8. INCOME TAXES

The Company is subject to federal and state income taxes as regular (Subchapter C) corporation. As a result of continuing losses for tax purposes, the Company has historically not paid income taxes and has recorded a full valuation allowance against the net deferred tax asset. Interest and penalties related are recorded as income tax expense. There was no tax interest or penalties recorded in the financial statements as of December 31, 2014. The tax years 2011-2014 remain open to examination by the major taxing jurisdictions to which the Company is subject.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets for federal and state income taxes as of December 31, 2014 and 2013 are as follows:

	2014		2013
Deferred tax assets:
Net operating loss carryforwards	$	17,164,000	$	16,473,000
Reserves-		32,000		-
Deferred rent		51,000		66,000
Research & development tax credits		109,000		139,000
Total deferred tax assets		17,356,000		16,678,000
Deferred tax liabilities:
Intangible assets		(1,108,000)		(1,355,000)
Other		(1,000)		(1,000)
Depreciation		(140,000)		(138,000)
Total deferred tax liabilities		(1,249,000)		(1,494,000)
Net deferred tax assets		16,107,000		15,184,000
Less: Valuation allowance		(16,107,000)		(15,184,000)
Deferred tax assets, net of allowance	$	-	$	-

Realization of deferred tax assets is dependent upon future earnings, if any. The Company has recorded a full valuation allowance against its deferred tax assets since management believes that it is more likely than not that these assets will not be realized.

As of December 31, 2014 the Company had net operating loss carryforwards (NOL’s) for federal and New York State income tax purposes of approximately $42.9 million. There can be no assurance that the Company will realize the benefit of the NOL’s. The federal and state NOL’s are available to offset future taxable income and expire from 2018 through 2030 if not utilized. Under Section 382 of the Internal Revenue Code, these NOL’s may be limited due to ownership changes.

The effective tax rate for the years ended December 31, 2014 and 2013 is different from the tax benefit that would result from applying the statutory tax rates primarily due to the recognition of valuation allowances.

ASC Topic 740-10 requires evaluation of uncertain tax positions. As of December 31, 2014, the Company has no material uncertain tax positions.