Note 7 – Income Taxes
At December 31, 2011, the Company had deferred tax assets of $22,067,000 including the deferred tax benefits related to federal net operating loss carryforwards of approximately $20,363,000 that expire between 2028 and 2031 and state net operating loss carryforwards totaling approximately $17,264,000 that expire between 2023 and 2031.
In assessing the realizability of the Company’s deferred tax assets, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of the gross deferred tax assets depends on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Pursuant to FASB guidance, a cumulative loss in recent years is a significant piece of negative evidence to be considered in evaluating the need for a valuation allowance that is difficult to overcome. Based on the pretax losses in 2008 through 2011, the Company determined that it was not appropriate to consider expected future income as the primary factor in determining the realizability of its deferred tax assets. As a result, the Company has recognized valuation allowances that fully offset all deferred tax assets as of December 31, 2011.
Based on the continuation of cumulative losses, the Company continued to fully offset any additional deferred tax assets with additional valuation allowances during the nine months ended September 30, 2012.