Income Taxes

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Income Taxes

9. Income Taxes

The United States and foreign components of loss from continuing operations before income taxes are as follows for the years ended December 31:

	2011			2010
United States	$	(1,611,052	)	$	(1,565,448	)
Foreign		(790	)		(8,608	)
Intercompany elimination		—			—
Loss from continuing operations before income taxes	$	(1,611,842	)	$	(1,574,056	)

The significant components of the Company’s net deferred tax assets are as follows for the years ended December 31:

	2011			2010
Deferred tax assets:
Net operating loss carryforwards		16,846,134		$	16,253,503
Depreciation and amortization		61,895			68,045
Accrued expenses and reserves		144,179			126,215
Impairment loss		78,304			78,304
Compensatory stock options and warrants		76,871			76,871
Capital Loss Carryover	$	44,739		$	44,739
Other		18,873			18,544
Total deferred tax assets		17,270,995			16,666,222
Valuation allowance		(17,270,995	)		(16,666,222	)
Net deferred tax assets	$	—		$	—

FASB ASC 740, Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance of $17,270,995 and $16,666,222 against its net deferred taxes is necessary as of December 31, 2011 and December 31, 2010, respectively. The change in valuation allowance for the years ended December 31, 2011 and 2010 is $604,773 and $586,739 respectively.

At December 31, 2011 and December 31, 2010, respectively, the Company had $46,120,202 and $44,545,313, respectively, of U.S. net operating loss carryforwards remaining, which expire beginning in 2018. The Company will record the benefit of approximately $1,352,373 of the net operating loss carryforwards through additional paid-in capital if and when the net operating loss carryforwards are utilized, as such amounts relate to the unrecognized tax benefit from stock option exercises.

As a result of certain ownership changes, the Company may be subject to an annual limitation on the utilization of its U.S. net operating loss carryforwards pursuant to Section 382 of the Internal Revenue Code. A study to determine the effect, if any, of this change, has not been undertaken.

A reconciliation of the Company’s income taxes to amounts calculated at the federal statutory rate is as follows for the years ended December 31:

	2011		2010
Federal statutory taxes		(34.00)%		(34.00)%
State income taxes, net of federal tax benefit		(3.63)		(3.63)
Nondeductible items		0.11		0.15
Change in valuation allowance		37.54		37.48
Other		(0.02)		—
		—%		—%