13 - Income Taxes

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Text Block]

13 — Income Taxes

At September 30, 2012, the Company had net operating loss carryforwards to offset future taxable income, if any, of approximately $39 million for Federal and State taxes. The Federal net operating loss carryforwards begin to expire in 2021. The State net operating loss carryforwards began to expire in 2008.

The following is a summary of the Company’s deferred tax assets and liabilities (in thousands):

	September 30, 2012			December 31, 2011
	(unaudited)
Current assets and liabilities:
Current assets and liabilities:
Deferred revenue	$	140		$	78
Stock based compensation		85			—
Bad Debt		78			160
Accrued expenses		863			668
		1,166			906
Valuation allowance		(1,166	)		(906	)
Net current deferred tax asset	$	—		$	—
Non-current assets and liabilities:
Depreciation and amortization	$	124		$	127
Net operating loss carryforward		15,585			15,956
		15,709			16,083
Valuation allowance		(15,709	)		(16,083	)
Net non-current deferred tax asset	$	—		$	—

The reconciliation between the statutory income tax rate and the effective rate is as follows:  

	For the Nine months Ended September 30,
	2012			2011
	(unaudited)
Federal statutory tax rate		(34	)%		(34	)%
State and local taxes		(6	)		(6	)
Valuation reserve for income taxes		40			40
Effective tax rate		—	%		—	%

Management has concluded that it is more likely than not that the Company will not have sufficient taxable income of an appropriate character within the carryforward period permitted by current law to allow for the utilization of certain of the deductible amounts generating the deferred tax assets; therefore, a full valuation allowance has been established to reduce the net deferred tax assets to zero at September 30, 2012 and December 31, 2011.

The Company has applied the provision of FASB ASC 740, “Income Taxes” which clarifies the accounting for uncertainty in tax positions.  FASB ASC 740 requires the recognition of the impact of a tax position in the financial statements if that position is more likely than not of being sustained on a tax return upon examination by the relevant taxing authority, based on the technical merits of the position.  At September 30, 2012 and December 31, 2011, the Company had no unrecognized tax benefits.

The Company recognizes interest and penalties related to income tax matters in interest expense and operating expenses, respectively.  As of September 30, 2012 and December 31, 2011, the Company has no accrued interest and penalties related to uncertain tax positions.

The Company is subject to taxation in the United States of America (“U.S.”) and files tax returns in the U.S. federal jurisdiction and California (or various) state jurisdiction (s). The Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2007. The Company currently is not under examination by any tax authority.