|
Note 9 - Income Taxes
|
3 Months Ended |
|---|---|
|
Dec. 31, 2011
|
|
| Income Tax Disclosure [Text Block] |
Note
9. Income Taxes
The
Company recorded a provision for income taxes of
approximately $49,000 and $35,000, for the three months ended
December 31, 2011 and 2010, 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 $373,000. This change
consists of $395,000 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
$22,000 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, 2011 the Company had U.S. federal and state
net operating loss (NOL) carry-forwards of approximately
$27,278,000 and $22,090,000, 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” approach as required by ASC 740 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 our
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.
The
Company 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 December 31, 2011 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 December 31,
2011 and 2010, the Company has reduced its valuation
allowance by approximately $373,000 and $217,000
respectively.
As
of December 31, 2011, 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.
|