• Filing Date: 2013-04-12
  • Form Type: 10-K
  • Description: Annual report
v2.4.0.6
INCOME TAXES
12 Months Ended
Dec. 31, 2012
INCOME TAXES  
INCOME TAXES

NOTE 14 – INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC Topic No. 740, “Income Taxes.”  This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.

 

At December 31, 2012, a deferred tax asset results from the deferred tax benefit of asset reserve accounts in the amount of approximately $2,894,000 and net operating loss carryover of approximately $27,100,000, based on the U.S. Corporate income tax rate of 34%.  A 100% valuation allowance has been provided for both the current and non-current deferred tax assets, as the ability of the Company to generate sufficient taxable income in the future is uncertain. The change in the valuation allowance is approximately $1,928,000.

 

The unexpired net operating loss carry forward at December 31, 2012 is approximately $27,700,000 with various expiration dates between 2018 and 2032 if not utilized.

 





 

Current deferred tax asset:

 

 

2012

 

 

2011

 

Asset Reserve Accounts

 

$

984,068

 

 

$

142,736

 

Valuation allowance

 

 

(984,068

)

 

 

(142,736

)

Net benefit recorded

 

 

-

 

 

 

-

 

 

 

Non-current deferred tax asset:

 

 

2012

 

 

2011

 

34% of net operating loss carry forwards

 

$

9,214,157

 

 

$

8,127,127

 

Valuation allowance

 

 

(9,214,157

)

 

 

(8,127,127

)

Net non-current deferred tax asset

 

 

-

 

 

 

-

 

 

 

Reconciliations of the expected federal income tax benefit based on the statutory income tax rate of 34% to the actual benefit for the years ended December 31, 2012 and 2011 are listed below.

 

 

2012

 

 

2011

 

Expected federal income tax benefit

 

 

$627,410

 

 

 

$4,220,745

 

Valuation allowance

 

 

(1,928,362

)

 

 

(1,530,637

)

Debt Settlement Expense

 

 

8,940

 

 

 

(383,831

)

Impairment Loss

 

 

(9,195

)

 

 

(1,090,846

)

Derivative Expense

 

 

1,581,360

 

 

 

(836,831

)

Amortization of beneficial Conversion Discount

 

 

(99,632

)

 

 

(291,175

)

Other

 

 

(167,871

)

 

 

(87,969

)

Expiration of Net Operating Loss Carryover

 

 

(12,650

)

 

 

-

 

Income tax expense (benefit)

 

$

-

 

 

$

-

 

 

The Company has no tax positions at December 31, 2012 and 2011 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

 

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.  During the years ended December 31, 2012 and 2011, the Company recognized no interest and penalties.  All tax years starting with 2009 are open for examination.