XML 28 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
INCOME TAXES
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
INCOME TAXES
6.
INCOME TAXES
 
Deferred tax assets are attributable to the following at December 31 (in thousands):
 
   
2011
    
2010
  
Federal net operating loss carryforwards 
   $ 17,041     $ 16,977  
Research and development and other tax credit carryforwards 
     18,807       18,719  
State net operating loss carryforwards 
     465       535  
Capitalized research and development costs 
     1,651       3,018  
Other 
     2,512       2,510  
   Total 
     40,476       41,759  
Less valuation allowance 
     (40,476 )     (41,759 )
   Deferred tax assets, net 
   $ -     $ -  
 
A reconciliation of the U.S. federal statutory rate to the effective tax rate is as follows:
 
   
Year ended December 31,
  
   
2011
    
2010
    
2009
  
Federal statutory rate
     34 %     34 %     34 %
State rate, net of federal benefit
     6       8       9  
Tax credits
     (9 )     (128 )     (88 )
Change in valuation allowance
     (50 )     (558 )     30  
State tax rate change
     0       157       0  
Non-qualified option cancellations and forfeitures
     11       394       0  
Nondeductible compensation expense
     (1 )     0       6  
Prior year adjustment
     (2 )     5       0  
Expiring NOLs and tax credits
     10       84       8  
Other
     1       5       2  
   Effective tax rate
     0 %     1 %     1 %
 
At December 31, 2011, we had federal net operating loss (“NOL”) and research and development credit carryforwards of approximately $51.4 million and $13.6 million respectively, expiring in 2012 through various dates up through 2031.  In 2011, no NOLs and approximately $114,000 of research and development credits expired unused. 
 
For state purposes, we had state NOLs and research and development credit carryforwards of approximately $9.3 million and $7.4 million respectively, expiring in 2012 through various dates up to 2026.  In 2011, approximately $2.2 million of state NOLs expired unused and $79,000 research and development credits expired unused.
 
Ownership changes, as defined in Section 382, could limit the amount of net operating loss carryforwards and research and development credits that can be utilized annually to offset future taxable income.
 
We recorded a full valuation allowance against our deferred tax assets because based on all the available evidence, we continue to believe that it is more likely than not that our deferred tax assets are not currently realizable.  In reaching this determination, we evaluated our three-year cumulative results as well as the impact that current economic conditions may have on our future results.
 
We will continue to assess the level of valuation allowance required in future periods. Should more positive than negative evidence regarding the realizability of tax assets exist at a future point in time, the valuation allowance may be reduced or eliminated altogether.
 
We did not record a provision for federal income taxes in 2011, 2010, and 2009 due to tax net operating losses and the uncertainty of the timing of profitability in future periods. However, in 2011, 2010 and 2009 we paid immaterial amounts of state excise taxes.
 
Gross deferred tax assets include cumulative deductions for stock options in excess of book expense of $62.6 million.  None of the benefit related to these options has been reflected in equity because we determined that it was more likely than not that such deferred tax assets may not be realized. Therefore, the portion of the deferred tax asset valuation allowance related to the tax benefit of these options must be recorded to equity, when the tax benefit is realized.  The estimated federal amount of this benefit is $22.9 million, and the estimated state amount is $0.6 million for a total amount of $23.5 million.
 
Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense.  As of December 31, 2011, we had no accrued interest or penalties related to uncertain tax positions.