XML 60 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 6 Months Ended
Jun. 30, 2012
Income Taxes [Abstract]  
INCOME TAXES

NOTE G – INCOME TAXES

As of June 30, 2012, the Company had consolidated income tax net operating loss (“NOL”) carryforwards for federal tax purposes of approximately $138 million. The NOL will expire in various years beginning in 2013 and ending through the year 2032. From 2013 through 2023, approximately $8 million of the NOL will expire, from 2024 through 2028, approximately $80.5 million of the NOL will expire and from 2029 through 2032, approximately $50 million of the NOL will expire.

Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

         

Deferred tax assets:

        

Net operating loss and tax credit carryforwards

   $ 49,796,627  

Capital loss carryforward

     386,151  

Accrued expenses

     62,829  

Reserve for accounts receivable

     2,094,123  

Reserve for inventory

     133,584  

Start-up costs

     107,422  

Excess of book over tax depreciation

     1,158,737  

Stock option and restricted stock award expense

     1,454,572  

Investment in unconsolidated entity

     3,707,636  

Less: valuation allowance

     (57,719,607 ) 
   

 

 

  
    $ 1,182,074  
   

 

 

  

Deferred tax liability:

        

Property and equipment basis

   $ 69,484  

Prepaid expenses

     1,112,590  
   

 

 

  
    $ 1,182,074  
   

 

 

  

Net deferred tax asset

   $ —    
   

 

 

  

 

As reflected above, we have recorded a net deferred tax asset of $0 at June 30, 2012. As required by the Accounting for Income Taxes topic in the ASC, we have evaluated whether it is more likely than not that the deferred tax assets will be realized. Based on the available evidence, we have concluded that it is more likely than not that those assets would not be realized without the recovery and rights of ownership or salvage rights of high-value shipwrecks and thus a valuation allowance has been recorded as of June 30, 2012.

The change in the valuation allowance is as follows:

 

         

June 30, 2012

   $ 57,719,607  

December 31, 2011

     52,515,797  
   

 

 

  

Change in valuation allowance

   $ 5,203,810  
   

 

 

  

Income taxes for the six-month periods ended June 30, 2012 and 2011 differ from the amounts computed by applying the effective federal income tax rate of 34.0% to income (loss) before income taxes as a result of the following:

 

                 
    June 30,
2012		     June 30,
2011		  

Expected (benefit)

   $ (7,164,530 )    $ (2,415,560 ) 

State income taxes net of federal benefits

     (191,873 )      (138,430 ) 

Nondeductible expense

     8,050       7,920  

Stock options and restricted stock awards

     240,265       188,855  

Derivatives

     1,667,465       198,771  

Change in valuation allowance

     5,203,811       1,752,527  

Effects of:

                

Change in apportionment estimate

     —         406,193  

Change in net operating loss estimate

     610,863       —    

Change in capital loss carryover estimate

     (374,051 )      —    

Other, net

     —         (276 ) 
   

 

 

    

 

 

  
    $ —       $ —    
   

 

 

    

 

 

  

During the six-month periods ended June 30, 2012 and 2011 the Company recognized certain tax benefits and (liabilities), prior to any valuation allowances, related to stock option plans in the amounts of $248,038 and $0, respectively. If we did not have a full valuation allowance, such benefits would be recorded as an increase to the deferred tax asset and increase in additional paid in capital.

We have not recognized a material adjustment in the liability for unrecognized tax benefits and have not recorded any provisions for accrued interest and penalties related to uncertain tax positions.

The earliest tax year still subject to examination by a major taxing jurisdiction is 2008.