Note 13 - Income Taxes

6 Months Ended

Jun. 30, 2015

13.

Income Taxes

Provisions for income taxes were $4,633,038 and $6,645,665 for the three- and six-month periods ended June 30, 2015, respectively, based on effective tax rates of 37% for both periods.

Provisions for income taxes were $5,906,298 and $14,747,080 for the three- and six-month periods ended June 30, 2014, respectively, based on effective tax rates of 39% and 38%.

The decrease in income taxes over the three- and six-month periods ended June 30, 2014 was primarily due to decreased net income as a result of the approximately $24.7 million in milestone and contract revenue recognized for the six months ended June 30, 2014 associated with the Company’s U.S. license agreement for MONOVISC. See the previous discussion under Note 12. The decrease in the effective tax rate

for each of the three- and six-month periods ended June 30, 2015, as compared to the same periods in 2014,

was primarily due to an increase in the expected tax benefit of the domestic production deduction.

The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in Italy. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The Company’s filings from 2011 through the present tax year remain subject to examination by the IRS and other taxing authorities for U.S. federal and state tax purposes. The Company’s filings from 2010 through the present tax year remain subject to examination by the appropriate governmental authorities in Italy.

In connection with the preparation of the financial statements, the Company performed an analysis to ascertain if it was more likely than not that it would be able to utilize, in future periods, the net deferred tax assets associated with its net operating loss carryforward. The Company concluded that the positive evidence outweighs the negative evidence and, thus, those deferred tax assets are realizable on a “more likely than not” basis. As such, the Company did not record a valuation allowance at June 30, 2015 or December 31, 2014.