XML 59 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 3 Months Ended
Mar. 31, 2013
Income Taxes [Abstract]  
INCOME TAXES

NOTE F – INCOME TAXES

As of March 31, 2013, the Company had consolidated income tax net operating loss (“NOL”) carryforwards for federal tax purposes of approximately $126 million. The federal NOL carryforward from 1997 of $564,000 will expire beginning with the 2013 tax year. The federal NOL carryforwards from 1998 forward will expire in various years beginning in 2018 and ending through the year 2032. From 2018 through 2022, approximately $7.5 million of the NOL will expire, from 2023 through 2028, approximately $80.5 million of the NOL will expire, and from 2029 through 2032, approximately $45.0 million of the NOL will expire.

As of March 31, 2013 we utilized $7.5 million of the federal NOL carryforwards. For Alternative Minimum Tax (AMT) purposes, a limitation is imposed on the allowable amount of the NOL carryforward, this limitation resulted in a current federal tax expense. The AMT rate applied is 20%.

The components of the provision for income tax (benefits) are attributable to continuing operations as follows:

 

                         
    March 31, 2013     March 31, 2012     March 31, 2011  

Current

                        

Federal

   $ 150,742     $ —       $ —    

State

     —         —         —    
   

 

 

    

 

 

    

 

 

  
    $ 150,742     $ —       $ —    
   

 

 

    

 

 

    

 

 

  

Deferred

                        

Federal

   $ —       $ —       $ —    

State

     —         —         —    
   

 

 

    

 

 

    

 

 

  
    $ 150,742     $ —       $ —    
   

 

 

    

 

 

    

 

 

  

 

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

   $ 44,514,698  

Capital loss carryforward

     395,868  

Accrued expenses

     98,594  

Deferred revenue

     1,020,308  

Reserve for accounts receivable

     2,146,815  

Reserve for inventory

     133,617  

Start-up costs

     110,125  

Excess of book over tax depreciation

     1,314,230  

Stock option and restricted stock award expense

     1,594,793  

Investment in unconsolidated entity

     3,800,928  

Less: valuation allowance

     (54,940,552 ) 
   

 

 

  
    $ 189,424  
   

 

 

  

Deferred tax liability:

        

Property and equipment basis

   $ 71,234  

Prepaid expenses

     118,190  
   

 

 

  
    $ 189,424  
   

 

 

  

Net deferred tax asset

   $ —    
   

 

 

  

As reflected above, we have recorded a net deferred tax asset of $0 at March 31, 2013. 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, i.e.: without the recovery and rights of ownership or salvage rights of high-value shipwrecks, and thus a valuation allowance has been recorded as of March 31, 2013.

The decrease in the valuation allowance for March 31, 2013 is due to the utilization of $7.5 million of our net operating loss carryforward. The net taxable income is a result of a $15 million dividend from Odyssey Marine Enterprises, Ltd. (a wholly owned Bahamas company).

The change in the valuation allowance is as follows:

 

         

March 31, 2013

   $ 54,940,552  

December 31, 2012

     57,901,529  
   

 

 

  

Change in valuation allowance

   $ (2,960,977 ) 
   

 

 

  

Income taxes for the three-month periods ended March 31, 2013 and 2012 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:

 

                 
    March 31,2013     March 31,2012  
     

Expected (benefit)

   $ (3,235,669 )    $ (1,869,034 ) 

U.S. income tax expense at the AMT 20% rate

     150,742       —    

State income taxes net of federal benefits

     140,868       (74,736 ) 

Nondeductible expense

     4,669       4,094  

Stock options and restricted stock awards

     118,912       240,763  

Controlled Foreign Corporation dividend income

     5,100,000       —    

Derivatives

     459,593       188,191  

Change in valuation allowance

     (2,960,977 )      1,308,861  

Effects of:

                

Change in apportionment estimate

     400,938       35,026  

Change in net operating loss estimate

     2,240       860,527  

Change in capital loss carryover estimate

     —         (682,459 ) 

Other, net

     (30,574 )      (11,233 ) 
   

 

 

    

 

 

  
    $ 150,742     $ —    
   

 

 

    

 

 

  

 

During the three-month periods ended March 31, 2013 and 2012 the Company recognized certain tax benefits and (liabilities), prior to any valuation allowances, related to stock option plans in the amounts of $349,792 and $249,256, 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 2009.