E - INCOME TAXES

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

E - INCOME TAXES

Note E - Income Taxes

The Company files a consolidated federal income tax return with its subsidiaries.

Income tax expense (benefit) provision consists of the following:

	Year Ended December 31,
	2012			2011			2010
Federal income tax expense (benefit):
Current	$	—		$	—		$	286,000
Deferred		—			—			731,000
		—			—			1,017,000
State and local:
Current		34,000			23,000			—
Deferred		—			—			592,000
		34,000			23,000			592,000
Total:
Current		34,000			23,000			286,000
Deferred		—			—			1,323,000
	$	34,000		$	23,000		$	1,609,000
A reconciliation between the income tax (benefit) and income taxes computed by applying the statutory Federal income tax rate to loss before income taxes is as follows:
	Year Ended December 31,
	2012			2011			2010
Expected income tax benefit at statutory Federal tax rate (34%)	$	(47,000)		$	(1,812,000	)	$	(351,000	)
State and local taxes, net of Federal tax effect		22,000			(406,000	)		(67,000	)
Increase in valuation allowance		—			2,177,000			1,980,000
Permanent difference		36,000			36,000			47,000
Other		(23,000	)		28,000			—
Income tax expense	$	34,000		$	23,000		$	1,609,000

Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and their tax basis. The principal items giving rise to deferred tax assets (liabilities) are as follows:

	December 31,
	2012			2011
Deferred tax asset:
Net operating loss carryforwards	$	3,239,000		$	3,060,000
Employee stock based compensation		237,000			231,000
Retail brokerage accounts		362,000			430,000
Contribution carryover		345,000			252,000
Furniture, equipment and leasehold improvements		59,000			68,000
Accrued expenses		134,000			400,000
Accrued compensation and other		179,000			59,000
		4,555,000			4,500,000
Valuation allowance		(4,432,000	)		(4,260,000	)
		123,000			240,000
Deferred tax liability:
Acquired intangible assets		(123,000	)		(240,000	)
	$	0		$	0

Due to cumulative losses incurred by the Company during the current and prior two years, the Company is unable to conclude that it is more likely than not that it will realize its net deferred tax asset and, accordingly, has recorded a valuation allowance to fully offset its deferred tax asset at December 31, 2012 and 2011.

At December 31, 2012, the Company has state net operating loss carryforwards aggregating $13.1 million, which expires through 2032 in various states. In addition, the Company has federal net operating loss carryforwards of $6.2 million at December 31, 2012, which expires through 2032. The Company also has additional federal net operating loss carryforwards of $775,000 at December 31, 2012 which is attributable to WFN and expires through 2020. Utilization of WFN’s federal net operating loss carryforwards is subject to annual limitations under Section 382 of the Internal Revenue Code.

The Company applied the “more-likely-than not” recognition threshold to all tax positions taken or expected to be taken in a tax return which resulted in no unrecognized tax benefits reflected in the financial statements as of December 31, 2012. The Company classifies interest and penalties that would accrue according to the provisions of relevant tax law as income taxes.

The provision for income taxes in 2012 represents a state tax assessment of $34,000 relating to years 2007, 2008 and 2009 based on a tax examination completed by New York state in 2012. For federal and certain state and local jurisdictions, the 2009 through 2012 tax years remain open by the taxing authorities. For other states the 2008 through 2012 tax years remain open for examinations.