Section 382) to approximately $950,000 per year through 2025.

 

A valuation allowance was established due to the uncertainty relating to the future utilization of net operating loss carryforwards. The amount of the deferred tax assets considered realizable could be adjusted in the future based upon changes in circumstances that result in a change in our assessment of our ability to realize those deferred tax assets through the generation of taxable income or other tax events.

 

The Company accounts for all income taxes in accordance ASC 740 – Income Taxes which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It requires that we recognize in our consolidated financial statements, only those tax positions that are “more-likely-than-not” of being sustained as of the adoption date, based on the technical merits of the position. There are no unrecognized tax benefits in the Company’s financial statements as of December 31, 2011 and 2010.

 

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. As the Company has a federal Net Operating Loss carryforward from the year ended December 31, 1995 forward, all tax years from 1995 forward are subject to examination. As states have varying carryforward periods, and the Company has recently entered into additional states, the Company is generally subject to examination by the states for the previous 15 years or less.

 

The Company recognizes interest accrued, net of tax and penalties, related to unrecognized tax benefits as components of income tax provision as applicable. As of December 31, 2011, the Company did not have any accrued interest or penalties.