Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2013

Note 12 - Income Taxes

Note 12- Income Taxes

Note 12 – Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes plus operating loss carryforwards. The tax effects of significant items comprising the Company’s net deferred tax assets and liabilities are as follows:

	As of December 31,
	2013		2012
Deferred Tax Assets:
Net operating loss carryforward	$	4,627,565	$	3,594,979
Charitable contributions carryforward		5,070		5,028
Deferred Revenue		125,108		11,103
Property and Equipment		9,015		—
Stock-based compensation		67,898		—
Deferred Tax Assets	$	4,834,656	$	3,611,110
Deferred Tax Liabilities
Property and Equipment	$	—	$	(6,956)
Stock-based compensation		—		(17,489)
Convertible Stock		(67,015)		—
Deferred Tax Liabilities	$	(67,015)	$	(24,445)
Valuation Allowances		(4,767,641)		(3,586,665)
Total Net deferred tax assets	$	—	$	—

At December 31, 2013 the Company has tax operating losses of $12 million (tax effected $4.7 million). The Company is in a domestic cumulative taxable loss position for the three year period ended December 31, 2013, which is considered significant evidence that the Company may not be able to realize some portion or all of these deferred tax assets in the future. The Company has decided that based on all available evidence that a full valuation allowance should be taken against the entire deferred tax assets of $4.7 million.

The Company has federal operating loss carried forward of $11.6 million that can be carried forward for twenty years. The operating losses will begin to expire in 2029 through 2034. The Company’s ability to utilize the net operating losses is contingent on generating sufficient future taxable income prior to their expiration. As a result, an equivalent amount of taxable income would need to be generated in order to fully realize the net deferred tax assets. However due to the Company’s limited operating history and uncertainty of achieving sufficient profits to utilize the net operating loss carryforwards the Company has recorded a valuation allowance of $4.7 million related to the net deferred tax assets.

The Company will continue to monitor and update its assumptions and forecasts of future taxable income to determine if a valuation allowance will continue to be needed.

The Company’s effective income tax rate is lower than what would be expected if the federal statutory rate were applied to the loss from operations primarily because of the effect of the state tax benefit, net of federal benefit, and the change in the valuation allowance provided against deferred tax assets. The change in the valuation allowance for the year ended December 31, 2013 was $1,180,976.

Uncertain Tax Positions

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered in income.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized.  Management has evaluated the effect of the guidance provided by GAAP on Accounting for Uncertainty in Income Taxes.  Management has evaluated all other tax positions that could have a significant effect on the financial statements and determined the Company had no uncertain income tax positions at December 31, 2013.