NOTE 11 - INCOME TAXES

Income tax expense for the years ended December 31, 2014 and 2013 is shown as follows:

(In thousand $)

Years ended December 31,	2014			2013
Current provision	$	(748	)	$	-
Deferred provision		-			-
Total tax provision (benefit)	$	(748	)	$	-

Included in the year ended December 31, 2014 is an income tax benefit resulting from the reversal of a valuation allowance previously recorded against the Company’s New Jersey State net operating losses (“NOL”) that resulted from the Company’s sale of $8,890 of its New Jersey State NOLs and $15 of its unused research and development tax credits under the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) for cash of $750, net of commissions. The Program allows qualified technology and biotechnology businesses in New Jersey to sell unused amounts of NOLs and defined research and development tax credits for cash. The remaining net deferred tax asset as of December 31, 2014 remains fully offset by a valuation allowance due to the Company’s history of losses.

The significant components of the Company's deferred tax assets and liabilities at December 31, 2014 and 2013 are as follows:

(In thousand $)	2014			2013
Federal net operating losses	$	3,997		$	3,042
State net operating losses		160			531
Stock options		1,104			-
Federal tax credit		110			-
Amortization		508			560
Depreciation		(12	)		(16	)
Contributions		13			4

Total gross deferred tax assets/(liabilities)	$	5,880		$	4,121

Less valuation allowance		(5,880	)		(4,121	)

Net deferred tax assets/(liabilities)	$	-		$	-

The income tax benefit for the year ended December 31, 2014 differed from the amounts computed by applying the U.S. federal income tax rate of 34% to loss before tax benefit as a result of nondeductible expenses, tax credits generated, utilization of net operating loss carryforwards, and increases in the Company’s valuation allowance.

(In thousand $)	2014 ($)			2013 ($)
Federal statutory rate	$	(1,770	)	$	(1,450	)
Sale of NJ NOL/credits		(495	)		-
Permanent differences		136			50
Research and development		(110	)		-
State taxes		1			-
Stock compensation		(584	)		-
Valuation allowance		2,074			1,400
Effective tax rate	$	(748	)	$	-

A valuation allowance is required to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of the available evidence, both positive and negative, the Company determined that valuation allowances of $5.9 million and $4.1 million at December 31, 2014 and 2013, respectively, were necessary to reduce the deferred tax assets to the amount that will more likely than not be realized.

At December 31, 2014 and 2013, the Company had approximately $11.8 million and $9.1 million of gross federal net operating loss carry-forwards, respectively. At December 31, 2014 and 2013, the Company had approximately $2.7 million and $8.9 million of gross state net operating loss carry-forwards, respectively. If not utilized, the federal and state net operating loss carry-forwards will begin to expire in 2027. The utilization of such net operating loss carry-forwards and realization of tax benefits in future years depends predominantly upon having taxable income. The Company also has approximately $110 of federal research and development credits which will begin to expire in 2033 if not utilized.

The Company may be subject to the net operating loss provisions of Section 382 of the Internal Revenue Code. The Company has not calculated if an ownership change has occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period, and the federal published interest rate.

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2014 there were no uncertain positions. The federal and state income tax returns of the Company for 2011, 2012 and 2013 are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. In years where a NOL is generated, the statute remains open with respect to the NOL until three years after the NOL is utilized. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. There was no income tax related interest and penalties included in the income tax provision for 2014 and 2013.