Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

As of December 31, 2011, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $82,855,000 and $44,981,000, respectively and federal and Massachusetts state research and development (“R&D”) credit carryforwards of approximately $1,578,000 and $1,110,000, respectively subject to limitation, may be available to offset future federal and state income tax liabilities through 2031.

Deferred tax assets consisted of the following as of December 31:	2011			2010
Net operating loss carryforward	$	31,338,000		$	31,534,000
Capitalized research and development expenses		10,402,000			12,977,000
License fees		325,000			617,000
Stock-based compensation expense		2,264,000			2,264,000
Other		737,000			2,754,000
Gross deferred tax assets		45,066,000			50,146,000
Valuation allowance		(45,066,000	)		(50,146,000	)
Net deferred tax assets	$	—		$	—

A reconciliation of the amount of reported tax benefit and the amount computed using the U.S. federal statutory rate of 35% for the years ended December 31 is as follows:

	2011			2010
(Benefit)/provision at statutory rate	$	(1,009,000	)	$	179,000
State taxes, net of federal benefit		267,000			32,000
Expiring state net operating loss carryforward		455,000			178,000
Gain on forgiven interest and cancellation of debt and other		2,567,000			3,000
Decrease in valuation allowance		(5,080,000	)		(392,000	)
NOL attribute reduction on debt cancellation		2,800,000			—
	$	—		$	—

For the years ended December 31, 2011 and 2010, the Company did not record any federal or state tax expense given its continued net operating loss position. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets, which are comprised principally of net operating losses (“NOL”) and capitalized research and development expenditures. Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets and, as a result, a full valuation allowance has been recorded.

Income tax benefit for the years ended December 31:	2011			2010
Federal	$	(2,737,000	)	$	(1,560,000	)
State		(645,000	)		(389,000	)
		(3,382,000	)		(1,949,000	)
Valuation allowance		3,382,000			1,949,000
	$	—		$	—

A reconciliation of the unrecognized tax benefits recorded for the years ended December 31 is as follows:

	2011		2010
Balance at January 1	$	2,822,531	$	2,798,199
Additions based on tax positions related to the current year		—		24,332
Balance at December 31	$	2,822,531	$	2,822,531

The balance of unrecognized tax benefits as of December 31, 2011 of approximately $2,822,531 are tax benefits that, if recognized, would not affect the Company’s effective tax rate since they are subject to a full valuation allowance.

The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company has no accrual for interest and penalties as of December 31, 2011.

The Company is subject to both federal and state income tax for the jurisdiction within which it operates. Within these jurisdictions, the Company is open to examination for tax years ended December 31, 2009 through December 31, 2011. The U.S. Internal Revenue Service (IRS) had completed an audit of tax years 2007 and 2008 and had informed us that no adjustments to the federal tax returns as filed would be proposed as a result of the audit. However, because we are carrying forward income tax attributes such as the NOL from 2006, these attributes can still be audited when utilized on returns filed in the future.