INCOME TAXES

12 Months Ended

Dec. 31, 2011

NOTE 7 — INCOME TAXES

The Company and its subsidiaries are included in a consolidated Federal income tax return. For the year ended December 31, 2011, the Company’s international subsidiaries filed various income tax returns in their tax jurisdictions. As previously stated, the Company deconsolidated its China subsidiary, JPI, effective September 29, 2009. The provision for income taxes is as follows:

	2011		2010
Current:
Federal	$	-	$	-
State		-		-
Total current		-		-

Deferred		-		-
Total provision for income taxes	$	-	$	-

The Company’s loss before income tax provision was subject to taxes in the following jurisdictions for the following periods:

	2011			2010
Pretax loss:
United States	$	(86,187,269	)	$	(85,711,853	)
Foreign		-			-
	$	(86,187,269	)	$	(85,711,853	)

The provision (benefit) for income taxes differs from the amount computed by applying the U.S. Federal income tax rate of 34% to loss before income taxes as a result of the following for the years ended December 31:

	2011			2010
Computed tax benefit at federal statutory rate	$	(29,304,000	)	$	(29,144,000	)
State income tax benefit, net of federal benefit		1,000			1,000
Nondeductible interest expense		19,171,000			12,775,000
Fair value adjustments to derivatives		(12,650,000	)		3,188,000
Loss on extinguishment of debt		15,597,000			1,102,000
NQSO Expirations		1,108,000
Tax credits		(7,000	)		(33,000	)
Expired net operating losses		552,000			431,000
Change in valuation allowance		5,524,000			11,670,000
Other		8,000			10,000
	$	-		$	-

The components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2011			2010
Deferred tax asset:
Net operating loss carryforwards	$	25,114,000		$	19,926,000
Expenses recognized for granting of options and warrants		1,806,000			2,686,000
Tax credit carryforwards		346,000			334,000
Depreciation		418,000			475,000
Deferred gain on JPI		2,551,000			2,551,000
Book write-off of JPI note		1,146,000			1,146,000
Other temporary differences		5,557,000			88,000
Total gross deferred tax asset		36,938,000			27,206,000
Valuation allowance		(33,278,000	)		(26,171,000	)
Net deferred tax asset		3,660,000			1,035,000

Deferred tax liabiltities:
Unamortized debt discount		(3,660,000	)		(1,035,000	)
Total deferred tax liabilities		(3,660,000	)		(1,035,000	)
Net deferred tax asset	$	-		$	-

The Company records a valuation allowance to reduce the carrying value of the net deferred tax assets to an amount that is more likely than not to be realized. The valuation allowance increased by approximately $7,107,000 during the year ended December 31, 2011.

The federal and state net operating loss carry forward expire on various dates through 2025, unless previously utilized. The Company does not have any net operating losses that are attributable to excess stock option deductions which would be recorded as an increase in additional paid in-capital when realized. The Company has research and development tax credit carry forwards of approximately $172,000 and $174,000 to reduce federal and state income tax, respectively. The federal research and development tax credits will begin to expire in 2022, unless previously utilized. The Company’s California research and development tax credit carry forwards do not expire and will carry forward indefinitely until utilized. Any net operating loss or credit carry forwards that will expire prior to utilization will be removed from deferred tax assets with a corresponding reduction of the valuation allowance.

Utilization of the net operating loss and research and development credit carry forwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future as provided by Sections 382 and 383 of the Internal Revenue Code of 1986, as well as similar state and foreign provisions. These ownership changes may limit the amount of net operating loss and research and development credit carry forwards than can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Company’s formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with dispositions of shares, may have resulted in a change of control, or could result in a change of control when combined with future transactions. The Company has not currently completed a study to assess whether a change or changes in control have occurred due to the significant complexity and cost associated with such a study. Any limitation may result in expiration of a portion of the net operating loss or research and development credit carry forwards before utilization.

On January 1, 2007 the Company adopted the provisions of ASC 740-10-05-6. As a result of applying the provisions of ASC 740-10-05-6, the Company increased its liability for unrecognized tax benefits by approximately $123,000, offsetting the valuation allowance on net deferred tax assets. Interest or penalties have not been accrued at December 31, 2011 or 2010. If tax benefits are ultimately recognized, there will be no impact to the Company’s effective tax rate as a result of the Company’s valuation allowance. The Company does not anticipate any significant increases or decreases to its liability for unrecognized tax benefits within the next 12 month period.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (which are not recorded as a liability because they are offset by net operating loss carry forwards) follows:

	2011		2010
Unrecognized Tax Benefits:
Balance at beginning of year	$	54,000	$	53,000
Increase/(decrease) for tax provisions taken in prior years, net		-		-
Balance at end of year	$	54,000	$	53,000

The Company is no longer subject to U.S. federal and state income tax examinations for years before 2007 and 2006, respectively. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carry forward amount the Company has in fiscal years 2008, 2009, and 2010 open for federal and 2007, 2008, 2009, and 2010 for state income tax examinations, respectively. The Company is not currently under Internal Revenue Service or state tax examinations.

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 43, 44, 45, 46, 47, 48, 49

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

-Article 4

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 9

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 15

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(h))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

+ Details

RADIENT PHARMACEUTICALS Corp 10-K/A