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Note 9 - Income Taxes
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9 Months Ended |
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Jun. 30, 2012
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| Income Tax Disclosure [Text Block] |
Note
9. Income Taxes
The
Company recorded a provision for income taxes of
approximately $65,000 and $46,000, for the three months
ended June 30, 2012 and 2011, respectively. The
Company’s tax provision includes estimated current
federal alternative minimum taxes and state franchise
taxes, but is primarily related to deferred tax expense
related to book and income tax basis difference in goodwill
on prior asset acquisitions. Our year-to-date
net change in valuation allowance is
$1,054,000. This change consists of $1,116,000
of tax benefit as a result of a reduction in valuation
allowance after considering current financial condition and
potential future taxable income. This reduction
is partially offset by a $62,000 increase in valuation
allowance from the current year AMT tax credit generated as
its utilization does not meet the “more likely than
not” criteria.
As
of September 30, 2011 the Company had U.S. federal and
state net operating loss (NOL) carry-forwards of
approximately $27,239,000 and $22,245,000, respectively,
which expire in fiscal years 2013 to 2028 if not utilized.
In fiscal 2009, the Company completed an Internal Revenue
Code Section 382 analysis of the loss carry-forwards and
determined that all of its loss carry-forwards were
utilizable and not restricted under Section 382.
Deferred
taxes recognize the impact of temporary differences between
the amounts of the assets and liabilities recorded for
financial statement purposes and these amounts measured in
accordance with tax laws. The Company’s realization
of net operating loss carry-forward and other deferred tax
temporary differences is contingent upon future taxable
earnings. The Company reviewed its deferred tax asset for
expected utilization using a “more likely than
not” criteria by assessing the available positive and
negative factors surrounding its recoverability.
During
the fourth quarter of fiscal year 2011, the Company
reversed a portion of its valuation allowance in
consideration of all available positive and negative
evidence, including its historical operating results,
current financial condition, and potential future taxable
income. The reduction in the valuation allowance
in the fourth quarter resulted in a non-cash income tax
benefit of $2,481,000. As of September 30, 2011,
the Company had a remaining valuation allowance of
approximately $6,042,000.
During
the quarter ended September 30, 2011, the Company’s
future taxable income was evaluated based primarily on
anticipated operating results from fiscal years 2012
through 2014. The Company determined that
projecting operating results beyond 2014 involves
substantial uncertainty and the Company discounted
forecasts beyond 2014 as a basis to support its deferred
tax assets. Based upon the assessment of all
available evidence, the Company reversed a portion of its
valuation allowance for the quarter ended June 30, 2012 in
an amount in which the tax benefit generated offsets the
tax provision to be realized from current year estimated
taxable income. The Company will continue to
assess the assumptions it uses to determine the amount of
its valuation allowance and may adjust the valuation
allowance in future periods based on changes in assumptions
of estimated future taxable income and other factors. If
the valuation allowance is reduced, the Company would
record an income tax benefit in the period in which that
determination is made. If the valuation allowance is
increased, we would record additional income tax expense.
For the three months ended June 30, 2012 and 2011, the
Company has reduced its valuation allowance by
approximately $607,000 and $321,000 respectively. As of
June 30, 2012 the Company had a valuation allowance of
approximately $4,988,000.
As
of June 30, 2012, we do not have any unrecognized tax
benefits. It is the Company’s practice to
recognize interest and penalties accrued on any
unrecognized tax benefits as a component of income tax
expense. The Company does not expect any
material changes in its unrecognized tax positions over the
next 12 months.
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