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INCOME TAXES
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
11.
INCOME TAXES
 
Our income tax expense (benefit) aggregated $87,865, $102,640 and ($287,171) (amounting to 43%, 53% and (41%) of the income (loss) before income taxes, respectively) for the years ended December 31, 2013, 2012 and 2011, respectively. The income tax provision consisted of the following:
 
 
 
Year Ended December 31,
 
 
 
2013
 
2012
 
2011
 
Current
 
$
301
 
$
708
 
$
510
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
74,713
 
 
89,788
 
 
(250,899)
 
State
 
 
12,851
 
 
12,144
 
 
(36,782)
 
Deferred
 
 
87,564
 
 
101,932
 
 
(287,681)
 
Total
 
$
87,865
 
$
102,640
 
$
(287,171)
 
 
The actual income tax expense (benefit) differs from the expected tax computed by applying the U.S. federal corporate tax rate of 34% to income before income tax as follows:
 
 
 
Year Ended December 31,
 
 
 
2013
 
2012
 
2011
 
Computed expected tax expense (benefit)
 
$
69,788
 
$
65,332
 
$
(236,871)
 
State income taxes, net of federal expense (benefit)
 
 
8,482
 
 
8,015
 
 
(24,276)
 
Share-based compensation
 
 
10,526
 
 
9,766
 
 
8,042
 
Research and development tax credit
 
 
(21,887)
 
 
(10,813)
 
 
(23,796)
 
Other
 
 
20,956
 
 
30,340
 
 
(10,270)
 
Total income tax expense (benefit)
 
$
87,865
 
$
102,640
 
$
(287,171)
 
 
The significant components of our deferred tax asset consisted of the following:
 
 
 
As of December 31,
 
 
 
2013
 
2012
 
Deferred revenue and other reserves
 
$
5,565
 
$
6,028
 
Product rights
 
 
165,527
 
 
201,000
 
Depreciation
 
 
8,215
 
 
8,355
 
Research and development tax credit
 
 
235,567
 
 
207,529
 
Federal net operating loss carryforward
 
 
525,012
 
 
592,774
 
State net operating loss carryforward
 
 
201,698
 
 
238,536
 
Interest rate swap
 
 
13,166
 
 
33,263
 
Prepaid expenses and other
 
 
15,143
 
 
(10,326)
 
Deferred tax asset
 
$
1,169,893
 
$
1,277,159
 
 
We have a state net operating loss carryforward of approximately $2,259,000 that expires in 2028, 2029, 2030 and 2031, if not utilized before then, and a federal net operating loss carryforward of approximately $1,544,000 that expires in 2029, 2030 and 2031, if not utilized before then. The $965,000 licensing payment that we made during the fourth quarter of 2004 was treated as an intangible asset and is being amortized over 15 years, for tax return purposes only. Approximately $1,258,000 of our planned investment to produce pharmaceutical-grade Nisin for Mast OutÒ is being expensed as incurred for our books (including approximately $110,000 during the fourth quarter of 2013), but this investment will be capitalized and depreciated over statutory periods for tax return purposes.
 
Deferred tax assets are recognized only when it is probable that sufficient taxable income will be available in future periods against which deductible temporary differences and credits may be utilized. However, the amount of the deferred tax asset could be reduced if projected income is not achieved due to various factors, such as unfavorable business conditions. If projected income is not expected to be achieved, we would decrease the deferred tax asset to the amount that we believe can be realized.
 
Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership, as defined.
 
The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2010. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.