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INCOME TAXES
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

NOTE 9. - INCOME TAXES

 

The components of income tax expense (benefit) follows:

 

    December 31,  
    2012     2011  
Deferred:                
Federal   $ 1,259,000       2,050,000  
State     (172,000 )     598,000  
      1,087,000       2,648,000  
Change in valuation allowance     (1,087,000 )     (2,648,000 )
    $ 0     $ 0  

 

During the year ended December 31, 2011, the Company recorded a decrease to the deferred tax asset related to the termination of its defined pension benefit liability. A portion of this decrease, approximately $1,182,000, was recorded through other comprehensive income offset by the reversal of the related valuation allowance.

 

At December 31, 2012, the Company had federal net operating loss carryforwards of approximately $6,500,000 and various state net operating loss carryforwards of approximately $4,000,000 which expire from 2018 through 2032.  These carryforwards exclude federal net operating loss carryforwards from inactive subsidiaries of approximately $6,600,000, as well as net operating loss carryforwards from states that the Company does not presently operate in of approximately $2,200,000.  Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenues Code and similar state provisions. The annual limitation may result in the expiration of the net operating loss carryforwards before utilization.

 

At December 31, 2012, a net deferred tax asset, representing the future benefit attributed primarily to the available net operating loss carryforwards and defined pension plan expenses, in the amount of approximately $3,043,000, had been fully offset by a valuation allowance because management believes that the regulatory limitations on utilization of the operating losses and concerns over achieving profitable operations diminish the Company’s ability to demonstrate that it is more likely than not that these future benefits will be realized before they expire.

 

The following is a summary of the Company's temporary differences and carryforwards which give rise to deferred tax assets and liabilities.

  

    December 31,  
    2012     2011  
Deferred tax assets:                
Net operating loss carryforwards   $ 2,427,000     $ 3,510,000  
Defined benefit pension liability     340,000       385,000  
Property and equipment     1,000       14,000  
Reserves and accrued expenses payable     275,000       222,000  
Gross deferred tax asset     3,043,000       4,131,000  
Deferred tax asset valuation allowance     (3,043,000 )     (4,131,000 )
Net deferred tax asset   $ 0     $ 0  

 

The differences between the U.S. statutory federal income tax rate and the effective income tax rate in the accompanying consolidated statements of income are as follows.

 

    December 31,  
    2011     2011  
Statutory U.S. federal tax rate     34.0 %     34.0 %
State income taxes     (63.6 )     3,054.8  
Stock-based compensation and warrants     .0       140.4  
Expired stock-based compensation and warrants     4.4       106.6  
Defined benefit pension termination     (50.1 )     277.9  
Other permanent non-deductible items     1.2       16.5  
Change in valuation allowance     (400.8 )     (13,522.3 )
Expired net operating loss carryforward     474.8       9,888.7  
Other     .1       3.4  
Effective income tax rate     0.0 %     0.0 %