INCOME TAXES

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10. INCOME TAXES

We have not made provision for income taxes for the years ended December 31, 2012 or 2011, since we have net operating loss carryforwards to offset current taxable income.

Deferred tax assets consist of the following at December 31:

	2012			2011
Benefit from net operating loss carryforwards	$	2,279,261		$	2,218,568
Less:  valuation allowance		(2,279,261	)		(2,218,568	)
	$	-		$	-

Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a full valuation has been established to offset the net deferred income tax asset. Based on management’s assessment, utilizing an effective combined tax rate for federal and state taxes of approximately 37%, we have determined that it is not currently likely that a deferred income tax asset of approximately $2,279,261 and $2,218,568 attributable to the future utilization of the approximate $7,043,430 in eligible net operating loss carryforwards as of December 31, 2012 will be realized. We will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforwards will begin to expire in varying amounts from year 2018 to 2031.

Current income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, amounts available to offset future taxable income may be limited under Section 382 of the Internal Revenue Code.

Following is a reconciliation of the (provision) benefit for federal income taxes as reported in the accompanying Statements of Operations, to the expected amount at the 34% federal statutory rate:

	2012			2011
Income tax (provision) benefit at the 34% statutory rate	$	146,274		$	(447,101	)
Effect of state income taxes		12,906			(39,511	)
Non-deductible interest expense		(98,487	)		(55,605	)
Other		-			(2,112	)
Less change in valuation allowance		(60,693	)		544,329
Income tax (provision) benefit	$	-		$	-

During 2010, we filed certain delinquent U.S. federal and state tax returns and are now current in our income tax return filings. Such filings did not have any significant impact on our financial position, results of operations and cash flows considering our net operating loss carryforward position.

We are subject to taxation in the United States and certain state jurisdictions. Our tax years for 2002 and forward are subject to examination by the United States and applicable state tax authorities due to the carryforwards of unutilized net operating losses and the timing of tax filings.