Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 10 – Income Taxes

 

The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the years ended December 31, 2012 and 2011 to the Company’s effective tax rate is as follows:

 

    Year ended December 31,  
    2012     2011  
U.S. federal statutory rate     -34.0  %      -34.0 %
State income tax, net of federal benefit      -6.0  %     -6.0 %
Permanent differences     67.0   %     16.0 %
Change in valuation allowance     -27.0   %     23.4 %
Income tax provision (benefit)     0.0   %     0.6 %

 

The benefit for income tax is summarized as follows:

 

    Year ended December 31,  
    2012     2011  
Federal:            
Current   $ -     $ -  
Deferred      (894,135 )     (1,693,454 )
State and local:                
Current     -          
Deferred     (157,789  )     (298,845 )
Change in valuation allowance             1,995,571  
Income tax provision (benefit)   $ 1,051,924      $ 3,272  

 

The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of December 31, 2012 and 2011 are as follows:

 

    Year ended December 31,  
    2012     2011  
Deferred tax assets            
Net operating losses   $ 2,172,000      $ 1,003,188  
Allowance for doubtful accounts     18,447       179,810  
      2,190,447       1,182,998  
Less: valuation allowance     (2,190,447 )      (1,182,998 )
              -  
Deferred tax liability                
Depreciation     102,022       102,022  
Total deferred tax liability   $ 102,022     $ 102,022  

 

As of December 31, 2012 and 2011, the Company had approximately $5,400,000 and $2,500,000 of federal and state net operating loss carryovers (“NOLs”) which begin to expire in 2028.  Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.  The change in ownership occurred of the Company that in June 2011 resulted in an annual limitation on the usage of the Company’s pre-acquisition net operating loss carryforwards.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

 

The Company files U.S. federal and states of California tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2008. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

 

BioZone Labs is currently under examination for the year ended December 31, 2009, and is still open to examination for all periods subsequent to this date. The companies included in the consolidated financial statements are open for examination for the years ended December 31, 2009, 2010, and 2011.