Note 12. Provision for Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

Note 12. Provision for Income Taxes

Given the company’s historical losses from operations, income taxes have been limited to the minimum franchise tax assessed by the State of California.

We have no unrecognized tax benefits for uncertain tax position as defined under GAAP for either of the years ended December 31, 2010 or 2011.  Further, we have evaluated our income tax position and concluded that no accrual for additional taxes, penalties or interest are required.  To the extent applicable in the future, interest and penalties will be included in pre-tax income as interest expense and tax penalties.

At December 31, 2011 we had federal and California tax net operating loss carry-forwards of approximately $33 million. In the event of changes in our ownership through common stock issuances, the utilization of net operating loss carry-forwards may be subject to annual limitations and discounts under provisions of the Internal Revenue Code. Such limitations could result in the permanent loss of a significant portion of the net operating loss carry-forwards. Realization of our deferred tax assets, which relate to operating loss carry-forwards and timing differences, is dependent on future earnings. The timing and amount of future earnings are uncertain and therefore we have established a 100% valuation allowance.

At December 31, 2011, our U.S. Federal and California State income tax returns related to the years 2008-2010 remain open to examination by tax authorities. However, given our history of net operating losses, as discussed above, the statute of limitations could remain open to examine years prior to 2007 for the year(s) in which net operating losses were originally incurred if/when we reach profitability and begin to utilize our net operating losses to offset taxable income.