4. INCOME TAXES

The (expense) benefit from income taxes consisted of the following:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2012			2011			2012			2011
Current	$	—		$	—		$	—		$	—
Deferred		(5,689	)		2,959			(4,882	)		5,681
		(5,689	)		2,959			(4,882	)		5,681
Less: Changes in Valuation allowance		5,689			(2,959	)		4,882			(5,681	)
Total	$	—		$	—		$	—		$	—

The Company and its wholly-owned subsidiaries file income tax returns in the United States and in the United Kingdom. Income tax (expense) benefit is determined using the asset and liability method provided for in the authoritative guidance issued by the FASB. Deferred income taxes are recognized at currently enacted tax rates for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial reporting purposes. Deferred taxes are provided for the undistributed earnings as if they were to be distributed. The Company regularly reviews its deferred tax assets for recoverability taking into consideration such factors as historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In view of the level of deferred tax assets as of September 30, 2012 and the Company's historical losses from operations, the Company has determined that it should record a full valuation allowance against its net deferred tax assets. The Company did not record tax expense for the three and nine months ended September 30, 2012, as it has net operating loss carryforwards available to offset any taxable income forecast for the year ending December 31, 2012. The Company did not record a benefit from income taxes for the three and nine months ended September 30, 2012 and 2011 as it would not be able to carryback any of its 2011 net operating losses and it is more likely than not that the Company will not be able to realize its deferred tax assets. The Company has not recorded any liability for unrecognized tax benefits.

In the event that the Company earns pre-tax income in the future such that it will be able to use some or all of its deferred tax assets, the Company may reduce or eliminate the valuation allowance. If the Company were to reverse the valuation allowance, in whole or in part, the Company's income statement for such reporting period would record a reduction in income tax expense and an increase in net income, to the extent of the reversal of the valuation allowance.

The Company is no longer subject to examinations by income tax authorities in most jurisdictions for years prior to 2007.