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Taxes | 12 Months Ended
--- | ---
Dec. 31, 2011
Taxes |
Taxes |
14 Taxes In the accompanying Consolidated Statements of Operations, “Loss before taxes” includes the following components for the years ended December 31, 2009, 2010 and 2011:
|  | Year ended December 31, 2009 |  | Year ended December 31, 2010 |  | Year ended December 31, 2011 |
|  | $000 |  | $000 |  | $000 |
Domestic |  | (3,013 | ) | (4,664 | ) | 264 |
Foreign |  | (17,505 | ) | (12,014 | ) | (16,072 | )
Total loss before taxes |  | (20,518 | ) | (16,678 | ) | (15,808 | )
The benefit for income taxes consists of the following:
|  | Year ended December 31, 2009 |  | Year ended December 31, 2010 |  | Year ended December 31, 2011 |
|  | $000 |  | $000 |  | $000 |
Current — domestic |  | (12 | ) | (10 | ) | — |
Current — foreign |  | 960 |  | 667 |  | 565 |
Current — total |  | 948 |  | 657 |  | 565 |
The Company has made a taxable loss in each of the operating periods since incorporation. The income tax credits of $0.9 million, $0.7 million and $0.6 million for the years ended December 31, 2009, 2010 and 2011, respectively, represent U.K. research and development (“R&D”) tax credits receivable against such expenditures in the United Kingdom that are refundable. A reconciliation of the (benefit) provision for income taxes with the amount computed by applying the statutory federal tax rate to loss before income taxes is as follows:
|  | Year ended December 31, 2009 |  | Year ended December 31, 2010 |  | Year ended December 31, 2011 |
|  | $000 |  | $000 |  | $000 |
Loss before income taxes |  | (20,518 | ) | (16,678 | ) | (15,808 | )
Income tax expense computed at statutory federal tax rate |  | (6,976 | ) | (5,672 | ) | (5,375 | )
State income tax (net of federal benefit) |  | 8 |  | 7 |  | — |
Disallowed expenses and non-taxable income |  | (773 | ) | (490 | ) | (141 | )
Loss surrendered to generate R&D credit |  | 2,322 |  | 1,605 |  | 1,372 |
Additional research and development tax relief |  | (1,185 | ) | (793 | ) | (2,260 | )
Change in valuation allowance |  | 4,605 |  | 3,984 |  | 3,170 |
Research and development tax credit rate difference |  | 237 |  | 132 |  | — |
Foreign items, including change in tax rates |  | 814 |  | 570 |  | 2,669 |
|  | (948 | ) | (657 | ) | (565 | )
Significant components of the Company’s deferred tax assets are shown below:
|  | December 31, |
|  | 2010 |  | 2011 |
|  | $000 |  | $000 |
Net operating loss carryforwards |  | 43,056 |  | 43,870 |
Depreciation, amortization and impairment of property and equipment |  | 1,925 |  | 1,772 |
Stock Options |  | 1,228 |  | 1,372 |
Accrued Expenses |  | 3,778 |  | 3,435 |
Other |  | 89 |  | 96 |
Translation adjustment |  | (2,452 | ) | 249 |
Deferred Tax Assets |  | 47,624 |  | 50,794 |
Valuation allowance for deferred tax assets |  | (47,624 | ) | (50,794 | )
Net deferred taxes |  | — |  | — |
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. A valuation allowance has been established, as realization of such assets is uncertain. The Company’s management evaluated the positive and negative evidence bearing upon the realizability of its deferred assets, and has determined that, at present, the Company may not be able to recognize the benefits of the deferred tax assets under the more likely than not criteria. Accordingly, a valuation allowance of approximately $50.8 million has been established at December 31, 2011. The benefit of deductions from the exercise of stock options is included in the net operating loss (“NOL”) carryforwards. The benefit from these deductions will be recorded as a credit to additional paid-in capital if and when realized through a reduction of cash taxes. In certain circumstances, as specified in the Tax Reform Act of 1986, due to ownership changes, the Company’s ability to utilize its NOL carryforwards may be limited. However, the Company’s overseas subsidiary has, subject to agreement with the United Kingdom’s H.M. Revenue & Customs, the following tax losses and accumulated tax losses available for carry forward against future operations, which under U.K. tax laws do not expire:
|  | December 31, |
|  | 2010 |  | 2011 |
|  | $000 |  | $000 |
Accumulated tax losses |  | 132,521 |  | 148,274 |
As of December 31, 2010 and 2011, the Company had federal and foreign NOLs of $147.7 million and $166.9 million, respectively. The Company has federal NOLs that will start to expire in 2027 and state NOLs that will start expiring in 2023. Utilization of the NOLs may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has not currently completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since the Company’s formation, due to the significant complexity and related cost associated with such study. Management has evaluated all significant tax positions at December 31, 2010 and 2011 concluding that there are no material uncertain tax positions. The Company would recognize both interest and penalties related to unrecognized benefits in income tax expense. The Company has not recorded any interest and penalties on any unrecognized tax benefits since its inception. Tax years 2009, 2010 and 2011 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United Kingdom and the United States, as carryforward attributes generated in years past may still be adjusted upon examination by the United Kingdom’s H.M. Revenue & Customs, the Internal Revenue Service (“IRS”) or state tax authorities if they have or will be used in a future period. The Company is currently not under examination by the IRS or any other jurisdictions for any tax years.

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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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: 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 3: 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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 Reference 6: 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 7: 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 8: 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 + Details
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