Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2014
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 12 - INCOME TAXES

Income tax expense differs from the statutory amounts as follows:

   
2014
    
2013
  
         
Income taxes at U.S. statutory rate
  
$
(9,105,000
)
  
$
1,513,000
  
Current year reserve
    
1,254,000
      
224,000
  
Expenses not deductible
    
7,851,000
      
(1,737,000
)
                 
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,
  
   
2014
    
2013
  
Deferred tax assets
        
Net operating loss carryforwards
  
$
68,263,000
    
$
63,087,000
  
General business credit carryforwards
    
2,486,000
      
2,362,000
  
State credits
    
2,061,000
      
3,053,000
  
Property and equipment
    
-
      
-
  
Stock options
    
542,000
      
473,000
  
Derivatives
    
(92,000
)
    
(92,000
)
Deferred revenue
    
92,000
      
1,072,000
  
Intangible assets
    
464,000
      
418,000
  
Accrued interest
    
253,000
      
253,000
  
Other
  
231,000
      
231,000
  
Gross deferred tax assets
    
74,300,000
      
70,857,000
  
Valuation allowance
    
(74,300,000
)
    
(70,857,000
)
Net deferred taxes
  
$
-
    
$
-
  

At December 31, 2014, we had approximately $200,744,000 of net operating loss carryforwards and approximately $2,486,000 of general business credit carryforwards. These carryforwards expire as follows:
 
   
Net operating
loss carryforwards
   
General business
credit carryforwards
  
2013
  
$
-
    
$
-
  
2014
    
-
      
-
  
2015
    
-
      
-
  
2016
    
-
      
-
  
Thereafter
    
200,744,000
      
2,486,000
  
   
$
200,744,000
    
$
2,486,000
  

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.