| Income Tax Expense |
Note 16 - Income Tax Expense
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The Company’s income tax benefit/(provision) is as follows: |
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|
Years Ended December 31 |
|
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|
2016 |
|
|
2015 |
|
| Current |
|
$ |
895,000 |
|
|
$ |
3,228,852 |
|
| Deferred |
|
|
(1,646,000 |
) |
|
|
835,596 |
|
| Change in Valuation Allowance |
|
|
751,000 |
|
|
|
(3,795,104 |
) |
| Net |
|
$ |
- |
|
|
$ |
269,344 |
|
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|
During 2015, the Company was approved by the State of New Jersey to sell a portion of its state tax benefits that existed as of December 31, 2014, pursuant to the Technology Tax Certificate Transfer Program. The Company received net proceeds of $269,344 for the year ending December 31, 2015 from the sale of the tax benefits, which has been included as an income tax benefit in the Consolidated Statement of Operations and Comprehensive Loss. |
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As of December 31, 2016 and 2015, the Company had Federal net operating loss carry forwards of approximately $60,100,000 and $58,000,000, expiring through the year ending December 31, 2036. As of December 31, 2016 and 2015, the Company had New Jersey state net operating loss carry forwards of approximately $9,400,000 and $7,200,000, expiring through the year ending December 31, 2023. |
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|
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The principle components of the deferred tax assets and related valuation allowances as of December 31, 2016 and 2015 are as follows: |
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|
Years Ended December 31 |
|
| |
|
2016 |
|
|
2015 |
|
| Reserves and other |
|
$ |
865,000 |
|
|
$ |
2,506,000 |
|
| Net operating loss carry-forwards |
|
|
21,618,000 |
|
|
|
20,728,000 |
|
| Valuation Allowance |
|
|
(22,483,000 |
) |
|
|
(23,234,000 |
) |
| Net |
|
$ |
- |
|
|
$ |
- |
|
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|
The reconciliation of income taxes using the statutory U.S. income tax rate and the benefit from income taxes for the years ended December 31, 2016 and 2015 are as follows: |
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|
Years Ended December 31 |
|
| |
|
2016 |
|
|
2015 |
|
| Statutory U.S. Federal Income Tax Rate |
|
|
(35.0 |
)% |
|
|
(35.0 |
)% |
| New Jersey State income taxes, net of U.S. Federal tax effect |
|
|
(6.0 |
)% |
|
|
(6.0 |
)% |
| Benefit from Sale of New Jersey NOL |
|
|
0.0 |
% |
|
|
(2.9 |
)% |
| Change in Valuation Allowance |
|
|
41.0 |
% |
|
|
41.0 |
% |
| Net |
|
|
- |
% |
|
|
(2.9 |
)% |
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|
The valuation allowance for deferred tax assets as of December 31, 2016 and 2015 was $22,483,000 and $23,234,000. The change in the total valuation for the years ended December 31, 2016 and 2015 were a decrease of $751,000 and an increase of $3,795,104. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. The value of the deferred tax assets was fully offset by a valuation allowance, due to the current uncertainty of the future realization of the deferred tax assets. |
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The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2016, the Company had no unrecognized tax benefits and no charge during 2016, and accordingly, the Company did not recognize any interest or penalties during 2016 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2016. |
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The Company files U.S. federal income tax returns and a state income tax returns. The U.S. and state income tax returns filed for the tax years ending on December 31, 2013 and thereafter are subject to examination by the relevant taxing authorities. |
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