for income tax purposes. The tax effects of temporary differences
that give rise to significant portions of deferred taxes at
December 31, 2010 and 2009 are presented below:
2010 2009
Deferred tax assets:
A ccrued compensation $ 36,981 $ 213,742
Provisions for book 725,190 483,614
N et operating loss and charitable
contribution carry forward 15,596,748 13,571,563
Basis in intangibles 3,933,798 4,267,440
Property and equipment 26,746 41,621
S tock compensation 1,013,281 1,215,730
Total gross deferred tax assets 21,332,744 19,793,710
L ess valuation allowance (21,305,631) (19,730,806)
N et deferred tax assets 27,113 62,904
Deferred tax liabilities
Prepaid expenses (27,113) (62,904)
Net deferred tax asset $ - $ -
At December 31, 2010, the Company had federal and state
net operating loss carry forwards of US $40.1 million (2009:
US $34.8 million). The federal net operating loss carry forwards
begin to expire in 2027 and state net operating loss carry
forwards 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 carry forward
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 NOL s 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 US $5.5 million annual limitation on NOL utilization.
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, 2010 was US $21.3 million (2009: US $19.7
million).
(15) Loss Per Share
Basic earnings per common share were computed by dividing
net loss by the weighted average number of shares of common
stock outstanding during the year. The 2010 diluted
shares outstanding do not assume the conversion of stock
appreciation rights or warrants outstanding of 4,943,757
(2009: 1,927,309) common shares as it would have an anti-dilutive
effect on earnings per share.
(16) Conti ngencies
Litigation
In November 2008, Molecular Securities, Inc. ("Molecular")
filed a Complaint against the Company asserting claims for
breach of contract in New York state court. Molecular alleges
that it is owed US $2,760,470 for services it allegedly provided
to the Company plus interest, attorneys' fees, and costs. On
May 26, 2011, the New York Supreme Court, Appellate
Division of New York County issued a ruling entering judgment
in favour of the Company and against Molecular and dismissing
Molecular's complaint in its entirety. Molecular may
choose to appeal the ruling with the Court of Appeals (New
York's highest court) in which case the Company will continue
to vigorously defend itself and continues to believe that the
recording of any liability is inappropriate as Molecular's claims
are meritless.
(17) Subsequent Events
We have evaluated all events and transactions through June
21, 2011, the date the consolidated financial statements
were available to be issued based on such evaluation, no
events have occurred that in the opinion of management
warrant disclosure in or adjustment to consolidated financial
statements.
43
T y r a T e c h , I n c . : A n n u a l R e p o rt 2 0 1 0
