INCOME TAXES

3 Months Ended

Mar. 31, 2012

INCOME TAXES

INCOME TAXES

NOTE 10. INCOME TAXES

        We recorded a tax benefit of $2,783,000 for the three months ended March 31, 2012, compared to a tax provision of $44,000 for the three months ended March 31, 2011. The 2012 tax benefit was related to refundable UK research and development tax credits, which are included in income taxes receivable on the accompanying balance sheet, and benefits related to amortization of acquired intangibles related to our ATL acquisition that reduced our deferred tax liabilities. The 2011 provision was based on the Company's estimated effective tax rate for the year, taking into account the available net operating loss carryforwards and estimated research and development tax credits.

        Utilization of our net operating loss carryforwards are subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation will result in the expiration of the net operating losses before utilization. The Company's deferred tax assets have been adjusted for the expected limitation.

        We have no unrecognized tax benefits as of March 31, 2012. Our policy is to recognize interest and penalties related to income taxes as a component of income tax expense and there have been no such interest and penalties recorded for any of the periods presented. We are subject to income tax examinations for U.S. federal and state income taxes from 1997 forward due to net operating losses in tax years 1995 through 2009. We are subject to tax examinations in the UK from 2010 forward. We do not anticipate that our total unrecognized tax benefits will significantly change prior to March 31, 2013.