Note 11 - Income Taxes

The actual income tax provision (benefit) differs from the expected income tax provision (benefit) computed at the federal statutory rate as follows:

	December 31,
	2011			2010

Statutory federal tax benefit	$	(1,291,175	)	$	(11,848,754	)
State income tax, net of federal benefit		(232,489	)		(1,284,265	)
Other permanent differences		22,101			607,981
Foreign rate differential		(50,173	)		2,492,478
Write-off of expired/forfeited options and conversion of notes		391,826			3,071,189
Canada transfer pricing and expiring attributes		(8,965,832	)		-
Expiration (Reversal of Expiration) of Net Operating Losses		(4,745,271	)		5,053,927
Other		732,322			309,840
Subtotal		(14,138,691	)		(1,597,604	)
Increase in valuation allowance		14,138,691			1,597,604
Income tax provision (benefit)	$	-		$	-

Our deferred tax assets (liabilities) consisted of the following:

	December 31,
	2011			2010

Deferred tax assets:
Net operating loss carry forwards	$	62,873,360		$	36,611,209
Fixed assets/intangibles		49,389			3,357,098
Research and development credits/loss carryforwards		3,291,651			3,073,821
Stock based compensation		2,611,770			2,180,069
Accrued expenses and other		1,368,036			2,970,309
Total deferred tax assets		70,194,206			48,192,506

Deferred tax liabilities:
Intercompany bad debt		(6,209,959	)		-
Total deferred tax liabilities		(6,209,959	)		-
Net deferred tax assets		63,984,247			48,192,506
Less: valuation allowance		(63,984,247	)		(48,192,506	)
Net deferred tax assets	$	-		$	-

For the years ended December 31, 2011 and 2010, we increased the valuation allowance to fully reserve for the value of deferred tax assets. Due to continued operating losses, there is no indication that it is more likely than not that we will be able to utilize our deferred tax assets. As such, there have been no recoveries of previously recorded valuation allowances in 2011 or 2010.

The U.S. federal net operating loss carryforwards of approximately $138.9 million will begin to expire in various years beginning in 2021. Under Section 382 of the U.S. Internal Revenue Code, the Company’s net operating loss carryforwards may be limited due to underlying ownership of its common stock. The Canadian federal net operating loss carry forwards of approximately $12.5 million will begin to expire in 2030. The Quebec Provincial net operating loss carry forwards of approximately $12.5 million will begin to expire in 2030. The UK net operating loss carry forwards of approximately $19.3 million have an unlimited life.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income during the periods in which the net operating loss carryforwards are available. We consider projected future taxable income, the scheduled reversal of deferred tax liabilities and available tax planning strategies that can be implemented by us in making this assessment on a jurisdiction-by-jurisdiction basis. Based upon these factors, we have established a full valuation allowance against the net deferred tax asset in 2011, consistent with 2010.

We have analyzed tax positions in all jurisdictions where the Company is required to file an income tax return and have concluded that we do not have any material unrecognized tax benefits. As such, we believe that any of our uncertain tax positions would not result in adjustments to our effective income tax rate.