Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Note 21 — Income Taxes
 
The Company files U.S. federal and U.S. state tax returns. At December 31, 2013, the Company had unrecognized tax benefits totaling $11,405,522, of which would have a favorable impact on our tax provision (benefit), if recognized.
 
Pre-tax earnings consisted of the following for the years ended December 31, 2013 and 2012:
 
December 31,
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Total Pre-Tax (Loss) Earnings
 
$
(10,146,228)
 
$
382,838
 
 
The provision (benefit) for income taxes for the years ended December 31, 2013 and 2012 was as follows:
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Current Income Tax Provision (Benefit)
 
 
 
 
 
 
 
Federal – (all related to Gain on Sale of Discontinued Operations)
 
$
 
$
19,800
 
State and Foreign
 
 
 
 
 
State Tax Credit Refund
 
 
 
 
 
Net Change in Liability for Unrecognized Tax Benefits
 
 
 
 
 
 
 
$
 
$
19,800
 
Deferred Provision (Benefit)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Provision (Benefit)
 
$
 
$
19,800
 
 
A reconciliation of the statutory U.S. federal income tax rate to the effective rates for the years ended December 31, 2013 and 2012 is as follows:
 
 
 
2013
 
 
2012
 
Federal Income Tax at Statutory Rate
 
 
34.4
%
 
 
34.0
%
State Tax Provision, Net of Federal Benefit
 
 
0.5
%
 
 
3.5
%
Foreign Income Taxed at Other Than 34%
 
 
(0.2)
%
 
 
0.0
%
Meals and Entertainment
 
 
0.0
%
 
 
1.4
%
Stock Compensation Expense
 
 
(0.6)
%
 
 
16.1
%
Research and Development Credits
 
 
(0.2)
%
 
 
4.2
%
Loss on Derivative Valuation
 
 
(12.2)
%
 
 
0.0
%
Debt Discount
 
 
(0.2)
%
 
 
0.0
%
Officer’s Life Insurance
 
 
0.0
%
 
 
0.3
%
Change in Rate Assumptions
 
 
41.0
%
 
 
(114.5)
%
Adjustments to Prior Year Tax Credits
 
 
0.7
%
 
 
(11.6)
%
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
63.2
%
 
 
(66.6)
%
Change in Valuations Allowance
 
 
(63.2)
%
 
 
77.7
%
 
 
 
 
 
 
 
 
 
Net Effective Tax Rate
 
 
0.0
%
 
 
11.1
%
 
Deferred tax assets (liabilities) for the years ended December 31, 2013 and 2012 consist of the following:
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Inventory and Inventory Related Items
 
$
196,871
 
$
234,000
 
Warranty Reserves
 
 
10,845
 
 
32,000
 
Accrued Interest
 
 
9,673
 
 
152,000
 
Accrued Services
 
 
(1,887)
 
 
28,000
 
Accrued Loss Contingency
 
 
 
 
9,000
 
Accrued Officer Compensation
 
 
111,276
 
 
 
Net Operating Loss Carryforwards
 
 
9,739,496
 
 
2,881,000
 
Accrued Compensation
 
 
 
 
405,000
 
Amortization
 
 
(143,364)
 
 
 
(Gain)Loss on Fixed Assets
 
 
100,464
 
 
 
Patents Costs and Loss on Abandonment or Sale of Patents
 
 
(81,093)
 
 
 
Charitable Contributions
 
 
2,487
 
 
 
Unrealized Gains/Losses
 
 
47,049
 
 
 
Tax Credit Carryforwards
 
 
1,466,429
 
 
1,399,000
 
Depreciation
 
 
7,832
 
 
11,000
 
 
 
 
 
 
 
 
 
Total Gross Deferred Tax
 
$
11,466,078
 
$
5,151,000
 
Valuation Allowance — 100%
 
 
(11,466,078)
 
 
(5,151,000)
 
 
 
 
 
 
 
 
 
Net Deferred Tax
 
$
 
$
 
 
As of December 31, 2013, the Company has available $ 28,395,033 in net operating loss carryforwards which will begin to expire in 2018 if not utilized.
 
As the result of the assessment of the FASB ASC 740-10 (Prior Authoritative Literature: FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109), the Company has no unrecognized tax benefits. By statute, tax years 2010 -2013 are open to examination by the major taxing jurisdictions to which the Company is subject.
 
Cash paid for income taxes during the years ended December 31, 2013 and December 31, 2012 were $ 32,533 and $19,012, respectively.
 
FASB ASC 740 (Prior Authoritative Literature: SFAS No. 109, Accounting for Income Taxes), requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differing treatment of items for financial reporting and income tax reporting purposes. The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction, based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. We have provided deferred income tax benefits on net operating loss carry-forwards to the extent we believe we will be able to utilize them in future tax filings.