Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 7 – INCOME TAXES

We are subject to the income tax jurisdictions of the U.S., Puerto Rico, as well as multiple state tax jurisdictions. Our provisions for income taxes for the three and nine months ended September 30, 2012 and 2011 were attributable to Puerto Rico and certain states. The estimated effective income tax rates for the three and nine months ended September 30, 2012 were 11.1% and 4.7%, respectively. Our income before income taxes for the three and nine months ended September 30, 2012 was attributable to the net profit of a subsidiary in Puerto Rico, which is currently not subject to the U.S. federal tax jurisdiction. For the nine months ended September 30, 2012, our subsidiary in Puerto Rico utilized approximately $1.2 million of deferred tax assets from net operating loss carryforwards. No further net operating loss carryforwards remain to be used in Puerto Rico in future years. At September 30, 2012, we have federal net operating loss carryforwards of approximately $38.4 million, the deductibility of $29.6 million of which is presently limited under Section 382 of the Internal Revenue Code. Approximately $361,000 of any net operating losses prior to the January 2009 ownership change (“the earlier change”) can be used to offset taxable income annually. In addition, we can offset our taxable income each year by approximately $274,000 of the net operating losses which incurred between the earlier change and the August 2011 ownership change. We estimate that 59% of the $29.6 million pre-change losses will expire and be unavailable to offset our future taxable income.

Management has evaluated our tax positions taken or to be taken on income tax returns that remain subject to examination (i.e., tax years 2008 and thereafter federally, earlier for certain other jurisdictions), and has concluded that there are no uncertain tax positions, as defined in generally accepted accounting principles, that require recognition or disclosure in the consolidated financial statements.