9. Income Taxes

Net operating losses

The Company generated net operating losses (“NOLs”) during the three months ended March 31, 2014 and prior periods. The following table provides a summary of the NOL activity for the three months ended March 31, 2014:


Beginning NOL	$	(140,959	)
U.S. GAAP pretax income		16,479
Income tax differences:
Temporary		(2,603	)
Permanent		(18,804	)

Ending NOL	$	(145,887	)

Deferred tax asset

At March 31, 2014 and December 31, 2013, $130,460 and $111,635 of the NOLs were generated from stock-based compensation amounts recognized for tax purposes at the time options are exercised (at the intrinsic value) or restricted stock is vested (at fair value of the share price) in excess of amounts previously expensed at the date of grant for U.S. GAAP purposes. Since these amounts cannot be recognized as a deferred tax asset under U.S. GAAP, accordingly, a deferred tax asset related to this amount is not recorded. In addition, $3,487 of the NOLs are deemed worthless.

During the three months ended March 31, 2014, management determined that although realization is not assured, it believes that it is more likely than not the remaining gross deferred tax asset of $30,211 will be realized. Therefore, it released the valuation allowance previously recorded resulting in a tax benefit of $13,725 on the Company’s Consolidated Statement of Operations and net deferred tax asset on the Company’s Consolidated Balance Sheet.

A summary of the components of the deferred tax asset and tax affected benefit recorded is as follows:


NOLs available for deferred tax asset	$	11,940
Stock-based compensation		13,437
Deferred rent liability		4,726
Other		108

Gross deferred tax asset		30,211
Income tax rate		45.43	%

Tax affected	$	13,725