Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Income Tax Disclosure [Text Block]

Note 8 - Income Taxes

The provision for income taxes for the years ended December 31, 2011 and 2010 is as follows:

	2011		2010
Federal  - Net operating loss carryback	$	-	$	(63,000	)
State – current year provision		10,000		3,000
Income tax provision (benefit)	$	10,000	$	(60,000	)

For continuing operations, the Company recorded a $10,000 provision for income taxes for 2011 compared to a $60,000 benefit from income taxes for 2010.

Differences between the provision for income taxes and income taxes at the statutory federal income tax rate for the years ended December 31, 2011 and 2010 are as follows:

	2011			2010
Income tax expense at federal statutory rate	$	(269,000	)	$	(297,000	)
State income taxes, net of federal benefit		(273,000	)		(6,000	)
Change in valuation allowance		361,000			348,000
Permanent differences		23,000			30,000
Expiration of federal NOL/credit		168,000			(72,000	)
Income tax expense		10,000			3,000
Federal NOL carryback		-			(63,000	)
Income tax benefit	$	10,000		$	(60,000	)

The calculations for the Company's effective tax rates for 2011 and 2010 are as follows:

	2011			2010
Income tax expense at federal statutory rate		-34	%		-35	%
State income taxes, net of federal benefit		-35	%		-1	%
Change in valuation allowance		46	%		41	%
Permanent differences		2	%		4	%
Expiration of federal NOL/credit		21	%		-8	%
Effective tax rates		1	%		-7	%

The Company recognized no net deferred tax asset as of December 31, 2011 and 2010.  The components of the net deferred tax asset at December 31, 2011 and 2010 are as follows:

	2011			2010
Current:
Accounts receivable reserve	$	43,000		$	33,000
Accrued expenses and other		396,000			562,000
Total current deferred tax asset	$	439,000		$	595,000
Noncurrent:
Net operating loss carryforward	$	3,013,000		$	2,801,000
Depreciation and amortization		(72,000	)		34,000
Tax credit carryforward		44,000			54,000
Stock compensation		243,000			211,000
Other		209,000			(180,000	)
Valuation allowance		(3,876,000	)		(3,515,000	)
Total non-current deferred tax		(439,000	)		(595,000	)
Total deferred tax asset		-		$	-

A valuation allowance is recorded if the weight of available evidence suggests it is more likely than not that some portion or the entire deferred tax asset will not be recognized.

The Company determined at the end of 2011 and 2010 that, based on recent operating results, it was unlikely that the Company would realize any of the deferred tax assets.  Therefore, the Company recorded a 100% valuation reserve against all of the net deferred tax assets as of December 31, 2011 and December 31, 2010.

As of December 31, 2011, the value of the Company’s federal and state net operating loss carryforwards were $7.5 million and $10.0 million, respectively. The difference in the net operating loss carryovers for federal and state purposes relate to the filing of combined versus stand-alone income tax returns. The ability of the Company to utilize the available federal net operating loss carryforward is scheduled to expire over time starting in 2012 and ending in 2030. The ability for the Company to utilize the available state net operating loss is scheduled to expire over time starting in 2017 and ending 2030.

Utilization of our net operating loss may be subject to substantial annual limitation as a result of a change in ownership as provided by the Internal Revenue Code and similar state provisions.  Such a limitation could result in the expiration of the net operating loss before utilization.