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Income Taxes
6 Months Ended
Jun. 30, 2011
Income Taxes [Abstract]  
Income Tax Disclosure
Income Taxes


The Company's effective tax rate for the three months ended June 30, 2011 and 2010, differs from the statutory rate primarily due to a full valuation allowance provided against its United States (“U.S.”) net deferred tax assets, Canadian research and experimental development claims, the impact of stock option expense, the amortization of goodwill for tax purposes and taxes on foreign income that differ from the U.S. tax rate. In addition to the aforementioned items, the effective tax rate for the three months ended June 30, 2011 differs from the statutory rate due to the re-measurement of uncertain tax positions related to the examination by the Canada Revenue Agency ("CRA").
The Company utilizes the asset and liability method of accounting for income taxes. The Company records deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon the Company's review of all positive and negative evidence, including its projected three year U.S. cumulative pre-tax book loss and taxable loss, it concluded that a full valuation allowance should continue to be recorded against its U.S. net deferred tax assets at June 30, 2011. In certain other foreign jurisdictions, where the Company does not have cumulative losses or other negative evidence, the Company had net deferred tax assets of $16.6 million at June 30, 2011 and December 31, 2010.  In the future, if the Company determines that it is more likely than not that it will realize its U.S. net deferred tax assets, it will reverse the applicable portion of the valuation allowance and recognize an income tax benefit in the period in which such determination is made.
The Company's unrecognized tax benefits and related interest and penalties during the three months ended June 30, 2011 decreased by $81,000 due to the re-measurement of certain uncertain tax positions related to the examination by the CRA. The ending balance for the unrecognized tax benefits was approximately $1.3 million at June 30, 2011. The related interest and penalties were insignificant. It is reasonably possible that the Company's uncertain tax positions could decrease by approximately $1.1 million in the next twelve months due to tax examination closure.
The Company is currently under examination by the CRA for tax years 2006 through 2008. During the fourth quarter of 2010, the CRA issued proposed adjustment notices. During the three months ended June 30, 2011, the CRA has reissued the proposed adjustments and the Company is in the process of reaching an agreement with CRA with respect to the tax carry-forward attributes to be utilized in future tax years. The Company believes that it has adequately provided for uncertain tax positions at June 30, 2011. However, should the Company experience an unfavorable outcome, it could have a material impact on its results of operations, financial position, and cash flows. The Company is not currently under examination by tax authorities in any other jurisdictions.