checkmate, that tax benefit was unrelated to the valuation allowance that allows the company to show no taxes on its income statement. From the Q:
Income Taxes At December 31, 2004, the Company has available net operating loss carryforwards of approximately $53 million expiring at various dates through 2024, federal research and development credit carryforwards of approximately $2.3 million, and state research and development credit carryforwards of approximately $921 thousand. With these available carryforwards, the Company does not believe a provision for income taxes is required as of June 30, 2005. The tax benefit recognized in the quarter ended June 30, 2004 is the result of the Company’s settlement with the ITC, which resulted in the receipt of $975 thousand in April 2004, net of approximately $156 thousand of withholding tax on the gross settlement amount. Management continues to monitor the likeliness of recoverability of its deferred tax assets in light of its continued generation of profits. If the Company continues to generate profits during 2005, and there is continued confidence in the outlook for continuing future profitability, management may deem that it is more likely than not that certain of the deferred tax assets will be realized resulting in a potentially material income tax benefit adjustment from the release of some or all of the Company’s approximate $33 million valuation allowance.
---
I'm afraid that traders just looked at the net eps drop and sold first without investigating that pretax income was up strongly. I've seen this happen a lot, but the stock usually recovers eventually.