Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Note 13—Income Taxes

For the years ended December 31, 2013 and 2012, the Company recorded no tax provision or benefit. While the Company has incurred losses from operations it has not recorded an income tax benefit for 2013 or 2012 as it has recorded a valuation allowance against net operating losses and other net deferred tax assets due to uncertainties related to the realizability of these tax assets.

Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases using enacted federal and state tax rates in effect for the year in which the differences are expected to reverse. As of December 31, 2013 and 2012, the approximate income tax effect of the Company’s deferred tax assets (liabilities) consisted of the following:

	2013		2012
Deferred tax asset:
Tax effect of:
Net operating loss carryforwards	$	25,504,000	$	27,926,000
Accrued expenses		49,000		21,000
Amortization of definite lived intangible assets		15,000		16,000
Non-qualified stock option compensation		69,000		248,000
Depreciation		123,000		121,000
Other		297,000		227,000
Patents		(114,000)		(158,000)
State net operating loss carryforwards, net of federal tax benefit		19,000		428,000
Research tax credit carryforwards		2,223,000		2,080,000
Total deferred tax assets		28,185,000		30,909,000
Valuation allowance		(28,185,000)		(30,909,000)
Net deferred tax assets	$	-	$	-

As of December 31, 2013, the Company had gross net operating loss (NOL) and research tax credit carryforwards of approximately $77.6 million and $1.6 million, respectively, for federal income tax purposes, expiring in varying amounts through the year 2033. Of the $77.6 million NOL carryforward, $2.5 million relates to stock-based compensation and has not been reflected in the deferred taxes and when the benefit of these losses, if any, is realized, the Company will credit additional paid in capital.

As of December 31, 2013, the Company had gross NOL and research tax credit carryforwards of approximately $450,000 and $960,000 for state income tax purposes, expiring in varying amounts through the year 2033.

The Company’s ability to use its NOL and tax credit carryforwards to reduce future taxes is subject to the restrictions provided by Section 382 of the Internal Revenue Code of 1986. These restrictions provide for limitations on the Company’s utilization of its NOL and tax credit carryforwards following a greater than 50% ownership change during the prescribed testing period. Beginning on March 5, 2003, the Company had such a change. As a result, all of the Company’s NOL carryforwards as of that date are limited as to utilization. The annual limitation may result in the expiration of certain of the carryforwards prior to utilization.

The benefit for income taxes differs from the federal statutory rate due to the following:

	2013		2012
Tax at statutory rate	(34.0)	%	(34.0)	%
State taxes, net of federal benefit	0.0		0.0
Research and development credit	(1.7)		0.1
Share based payment expense	0.7		0.9
Other	3.0		1.4
Removal of deferred tax asset on federal net operating losses	64.1		26.9
Establishment of deferred tax asset on state net operating      losses and state deferred taxes, net of federal income tax      benefits	6.4		(9.6)
Change in valuation allowance	(38.6)		14.3
Effective tax rate	0.0	%	0.0	%