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Note 9 - Income Taxes
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Dec. 31, 2011
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| Income Tax Disclosure [Text Block] |
NOTE
9 – Income
Taxes
The
Company accounts for income taxes using the liability method,
which requires the recognition of deferred tax assets or
liabilities for the tax-effected temporary differences
between the financial reporting and tax bases of its assets
and liabilities, and for net operating loss and tax credit
carryforwards.
The
Company completes a detailed analysis of its deferred income
tax valuation allowances on an annual basis or more
frequently if information comes to our attention that would
indicate that a revision to its estimates is
necessary. In evaluating the Company’s
ability to realize its deferred tax assets, management
considers all available positive and negative evidence on a
country by country basis, including past operating results
and forecast of future taxable income. In
determining future taxable income, management makes
assumptions to forecast U.S. federal and state, U.K. and
Malaysia operating income, the reversal of temporary
differences, and the implementation of any feasible and
prudent tax planning strategies. These
assumptions require significant judgment regarding the
forecasts of the future taxable income in each tax
jurisdiction, and are consistent with the forecasts used to
manage the Company’s business. It
should be noted that the Company realized significant losses
through 2005 on a consolidated basis. Since fiscal
year 2006, the Company has consistently generated taxable
income on a consolidated basis, providing a reasonable future
period in which the Company can reasonably expect to generate
taxable income. In management’s analysis to
determine the amount of the deferred tax asset to recognize,
management projected future taxable income for the subsequent
five years for each tax jurisdiction.
As
of December 31, 2011, the Company had federal and state net
operating loss carryforwards of approximately $29,741,000 and
$15,012,000, respectively, for income tax purposes expiring
in years 2012 to 2027. The Company’s U.K.
subsidiary, The Female Health Company-UK, plc has U.K. net
operating loss carryforwards of approximately $68,476,000 as
of December 31, 2011, which can be carried forward
indefinitely to be used to offset future U.K. taxable
income. The Company’s Malaysian subsidiary,
The Female Health Company (M) SDN.BHD, has no net operating
loss carryforwards as of December 31, 2011. With
the increasing demand for and profitability of the FC2 female
condom, the Company expects utilization of its net operating
losses in both the U.K. and the U.S. will
continue. However, because some of the U.S.
Federal tax losses have a net loss carryforward limitation of
fifteen years, it is possible that some of the
Company’s early losses carried forward in the U.S. will
not be fully utilized. The U.K. net operating
losses do not expire.
A
reconciliation of income tax expense and the amount computed
by applying the statutory Federal income tax rate to income
before income taxes for the three months ended December 31,
2011 and 2010 is as follows:
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