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Note 9 - Income Taxes
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9 Months Ended |
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Jun. 30, 2011
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| Income Tax Disclosure [Text Block] |
Note
9. Income Taxes
We
recorded a provision for income taxes of approximately
$46,000 and $30,000, for the three months ended June 30, 2011
and 2010. Our 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
$720,000. This change consists of $762,000
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 $42,000 increase in
valuation allowance from the current year AMT tax
credit generated as its utilization does not meet the
“more likely than not” approach as required by
Accounting Standards Codification (“ASC”)
740.
As
of September 30, 2010 the Company had U.S. federal and state
net operating loss (NOL) carry-forwards of approximately
$30,289,000 and $23,032,000, respectively, which expire in
fiscal years 2020 to 2028. 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” approach as required by ASC 740 by assessing the
available positive and negative factors surrounding its
recoverability.
Our
future taxable income was evaluated based primarily on
anticipated operating results from fiscal years 2011 through
2013. We determined that projecting operating
results beyond 2013 involves substantial uncertainty and we
discounted forecasts beyond 2013 as a basis to support our
deferred tax assets. Based upon the assessment of
all available evidence, the Company reversed a portion of its
valuation allowance for the year ended September 30, 2010 in
an amount in which the tax benefit generated offsets the tax
provision to be realized from current year estimated taxable
income. At September 30, 2010 the Company has a valuation
allowance of approximately $9,963,000 against its remaining
deferred tax assets. We will continue to assess the
assumptions we used to determine the amount of our 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, we 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 nine months ended June 30, 2011 and 2010 the
Company has reduced its valuation allowance by approximately
$720,000 and $153,000 respectively.
As
of June 30, 2011, we do not have any unrecognized tax
benefits. It is our practice to recognize interest
and penalties accrued on any unrecognized tax benefits as a
component of income tax expense. We do not expect
any material changes in our unrecognized tax positions over
the next 12 months.
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