Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

13.      Income Taxes

The (benefit) from income taxes attributable to loss from continuing operations before (benefit) from income taxes for the years ended December 31, 2011 and 2010 is as follows:

	2011			2010
	(in thousands)
Current tax expense (benefit):
Federal	$	—		$	—
State and local		(226	)		(217	)
Total current tax expense (benefit)		(226	)		(217	)
Deferred tax expense
Federal		—			—
State and local		—			—
Total deferred tax expense		—			—
Total expense (benefit) from income taxes	$	(226	)	$	(217	)

The Company sold some of its New Jersey operating loss carry forwards in exchange for net proceeds of $231,000 and $222,000 in 2011 and 2010 respectively.

The (benefit) from income taxes differed from the amount of income taxes determined by applying the applicable Federal tax rate (34%) to pretax loss from continuing operations as a result of the following:

	2011			2010
	(in thousands)
Statutory benefit	$	(1,097	)	$	(1,237	)
Other non-deductible expenses		1			3
State income taxes, net of valuation allowance		(149	)		(143	)
Increase in Federal valuation allowance		1,019			1,160
Tax benefits expiring		-			-
	$	(226	)	$	(217	)

Deferred tax assets included in the Consolidated Balance Sheets as of December 31, 2011 and 2010 consisted of the following:

	2011			2010
	(in thousands)			(in thousands)
Current Assets
Allowance for doubtful accounts	$	4		$	4
Inventory reserve		66			78
Other		91			49
Total Current Assets		161			131
Long Term Assets (Liabilities)
Property, plant and equipment		170			139
Deferred royalty payments		12			14
Tax operating loss carry forwards		9,899			9,069
Tax credit carry forwards		335			335
Non-employee stock options		560			507
Other		(8	)		(8	)
Total Long Term Assets (Liabilities)		10,968			10,056
Gross Deferred Tax Asset (Liability)		11,129			10,187
Less:  valuation allowance		(11,129	)		(10,187	)
Deferred taxes, net	$	—		$	—

The Company evaluates the recoverability of its deferred tax assets based on its history of operating earnings, its plan to sell the benefit of certain state net operating loss carry forwards, its expectations for the future, and the expiration dates of the net operating loss carry forwards. The Company has concluded that it is more likely than not that it will be unable to realize the gross deferred tax assets in the immediate future and has established a valuation allowance for all such deferred tax assets.  Accordingly, the Company has provided a valuation allowance of $9,899,000 over the years on the deferred tax assets relating to these net operating loss carryforwards.

Operating loss and tax credit carry forwards for tax reporting purposes as of December 31, 2011 were as follows:

	(in thousands)
Federal:
Operating losses (expiring through 2031)	$	28,041
Research tax credits (expiring through 2025)		279
Alternative minimum tax credits (available without expiration)		28
State:
Net operating losses - New Jersey (expiring through 2017)		3,563
Alternative minimum assessment – New Jersey (available without expiration)		29

           Federal net operating loss carry forwards that expire through 2030 have significant components expiring in 2020 (24%), 2029 (12%), 2030 (12%) and 2031 (10%).

The Company’s ability to use net operating loss carry forwards may be subject to substantial limitation in future periods under certain provisions of Section 382 of the Internal Revenue Code, which limit the utilization of net operating losses upon a more than 50% change in ownership of the Company’s stock that is held by 5% or greater stockholders.  The Company is currently examining the application of Section 382 with respect to an ownership change that took place during 2009 and 2010, as well as the possibility of such limitation having any material effect on the application of net operating loss carry forwards in the immediate future.  The Company believes that it is likely that a change in ownership takes place and that the net operating loss carryforwards will be limited.

The Company complies with ASC 740-10-25 and there was no effect on the Company’s consolidated financial position and results of operations. Accordingly, there is no interest and penalties recorded on the balance sheet for such reserves. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the appropriate state income taxing authorities for the tax years 2008 to 2011 due to the net loss carry forwards from those years.