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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of the Company's net deferred tax assets at December 31 are as follows:
|  | 2012 |  | 2011
Deferred Tax Assets |  |  |  |
Net operating loss and tax credits |  | $ | 1,159,865 |  |  | $ | 1,025,621 |
Property and equipment and intangibles |  | 153,361 |  |  | 92,470 |
Allowance for accounts receivable |  | 74,362 |  |  | 92,977 |
Reserve for expired product |  | 706,960 |  |  | 735,992 |
Inventory |  | 1,185,419 |  |  | 1,079,541 |
Deferred charges |  | 582,480 |  |  | 563,141 |
Cumulative compensation costs incurred on deductible equity awards |  | 1,251,382 |  |  | 584,212 |
Total deferred tax assets |  | 5,113,829 |  |  | 4,173,954 |
Deferred Tax Liabilities |  |  |  |
Intangible assets |  | (2,665,022 | ) |  | (2,500,642 | )
Net deferred tax assets, before valuation allowance |  | 2,448,807 |  |  | 1,673,312 |
Less: deferred tax asset valuation allowance |  | (108,318 | ) |  | (94,459 | )
Net deferred tax assets |  | $ | 2,340,489 |  |  | $ | 1,578,853 |
As a result of the Exchange Program, discussed in Note 9, Shareholder's Equity, the Company recognized a deferred tax asset in 2012 related to the expected tax benefit of previously recognized compensation expense for incentive stock options that were exchanged. The deferred tax asset will be realized when the restrictions lapse on the restricted stock. The following table summarizes the amount and year of expiration of the Company's federal and state net operating loss carryforwards as of December 31, 2012:
Years of expiration |  | Federal |  | State
2014 |  | $ | — |  |  | $ | 2,249,078 |
2015 - 2017 |  | — |  |  | 504,822 |
2018 - 2024 |  | — |  |  | 51,629,844 |
2029 |  | 48,566,499 |  |  | — |
Total federal and state net operating loss carryforwards |  | $ | 48,566,499 |  |  | $ | 54,383,744 |
The Company has unrecognized federal net operating loss carryforwards as a result of the exercise of nonqualified options of approximately $48.6 million. These benefits will be recognized in the year in which they are able to reduce current income taxes payable. The usage of these net operating losses carryforwards resulted in the Company paying minimal income taxes in 2009 through 2012, and the Company expects to pay minimal income taxes in 2013. The Company has $54.4 million of state net operating loss carryforwards. This amount includes $51.8 million from the exercise of nonqualified options during 2009. The state net operating loss carryforwards above include approximately $2.4 million that is subject to a full valuation allowance at December 31, 2012. Income tax (expense) benefit includes the following components for the years ended December 31:
|  | 2012 |  | 2011 |  | 2010
Current: |  |  |  |  |  |
Federal |  | $ | (3,185,743 | ) |  | $ | (1,992,804 | ) |  | $ | (2,665,404 | )
State and other |  | (820,669 | ) |  | (422,290 | ) |  | (518,365 | )
Total current income tax expense |  | (4,006,412 | ) |  | (2,415,094 | ) |  | (3,183,769 | )
Deferred: |  |  |  |  |  |
Federal |  | 677,190 |  |  | (1,543,261 | ) |  | 268,563 |
State |  | 84,446 |  |  | (121,849 | ) |  | 63,786 |
Total deferred income tax benefit (expense) |  | 761,636 |  |  | (1,665,110 | ) |  | 332,349 |
Total income tax expense |  | $ | (3,244,776 | ) |  | $ | (4,080,204 | ) |  | $ | (2,851,420 | )
The Company's deferred tax benefit in 2012 was primarily a result of the income tax benefit arising from the Exchange Program. The Company’s deferred tax expense in 2011 was primarily due to the write-off for tax purposes of the Kristalose license rights but maintained as a component of products rights for book purposes, and due to inventory write-downs. The deferred tax benefit for 2010 was primarily due to rent and expired product expenses recognized for book purposes in 2010 that will not be deductible for tax purposes until the future. Deferred income tax benefit (expense) is comprised of the following components for the years ended December 31:
|  | 2012 |  | 2011 |  | 2010
Deferred tax (expense) benefit, excluding items below |  | $ | (39,870 | ) |  | $ | 439,744 |  |  | $ | 459,575 |
Inventory write-downs |  | 179,755 |  |  | 817,840 |  |  | 31,228 |
Creation of operating loss carryforwards |  | 25,552 |  |  | 11,348 |  |  | 9,567 |
Creation (utilization) of tax credit carryforwards |  | 108,699 |  |  | 56,395 |  |  | (3,115 | )
Change in valuation allowance due to changes in net deferred tax asset balances |  | (15,291 | ) |  | (13,597 | ) |  | (10,750 | )
Deductible equity awards |  | 667,171 |  |  | (330,329 | ) |  | (132,193 | )
Intangible assets |  | (164,380 | ) |  | (2,646,511 | ) |  | (21,963 | )
Deferred income tax benefit (expense) |  | $ | 761,636 |  |  | $ | (1,665,110 | ) |  | $ | 332,349 |
The valuation allowance at December 31, 2012 and 2011 is primarily related to state tax benefits at CET that will likely not be realized. The Company’s effective income tax rate for 2012, 2011 and 2010 reconciles with the federal statutory tax rate as follows:
|  | 2012 |  | 2011 |  | 2010
Federal tax expense at statutory rate |  | 34 | % |  | 35 | % |  | 34 | %
State income tax expense (net of federal income tax benefit) |  | 4 | % |  | 4 | % |  | 6 | %
Permanent differences associated with tax grants |  | — | % |  | — | % |  | 5 | %
Permanent differences associated with stock options |  | (5 | )% |  | 2 | % |  | 4 | %
Other permanent differences |  | 3 | % |  | 2 | % |  | 4 | %
Other |  | — | % |  | (1 | )% |  | 1 | %
Net income tax expense |  | 36 | % |  | 42 | % |  | 54 | %
During 2010, the Company applied for and received tax-free grants under the Therapeutic Discovery Project. Qualifying expenses certified under this program are nondeductible for federal income tax purposes. Approximately $0.4 million of qualifying expenses related to 2009 for which the Company filed an amended tax return in 2011. The Company’s 2009 federal tax return was selected for examination during 2012, and this examination was completed during the year with no significant findings or adjustments. Federal tax years that remain open to examination are 2010 through 2012. Due to a 2009 net operating loss carryback, federal tax years 2006 through 2008 remain open to the extent of net operating losses utilized in those years. State tax years that remain open to examination are 2007 to 2012. Excluding the alternative minimum tax (AMT) tax credits, the Company will need to generate future taxable income of approximately $5.7 million in order to fully realize the deferred tax assets. Taxable income, excluding tax deductions generated by the exercise of nonqualified options, for 2012, 2011 and 2010 was approximately $9.4 million, $5.7 million and $7.3 million, respectively. Based upon the level of taxable income over the last three years and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2012. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

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- 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 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 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: 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 6: 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 7: 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 8: 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 + Details
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