Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

Note 8. Income Taxes

The provision for income taxes consists of the following for the years ended December 31, :

	2012		2011
Federal	$	--	$	--
State and local		--		--
Foreign		--		--
Total income tax expense	$	--	$	--

	2012		2011
Current		--		--
Deferred		--		--
Total Income Tax Expense		--		--

For the years ended December 31, 2012 and 2011, the provision for income taxes differs from the expected tax provision computed by applying the U.S. federal statutory rate to income before taxes as a result of the following:

	2012			2011
Statutory U.S. federal rate		(34.0	)%		(34.0	)%)
Permanent differences		--			--
Valuation allowance		34.0	%		34.0	%
Provision for income tax expense(benefit)		0.0	%		0.0	%

The significant components of the Company’s deferred tax assets and liabilities are as follows:

	2012			2011
	(in thousands)
Deferred Tax Assets:
Net Operating Loss Carryforwards	$	30,288		$	29,421
Non-cash compensation		1,043			809
Writedown of intangibles		63			63
Provision for inventory adjustment		--			412
Provision for fixed asset impairment		--			286
Accrued Liabilities		71			11
Total Deferred Tax Assets		31,465			31,002
Deferred Tax Liabilities:
Total Deferred Tax Liabilities		--			--
Net Deferred Tax Asset		31,465			31,002
Valuation Allowance		(31,465	)		(31,002	)
Net Deferred Tax Asset	$	--		$	--

At December 31, 2012 and 2011, CytoCore had net operating loss carry forwards for U.S. federal income tax of approximately $71.7 million and $71.2 million and state income tax of approximately $84.7 million and $83.5 million respectively, which will begin to expire in 2018 and 2017, respectively. In September 2001, the Company acquired 100% of the outstanding stock of AccMed International, Inc. by means of merger of AccuMed into a wholly-owned subsidiary of the Company. AccuMed had a net operating loss carry forward for U.S. federal income tax purposes. For federal tax purposes, the acquired NOL is subject to limitation as prescribed under IRC Section 382 to approximately $6.2 million. The net operating loss carry forward began expiring at approximately $415,000 per year, starting December 31, 2006. At December 31, 2012 total net operating loss carry forward from AccuMed is approximately $2.2 million.

For financial reporting purposes, the entire amount of deferred tax assets related principally to the net operating loss carry forwards has been offset by a valuation allowance due to uncertainty regarding the realization of the assets. The valuation allowance increased by approximately $0.5 million and $0.7 million for the years ended December 31, 2012 and 2011, respectively.

Tax Uncertainties

The Company follows the provisions of FASC 740-10 in accounting for uncertainty in income taxes. This guidance prescribes recognition and measurement parameters for the financial statement recognition and measurement of tax positions taken or expected to be taken in the Company’s tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. The periods subject to examination for the Company’s tax returns are for the years 2009, 2010 and 2011. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits (in millions):

	Amount
Gross Unrecognized tax benefits at December 31, 2011	$	--
Increases in tax positions for current year		--
Settlements		--
Lapse in statute of limitations		--
Gross Unrecognized tax benefits at December 31, 2012	$	--

The Company is subject to U.S. federal income tax including state and local jurisdictions. Currently, no federal or state income tax returns are under examination by the respective taxing jurisdictions.

The Company’s accounting policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company has not accrued interest for any periods.