Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

NOTE 9 — INCOME TAXES

At December 31, 2011, we have federal net operating loss ("NOL") carryforwards totaling approximately $34.1 million, of which approximately $4.6 million is not subject to Internal Revenue Code Section 382 limitations (currently approximating $361,000 per year) from previous changes in control. The NOLs will expire in 2022 through 2031. We are particularly vulnerable to additional changes in control in the near term due to probable future equity dilution or possible takeover resulting in further loss of our ability to utilize the remaining carryforwards pursuant to Section 382. Primarily based on the foregoing and other facts and circumstances discussed in Note 7b, management has determined that realization of tax benefits from our NOLs and other deferred tax assets is not more likely than not at this time and, accordingly has provided an effective 100% valuation allowance at December 31, 2011 and 2010, and deferred income tax assets and liabilities at December 31, (amounts in thousands) are as follows:

	2011			2010
Deferred Tax Assets:
NOL carryforwards	$	12,933		$	9,471
Accrued expenses		1,360			1,601
Contract loss provision		171			—
Impairment loss on marketable securities		40			40
Employee benefits		64			70
Stock-based compensation		4,523			3,495
Undistributed loss from a foreign subsidiary		—			996
Depreciation		3			21
Bad debt		7			7
Other, net		73			73
Total Deferred Tax Assets		19,174			15,774
Less valuation allowance		(18,969	)		(15,384	)
Net Deferred Tax Assets		205			390
Deferred Tax Liabilities:
Purchased intangible assets		(11	)		(203	)
Goodwill amortization		(194	)		(183	)
Deferred revenue		—			(4	)
Total Deferred Tax Liabilities		(205	)		(390	)
Net	$	—		$	—

Reconciliation between the income tax expense and the amount computed by applying the statutory Federal income tax rate (34%) to loss before income tax is as follows (amounts in thousands):

	2011			2010
Income tax benefit at the statutory tax rate	$	(4,764	)	$	(3,467	)
State income tax benefit, net of federal tax effect		(551	)		(251	)
Change in valuation allowance		3,585			4,571
Non-deductible items		778			109
Adjustment to deferred taxes – undistributed loss		996			—
Adjustment to deferred taxes – reinstated warrant		—			(745	)
Other		33			12
Income taxes	$	77		$	229

Income taxes (benefits) consists of the following (amounts in thousands):

	2011			2010
Current, state	$	77		$	229
Deferred:
Federal		(3,018	))		(3,849	)
State		(567	)		(722	)
		(3,585	)		(4,571	)
Less effect of valuation allowance		3,585			4,571
Income taxes	$	77		$	229