16. Income Taxes

The Company accounts for income taxes using the asset and liability method for deferred income taxes.

The provision for income taxes includes federal, state and local income taxes currently payable and deferred taxes resulting from temporary differences between the financial statement and tax bases of assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

The Company has incurred net losses since inception, accordingly, it has not provided for income taxes for the years ended December 31, 2014 and 2013.

The difference between the actual income tax benefit and that computed by applying the U.S. federal income tax rate of 34% to pretax loss from continuing operations is summarized below:

	For the years ended December 31,
	2014		2013
Computed expected tax benefit	$	(4,270)	$	(8,822)
State tax benefit, net of federal effect		(217)		(1,557)
Increase in the valuation allowance		4,487		10,379
Provision for income taxes	$	-	$	-

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2014 and 2013 are as follows:

	December 31,
	2014		2013
Deferred tax assets:
Net operating loss carryforward	$	57,367	$	35,086
Capitalized research and developmental costs		12,925		27,794
Inventory		689		-
Reserves & accrued expenses		135		-
Warrant Liability		(3,123)		-
Property & equipment		(785)		-
Non-cash compensation		3,840		3,681
Total deferred tax assets		71,048		66,561
Less valuation allowance		(71,048)		(66,561)
Net deferred tax assets	$	-	$	-

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the Company’s historical net losses, management does not believe that it is more-likely-than not that the Company will realize the benefits of these deferred tax assets and, accordingly, a full valuation allowance has been recorded against the deferred tax assets as of December 31, 2014 and 2013. The Company’s valuation allowance against its deferred tax assets increased by $4,487 and $10,379 for the years ended December 31, 2014 and 2013, respectively.

At December 31, 2014, the Company has federal net operating loss carryforwards of approximately $144,759 to offset future taxable income. The Company has experienced certain ownership changes which, under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, result in annual limitations on the Company’s ability to utilize its net operating losses in the future. The February 2014 and July 2014 equity raises by the Company, will likely limit the annual use of these net operating loss carryforwards.

FASB ASC 740 “Income Taxes” contains guidance with respect to uncertain tax positions which applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to recognize. Tax positions that meet the more likely than not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority.

The Company does not have any unrecognized tax benefits or accrued penalties and interest. If such matters were to arise, the Company would recognize interest and penalties related to income tax matters in income tax expense. The earliest open tax year subject to examination is 2010.