TYRATECH, INC. • ANNUAL REPORT 2011 • PAGE 43
(11) 401(K) PLAN
The Company maintains a defined contribution 401(k) plan.
The 401(k) plan is designed in accordance with the applicable
sections of the Internal Revenue Code, and is subject
to minimum 3% funding requirements as required as a safe
harbor plan. The 401(k) plan covers all eligible employees of
the 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, subject to Internal Revenue
Service limitations. The Company has a matching policy in
which the Company matches 100% of the first 4% of each
employee's compensation contributed to the 401(k) plan. For
the years ended December 31, 2011 and 2010, the Company's
contribution, including administrative expenses, amounted
to $81,192 and $62,936 and are charged to general and
administrative, business and development, and research
and technical development expenses in Consolidated Statements
of Operations.
(12) 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.
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, 2011 and 2010 are presented below:
2011 2010
Deferred tax assets:
Accrued compensation $32,796 $36,981
Accured Expenses 48,233 -
Provisions for book 667,824 725,190
Deferred revenue 986,877 -
Deferred rent 24,607 -
Net operating loss and charitable
contribution carry forward 15,137,790 15,596,748
Basis in intangibles 3,600,155 3,933,798
Stock compensation 1,234,042 1,013,281
Total gross deferred tax assets 21,732,324 21,305,998
Less valuation allowance 21,601,195 (21,305,631)
Net deferred tax assets 131,129 367
Deferred tax liabilities
Prepaid expenses (26,490) (27,113)
Property and equipment (104,639) 36,746
Net deferred tax asset $ - $ -
At December 31, 2011, the Company had federal and state
net operating loss carry forwards of US$38.4 million (2010:
US$40.1 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
