INCOME TAXES

The Company’s provision for income taxes for the years ended December 31, 2013, 2012 and 2011 relates to income taxes in states, foreign countries and other local jurisdictions and differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:



	Dollars in Thousands
	2013			2012			2011
Benefit at federal rate	$	(5,454	)	$	(2,781	)	$	(3,311	)
Increase (decrease) resulting from:
State income taxes—net of federal benefit	(518		)	2			2
Foreign subsidiary tax rate difference	(3		)	(27		)	(94		)
Tax contingency	23			22			28
Expiring net operating loss carryforwards	—			1,472			988
Earnings repatriation	—			582			—
Miscellaneous permanent differences	155			284			332
Liability warrants	(102		)	(748		)	2,062
Tax credits	—			215			—
State, net operating loss expiration/true-up	1,179			—			—
Other—net	(80		)	15			(53		)
Valuation allowance	4,746			1,110			91
Total income tax (benefit) expense	$	(54	)	$	146		$	45



	Dollars in Thousands
	2013			2012		2011
Federal:
Current	$	—		$	—	$	16
Deferred	—			—		—
Total Federal	$	—		$	—	$	16
State:
Current	$	—		$	3	$	3
Deferred	—			—		—
Total State	$	—		$	3	$	3
Foreign:
Current	$	20		$	46	$	159
Deferred	(74		)	97		(133		)
Total Foreign	$	(54	)	$	143	$	26
Total Tax Provision	$	(54	)	$	146	$	45

The Company’s deferred income tax asset at December 31, 2013 and 2012 is comprised of the following temporary differences:



	Dollars in Thousands
	2013			2012
Deferred Tax Asset:
Net operating loss carryforward	$	42,950		$	39,481
Research and development credit carryforwards	951			1,017
Deferred revenue	174			188
Inventory	275			224
Other	1,997			1,111
	46,347			42,021
Less valuation allowance	(46,088		)	(41,342		)
Deferred Tax Asset	$	259		$	679
Deferred Tax Liability:
Foreign earnings	$	25		$	398
Property and equipment	186			300
Deferred Tax Liability	$	211		$	698
Net Deferred Asset (Liability)	$	48		$	(19	)

At December 31, 2013, we had total unused federal tax net operating loss carryforwards of $121.7 million. The expiration dates are as follows (amounts in thousands):




2018	$	1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,137
	$	121,659

Of these federal net operating loss carryforwards, $1.2 million were obtained in the acquisition of Annovis, Inc. and may be subject to certain restrictions. Remaining net operating loss carryforwards could be subject to limitations under section 382 of the Internal Revenue Code. At December 31, 2013, we had unused state tax net operating loss carryforwards of approximately $33.0 million that expire at various times beginning in 2014. At December 31, 2013, we had unused research and development credit carry-forwards of $1.0 million that expire at various times between 2014 and 2024. A valuation allowance has been provided for the remaining deferred tax assets, due to the cumulative losses in recent years and an inability to utilize any additional losses as carrybacks. We will continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent we begin to generate income in future years and it is determined that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time.

Our liability for uncertain certain tax positions, which was included in other long term liabilities, was $0.3 million as of December 31, 2013 and 2012. We recorded less than $0.1 million of additional uncertain tax positions during each of the years ended 2013 and 2012. We had no material interest or penalties during fiscal 2013 or fiscal 2012, and we do not anticipate any such items during the next twelve months. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations. We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. We have statutes of limitation open for Federal income tax returns related to tax years 2010 through 2013. We have state income tax returns subject to examination primarily for tax years 2010 through 2013. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. Open tax years related to foreign jurisdictions remain subject to examination. Our primary foreign jurisdiction is the United Kingdom, which has open tax years for 2010 through 2013.