(5) Income Taxes

Since inception, the Company has incurred losses from operations and as a result has not recorded income tax expense. Benefits related to net operating loss carry-forwards and deferred items have been fully reserved since it was not more likely than not that the Company would achieve profitable operations.

The Company applied for state research and development refundable credits for the years ended December 31, 2006 through 2009. In April 2012, the Company received $613,397 relating to these credits for the years 2006 through 2009, which is reflected as an income tax benefit in the accompanying statement of operations for 2012. The Company currently does not expect to collect additional credits for years subsequent to 2009. In addition, $61,340 is included in operating expenses on the accompanying statement of operations for the year ended December 31, 2012 relating to professional fees paid in connection with securing these refundable credits.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at December 31, 2014 and 2013 are presented below.

	2014			2013
Deferred tax assets:
Depreciation	$	113,000		$	104,000
Allowance for bad debts		108,000			70,000
Net operating loss carry-forwards		25,469,000			23,116,000
Stock option expense		1,439,000			1,347,000
Research and other credits		1,031,000			972,000
Other temporary differences		15,000			15,000
Total gross deferred tax assets		28,175,000			25,624,000
Less valuation allowance		(28,175,000	)		(25,624,000	)
	$	--		$	--

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future taxable income during the period in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon its historical operating losses, utilization of deferred tax assets cannot currently be determined. Accordingly, the Company has recorded a full valuation allowance against the deferred tax assets, as they will not be realized until the Company achieves profitable operations in the future.

At December 31, 2014, the Company had a net operating loss carry-forward for federal income tax purposes of approximately $64,000,000, varying amounts of which will expire in each year from 2018 through 2034. Research and other credit carry-forwards of approximately $1,031,000 are available to the Company to reduce income taxes payable in future years varying amounts of which will expire in each year from 2019 through 2034.