Note 9 - Income Taxes

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

	Year ended December 31,
	2013			2012			2011

Statutory federal tax benefit		(3,963,246	)		(1,604,648	)		(1,291,175	)
State income tax, net of federal benefit		(1,179,476	)		(19,918	)		(232,489	)
Other permanent differences		(2,706,156	)		4,975			22,101
Foreign rate differential		(710,512	)		(80,292	)		(50,173	)
Rate change		(369,407	)		388,656			-
Lobbying costs		98,507			122,204			-
Write-off of expired/forfeited options and conversion of notes		-			193,605			391,826
Canada transfer pricing and expiring attributes		-			-			(8,965,832	)
Cancellation of debt limitation deferred write off		6,246,942			-			-
Reversal of expiration of net operating losses		-			-			(4,745,271	)
Other		(1,816	)		1,393,366			732,322
Subtotal		(2,585,164	)		397,948			(14,138,691	)
Decrease (increase) in valuation allowance		2,646,910			(202,451	)		14,138,691
Income tax provision (benefit)	$	61,746		$	195,497		$	-

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

	December 31,
	2013			2012
Deferred tax assets:
Net operating loss ("NOLs") carry forwards	$	61,590,084		$	58,334,073
Fixed assets/intangibles		148,395			114,826
Research and development credits/loss carryforwards		1,726			3,278,995
Share-based compensation		3,368,571			3,047,573
Accrued expenses and other		859,358			2,789,776
Total deferred tax assets		65,968,134			67,565,243

Deferred tax liabilities:
Intercompany bad debt		-			(3,978,944	)
Total deferred tax liabilities		-			(3,978,944	)
Net deferred tax assets		65,968,134			63,586,299
Less: valuation allowance		(66,225,409	)		(63,781,796	)
Net deferred tax liabilities	$	(257,275	)	$	(195,497	)

For the years ended December 31, 2013 and 2012, 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.

The U.S. federal NOLs of approximately $144 million will begin to expire in various years beginning in 2022, if not limited by triggering events prior to such time. In connection with the adoption of stock-based compensation guidance in 2006, the Company elected to follow the with-and-without approach to determine the sequence in which deductions and NOLs are utilized. Under Section 382 of the U.S. Internal Revenue Code, the Company's NOLs may be limited due to certain underlying ownership changes of its common stock. We have not completed an analysis under Section 382 to determine what, if any, impact any prior ownership change has had on our ability to utilize our NOLs. Until such analysis is completed, we cannot be sure that the full amount of the existing NOLs will be available to us, even if we do generate taxable income before their expiration. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that could result in further limitations being placed on our ability to utilize our NOLs. The UK net operating loss carry forwards of approximately $21 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 NOLs 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 2013, consistent with 2012. Also, the Company has a deferred tax liability related to tax deductible goodwill, for which the scheduled reversal is not determinable. As such, this deferred tax liability cannot be used as a source of future taxable income with which to realize the deferred tax assets. The cumulative amount of this deferred tax liability is approximately $257,000 at December 31, 2013 and is classified as Other long-term liabilities on the consolidated balance sheets.

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.