13. INCOME TAXES

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

	2013			2012			2011

Tax Expense Computed at 34% of Pretax Income	$	(16,583,000	)	$	(18,367,000	)	$	(7,291,000	)
State Income Taxes		—			—			2,005
Effect of Change in Valuation Allowance		(16,583,000	)		(18,367,000	)		(7,291,000	)


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

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

	December 31,

	2013			2012
Deferred tax assets:
Net Operating Loss Carryforward	$	49,426,000		$	33,016,000
Stock Based Compensation		6,839,000			5,398,000
Accrued Expenses		334,000			274,000
Inventories		65,000			66,000
Prepaid Expenses		—			51,000
Workers' Compensation Reserve		60,000			—
Accounts Receivable		13,000			9,000


Total Deferred Tax Assets		56,737,000			38,814,000
Deferred Tax Liabilities:
Tax over Book Depreciation		118,000			276,000
Goodwill & Intangible Assets		225,000			272,000
Prepaid Expenses		122,000			—


Total Deferred Tax Liabilities		465,000			548,000


Subtotal		56,272,000			38,266,000
Valuation Allowance		(56,272,000	)		(38,266,000	)


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 $145,371,000 that expire between 2018 and 2033.

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, 2013, 2012 and 2011. While we anticipate generating income within the next year or two, we expect to incur operating losses until our drug products are approved to be marketed and manufactured. Considered together with our limited history of operating income and our net losses in 2013, 2012 and 2011, management has placed a full valuation allowance against the net deferred tax assets as of December 31, 2013 and 2012. 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 $3.7 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, 2013 and 2012.