Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes
6 Months Ended
Jun. 30, 2011
Income Taxes [Abstract]  
Our effective tax rate was (1.17%) and (1.15%) for the three and six months periods ended June 30, 2011, respectively, as compared to (0.2%) and (0.25%) for three and six month periods ended June 30, 2010. Our effective rates differ from the U.S. federal statutory rate primarily due to our U.S. and foreign deferred tax asset valuation allowance position, foreign taxes and state taxes.
As of December 31, 2010 we had cumulative unrecognized tax benefit of approximately $91,000, which if recognized, would increase our annual effective tax rate. We do not expect that our unrecognized tax benefit will change significantly within the next 12 months. There have been no material changes to the unrecognized tax benefit during three month period ended June 30, 2011.
We periodically evaluate likelihood of the realization of deferred tax assets, and adjust the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than no. We considered many factors when assessing the likelihood of future realization of our deferred tax assets, including any recent cumulative earnings experience by taxing jurisdictions, expectations of future taxable income or loss, the carryfoward periods available to us for tax reporting purposes and other relevant factors.
At December 31, 2010, we had federal and state net operating loss (NOL) carryfoward balances of approximately $66.1 million and $41.0 million respectively, which begin to expire in 2011. In addition, we had federal and state tax credits of approximately $665,000 and $458,000 respectively. Federal credits will begin to expire in 2018 and state tax credits will carryforward indefinitely.
As of December 31, 2010, based on the weight of available evidence, including cumulative losses in recent years and expectations regarding future taxable income, realization of our deferred tax assets does not appear more likely than not. We recorded a valuation allowance of approximately $34.3 million. In addition we recorded a deferred tax liability related to its indefinite-lived other intangible assets that is not expected to reverse in the foreseeable future resulting in a net deferred tax liability of approximately $533,000. As of June 30, 2011 due to uncertainties surrounding the timing of realizing tax benefits of NOL carryfowards in the future, we continue to carry the full valuation allowance net of the naked liability.