Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

Note 9 — Income Taxes

At December 31, 2012, we have federal net operating loss (“NOL”) carryforwards totaling approximately $33.7 million, of which approximately $29.5 million is subject to Internal Revenue Code (“IRC”) Section 382 limitations (currently approximating $635,000 per year) as a result of 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 because of low common stock trading prices resulting in further loss of our ability to utilize the remaining carryforwards under IRC 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, 2012 and 2011. Deferred income tax assets and liabilities at December 31, are as follows (amounts in thousands):

	2012			2011
Deferred tax assets:
NOL carryforwards	$	12,778		$	12,933
Accrued expenses		713			1,360
Contract loss provision		—			171
Impairment loss on marketable securities		40			40
Employee benefits		33			64
Stock-based compensation		1,369			4,523
Depreciation		13			3
Bad debt		7			7
Other, net		73			73
		15,026			19,174
Less valuation allowance		(15,026	)		(18,969	)
		—			205
Deferred tax liabilities:
Purchased intangible assets		—			(11	)
Goodwill amortization		—			(194	)
		—			(205	)
Net	$	—		$	—

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

	2012			2011
Income tax benefit at the statutory tax rate	$	(2,375	)	$	(4,764	)
State income tax benefit, net of federal tax effect		(277	)		(551	)
Change in valuation allowance		(3,943	)		3,585
Cancellation/forfeitures of stock options		3,328			—
Non-deductible items		3,329			778
Adjustment to deferred taxes – undistributed loss		—			996
Other		(58	)		33
Income taxes	$	4		$	77

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

	2012			2011
Current, state	$	4		$	77
Deferred:
Federal		3,320			(3,018	)
State		623			(567	)
		3,943			(3,585	)
Less effect of valuation allowance		(3,943	)		3,585
Income taxes	$	4		$	77