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INCOME TAXES
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
9. INCOME TAXES

 

Our income tax expense (benefit) aggregated $102,640, ($287,171) and ($298,728) (amounting to 53%, (41%) and (44%) of the income (loss) before income taxes, respectively) for the years ended December 31, 2012, 2011 and 2010, respectively. The income tax provision consists of the following:

 

    Year Ended December 31,  
    2012     2011     2010  
                   
Federal   $ —     $ —     $ —  
State     —       —       —  
International     708       510       144  
Current     708       510       144  
                         
Federal     89,788       (250,899 )     (262,985 )
State     12,144       (36,782 )     (35,887 )
International     —       —       —  
Deferred     101,932       (287,681 )     (298,872 )
Total   $ 102,640     $ (287,171 )   $ (298,728 )

 

The actual income tax expense (benefit) differs from the expected tax computed by applying the U.S. federal corporate tax rate of 34% to income before income tax as follows:

 

    Year Ended December 31,  
    2012     2011     2010  
Computed expected tax expense (benefit)   $ 65,332     $ (236,871 )   $ (232,360 )
State income taxes, net of federal expense (benefit)     12,144       (36,782 )     (35,887 )
Share-based compensation     9,766       8,042       10,034  
Research and development tax credit     (10,813 )     (23,796 )     (22,357 )
Other     26,211       2,236       (18,158 )
Total income tax expense (benefit)   $ 102,640     $ (287,171 )   $ (298,728 )

  

The significant components of our deferred tax asset are as follows:

 

    As of December 31,  
    2012     2011  
Deferred revenue and other reserves   $ 6,028     $ 9,817  
Product rights     201,000       236,509  
Depreciation     8,355       (32,781 )
Research and development tax credit     207,529       180,192  
Federal net operating loss carryforward     592,774       651,465  
State net operating loss carryforward     238,536       275,226  
Interest rate swap     33,263       27,088  
Prepaid expenses and other     (10,326 )     17,835  
Deferred tax asset   $ 1,277,159     $ 1,365,351  

 

In order to accelerate the utilization of available net operating loss carryforwards in advance of their expiration dates, we elected to increase income for federal income tax purposes by capitalizing research and experimentation expenditures aggregating approximately $1,731,000 for our 2000 and 2001 tax returns. Accordingly, we recorded amortization of these capitalized expenditures of approximately $90,000 in 2000 and $173,000 in each of the nine years ended December 31, 2009 and $83,000 for the year ending December 31, 2010 for tax return purposes only. We carried back our 2008 federal net operating loss of approximately $1,151,000 to previous years for tax return purposes, and we have a state net operating loss carryforward of approximately $2,671,000 that expires in 2028, 2029, 2030 and 2031, if not utilized before then, and a federal net operating loss carryforward of approximately $1,743,000 that expires in 2029, 2030 and 2031, if not utilized before then. The $965,000 licensing payment that we made during the fourth quarter of 2004 was treated as an intangible asset and is being amortized over 15 years, for tax return purposes only.

 

The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2009. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.