12. INCOME TAXES

A reconciliation of income tax expense at the statutory rate to income tax expense at our effective tax rate is as follows:

	2012			2011			2010

Tax Expense Computed at 34% of Pretax Income	$	(18,367,000	)	$	(7,291,000	)	$	(912,000	)
Effect of Permanent Differences Principally Related to Non-taxable government grants		—			—			(83,000	)
State Income Taxes		—			2,005			—
Effect of Change in Valuation Allowance		(18,367,000	)		(7,291,000	)		(995,000	)

Total Income Tax Expense	$	-0-		$	2,005		$	-0-

The details of the net deferred tax asset are as follows:

	December 31,

	2012			2011
Deferred tax assets:
Net Operating Loss Carryforward	$	33,016,000		$	16,728,000
Stock Based Compensation		5,398,000			3,467,000
Accrued Expenses		274,000			78,000
Inventories		66,000			66,000
Prepaid Expenses		51,000			—
Accounts Receivable		9,000			10,000

Subtotal		38,814,000			20,349,000
Deferred Tax Liabilities:
Tax over Book Depreciation		276,000			323,000
Goodwill & Intangible Assets		272,000			297,000
Prepaid Expenses		—			3,000

Subtotal		548,000			623,000

Subtotal		38,266,000			19,726,000
Valuation Allowance		(38,266,000	)		(19,726,000	)

Net Deferred Tax Asset	$	-0-		$	-0-

Deferred tax assets result primarily from net operating loss carryforwards. For tax purposes, we have net operating loss carryforwards of approximately $97,107,000 that expire between 2018 and 2032.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized upon the generation of future taxable income during the periods in which those temporary differences become deductible. We recognized no income tax expense or benefit for the years ended December 31, 2012, 2011 and 2010. Due to anticipated spending on research and development over the next several years, coupled with our limited history of operating income and our net losses in 2012, 2011 and 2010, management has placed a full valuation allowance against the net deferred tax assets as of December 31, 2012 and 2011. The portion of the valuation allowance resulting from excess tax benefits on share based compensation that would be credited directly to contributed capital if recognized in subsequent periods is $2.4 million.

The Company accounts for its uncertain tax positions in accordance with ASC 740-10, Income Taxes and the amount of unrecognized tax benefits related to tax positions is not significant at December 31, 2012 and 2011.