Income Taxes And Subsequent Event

12 Months Ended

Dec. 31, 2011

Income Taxes And Subsequent Event

Income Taxes And Subsequent Event

(15) Income Taxes (FASB ASC 740 Income Taxes) And Subsequent Event

The Company applies the provisions of FASB ASC 740-10 Uncertainty in Income Taxes. As a result of the implementation, there has been no material change to the Company's tax position as they have not paid any corporate income taxes due to operating losses. All tax benefits will likely not be recognized due to the substantial net operating loss carryforwards which will most likely not be realized prior to expiration.

In February 2011, the Company effectively sold $28,000,000 of its New Jersey state net operating loss carryforwards (for the years 2003 through 2008) for approximately $2,272,000.

As of December 31, 2011, the Company has approximately $108,000,000 of federal net operating loss carryforwards (expiring in the years 2012 through 2030) available to offset future federal taxable income. The Company also has approximately $39,000,000 of Pennsylvania state net operating loss carryforwards (expiring in the years 2018 through 2030) and approximately $25,000,000 of New Jersey state net operating loss carryforwards (expiring in the years 2016 through 2018 available to offset future state taxable income.

In January 2012, the Company effectively sold $16,000,000 of its approximately $25,000,000 of New Jersey state net operating loss carryforwards (for the years 2009 and 2010) for approximately $1,328,000. The utilization of certain state net operating loss carryforwards may be subject to annual limitations. With no tax due for the foreseeable future, the Company has determined that a policy to determine the accounting for interest or penalties related to the payment of tax is not necessary at this time.

Under the Tax Reform Act of 1986, the utilization of a corporation's net operating loss carryforward is limited following a greater than 50% change in ownership. Due to the Company's prior and current equity transactions, the Company's net operating loss carryforwards may be subject to an annual limitation generally determined by multiplying the value of the Company on the date of the ownership change by the federal long-term tax exempt rate. Any unused annual limitation may be carried forward to future years for the balance of the net operating loss carryforward period.

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Due to the uncertainty of the Company's ability to realize the benefit of the deferred tax asset, the deferred tax assets are fully offset by a valuation allowance at December 31, 2011 and 2010.

The components of the net deferred tax asset of December 31, 2011 and 2010 consist of the following:

	(in thousands)
Deferred tax assets:	December 31,
	2011			2010
Net operating losses	$	36,612		$	34,514
Amortization & depreciation		(1,282	)		(1,095	)
Research and development costs		2,285			2,477
Stock compensation		123			252
Inventory reserve		65			0
Total		37,803			36,148
Less: Valuation allowance		(37,803	)		(36,148	)
Balance	$	-0-		$	-0-