Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2015
INCOME TAXES [Abstract]  
INCOME TAXES

NOTE 12 - INCOME TAXES

 

Income tax expense differs from the statutory amounts as follows:

 

    2015     2014  
             
Income taxes at U.S. statutory rate   $ (4,939,000 )   $ (9,105,000 )
Current year reserve     6,257,000       1,254,000  
Other     (1,318,000 )     7,851,000  
                 
Total tax expense   $ -     $ -  

 

Deferred taxes are provided for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. The temporary differences that give rise to deferred tax assets were as follows:

 

    December 31,  
    2015     2014  
Deferred tax assets                
Net operating loss carryforwards   $ 68,636,000     $ 68,263,000  
General business credit carryforwards     2,497,000       2,486,000  
State credits     2,055,000       2,061,000  
Property, equipment and goodwill     (25,000 )     -  
Stock options     3,678,000       542,000  
Derivatives     (92,000 )     (92,000 )
Deferred revenue     1,669,000       92,000  
Intangible assets     595,000       464,000  
Accrued interest     253,000       253,000  
Other     231,000       231,000  
Gross deferred tax assets     79,497,000       74,300,000  
Valuation allowance     (79,497,000 )     (74,300,000 )
Net deferred taxes   $ -     $ -  

 

At December 31, 2015, we had approximately $209,666,000 of net operating loss carryforwards and approximately $2,497,000 of general business credit carryforwards. These carryforwards expire as follows:

 

    Net operating     General business  
    loss carryforwards     credit carryforwards  
2016   $ -     $ -  
2017     -       -  
2018     3,324,000       112,000  
Thereafter     206,342,000       2,385,000  
    $ 209,666,000     $ 2,497,000  

 

As a result of a merger on January 25, 1996, a change in control occurred for federal income tax purposes, which limits the utilization of pre-merger net operating loss carryforwards of approximately $3,100,000 to approximately $530,000 per year.

 

Additionally, we acquired MacroChem Corporation on February 25, 2009 and Somanta Pharmaceuticals, Inc. on January 4, 2008. Both corporations were loss companies at the time of the acquisition. Therefore, the net operating losses related to those acquisitions may be subject to annual limitations as provided by IRC Sec. 382.