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Income Taxes
6 Months Ended
Jun. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

The Company recorded a provision for federal, state and foreign income taxes of approximately $1.6 million and $1.2 million for the three months ended June 30, 2012 and 2013, respectively, and $2.7 million and $1.2 million for the six months ended June 30, 2012 and 2013, respectively. The tax provision recorded in the three and six months ended June 30, 2013 is due to generating taxable income primarily in the United States offset by losses in certain foreign jurisdictions where there is no corresponding benefit.

Deferred income taxes are provided for the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss carry-forwards and credits using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. At each balance sheet date, the Company assesses the likelihood that deferred tax assets will be realized, and recognizes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction.

During 2012, the Company reassessed the need for a valuation allowance against its deferred tax assets relating to its Xively subsidiary and concluded that it was more likely than not that it would be able to realize its deferred tax assets as a result of forecasted future earnings. Accordingly, the Company reversed the valuation allowance related to its Xively deferred tax assets of approximately $677,000 in 2012. As of December 31, 2012, and June 30, 2013, the Company maintained a full valuation allowance against the deferred tax assets of its Hungarian subsidiary. This entity has historical losses and the Company concluded it was not more likely than not that these deferred tax assets are realizable.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company’s income tax returns since inception are open to examination by federal, state, and foreign tax authorities. The Company has recorded a liability related to uncertain tax provisions of approximately $251,000 and $272,000 as of December 31, 2012 and June 30, 2013, respectively. The Company’s policy is to record estimated interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision. The Company recognized approximately $2,000 of interest expense in its statements of income during the three and six months ended June 30, 2012, respectively. The Company did not recognize any interest or penalties in its statement of operations during the three or six months ended June 30, 2013, and there are no accruals for interest or penalties at either December 31, 2012 or June 30, 2013.

The Company has performed an analysis of its ownership changes as defined by Section 382 of the Internal Revenue Code and has determined that an ownership change as defined by Section 382 occurred in October 2004 and March 2010 resulting in approximately $219,000 and $12,800,000, respectively, of net operating losses, or NOLs, being subject to limitation. As of December 31, 2012 and June 30, 2013, the Company believes all NOLs generated by the Company, including those subject to limitation, are available for utilization given the Company’s large annual limitation amount. Subsequent ownership changes as defined by Section 382 could potentially limit the amount of net operating loss carry-forwards that can be utilized annually to offset future taxable income.