Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes

Income Taxes

Significant components of the Company’s deferred tax assets and liabilities for federal and state income taxes as of December 31, consisted of the following:

	2013			2012
Deferred tax assets
Net operating loss carry-forwards	$	27,516,000		$	27,079,000
Stock based compensation		852,000			845,000
Other, net		36,000			(406,000	)
		28,404,000			27,518,000
Less valuation allowance		(28,404,000	)		(27,518,000	)
Net deferred tax assets	$	—		$	—

The Tax Reform Act of 1986 limits the use of net operating loss carryforwards in certain situations where changed occur in the stock ownership of a company. In the event the Company has had a change in ownership, utilization of the carryforwards could be restricted.

Deferred taxes arise from temporary differences in the recognition of certain expenses for tax and financial reporting purposes. The deferred tax assets have been offset by a valuation allowance since management does not believe the recoverability of these in future years is more likely than not to occur. The valuation allowance increased by $887,000 in 2013 compared to a increase of $1,788,000 in 2012. As of December 31, 2013, the Company had net operating loss carry forwards for federal and state income tax purposes of approximately $67,817,000 and $50,428,000, respectively. These operating loss carry forwards will expire in 2014 through 2033.

The provision for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (34% in 2013 and 2012) to income taxes as follows:

	December 31, 2013			December 31, 2012
Tax benefit computed at 34%	$	(987,000	)	$	(2,800,000	)
Change in valuation allowance		887,000			1,788,000
State tax (net of Federal benefit)		(169,000	)		(480,000	)
Change in carryovers and tax attributes		269,000			1,492,000
Net tax benefit	$	—		$	—

The Company files federal income tax returns in the U.S. and in various state jurisdictions. The Company has not been audited by the Internal Revenue Service or any state for income taxes. The Company reviews its recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. The Company reviews all material tax positions for all years open to statute to determine whether it is more likely than not that the positions taken would be sustained based on the technical merits of those positions. The Company did not recognize any adjustments for uncertain tax positions as of and during the years ended December 31, 2013 and 2012.