E - INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

E - INCOME TAXES

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

Income tax expense consists of the following:

	Year Ended December 31,
	2013		2012		2011
Federal income tax expense:
Current	$	19,000	$	—	$	—
Deferred		—		—		—
		19,000		—		—
State and local:
Current		—		34,000		23,000
Deferred		—		—		—
		—		34,000		23,000
Total:
Current		19,000		34,000		23,000
Deferred		—		—		—
	$	19,000	$	34,000	$	23,000

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,
	2013			2012			2011
Expected income tax benefit at statutory Federal tax rate (34%)	$	(2,004,000	)	$	(47,000	)	$	(1,812,000	)
State and local taxes, net of Federal tax effect		(413,000	)		22,000			(406,000	)
Increase in valuation allowance		2,342,000			—			2,177,000
Permanent difference		46,000			36,000			36,000
Other		48,000			23,000			28,000
Income tax expense	$	19,000		$	34,000		$	23,000

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 2013 financial statements. 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 2013 represents a federal alternative minimum tax assessment of $19,000 relating to the year 2012. 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. Tax Years for 2010 and thereafter are subject to examinations by federal and state authorities. The Company is currently under tax examination by the States of New York and illinois for tax years 2010 and 2011.

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,
	2013			2012
Deferred tax asset:
Net operating loss credit carryforwards	$	4,670,000		$	3,239,000
Alternative minimum tax carryforward		15,000			—
Employee stock based compensation		237,000			237,000
Retail brokerage accounts		281,000			362,000
Contribution carryover		347,000			345,000
Furniture, equipment and leasehold improvements		96,000			59,000
Accrued expenses		83,000			134,000
For investment in affiliate		1,001,000	(a)		—
Accrued compensation and other		44,000			179,000
		6,774,000			4,555,000
Valuation allowance		(6,774,000	)		(4,432,000	)
		—			123,000
Deferred tax liability:
Acquired intangible assets		—			(123,000	)
	$	0		$	0

(a) Attributable to non-deductible bonus accrued at December 31, 2013 by affiliate, which will be deductible in 2014.

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, 2013 and 2012.

At December 31, 2013, the Company has state net operating loss carryforwards aggregating $16 million, which expires through 2033 in various states. In addition, the Company has federal net operating loss carryforwards of $10 million at December 31, 2013, which expires through 2033. The Company also has additional federal net operating loss carryforwards of $471,000 at December 31, 2013 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 2013 financial statements. 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 2013 represents a federal alternative minimum tax assessment of $19,000, including $4000 of interest and penalties, relating to the year 2012. 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. Tax years for 2010 and thereafter are subject to examinations by federal and state authorities. The Company is currently under tax examination by the States of New York and illinois for tax years 2010 and 2011.