14.

INCOME TAXES

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

	September 30, 2014		September 30, 2013
Current taxes
Federal	$	—	$	—
State		—		—
Current taxes		—		—
Change in deferred taxes				(46,799)
Change in valuation allowance		—		47,762

Provision for income tax expense	$	—	$	963

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

	September 30, 2014		September 30, 2013
Current taxes
Federal	$	—	$	—
State		—		—
Current taxes		—		—
Change in deferred taxes		47,311		(82,091)
Change in valuation allowance		(47,267)		86,381

Provision for income tax expense	$	44	$	4,290

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at September 30, 2014:

Deferred tax assets:
Equity based compensation	$	97,276
Allowance for doubtful accounts		16,320
Net operating loss carryforward		1,062,387
On-line training certificate reserve		743
Total deferred tax assets		1,176,726
Valuation allowance		(1,174,163)

Deferred tax assets net of valuation allowance		2,563

Less deferred tax assets – non-current, net of valuation allowance		2,330

Deferred tax assets – current, net of valuation allowance	$	233

The effective tax rate used for calculation of the deferred taxes as of September 30, 2014 was 34%. The Company has established a valuation allowance against deferred tax assets of $1,174,163 or 99.8%, 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 nine months ended are as follows:

	September 30, 2014		September 30, 2013
Statutory tax rate	—	%	—	%
Increase (decrease) in rates resulting from:
Net operating loss carryforward or carryback	(35)	%	(13)	%
Equity based compensation and loss	—	%	3	%
Change in valuation allowance	33	%	10	%
Change in allowance for doubtful accounts	2	%	—	%
Effective tax rate	—	%	—	%

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2013:

Deferred tax assets:
Equity based compensation	$	97,276
Allowance for doubtful accounts		13,260
Depreciation and amortization timing differences		—
Net operating loss carryforward		1,124,299
On-line training certificate reserve		1,109
Total deferred tax assets		1,235,944
Valuation allowance		(1,233,337)

Deferred tax assets net of valuation allowance		2,607

Less deferred tax assets – non-current, net of valuation allowance		2,330

Deferred tax assets – current, net of valuation allowance	$	277

The effective tax rate used for calculation of the deferred taxes as of December 31, 2013 was 34%. The Company has established a valuation allowance against deferred tax assets of $1,235,879 or 99.8%, 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.