Income taxes - Note 15

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Income taxes - Note 15

15. Income taxes

A provision for income taxes has not been recorded for 2011, 2010, and 2009 due to the valuation allowances placed against the net operating losses and deferred tax assets arising during such periods. A valuation allowance has been recorded for all deferred tax assets. Based on our history of losses since inception, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets.

At December 31, 2011, we have net operating loss carry-forwards of approximately $283.2 million, for federal income tax reporting purposes. In addition, we have research and development tax credits of $5.8 million. The net operating loss carry-forwards and research and development credits available to offset future taxable income, if any, will expire in varying amounts from 2017 to 2031 if not previously utilized. In 2011, $2.1 million in net operating loss carry-forwards expired. The research and development tax credits and the remaining net operating losses are scheduled to expire between 2017 and 2031. In certain circumstances, as specified in the Internal Revenue Code, a 50% or more ownership change by certain combinations of our stockholders during any three-year period would result in limitations on our ability to utilize our net operating loss carry-forwards. We have determined that such a change occurred during 1996 and the annual utilization of loss carry-forwards generated through the period of that change will be limited to approximately $1.6 million.

Deferred tax assets are summarized as follows:

		December 31,
		2011		2010
Deferred tax assets, current
Reserves	$	4,395,000	$	4,281,000
Other		806,000		853,000
Total gross deferred tax assets, current		5,201,000		5,134,000
Deferred tax assets, noncurrent
Net operating loss carryforwards		97,156,000		88,425,000
R&D credit carryforwards		5,754,000		5,428,000
Depreciation/amortization deferred		26,510,000		24,956,000
Other		6,958,000		5,815,000
Total gross deferred tax assets, noncurrent		136,378,000		124,624,000
Deferred tax liabilities, noncurrent
Convertible debt		-		-
Total gross deferred tax liabilities, noncurrent		-		-
Net deferred taxes before valuation allowance		141,579,000		129,758,000
Less: Valuation allowance		(141,579,000)		(129,758,000)
Deferred tax assets	$	-	$	-

The valuation allowance and the research and development credit carry forwards account for substantially all of the difference between our effective income tax rate and the Federal statutory tax rate of 34%.

Certain net operating losses arise from the deductibility for tax purposes of compensation under nonqualified stock options equal to the difference between the fair value of the stock on the date of exercise and the exercise price of the options. For financial reporting purposes, the tax effect of this deduction when recognized is accounted for as a credit to shareholders' equity.

We did not have any unrecognized tax benefits at December 31, 2011 and at December 31, 2010.

We recognize interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2011, 2010, and 2009, we recognized no interest or penalties.

We file income tax returns in the U.S. federal jurisdiction and various states. The tax years 2008-2010 generally remain open to examination by major taxing jurisdictions in the United States to which we are subject.