9.	IncomeTaxes

The components of the provision (benefit) for income taxes for the years ended December 31, 2012 and 2011 consisted of the following:

Current	2012		2011
Federal	$	—	$	—
State		—		—
Foreign		3,500		2,400
	$	3,500	$	2,400
Deferred
Federal	$	—	$	—
State		—		—
Foreign		—		—
		—		—
Total	$	3,500	$	2,400

The following table summarizes the differences between income tax expense and the amount computed applying the federal income tax rate of 34% for the years ended December 31, 2012 and 2011:

	2012			2011
Federal income tax (benefit) at statutory rate	$	(2,617,300	)	$	(534,500	)
Federal income tax (benefit) at statutory rate on discontinued operations		(159,300	)		(61,700	)
Foreign taxes		3,500			2,400
Compensation from exercise of non-qualified stock options and restricted stock awards		(215,500	)		—
Change in valuation allowance		2,987,700			593,500
Meals and entertainment (50%)		9,400			4,400
Other items		(5,000	)		(1,700	)
Provision (benefit) for income tax	$	3,500		$	2,400

Deferred income taxes and benefits result from temporary timing differences in the recognition of certain expense and income items for tax and financial reporting purposes. The following table sets forth those differences as of December 31, 2012 and 2011:

	2012			2011
Net operating loss carryforwards	$	17,022,000		$	15,815,000
Tax credit carryforwards		1,047,000			1,059,000
Depreciation and amortization		39,000			64,000
Compensation expense – non-qualified stock options		583,000			441,000
Deferred revenue and maintenance service contracts		1,391,000			1,329,000
Warrant liability		2,944,000			1,473,000
Deferred compensation		105,000			—
Reserves and other		111,000			89,000
Total deferred tax assets		23,242,000			20,270,000
Deferred tax liability – capitalized software		(89,000	)		(121,000	)
Net deferred tax asset		23,153,000			20,149,000
Valuation allowance		(23,153,000	)		(20,149,000	)
Net deferred tax asset	$	—		$	—

For financial reporting purposes, with the exception of the year ended December 31, 2007, the Company has incurred a loss in each year since inception. Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets at December 31, 2012 and 2011. The net change in the valuation allowance was $3,004,000 and $2,364,000 for the years ended December 31, 2012 and 2011, respectively.

At December 31, 2012, the Company had approximately $47 million of federal net operating loss carryforwards and approximately $16 million of California state net operating loss carryforwards available to reduce future taxable income. The federal loss carry forward will begin to expire in 2018 and the California state loss carry forward will began to expire in 2013. During the years ended December 31, 2012 and 2011, the Company did not utilize any of its federal or California net operating losses. Under the Tax Reform Act of 1986, the amounts of benefits from net operating loss carryforwards may be impaired or limited if the Company incurs a cumulative ownership change of more than 50%, as defined, over a three-year period.

At December 31, 2012, the Company had approximately $1 million of federal research and development tax credits that will begin to expire in 2018.