Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Text Block]

Note 8. 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 2011 and 2010 annual effective tax rate is estimated to be at a combined 40% for the U.S. federal and states statutory tax rate. We review tax uncertainties in light of changing facts and circumstances and adjust them accordingly. As of December 31, 2011 and 2010, 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 December 31, 2011 and 2010 respectively, are as follows:

Deferred Tax Assets   Total Amount     Deferred Tax Asset  
          Amount  
    2011     2010     2011     2010  
                         
Capitalized start-up costs $  5,589,739   $  6,101,739   $  2,235,896   $  2,440,696  
Stock-based compensation   21,070,686     20,073,918     8,428,274     8,029,567  
Net operating loss carry-forward   30,463,782     24,992,683     12,185,513     9,997,073  
Less: valuation allowance   (57,124,207 )   (51,168,340 )   (22,849,683 )   (20,467,336 )
                         
  $  -   $  -   $  -   $  -  

     We have a net operating loss carry-forward for federal and state tax purposes of approximately $30.5 million at December 31, 2011 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 December 31, 2011 and 2010, substantially all of the net operating losses are presently expected to 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 $2.3 million and $3.1 million for the years ended December 31, 2011 and 2010, 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 were not deductible for tax purposes until 2008.

     The Company files a consolidated tax return with its subsidiaries.