Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

8. Income Taxes

The Company accounts for income taxes using the asset and liability method. Deferred taxes are determined by calculating the future tax consequences attributable to differences between the financial accounting and tax bases of existing assets and liabilities. A valuation allowance is recorded against deferred tax assets when, in the opinion of management, it is more likely than not that the Company will not be able to realize the benefit from its deferred tax assets.

The Company files income tax returns, as prescribed by the national, state and local jurisdictions in which it operates. The Company’s uncertain tax positions are related to tax years that remain subject to examination and are recognized in the financial statements when the recognition threshold and measurement attributes are met. Interest and penalties related to tax deficiencies and uncertain tax positions are recorded as income tax expense.

Income (loss) from continuing operations consists of the following:

	For the Year Ended December 31,
	2012			2011			2010
US operations	$	(14,317,608	)	$	(1,775,053	)	$	(24,819,169	)
Foreign operations		(8,097,032	)		(3,454,672	)		(1,852,688	)
	$	(22,414,640	)	$	(5,229,725	)	$	(26,671,857	)

The provision for income taxes charged to continuing operations is $0 for all periods presented.

Deferred tax assets (liabilities) were comprised of the following as of the periods presented below:

	As of December 31,
	2012			2011			2010
Deferred tax assets:
Operating loss carryforwards	$	37,642,000		$	28,972,000		$	22,452,000
Accrued expenses		8,576,000			7,778,000			5,618,000
Tax credit carryforwards		2,921,000			2,537,000			2,217,000
Intellectual property		3,377,000			1,604,000			395,000
Outside tax basis difference in affiliate		1,616,000			1,378,000			472,000
Equipment		237,000			156,000			21,000
Other		4,000			4,000			4,000
Total deferred tax assets		54,373,000			42,429,000			31,179,000
Deferred tax liabilities		-			-			-
Net deferred tax asset		54,373,000			42,429,000			31,179,000
Valuation allowance		(54,373,000	)		(42,429,000	)		(31,179,000	)
	$	-		$	-		$	-

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to the pretax loss from continuing operations as a result of the following differences:

	For the Year Ended December 31,
	2012			2011			2010
Tax at the U.S. statutory rate	$	(7,621,000	)	$	(1,778,000	)	$	(9,110,000	)
Change in value of warrant liability		(2,619,000	)		(6,739,000	)		5,444,000
Stock option expenses		-			(140,000	)		(92,000	)
Valuation allowance		10,204,000			8,639,000			3,729,000
Other		36,000			18,000			29,000
	$	-		$	-		$	-

At December 31, 2012, the Company has U.S. federal net operating loss carryforwards of approximately $94,078,000, which begin to expire if not utilized by 2023, and approximately $2,921,000 of tax credit carryforwards that begin to expire if not utilized by 2024. The Company also has U.S. state net operating loss carryforwards of approximately $83,558,000, which begin to expire if not utilized by 2027 and state tax credit carryforwards of approximately $650,000, which begin to expire if not utilized by 2013.

The Company files U.S. federal tax returns, along with various state and foreign income tax returns. All federal, state and foreign tax returns for the years ended December 31, 2011, 2010 and 2009 are still open for examination.

The following presents a rollforward of the unrecognized tax benefits and the associated interest and penalties:

	Unrecognized Tax Benefits		Interest and Penalties
Balance at January 1, 2011	$	357,000	$	-
Prior year tax position		-		-
Current year tax position		-		-
Deferred tax position		50,000		-
Settlements with tax authorities		-		-
Expiration of the statute of limitations		-		-
Balance at December 31, 2011		407,000		-
Prior year tax position		-		-
Current year tax position		-		-
Deferred tax position		30,000		-
Settlements with tax authorities		-		-
Expiration of the statute of limitations		-		-
Balance at December 31, 2012	$	437,000	$	-

CBLI received New York State incentive tax credit refunds of $537,000, $367,000 and $438,000 during 2012, 2011 and 2010, respectively. These refundable tax credits were based on the Company’s research and development activities, real estate tax payments, employment levels and equipment purchases. Since there is no state tax liability or refund of prior year tax payments, these refundable tax credits were recorded against operating expenses in the year of receipt, instead of being recorded as an income tax benefit.