Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes:

Income Tax Disclosure

Note 13 – Income Taxes

Deferred income taxes are provided based on the provisions of ASC Topic 740, “Accounting for Income Taxes”, to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The tax years that remain subject to examination by major taxing jurisdictions are those for the years ended December 31, 2013, 2012, 2011 and 2010.

The Company classifies interest and penalties arising from underpayment of income taxes in the consolidated statements of operations as general and administrative expenses. As of December 31, 2013, the Company had no accrued interest or penalties related to uncertain tax provisions.

Significant components of the Company’s net deferred income taxes are as follows:

	For the Years ended
	December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	2,092,216		$	1,690,212
Start-up cost		381,070			448,156
Goodwill		871,272			989,819
Amortization of IP		(6,893	)		—
Stock based compensation		542,836			686,288
Other		1,653			3,420
Deferred tax assets		3,882,154			3,817,895
Less valuation allowance		(3,882,154	)		(3,817,895	)
Net deferred tax assets after valuation allowance	$	—		$	—

A reconciliation of the U.S. statutory federal income tax rate to the effective income tax rate (benefit) follows:

Rate Reconciliation	For the Years ended
	December 31,
	2013			2012
Federal income tax at statutory rate	$	(358,686	)	$	(1,616,870	)
State Tax		(58,023	)		(261,553	)
Permanent Differences		(13,829	)		1,248
Forfeiture of fully vested stock compensation		255,438			—
Rate Change from 39.5% to 37.63%		88,950			—
Other		21,891			(5,587	)
Change in Valuation Allowance		64,259			1,882,762
	$	—		$	—

In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more than likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making the assessment. After consideration of the evidence, both positive and negative, management has determined that a $3,882,154 valuation allowance at December 31, 2013 is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The change in the valuation allowance for the current year is $64,259, as opposed to $1,882,762 on December 31, 2012. At December 31, 2013, the Company has available net operating loss carry forwards for federal income tax purposes of $5,262,149 expiring at various times from 2027 through 2032.

Valuation and Qualifying Accounts

Description	Balance at		Charged to		Write-offs	Other	Balance at
	Beginning		Cost and			Charges	End of
	of Period		Expenses				Period
Deferred tax asset valuation allowance
Year ended December 31, 2013	$	3,817,895	$	64,259			$	3,882,154
Year ended December 31, 2012	$	1,935,133	$	1,882,762			$	3,817,895