Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v2.4.0.6
INCOME TAXES
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
INCOME TAXES

Note F – Income Taxes

 

At December 31, 2012, the Company had net operating loss carryforwards (NOLs) totaling approximately $25,255,000 expiring through 2029, with a future tax benefit of approximately $8,840,000. During 2011, as a result of the Company’s recent results and projected future operating results, management determined that a portion of the NOL was more likely than not to be utilized resulting in the recording of a one-time, non-cash tax benefit of $7,000,000 (income) or $0.29 per share (basic) for the three and six month periods ended June 30,2011. At December 31, 2011, $6,903,000 has been recorded as a deferred tax asset on the Company’s balance sheet and $6,903,000 (or $0.22 per share on a diluted basis) has also been recorded as deferred tax benefit on the Company’s statement of income for the year ended December 31, 2011. At December 31, 2012, $6,194,000 has been recorded as a deferred tax asset on the Company’s balance sheet. During the year ended December 31, 2012 as a result of income (before taxes) for the period of $3,372,000, $37,000 was recorded as income tax expense and the deferred tax asset was reduced by $709,000 to $6,194,000. To the extent that the Company earns income in the future, it will report income tax expense and such expense attributable to federal income taxes will reduce the recorded income tax benefit asset reflected on the balance sheet. Management will continue to evaluate the recoverability of the NOL and adjust the deferred tax asset appropriately. Utilization of NOL credit carryforwards can be subject to a substantial annual limitation due to ownership change limitations that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions.

 

 

The principal components of the net deferred tax assets are as follows:

 

  Year Ended
 

December 31,

 

2012

2011

     
Deferred tax assets:    
Net operating loss carryforwards $8,840,000  $9,450,000 
Options and warrants not yet deducted, for tax purposes     420,000       990,000 
   
  9,250,000  10,440,000 
Valuation allowance (3,066,000) (3,537,000)
     
Net deferred tax assets $6,194,000      $ 6,903,000

 

The reconciliation between the taxes as shown and the amount that would be computed by applying the statutory federal income tax rate to the income before income taxes is as follows:

 

  Year Ended
 

December 31,

 

2012

2011

     
Income tax - statutory rate 34.0% 34.0%
State and local, net   0.0% 0.0%
Valuation allowance on deferred tax assets (12.0)% (461.3)%
(Utilization of NOL)    

 

 

While only the tax returns for the four years ended December 31, 2012 are open for examination for taxes payable for those years, tax authorities could challenge returns for earlier years to the extent that they generated loss carry forwards that are available for those or future years.