7. Income Taxes

Significant components of our deferred tax assets and liabilities are as follows:



	December 31,
	2015		2014
Deferred tax assets/(liabilities)
Net operating loss carry-forwards	$	65,425,000	$	61,332,000
Research and orphan drug credit carry-forwards		5,181,000		3,855,000
Depreciation and amortization		(3,000)		(8,000)
Stock options and other		479,000		1,381,000
Intangible assets		(3,079,000)		(3,155,000)
Net deferred tax assets/(liabilities)		68,003,000		63,405,000
Valuation allowance for deferred tax assets		(71,008,000)		(66,483,000)
Net deferred tax assets/(liabilities)	$	(3,005,000)	$	(3,078,000)

At December 31, 2015, the Company had U.S. gross net operating loss carry-forwards, or “NOLs”, of approximately $182.3 million, foreign NOLs of $8.5 million, $3.0 million of which was generated in 2015 and domestic research tax credit carry-forwards of approximately $5.2 million. The carry-forwards may be further subject to the application of Section 382 of the Internal Revenue Code of 1986 or the “Code”, as discussed further below. The NOL carry-forwards will begin to expire in 2019. The domestic research tax credit carry-forward will begin to expire in 2019. The Company has provided a valuation allowance to offset the deferred tax assets due to the uncertainty of realizing the benefits of the net deferred tax asset.



	December 31,
	2015		2014
Percent of pre-tax income:
U.S. federal statutory income tax rate	34.0	%	34.0	%
Warrant liability and preferred stock conversion liability	573.8	%	(54.9)	%
Difference in foreign vs U.S. statutory rates	(21.8)	%	-	%
Stock option forfeitures & expirations	(138.2)	%	-	%
State taxes, net of federal benefit	-	%	3.7	%
Non-deductible stock issuance costs	(17.9)	%	-	%
R&D expenses associated with Australian research grants	27.8	%	-	%
Effect of tax rate changes	12.4	%		%
All other	(2.9)	%	1.0	%
Subtotal	467.2	%	(16.2)	%
Change in valuation allowance	(454.8)	%	16.2	%
Effective income tax rate	12.4	%	0.00	%

The Company’s past sales and issuances of common and preferred stock have likely resulted in ownership changes as defined by Section 382 of the Code. The Company has not conducted a Section 382 study to date. It is possible that a future analysis may result in the conclusion that a substantial portion, or perhaps substantially all, of the NOLs and credits will expire due to the limitations of Sections 382 and 383 of the Code. As a result, the utilization of the NOLs and tax credits may be limited and a portion of the carry-forwards may expire unused.

The Company does not have any material unrecognized tax benefits as of December 31, 2015.

The Company is subject to U.S. federal tax examinations by tax authorities for the years 1998 to 2015 due to the fact that NOLs exist going back to 1998 that may be utilized on a current or future year tax return.

The Company has a policy of recognizing tax related interest and penalties as additional tax expense when incurred. During the years ended December 31, 2015 and 2014, the Company did not recognize any interest and penalties.