12.

Income Taxes

At December 31, 2013, the Company has a net operating loss carryforward for Federal income tax purposes of $10,962,529 which expires in varying amounts during the tax years 2026 and 2033. The Company has a research and development tax credit carryforward of $520,891 for Federal tax purposes that expires in varying amounts in the tax years 2028 and 2033. The Company recorded an increase in the valuation allowance of $945,347 for the year ended December 31, 2013.

The components of the Company’s deferred tax asset are as follows:

	December 31,
	2013		2012
Current Deferred Tax Assets
Accrued Bonuses	$	15,725	$	39,313
Noncurrent Deferred Tax Assets
Net Operating Loss (NOL) Carryover		3,727,259		2,914,697
Technology Licenses		69,859		73,021
Research & Development Tax Credits		520,891		383,067
Share Based Expense		201,490		179,779
Total Deferred Tax Asset		4,535,224		3,589,877
Less: Valuation Allowance		(4,535,224)		(3,589,877)
Net Deferred Tax Asset	$	-	$	-

Reconciliation between income taxes at the statutory tax rate (34%) and the actual income tax provision for continuing operations follows:

	December 31,
	2013		2012

Loss Before Income Taxes	$	(3,266,013)	$	(2,582,537)
Tax (Benefit) @ Statutory Tax Rate		(1,110,444)		(878,063)
Effects of:
Exclusion of ISO Expense		217,813		-
R&D Tax Credits		(90,964)		(179,779)
Increase in Valuation Allowance		945,347		1,056,770
Other		38,248		1,072
Provision for Income Taxes	$	-	$	-

As of December 31, 2013 and 2012, the Company has no unrecognized income tax benefits. A reconciliation of our unrecognized tax benefits for the years ending December 31, 2013 and 2012 is presented in the table below:

	December 31,
	2013		2012

Beginning balance	$	-	$	-
Additions based on tax positions related to current year		-		-
Reductions for tax positions of prior years		-		-
Reductions due to expiration of statute of limitations		-		-
Settlements with taxing authorities		-		-
Ending Balance	$	-	$	-

The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or penalties have been recorded during the years ended December 31, 2013, and 2012 and no interest or penalties have been accrued as of December 31, 2013 and 2012.

The tax years from 2010 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.