Note 8 - Income Taxes

6 Months Ended

Jun. 30, 2011

Income Tax Disclosure [Text Block]

8.           INCOME TAXES

The components of deferred income taxes are as follows (in thousands):

	June 30, 2011		December 31, 2010
Deferred tax assets:
Net operating loss carryforwards	$	16,642	$	17,027
Temporary differences		4,609		4,074
		21,251		21,101
Deferred tax valuation allowance		740		889
	$	20,511	$	20,212

In accordance with accounting standards, the Company has not recorded a deferred tax asset related to the settlement of certain share-based awards in the accompanying consolidated financial statements because it will not result in the reduction of income taxes payable, due to the existence of net operating loss carryforwards. The cumulative amount of unrecognized tax benefits was approximately $0.67 million at June 30, 2011 and if the Company is able to utilize this benefit in the future it would result in a credit to additional paid in capital.

The components of the provision for income tax (expense) benefit for the periods ended June 30, 2011 and 2010 are as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Current:
State and foreign	$	(9	)	$	(5	)	$	(17	)	$	(20	)
Deferred:
State		(6	)		2			13			(4	)
Federal		(129	)		51			286			(86	)
		(135	)		53			299			(90	)
Income tax (expense) benefit, net	$	(144	)	$	48		$	282		$	(110	)

The variation in income tax (expense) benefit from the expected effective rate is primarily due to the amount of expense associated with our share-based payment arrangements and the amount that will give rise to tax deductions. Furthermore, share-based payments may result in tax deductions that do not result in a tax benefit in the accompanying financial statements because it will not result in the reduction of income taxes payable, due to the existence of net operating loss carryforwards.

At June 30, 2011, we had U.S. federal net operating loss carryforwards ("NOLs") of approximately $49 million expiring between the years 2012 through 2030. Approximately $6.9 million of the NOLs are set to expire in 2012 if not utilized. Based on management's current estimate of book and taxable income for the near future as well as the company's tax planning strategy currently being implemented where deferred revenue related to maintenance contracts at the beginning of the year will be taken into taxable income on a cash basis (full inclusion method) beginning in 2010 over a four year period, it was determined that it is more likely than not that the Company will be able to generate enough taxable income in the respective carry forward periods and will utilize the respective net operating losses set to expire beginning in 2012. We file U.S. federal income tax returns as well as income tax returns in various states and one foreign jurisdiction. We may be subject to examination by the Internal Revenue Service ("IRS") for calendar years 2007 through 2010 under the normal statute of limitations. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. Generally, for state tax purposes, the Company's 2006 through 2010 tax years remain open for examination by the tax authorities under a four year statute of limitations, however, certain states may have a statute of limitations of six to ten years.