Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes
6 Months Ended
Jun. 30, 2014
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 2014 and 2013 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 June 30, 2014 and December 31, 2013, 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 June 30, 2014 and December 31, 2013, respectively, are as follows:

Deferred Tax Assets (in millions)

    Total     Total     Deferred Tax Asset  
    2014     2013     2014     2013  
Capitalized start-up costs $ 4.3   $ 4.8   $ 1.7    $ 1.9  
Stock-based compensation   17.7     17.6     7.1     7.0  
Net operating loss carry-forward   43.4     36.8     17.3     14.7  
Less: valuation allowance   (65.4 )   (59.2 )   (26.1 )   (23.6 )
                                                                                                                      $   -   $   -   $   -   $   -  

We have a net operating loss carry-forward for federal and state tax purposes of approximately $43 million at June 30, 2014, that is potentially available to offset future taxable income, which will begin to expire in the year 2021. For financial reporting purposes, no deferred tax asset was recognized because at June 30, 2014 and December 31, 2013, 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 $1.1 million and $0.6 million for the six months ended June 30, 2014 and 2013, 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, except that earlier years can be examined for the sole purpose of challenging the net operating loss carry-forwards arising in those years.