Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Note 7. Income Taxes 

The provision for income taxes consists of the following components:

	Nine months ended September 30,
	2011		2010
Current (benefit) expense	$	-	$	7,610
Deferred Tax (benefit)		-		(80,384	)
	$	-	$	(72,774	)

The components of deferred income tax assets and liabilities are as follows:

	September 30,			December 31,
	2011			2010
Long-term deferred tax assets:
Stock compensation benefit	$	215,539		$	206,170
Net operating loss carryforward		1,598,842			1,375,108
Total long-term deferred tax assets		1,814,381			1,581,278
Valuation allowance		(310,023	)		-
		1,504,358			1,560,938
Long-term deferred tax liabilities:
Intangible assets		(481,115	)		(546,804	)
Property and equipment		(453,661	)		(464,892	)
Total long-term deferred tax liabilities		(934,776	)		(1,011,696	)
Net deferred tax assets	$	569,582		$	569,582

Our Federal net operating loss (“NOL”) carryforward balance as of September 30, 2011 was $4,618,762, expiring between 2011 and 2030. Management has assessed the realization of the deferred tax assets and has determined that it is more likely than not that a significant portion will be realized.  A schedule of the NOLs is as follows:

Tax Year	loss
1996	$	111,017
1997		66,707
1998		184,360
1999		187,920
2000		25,095
2001		104,154
2002		15,076
2003		96,977
2004		78,293
2005		70,824
2006		48,526
2007		180,521
2008		534,087
2009		1,444,831
2010		842,251
Current year taxable loss		628,123
	$	4,618,762

The Company's net deferred tax assets before valuation allowance as of September 30, 2011 was approximately $880,000, most of which relates to net operating losses that expire from 2011 to 2030. The Company recorded an operating loss for the quarter and has a recent history of operating losses. The Company has maintained the value of the deferred tax asset as we believe it more likely than not that the Company will realize operating profits and taxable income so as to utilize the net operating losses in the future. However, the Company has recorded a valuation allowance due to the potential that the 1996 and 1997 net operating losses will expire before being utilized.

The Company is subject to income taxes in the U.S. federal jurisdiction and a number of state jurisdictions. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by tax authorities for the years before 2007.