Cellectar Biosciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Dec. 31, 2013

10. INCOME TAXES

	2013		2012

Tax provision (benefit)
Current
Federal	$	—	$	—
State		—		—
Total current		—		—

Deferred
Federal		(4,705,250)		(3,225,486)
State		134,225		2,291,913
Total deferred		(4,571,025)		(933,573)

Change in valuation allowance		4,571,025		933,573
Total	$	—	$	—

Deferred tax assets consisted of the following at December 31:

	2013		2012

Deferred tax assets
Federal net operating loss	$	25,731,718	$	22,343,084
Federal research and development tax credit carryforwards		2,480,417		1,969,426
State net operating loss		2,070,642		2,252,566
State research and development tax credit carryforwards		724,200		633,571
Capitalized research and development expenses		11,128,803		11,068,868
Stock-based compensation expense		1,599,005		842,174
Intangible assets		380,339		440,556
Charitable contribution carryforwards		34,850		43,350
Accrued liabilities		26,112		25,199
Total deferred tax assets		44,176,086		39,618,794

Deferred tax liabilities
Depreciable assets		(257,314)		(271,049)
Total deferred tax liabilities		(257,314)		(271,049)

Net deferred tax assets		43,918,772		39,347,745
Less valuation allowance		(43,918,772)		(39,347,745)
Total deferred tax assets	$	—	$	—

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows:

	Year ended December 31,
	2013			2012

Income tax benefit using U.S. federal statutory rate		34.00	%	34.00	%
State income taxes		(0.82)	%	(17.20)	%
Permanent items		5.10	%	(0.17)	%
Change in valuation allowance		(42.40)	%	(10.61)	%
Other		4.12	%	(6.02)	%

Total		—	%	—	%

As of December 31, 2013, the Company had federal and state net operating loss carryforwards (“NOLs”) of approximately $75,682,000 and $39,415,000 respectively, which expire in 2018 through 2032 and in 2014 through 2032, respectively. In addition, the Company has federal and state research and development and investment tax credits of approximately $2,480,000 and $1,097,000, respectively which expire in 2018 through 2032 and in 2018 through 2027, respectively. The amount of NOLs and tax credit carryforwards which may be utilized annually in future periods will be limited pursuant to Section 382 of the Internal Revenue Code as a result of substantial changes in the Company’s ownership that have occurred or that may occur in the future. The Company has not quantified the amount of such limitations.

Because of the Company’s limited operating history, continuing losses and uncertainty associated with the utilization of the NOLs in the future, management has provided a full allowance against the gross deferred tax asset.

The Company did not have unrecognized tax benefits or accrued interest and penalties at any time during the years ended December 31, 2013 or 2012, and does not anticipate having unrecognized tax benefits over the next twelve months. The Company is subject to audit by the IRS and state taxing authorities for tax periods commencing January 1, 2009. Additionally, the Company may be subject to examination by the IRS for years beginning prior to January 1, 2009 as a result of its NOLs. However, any adjustment related to these periods would be limited to the amount of the NOL generated in the year(s) under examination.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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