Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes
9 Months Ended
Sep. 30, 2013
Income Taxes [Text Block]

Note 5. Income Taxes

     Our tax provision is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. The 2013 and 2012 annual effective tax rate is estimated to be a combined 40% for the U.S. federal and state statutory tax rate. We review tax uncertainties in light of changing facts and circumstances and adjust them accordingly. As of September 30, 2013 and December 31, 2012, there were no tax contingencies recorded.

     Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting, and the amounts recognized for income tax purposes. The significant components of deferred tax assets (at a 40% effective tax rate) as of September 30, 2013 and December 31, 2012, respectively, are as follows:

Deferred Tax Assets (in millions)

    Total     Total     Deferred Tax Asset  
    2013     2012     2013     2012  

Capitalized start-up costs

$ 4.7   $ 5.1   $ 1.9   $ 2.0  

Stock-based compensation

  21.9     21.7     8.8     8.7  

Net operating loss carry-forward

  38.2     34.4     15.3     13.8  



Less: valuation allowance

  (64.8 )   (61.2 )   (26.0 )   (24.5 )




$   -   $   -   $   -   $   -  

     We have a net operating loss carry-forward for federal and state tax purposes of approximately $38 million at September 30, 2013, that is available to offset future taxable income, which will begin to expire in the year 2022. For financial reporting purposes, no deferred tax asset was recognized because at September 30, 2013 and December 31, 2012, management estimates that it is more likely than not that substantially all of the net operating losses will expire unused. As a result, the amount of the deferred tax assets considered realizable was reduced 100% by a valuation allowance. The change in the valuation allowance was approximately $1.5 million for the nine months ended September 30, 2013 and 2012, respectively. Many of the Company’s operating expenses in its 2007 and 2006 tax years were classified under the Internal Revenue Code as capitalized “Startup Costs”, which did not begin to be deductible for tax purposes until 2008. The Company files a consolidated tax return with its subsidiaries. The Company is no longer subject to U.S. federal, state, or non-U.S. income tax examinations by tax authorities for tax years before 2010. The tax returns from prior years to 2009 are subject to examination for the limited purpose of challenging the net operating losses carried forward from those periods.