Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

14.  Income Taxes

As of December 31, 2012 and 2011 the Company had approximately $12,600,000 and $8,000,000, respectively, of federal net operating loss carryforwards (“NOLs”) that may be available to offset future taxable income. The federal net operating loss carry forwards, if not utilized, will expire from 2027 to 2032.  As of December 31, 2012 and 2011, the Company had approximately $3,000,000 and $700,000 of state net operating loss carryforwards available to offset future taxable income. The state NOLs, if not utilized, will expire beginning in 2031.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions and is subject to examination by the various taxing authorities.  The Company’s federal and local income tax returns for tax years beginning in 2009 remain subject to examination.

In accordance with Section 382 of the Internal Revenue code, the usage of the Company's net operating loss carryforwards could be limited in the event of a change in ownership. Based upon a study that analyzed the Company's stock ownership activity, a change of ownership was deemed to have occurred in 2011. This change of ownership created an annual limitation of approximately $1,000,000 on the usage of the Company's losses which are available through 2031.

The income tax provision (benefit) for the years ended December 31, 2012 and 2011 was as follows:

	For The Years Ended
	December 31,
	2012			2011
Federal:
Current	$	-		$	-
Deferred		(1,299,493	)		(1,685,029	)
State and local:
Current		-			-
Deferred		(191,102	)		(247,798	)
		(1,490,595	)		(1,932,827	)
Change in valuation allowance		1,490,595			1,932,827
Income tax provision (benefit)	$	-		$	-

The effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows:

	December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	4,465,161		$	2,954,459
Stock-based compensation		258,743			164,841
Inventory reserves		54,000			58,500
Allowance for bad debt		87,405			252,993
Charitable contribution carryforwards		5,630			4,306
Accruals		24,775			-
Total deferred tax assets		4,895,714			3,435,099
Valuation allowance		(4,876,671	)		(3,386,076	)
Deferred tax assets, net of valuation allowance		19,043			49,023
Deferred tax liabilities:
Property and equipment		(19,043	)		(49,023	)
Net deferred tax assets	$	-		$	-
Change in valuation allowance	$	1,490,595		$	1,932,827

The Company assesses the likelihood that deferred tax assets will be realized.  To the extent that realization is not likely, a valuation allowance is established.  Based upon the history of losses, management believes that it is more likely than not that future benefits of deferred tax assets will not be realized.

For the years ended December 31, 2012 and 2011, the expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense (benefit) as follows:

	For The Years Ended
	December 31,
	2012			2011
US federal statutory rate		(34.0	%)		(34.0	%)
State tax rate, net of federal benefit		(2.0	%)		(5.0	%)
Permanent differences
- Stock based compensation		2.9	%		3.6	%
- Write-off and amortization of intangible asset		3.9	%		0.6	%
- Other		2.4	%		1.0	%
Change in valuation allowance		26.8	%		33.8	%
Income tax provision (benefit)		0.0	%		0.0	%