15.

INCOME TAXES

The components of the provision for income tax expense are as follows for the three months ended:

	September 30, 2013		September 30, 2012
Current taxes
Federal	$	--	$	--
State		--		--
Current taxes		--		--
Change in deferred taxes		(46,799)		840,909
Change in valuation allowance		47,762		(818,060)

Provision for income tax expense	$	963	$	22,849

The components of the provision for income tax expense are as follows for the nine months ended:

	September 30, 2013		September 30, 2012
Current taxes
Federal	$	--	$	--
State		--		--
Current taxes		--		--
Change in deferred taxes		(82,091)		667,494
Change in valuation allowance		86,381		(631,149)
Provision for income tax expense	$	4,290	$	36,345

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at September 30, 2013:

Deferred tax assets:
Equity based compensation	$	205,903
Allowance for doubtful accounts		13,260
Depreciation and amortization timing differences		--
Net operating loss carryforward		1,183,114
On-line training certificate reserve		823
Total deferred tax assets		1,403,100
Valuation allowance		(1,397,305)

Deferred tax assets net of valuation allowance		5,795

Less deferred tax assets – non-current, net of valuation allowance		5,589

Deferred tax assets – current, net of valuation allowance	$	206

The effective tax rate used for calculation of the deferred taxes as of September 30, 2013 was 34%. The Company has established a valuation allowance against deferred tax assets of $1,397,305 or 99%, due to the uncertainty regarding realization, comprised primarily of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts, and 97% reserve against the deferred tax assets attributable to the equity based compensation.

The significant differences between the statutory tax rate and the effective tax rates for the Company for the three months ended are as follows:

	September 30, 2013			September 30, 2012
Statutory tax rate		--	%	--	%
Increase (decrease) in rates resulting from:
Net operating loss carryforward or carryback		(13)	%	62	%
Equity based compensation and loss		3	%	(4)	%
Book/tax depreciation and amortization differences		--	%	--	%
Change in valuation allowance		10	%	(55)	%
Other		--	%	--	%
Effective tax rate		--	%	3	%

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2012:

Deferred tax assets:
Equity based compensation	$	236,145
Allowance for doubtful accounts		12,240
Depreciation and amortization timing differences		--
Net operating loss carryforward		1,071,409
On-line training certificate reserve		1,215
Total deferred tax assets		1,321,009
Valuation allowance		(1,310,924)

Deferred tax assets net of valuation allowance		10,085

Less deferred tax assets – non-current, net of valuation allowance		9,781

Deferred tax assets – current, net of valuation allowance	$	304

The effective tax rate used for calculation of the deferred taxes as of December 31, 2012 was 34%. The Company established a valuation allowance against deferred tax assets of $1,310,924, or 99%, due to the uncertainty regarding realization, comprised primarily of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts, and 95% reserve against the deferred tax assets attributable to the equity based compensation.