Note 9 - Income Taxes

At December 31, 2015 and 2014, the Company had net deferred tax assets of $41,554,045 and $31,505,287, respectively, primarily consisting of NOL carry forwards, research and experimental (“R&E”) credits, and differences between depreciation and amortization recorded for financial statement and tax purposes. The Company’s net deferred tax assets at December 31, 2015 and 2014 have been offset by a valuation allowance of $41,545,045 and $31,505,287, respectively. The valuation allowance has been recorded due to the uncertainty of realization of the deferred tax assets. The Company’s deferred tax assets and liabilities as of December 31, 2015 and 2014 are as follows:

	December 31,
	2015		2014
Deferred tax assets:
NOL carryforward	$	38,797,762	$	28,704,237
R&E credit carryforward		1,994,478		1,894,478
Share-based compensation		383,153		144,742
Inventory reserve		226,299		334,578
Depreciation		313,714		246,233
Accruals and other		495,640		185,702
Total deferred tax assets		42,211,046		31,509,970
Valuation allowance		(41,554,045)		(31,505,287)

Deferred tax liabilities:
Intangible assets		(657,001)		-
Fixed assets		-		(4,683)

Net deferred tax liability	$	-	$	-

The difference between the Company’s expected income tax provision (benefit) from applying federal statutory tax rates to the pre-tax loss and actual income tax provision (benefit) relates to the effect of the following:

	2015			2014
Federal income tax benefit at statutory rates		35.0	%		34.0	%
State income tax benefit, net of Federal benefit		3.3	%		3.6	%
Change in valuation allowance		(33.1)	%		(51.1)	%
Change in state tax rates and other		(4.5)	%		13.5	%
		0.7	%		0.0	%

Additionally, despite the NOL carryforwards, the Company may have future tax liability due to alternative minimum tax or state tax requirements. The Company has federal NOL carryforwards of $90,297,225 and $76,267,809 at December 31, 2015 and 2014, respectively. The NOL carry forwards begin to expire in 2022. Utilization of the NOL carryforward may be subject to an annual limitation as provided by Section 382 of the Internal Revenue Code. There can be no assurance that the NOL carryforward will ever be fully utilized. To date, the Company has not performed a formal study to determine if any of its remaining NOL and credit attributes might be further limited due to the ownership change rules of Section 382 or Section 383 of the Internal Revenue Code of 1986, as amended. The Company will continue to monitor this matter going forward. There can be no assurance that the NOL carryforwards will ever be fully utilized.