12. Income taxes

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Income taxes - Note 12

12. Income taxes

A provision for income taxes has not been recorded for 2013 and 2012 due to the valuation allowances placed against the net operating losses and deferred tax assets arising during such periods. A valuation allowance has been recorded for all deferred tax assets. Based on our history of losses since inception, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets.

At December 31, 2013, we have net operating loss carry-forwards of approximately $326.0 million, for federal income tax reporting purposes. In addition, we have research and development tax credits of $6.3 million. The net operating loss carry-forwards and research and development credits available to offset future taxable income, if any, will expire in varying amounts from 2017 to 2033 if not previously utilized. The research and development tax credits and the remaining net operating losses are scheduled to expire between 2018 and 2033. In certain circumstances, as specified in the Internal Revenue Code, a 50% or more ownership change by certain combinations of our stockholders during any three-year period would result in limitations on our ability to utilize our net operating loss carry-forwards.

Deferred tax assets are summarized as follows:

		December 31,
		2013		2012
Deferred tax assets, current
Reserves	$	2,994,000	$	3,804,000
Other		621,000		710,000
Total gross deferred tax assets, current		3,615,000		4,514,000
Deferred tax assets, noncurrent
Net operating loss carryforwards		111,339,000		104,893,000
R&D credit carryforwards		6,277,000		6,032,000
Depreciation/amortization deferred		24,526,000		26,594,000
Other		7,544,000		7,573,000
Total gross deferred tax assets, noncurrent		149,686,000		145,092,000
Net deferred taxes before valuation allowance		153,301,000		149,606,000
Less: Valuation allowance		(153,301,000)		(149,606,000)
Deferred tax assets	$	-	$	-

The valuation allowance and the research and development credit carry forwards account for substantially all of the difference between our effective income tax rate and the Federal statutory tax rate of 34%.

Certain net operating losses arise from the deductibility for tax purposes of compensation under nonqualified stock options equal to the difference between the fair value of the stock on the date of exercise and the exercise price of the options. For financial reporting purposes, the tax effect of this deduction when recognized is accounted for as a credit to shareholders' equity.

We did not have any unrecognized tax benefits at December 31, 2013 and at December 31, 2012.

We recognize interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2013 and 2012, we recognized no interest or penalties.

We file income tax returns in the U.S. federal jurisdiction and various states. Due to our operating loss and credit carry-forwards, the U.S. federal statute of limitations remains open for 1997 and onward.