10. Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

10. Income Taxes

Note 10. Income Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31:

	2012			2011
Gross deferred tax assets:
Net operating loss carryforwards	$	14,694,000		$	15,100,000
Depreciation and other items		36,000			70,000
Total deferred tax assets		14,730,000			15,170,000
Gross deferred tax liabilities:
Other items		-			(2,000	)
Total deferred tax liabilities		-			(2,000	)
Net deferred tax asset		14,730,000			15,168,000
Less: valuation allowance		(14,730,000	)		(15,168,000	)
Net deferred tax asset recorded	$	-		$	-

Management has reviewed its net deferred asset position, and due to the history of operating losses has determined that the application of a full valuation allowance at December 31, 2012 and December 31, 2011 is warranted. If applicable, the Company would recognize interest expense and penalties related to uncertain tax positions in interest expense. As of December 31, 2012, the Company had not accrued any interest or penalties related to uncertain tax provisions.

The Company has net operating loss carryforwards for tax purposes of approximately $44 million that begin to expire in the year 2020. Approximately $3.5 million of the total net operating loss is subject to an IRS Section 382 limitation from 1999.

The reconciliation of federal income tax computed at the U.S. federal statutory tax rates to total income tax expense is as follows for the year ended December 31:

	2012			2011
Tax (benefit) at statutory rate -- 34%	$	424,000		$	138,000
Change in valuation allowance		(438,000	)		(2,960,000	)
Permanent and other differences		14,000			2,822,000
Alternative minimum tax		20,500			-
Income tax expense	$	20,500		$	-