TYRATECH • ANNUAL REPORT 2014 • PAGE 38
N o t e s t o C o n s o l i d at e d F i n a n c i a l
S t at e m e n t s ( c o n t ' d )
At 31 December 2014, the Company had federal and state net
operating loss ("NOL") carry forwards of $61.6 million (2013: $54.1
million). These federal and state NOL carry forwards will expire
from 2028 to 2033, if not utilised.
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 recognised.
The ultimate realisation 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 or increased.
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 qualifying ownership
changes during 2011 and 2013 that triggered these limitations
and will have a $0.351 million limitation on NOL utilisation per
year plus any unrecognised built-in gains as of the ownership
change date that are recognised in the five years after the date
of Section 382 ownership change.
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 31
December 2014 was $28.9 million (2013: $26.9 million). Tax years
2011, 2012, and 2013 are still subject to examination by the IRS.
The Company's policy is to include interest and penalties related
to unrecognised tax benefits in income tax expense. As of 31
December 2014 and 2013, the Company had no unrecognised
tax benefits and accordingly, no accrued interest and penalties.
(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.
The 2014 diluted shares outstanding do not assume the
conversion of stock appreciation rights or warrants outstanding
of 21,128,434 (2013: 20,286,909) common shares as it would have
an anti-dilutive effect on earnings per share.
(15) SUBSEQUENT EVENTS
Management has evaluated subsequent events through 22
June 2015, the date the consolidated financial statements were
available for issuance.
On 20 April 2015, the Company and AMVAC announced that
they had updated their commercial relationship and amended
the Limited Liability Company Agreement (the "Amendment")
relating to Envance. As a result, TyraTech received approximately
$500,000 in cash in repayment of loans and consideration.
Under the terms of the Amendment, TyraTech and AMVAC
agreed that Covering Capital Contributions made subsequent
to the formation of Envance would be converted to Membership
Interests. With this conversion, the Membership Percentage
Interests in Envance would be adjusted from AMVAC owning
60 percent and TyraTech owning 40 percent to AMVAC owning
83.77 percent and TyraTech owning 16.23 percent.
Contemporaneous with the Amendment, AMVAC offered to
purchase, and TyraTech agreed to sell, approximately 3 percent
of its remaining ownership interest in Envance. Subsequent to
this transaction, AMVAC will have a Membership Percentage
Interest of 86.67 percent, and TyraTech will have a Membership
Percentage Interest of 13.33 percent.
