COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES

14. COMMITMENTS AND CONTINGENCIES:

Commitments.    We have lease financing arrangements (the “Capital Lease Arrangements”) with a bank related to certain property and equipment, as further described in Note 6. Payments under the Capital Lease Arrangements are to be made over a period of 48 to 60 months and have a blended interest rate of 6.03% per annum on the outstanding principal balances. As of December 31, 2011 and 2010, our outstanding obligations under the Capital Lease Arrangements totaled $52 thousand and $200 thousand, respectively. During the years ended December 31, 2011, 2010 and 2009, the Company made payments of principal and interest totaling $148 thousand, $215 thousand and $251 thousand, respectively, under the Capital Lease Arrangements.

We lease office space and certain equipment under capital and operating leases that expire at various times through 2016. Annual future minimum lease payments required under capital leases, together with the present value of such payments, and future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2011, were as follows:

Year Ending December 31,	Capital Leases		Abandoned Lease		Operating Leases
	(In Thousands)
2012	$	53	$	580	$	848
2013		-		591		783
2014		-		626		736
2015		-		626		705
2016		-		469		529
Thereafter		-		-		-
		53	$	2,892	$	3,601
Less amounts representing interest		1
	$	52

Rent payments under operating leases were $1.6 million, $1.6 million and $1.7 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Contingencies.    We are sometimes a party to litigation incidental to our business. We believe that these routine legal proceedings will not have a material adverse effect on our financial position. We are not involved in any active, pending, or (to the best of our knowledge) threatened legal proceedings which would be material to our consolidated financial statements. We maintain insurance in amounts with coverage’s and deductibles that we believe are reasonable. However, there can be no assurance that such coverage’s will continue to be available on reasonable terms or will be available in sufficient amounts to cover possible claims that may arise in the future, or that our insurers will not disclaim coverage as to any future claim. The successful assertion of one or more claims against the Company that exceed available insurance coverages or changes in the Company’s insurance policies, including premium increases or the imposition of a large deductible or co-insurance requirements, could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company had approximately $439 thousand and $361 thousand of unrecognized tax benefits, penalties and interest expense related to uncertain tax positions as of December 31, 2011 and 2010, respectively.

During the fourth quarter of 2010, in connection with the Company’s review of the impact of a discovered embezzlement activity upon Fullscope’s historical financial statements, the Company recorded a $950 thousand liability associated with potential pre-acquisition sales and use tax obligations. The recorded liability is unchanged and remains at $950 thousand at December 31, 2011. The potential sales and use tax-related liability was created by the methods employed by a former employee of Fullscope to conceal a fraudulent activity. The Company believes that this amount is recoverable from an existing escrow account established at the time of the acquisition as management believes it qualifies as an undisclosed liability at the time of our acquisition of Fullscope. The Company has accounted for this pre-acquisition liability as a period expense. Any amounts actually paid to settle this liability may be recoverable from an existing, fully funded escrow account which was established in connection with our acquisition of Fullscope. Future amounts recovered, if any, will be recorded by the Company in the period in which they are determined to be probable of recovery from escrow.