Annual report pursuant to section 13 and 15(d)

Income Taxes

v2.3.0.11
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
6.        INCOME TAXES
 
Deferred tax assets
 
Income Taxes
 
No provision has been recorded for the years ended December 31, 2011 and 2010 since the company had net losses and the increase in the deferred tax asset was offset by the valuation allowance.
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of the Company’s net deferred income taxes are as follows:
 
Deferred Tax Asset (Liability):
 
   
2011
    
2010
  
                 
Net tax loss carry forwards   
  
$
$    1,160,000
    
$
 $       385,000
  
Derivative liability
    
-
      
 638,000
  
Stock based compensation
    
 1,630,000
      
 1,468,000
  
Depreciation
    
(40,000)
        -  
Tax credit carry forward
    
36,000
      
 36,000
  
     
2,786,000
      
 2,527,000
  
Valuation allowance
    
(2,786,000)
      
(2,527,000)
) 
Non current deferred income tax assets
  
$
0
    
$
0
  
 
At December 31, 2011 and 2010, the Company had a net operating loss carry forwards for both federal and state purposes of approximately $3.6 million and $1.9 million, respectively, which may be offset against future taxable income through 2031.
 
The Company has determined that a valuation for the entire income tax provision is required. A valuation allowance is required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance is necessary to reduce the deferred tax asset to zero, the amount that will more likely not be realized. The change in the valuation allowance for the current year is $259,000.
 
Income taxes in the statements of operations
 
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
 
   
For the Years Ended
December 31,
2011 and 2010
  
         
     Federal statutory income tax rate
    
  15.0
%
     State taxes net of federal benefit
    
   5.0
%
     
  20.0
%
     Change in valuation allowance on deferred tax asset
    
  (20.0)
)%
     Effective income tax rate
    
    0.0
%
 
In May 2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1 “Definition of Settlement in FASB Interpretation No. 48” (FSP FIN 48-1). Now codified FASB ASC 740-10-25-9 provides guidance on how to determine whether a tax position is effectively settled for purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to January 1, 2007. The implementation of this standard did not have a material impact on our consolidated financial position or results of operation.