Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
Income Taxes
11. Income Taxes

The Company has temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their respective income tax basis, as measured by enacted state and federal rates as follows:

 

                 

December 31

   2011     2010  

Deferred tax assets:

                

Net operating loss carryforwards

   $ 15,065,000     $ 11,785,000  

Charitable contributions

     3,000       3,000  

Inventory reserves

     163,000       —    

Accruals

     —         50,000  

Stock-based compensation

     361,000       267,000  
   

 

 

    

 

 

  

Total deferred tax assets

     15,592,000       12,105,000  
   

 

 

    

 

 

  

Deferred tax liabilities:

                

Depreciation

     (160,000 )      (189,000 ) 

Amortization

     (51,000 )      (47,000 ) 
   

 

 

    

 

 

  

Total deferred tax liabilities

     (211,000 )      (236,000 ) 
   

 

 

    

 

 

  

Net deferred tax assets

     15,381,000       11,869,000  

Valuation allowance

     (15,381,000 )      (11,869,000 ) 
   

 

 

    

 

 

  
    $ —       $ —    
   

 

 

    

 

 

  

As of December 31, 2011, the Company had net operating loss carryforwards of approximately $31.6 million to offset future taxable income which expire in various years through 2030. A valuation allowance is recorded to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that a portion or none of the deferred tax assets will be realized. After consideration of all the evidence, including reversal of deferred tax liabilities, future taxable income and other factors, management has determined that a full valuation allowance is necessary as of December 31, 2011 and 2010. In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership. The valuation allowance increased by $3,512,000 and $2,402,000 during 2011 and 2010, respectively. The difference between the expected federal income tax rate and actual tax rate is primarily due to the valuation of deferred tax assets.