Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes
6 Months Ended
Jun. 30, 2012
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 2012 and 2011 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, 2012 and December 31, 2011, 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, 2012 and December 31, 2011, respectively, are as follows:

Deferred Tax Assets   Total Amount     Deferred Tax Asset  
    2012     2011     2012     2011  
Capitalized start-up costs $ 5,333,739   $ 5,589,739   $ 2,133,496   $ 2,235,896  
Stock-based compensation   21,488,009     21,070,686     8,595,204     8,428,274  
Net operating loss carry-forward   32,213,929     30,463,782     12,885,572     12,185,513  
Less: valuation allowance   (59,035,677 )   (57,124,207 )   (23,614,272 )   ( 22,849,683 )
  $ -   $ -   $ -   $ -  

We have a net operating loss carry-forward for federal and state tax purposes of approximately $32.2 million at June 30, 2012, that is available to offset future taxable income, that will begin to expire in the year 2021. For financial reporting purposes, no deferred tax asset was recognized because at June 30, 2012 and December 31, 2011, 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 $0.6 million and $0.4 million for the three months ended June 30, 2012 and 2011, respectively, and was approximately $0.1 million for each of the six month periods ended June 30, 2012 and 2011. 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.