Income Taxes

Provision (Benefit) for Income Taxes

The provision for income taxes consists of the following:



	2013			2012
Current tax provision	$	—		$	—
Deferred tax (benefit) provision	(310,097		)	(444,000		)
Total tax (benefit) provision	$	(310,097	)	$	(444,000	)

In addition, we recognized $123,024 of state franchise taxes in income tax benefit during 2012.

A reconciliation of the expected Federal statutory rate to our actual rate as reported for each of the periods presented is as follows:



	2013		2012
Expected statutory rate	(35	%)	(34	%)
State income tax rate, net of federal benefit	(4	%)	(4	%)
Permanent differences	(4	%)	2	%
Valuation allowance	(2,708	%)	48	%
Net operating loss adjustment	2,657	%	—	%
Other	26	%	(18	%)
	(68	%)	(6	%)

Deferred Income Taxes

Deferred income taxes are the result of temporary differences between book and tax basis of certain assets and liabilities, timing of income and expense recognition of certain items and net operating loss carry-forwards.

We assess temporary differences resulting from different treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in the consolidated balance sheets. We evaluate the realizability of our deferred tax assets on a regular basis, an exercise that requires significant judgment. In the course of this evaluation we considered our recent history of tax losses, the economic conditions in which we operate, recent organizational changes and our forecasts and projections. We believe it is more likely than not that none of our deferred tax assets will be realized, and we have recorded a full valuation for the net deferred tax assets as of December 31, 2013 and 2012.

The following is a schedule of the deferred tax assets and liabilities as of December 31, 2013 and 2012:



	2013			2012
Deferred tax assets:
Net operating loss carry forward	$	22,757,000		$	10,710,000
Intangible assets	6,425,000			6,303,000
Deferred rent	33,000			124,000
Depreciation	779,000			837,000
Allowance for doubtful accounts	57,000			88,000
Accrued expense	—			—
Stock based expenses	1,239,000			1,263,000
Other	540,000			225,000
Subtotal	31,830,000			19,550,000
Less valuation allowance	(31,830,000		)	(19,550,000		)
Total	—			—
Deferred tax liabilities:
Intangibles	3,788,903			4,099,000
Total	3,788,903			4,099,000
Total deferred tax assets (liabilities)	(3,788,903		)	(4,099,000		)

The net operating losses amounted to approximately $59,700,000 and expire beginning 2022 through 2033.

Under the Internal Revenue Code of 1986, as amended, these losses can be carried forward twenty years. We have approximately $2,500,000 of carry forward deductions from 2006 relating to stock options exercised as of December 31, 2013.

We have accrued $506,453 for an uncertain tax position.

We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2009 through 2013. Our state income tax returns are open to audit under the statute of limitations for the same periods.

We recognize interest and penalties related to income taxes in income tax expense. We have incurred no penalties and interest for the years ended December 31, 2013 and 2012.