l2, like you said, you don't know much about accounting so you shouldn't comment on it. It would take way too long to try to explain accounting and taxes to you so I wont even try. Here is Fagan's comments on the matter from the 10/04 cc:
"Before I open up the call for questions, let me just discuss the anticipated non-cash tax expense of approximately $4.5-5 million that will partially offset the 70 million income effect of the valuation allowance I just talked about. This anticipated book tax expense relates to the character or the Company's remaining net operating loss carried forwards, the majority of which resulted from deductions related to stock option exercises. While these tax benefits relieve our cash tax obligation, book accounting rules require that they afford no relief to our book tax expense. The reality is that book tax expense is a non-cash item that is offset in equity to the corresponding direct entry to additional paid-in capital.
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