Income taxes: Our provisions for income taxes for 2012 and 2011 were attributable to income earned in Puerto Rico and certain states. During 2012, our subsidiary in Puerto Rico utilized approximately $3.0 million of deferred tax assets from net operating loss carryforwards.
The United States and other parts of the world have been experiencing a severe and widespread recession accompanied by, among other things, instability in the financial markets and reduced credit availability, and uncertainty about the effects of prospective U.S. government action on healthcare all of which are likely to continue to have far-reaching effects on economic activity for an indeterminate period. The effects and probable duration of these conditions on our future operations and positive cash flows, including our ability to obtain continued support from our major stockholders and creditors, cannot be estimated at this time.
Goodwill. We evaluate the amount of any recorded goodwill at least annually, typically in the fourth quarter of our fiscal year. For 2012, we began our evaluation with a qualitative assessment of our managed care business, which is the reporting unit to which all our recorded goodwill related. Our assessment examined various indicators, primarily historical operating results, cash flows, and revenue trends, and resulted in a determination that it was more likely than not that our goodwill was impaired. To further confirm or invalidate this initial conclusion, we then proceeded to perform a quantitative analysis that calculates a fair value of the reporting unit which is then compared to the estimated fair values of our assets and liabilities. To obtain a reporting unit fair value, we used an income approach, which was heavily dependent upon management’s assumptions. The income approach utilizes a discounted cash flow model to estimate the fair value of the reporting unit by discounting future cash flows derived from forecasted revenues, expenses, and capital expenditures. The discount rate or weighted average cost of capital incorporates both market and company-specific risk premiums determined by management.
Consolidated Statements of Stockholders’ Equity Deficiency, Years Ended December 31, 2012 and 2011
At December 31, 2012, we had a working capital deficiency of approximately $21.7 million and a stockholders’ equity deficiency of approximately $22.9 million resulting from a history of operating losses. We expect that with our existing customer contracts, the addition of new contracts that we are close to obtaining through our marketing efforts, the collection of receivables, the extension of vendor payments, and the launch of our new pharmacy management programs, that we will be able to sustain current operations over the near term. However, we do not currently maintain a line of credit or other committed financing arrangement with any financial institution and have not made any arrangements to obtain any additional financing but are looking at various alternative sources of financing if operations cannot support our ongoing plan. Nevertheless, there can be no assurance that we will be able to find such financing in amounts or on terms acceptable to us, if at all, or that we will be able to achieve or sustain profitable operations and positive operating cash flows in the near term. Although subject to the general economic conditions, risks and uncertainties discussed in the following paragraph, management believes that our current cash position will likely be sufficient to meet our current levels of operations in the short term, our ability to achieve our business objectives and continue as a going concern for a reasonable period of time may be dependent upon the success of our plans to obtain sufficient debt or equity financing, and, ultimately, to achieve profitable operations and positive cash flows from operations during 2013.
From time-to-time, we grant stock options as compensation for services to our employees, non-employee directors and certain consultants (“grantees”) allowing grantees to purchase our common stock pursuant to stockholder-approved stock option plans. We currently have three active incentive qualified option plans, the 1995 Incentive Plan, the 2002 Incentive Plan and the 2009 Equity Compensation Plan (collectively, the “Plans”), that provide for the granting of stock options, stock appreciation rights, limited stock appreciation rights, restricted preferred stock, and common stock grants to grantees. Grants issued under the Plans may qualify as incentive stock options (“ISOs”) under Section 422A of the Internal Revenue Code of 1986, as amended. Options for ISOs may be granted for terms of up to ten years. The vesting of options issued under the 1995 and 2002 plans generally occurs after six months for one-half of the options and after 12 months for the remaining options. For the 2009 Equity Compensation Plan, the vesting period is determined by our Compensation and Stock Option Committee. The exercise