Notes to Consolidated Financial Statements
(CONTINUED)
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 NOLs could be limited in tax periods following the
date of an ownership change. The Company had an ownership
change during 2008 and 2010 that triggered these limitations
and will have a $1.0 million limitation on NOL utilization
for the next three tax years.
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, 2011 was US $21.6 million (2010:
US$21.3 million).
(13) 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.
The 2011 diluted shares outstanding do not assume the conversion
of stock appreciation rights or warrants outstanding of
4,517,625 (2010: 4,943,757) common shares as it would have
an anti-dilutive effect on earnings per share.
(14) DISCONTINUED OPERATIONS
During 2010, the Company discontinued the Sustainable Solutions
segment which is reported as discontinued operations
in the consolidated statements of operations for the twelve
months ended for December 31, 2010. The assets and liabilities
of discontinued operations have been reclassified and
are segregated in the consolidated balance sheets for the
years ended December 31, 2010.
The Company ceased operations of the Sustainable Solutions,
LLC. Subsidiary effective March 31, 2010 and began liquidating
the product inventory and settling the remaining liabilities
with suppliers. This subsidiary was discontinued because its
operations did not align with the Company's strategic plans.
The consolidated statements of operations for the years ended
December 31, 2011 and December 31, 2010 exclude revenues
of $0 and $108,963 and net income of $0 and a net loss
of $10,070, respectively. The following table summarizes the
major categories of assets and liabilities being discontinued,
as of December 31, 2010:
Cash 597
Accounts receivable -
Prepaid expenses -
Inventory -
Total current assets 597
Accounts payable 1,433
Accrued expenses 595
Total current liabilities 2,028
TYRATECH, INC. • ANNUAL REPORT 2011 • PAGE 44
