5. Income Taxes

During the year ended December 31, 2012 the Company recorded refundable tax credits in prepaid and other current assets for its (i) 2011 New York State QETC credit, totaling $250,000 and (ii) the 2012 New York City Biotechnology Tax Credit totaling $218,000. These credits were recorded as other current assets at December 31, 2012. On July 23, 2013, the Company received $250,000 for the 2011 New York State QETC credit and on September 8, 2013 the Company received the New York City Biotechnology Tax Credit of $218,000. As of December 31, 2013 the Company had no outstanding refundable tax credits.

At December 31, 2013, Synergy-DE has net operating loss carry forwards (“NOLs”) aggregating approximately $195 million, which, if not used, expire beginning in 2014 through 2033. The utilization of these NOLs is subject to limitations based on past and future changes in ownership of Synergy pursuant to Internal Revenue Code Section 382. The Company has determined that ownership changes have occurred for Internal Revenue Code Section 382 purposes and therefore, the ability of the Company to utilize its NOLs is limited. The Company has no other material deferred tax items. Synergy records a valuation allowance against deferred tax assets to the extent that it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Due to the substantial doubt related to Synergy’s ability to continue as a going concern and utilize its deferred tax assets, a valuation allowance for the full amount of the deferred tax assets has been established at December 31, 2013. As a result of this valuation allowance there are no income tax benefits reflected in the accompanying consolidated statements of operations to offset pre-tax losses.

The provisions of FASB ASC Topic 740-10-30-7, Accounting for Income Taxes were adopted by Synergy on January 1, 2007 and had no effect on Synergy’s financial position, cash flows or results of operations upon adoption, as Synergy did not have any unrecognized tax benefits. Synergy’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense and none have been incurred to date.

Synergy has no uncertain tax positions subject to examination by the relevant tax authorities as of December 31, 2013. Synergy files U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The 2010 through 2013 tax years generally remain subject to examination by federal and most state tax authorities.

On July 14, 2008, Synergy engaged in a tax-free reorganization pursuant to the Internal Revenue Code Section 368(a)(1)(B) thereby acquiring 100% of shares in Synergy-DE, from Callisto, , and other restricted holders of Synergy-DE shares, in exchange for 22,732,380 shares of the Company’s common stock (or approximately 70% of the Company’s outstanding common stock). The transaction was characterized as a tax-free type “B” reorganization resulting in no gain or loss recognition to the Company, for federal tax purposes.

Synergy periodically files for and receives certain federal, state and local research and development tax credits. The following are reported as other income in the Company’s statement of operations for the years indicated: ($ in thousands)

Year	New York State QETC Credit	New York City Biotechnology Tax Credit	Total
2011	246	116	362
2012	256	250	506
Total	502	366	868