Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.3.0.814
Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes

14. INCOME TAXES

 

The Company is subject to U.S. federal and various state income taxes.

 

The income tax provision (benefit) for the years ended December 31, 2014 and 2013 consists of the following:

 

    For The Years Ended  
    December 31,  
    2014     2013  
Federal:                
Current   $ -     $ -  
Deferred     (10,070,639 )     (8,732,121 )
                 
State and local:                
Current     -       -  
Deferred     (2,073,367 )     (1,797,790 )
      (12,144,006 )     (10,529,911 )
Change in valuation allowance     12,144,006       10,529,911  
Income tax provision (benefit)   $ -     $ -  

 

No current tax provision has been recorded for the years ended December 31, 2014 and 2013 because the Company had net operating losses for federal and state tax purposes. The related increase in the deferred tax asset was offset by the valuation allowance.

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

 

    For The Years Ended  
    December 31,  
    2014     2013  
             
Tax benefit at federal statutory rate     (34.0 )%     (35.0 )%
State income taxes, net of federal benefit     (7.0 )%     0.0 %
Permanent differences     (3.3 )%     1.7 %
Prior period adjustments     (8.0 )%     0.0 %
Impact of change in effective rate     0.0 %     0.0 %
Change in valuation allowance     52.3 %     33.3 %
Effective income tax rate     0.0 %     0.0 %

 

The Company has determined that a valuation allowance for the entire net deferred tax asset is required. A valuation allowance is required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance is necessary to reduce the deferred tax asset to zero, the amount that will more likely not be realized.

 

The tax effects of temporary differences that give rise to deferred tax assets are presented below:

 

    For The Years Ended  
    December 31,  
    2014     2013  
Deferred Tax Assets:                
Net operating loss carryforwards   $ 17,499,000     $ 11,982,779  
Stock-based compensation     4,232,300       2,805,860  
Provision for warrant liability     -       606,800  
Accruals     2,397,300       160,849  
Goodwill     2,501,517       -  
Intangible assets     553,100       248,741  
Tax credits     409,000       379,000  
Gross deferred tax assets     27,592,217       16,184,029  
                 
Deferred Tax Liabilities:                
Fixed assets     (833,300 )     (833,294 )
Derivative liabilities     -       (735,824 )
Gross deferred tax liabilities     (833,300 )     (1,569,118 )
                 
Net deferred tax assets     26,758,917       14,614,911  
                 
Valuation allowance     (26,758,917 )     (14,614,911 )
                 
Deferred tax asset, net of valuation allowance   $ -     $ -  
                 
Changes in valuation allowance   $ 12,144,006     $ 10,529,911  

  

At December 31, 2014 and 2013, the Company had a net operating loss carry forwards for both federal and state purposes of approximately $42.7 million and $29.2 million, respectively, which may be offset against future taxable income through 2034.

 

The Company’s tax returns are subject to examination by tax authorities beginning with the year ended December 31, 2012.