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INCOME TAXES
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
8. INCOME TAXES

 

Our income tax benefit aggregated $287,000, $299,000 and $212,000 (41%, 44% and 49% of the loss before income taxes, respectively) for the years ended December 31, 2011, 2010 and 2009, respectively. The income tax provision consists of the following (in thousands):

 

    Year Ended December 31,  
    2011     2010     2009  
Current                        
Federal   $ —     $ —     $ —  
State     (1 )     (1 )     (1 )
Foreign     —       —       —  
      (1 )     (1 )     (1 )
Deferred                        
Federal     260       260       112  
State     28       40       101  
      288       300       213  
                         
Total   $ 287     $ 299     $ 212  

 

The actual income tax expense differs from the expected tax computed by applying the U.S. Federal corporate tax rate of 34% to income before income tax as follows (in thousands):

 

    Year Ended December 31,  
    2011     2010     2009  
Computed expected tax benefit   $ 237     $ 233     $ 146  
State income taxes, net of federal benefit     36       39       38  
Share-based compensation     (8 )     (10 )     (32 )
Research and development tax credit     24       22       58  
Other     (2 )     15       2  
Total income tax benefit   $ 287     $ 299     $ 212  

 

The significant components of our deferred tax assets and liabilities are as follows (in thousands):

 

    As of December 31,  
    2011     2010  
Deferred tax assets (liabilities):                
Deferred revenue and other reserves   $ 10     $ 5  
Product rights     237       272  
Depreciation     (33 )     (56 )
Research and development tax credit     180       157  
Federal net operating loss carryforward     652       474  
State net operating loss carryforward     275       229  
Interest rate swap     27       —  
Prepaid expenses and other     17       (45 )
Deferred tax assets   $ 1,365     $ 1,036  

 

In order to accelerate the utilization of available net operating loss carryforwards in advance of their expiration dates, we elected to increase income for federal income tax purposes by capitalizing research and experimentation expenditures aggregating $1,731,000 for our 2000 and 2001 tax returns. Accordingly, we recorded amortization of these capitalized expenditures of approximately $90,000 in 2000 and $173,000 in each of the nine years ended December 31, 2009 and $84,000 for the year ending December 31, 2010 for tax return purposes only. We carried back our 2008 federal net operating loss of approximately $1,151,000 to previous years for tax return purposes, and we have a state net operating loss carryforward of approximately $3,082,000 that expires in 2028, 2029, 2030 and 2031, if not utilized before then, and a federal net operating loss carryforward of approximately $1,916,000 that expires in 2029, 2030 and 2031, if not utilized before then. The $965,000 licensing payment that we made during the fourth quarter of 2004 was treated as an intangible asset and is being amortized over 15 years, for tax return purposes only.

 

The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2008. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.