Annual report pursuant to section 13 and 15(d)

DEFERRED TAX ASSETS

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DEFERRED TAX ASSETS
 12 Months Ended
Sep. 30, 2012
DEFERRED TAX ASSETS [Abstract]  
DEFERRED TAX ASSETS


NOTE 6 -DEFERRED TAX ASSETS


 

 

The Company calculates its deferred tax assets based upon its consolidated net operating loss (NOL) carryovers available to offset future taxable income, net of other tax credit(s) or tax deferred liabilities, if any. No deferred tax assets for the years ended September 30, 2012 and 2011 have been recorded since any available deferred tax assets are fully offset by increases in its valuation allowances. The Company increased its valuation allowance based on its history of consolidated net losses.

 

Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes plus any available consolidated, net deferred tax credits. Significant components of the Company's net deferred income tax assets (liabilities) are:

                 

 

 

2012

 

 

2011

 

 

 

 

 

 

 

 

 

 

Consolidated NOL carryover

 

$

8,451,000

 

 

$

7,207,000

 
                 

Deferred tax asset from NOL carryover

arising from current net effective tax rate

 

$

3,295,000

 

 

$

2,810,000

 

Net deferred income tax asset

 

 

3,295,000

 

 

 

2,810,000

 

Less: valuation allowance

 

 

(3,295,000)

 

 

 

(2,810,000)

 

Total deferred income tax assets

 

$

0.00

 

 

$

0

 


A reconciliation of the Federal and respective State income tax rate as a percentage of income before taxes is as follows:



                 

 

 

2012

 

 

2011

 

 

 

 

 

 

 

 

 

 

Federal statutory income tax rate

 

  

34.0%

 

 

  

34.0%

 

State taxes, net of federal benefit

 

 

5.0

  

 

 

5.0%

 

Effective rate for deferred tax asset

 

 

39.0%

 

 

 

39.0%

  

Less: Valuation allowance

 

  

(39.0%)

 

 

 

(39.0%)

 

Effective income tax rate

 

  

0.0%

 

 

  

0.0%

 



A valuation allowance is required if it is more likely than not that some or the entire portion of the deferred tax asset will not be realized. For income tax purposes, the Company has approximately $8,451,000 in consolidated net operating loss carry forwards, subject to limitations, that expire in the years 2014 through 2030. The valuation allowance increased $485,000 in 2012 due to an increase in the consolidated NOL carryover of $3.3 million.

 

In May 2007, the FASB issued FASB Staff Position ("FSP") FIN 48-1 "Definition of Settlement in FASB Interpretation No. 48" (FSP FIN 48-1). Now codified FASB ASC 740-10-25-9 provides guidance on how to determine whether a tax position is effectively settled for purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to January 1, 2007. The implementation of this standard did not have a material impact on our consolidated financial position or results of operation.