T YR AT ECH, INC. / ANNUAL R EPORT 20 0 9
Notes to Consolidated Financial Statements
(CONTINUED)
Company and its subsidiaries upon completion of three months of service. Employees may elect to contribute up to
a maximum of 60% of their salary under Internal Revenue Service regulations. The Company has a matching policy in which the Company matches 100% of the first 4% of each employee's compensation contributed to the Plan. For the years ended December 31, 2009 and 2008, the Company's contribution, including administrative expenses, amounted to $99,611 and $159,357, respectively and are charged to salaries and benefits expense and reported in general and administrative, business development and research and technical development expenses in the Consolidated Statement of Operations.
(13) INCOME TAXES
Beginning on May 24, 2007 the Company is subject to both federal and state income taxes. For the period prior to May 24, 2007, the Company operated as a pass through entity
for tax purposes and tax liability was the responsibility of
its members. All tax years from incorporation are still able to be reviewed by the major taxing authorities.
The difference between the "expected" tax benefit (computed by applying the federal corporate income tax rate of 34% to the loss before income taxes) and the actual tax benefit is primarily due to the effect of the valuation allowance described below.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts utilized for income tax purposes. The tax effects of temporary differences that give rise to significant portions of deferred taxes at December 31, 2009 are presented below:
2009
2008
Deferred tax assets:
Accrued compensation
$ 213,742
$ 107,970
Accounts receiveable reserve
483,614
483,614
N
et operating loss and
charitable contribution
carryforward
13,571,563
9,435,408
Intangible assets
4,267,440
4,476,372
Property and equipment
41,621
5,626
Stock compensation
1,215,730
1,824,178
T
otal gross deferred
tax assets
19,793,710
16,333,168
Less valuation allowance
(19,730,806
)
(16,232,168
)
Net deferred tax assets
62,904
101,000
Deferred tax liabilities
Prepaid expenses
(62,904
)
(101,000
)
Net deferred tax liability
$ -
$ -
At December 31, 2009, the Company had federal and state net operating loss carryforwards of US$34.8 million (2008: US$25.3 million). The federal net operating loss carryforwards begin to expire in 2027 and state net operating loss carryforwards begin to expire in 2027, if not utilized.
Management establishes a valuation allowance for those deductible temporary differences when it is more likely than not that the benefit of such deferred tax assets will not be recognized. The ultimate realization of deferred tax assets is dependent upon the Company's ability to generate taxable income during the periods in which the temporary differences become deductible. Management considers the historical level of taxable income, projections for future taxable income, and tax planning strategies in making this assessment. Management's assessment in the near term is subject to change if estimates of future taxable income during the carryforward period are reduced.
The Company is subject to the "ownership change" rules of Section 382 of the Internal Revenue Code. Under these rules, our use of NOLs could be limited in tax periods following the date of an ownership change. The Company had an ownership change during 2008 that triggered these limitations and will have a $5.5 million limitation on NOL annually.
Given the Company does not have a history of taxable income or a basis on which to assess its likelihood of the generation of future taxable income, management has determined that it is most appropriate to reflect a valuation allowance equal to its net deferred tax assets. The total valuation allowance at December 31, 2009 was US$19.7 million (2008: US$16.2 million).
(14) EARNINGS PER SHARE
Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share were determined based on the assumption of the conversion of stock options using the treasury stock method at average market prices for the periods.
2009
2008
Loss attributable to TyraTech, Inc common shareholders
N
et loss
$ (13,852,847
)
$ (17,404,811
)
Weighted average shares outstanding
21,068,343
20,702,527
Per share information:
Basic and diluted loss per share
$ (0.66
)
$ (0.84
)
