INCOME TAXES |
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INCOME TAXES | 7. INCOME TAXES: The Company accounts for income taxes under FASB ASC 740 ("ASC 740"). Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company's consolidated loss before income taxes for the years ended December 31, 2016, 2015 and 2014 is as follows:
The benefit from income taxes consists of the following:
As of December 31, 2016, the Company had federal net operating loss ("NOL") carry forwards of approximately $36,402,000, state NOL carry forwards of approximately $6,755,000, and foreign NOL carry forwards of approximately $8,956,000 which are available to reduce future taxable income. The NOL carry forwards, if not utilized, will begin to expire at various dates starting in 2021. As of December 31, 2016, the Company had Federal and state research and development tax credit carryforwards of approximately $1,122,000 and $137,000, respectively, available to reduce future tax liabilities which will begin to expire at various dates starting in 2022. The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. The NOLs may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will generally be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. Sale of Net Operating Losses (NOLs) The Company may be eligible, from time to time, to receive cash from the sale of its Net Operating Losses and R&D tax credits under the State of New Jersey Technology Business Tax Certificate Transfer Program. In December 2016, the Company received a net cash amount of $318,550 from the sale of the 2015 state NOL and research and development credits. The principal components of the Company's deferred tax assets and liabilities are as follows:
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 this assessment, management has established a full valuation allowance against all of the deferred tax assets for each period because it is more likely than not that all of the deferred tax assets will not be realized. The increases in valuation allowance for the years ended December 31, 2016, 2015 and 2014 were $2,405,975, 3,673,088 and $2,771,746, respectively. A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:
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