Note 17 - Income Taxes

12 Months Ended

Sep. 30, 2011

Income Tax Disclosure [Text Block]

NOTE 17. INCOME TAXES

The primary difference between income tax expense at the federal statutory rate and actual tax expense is due to the utilization of net operating loss carryovers. The Company did not record a provision for income taxes due to the utilization of net operating losses.

	Years Ended
	September 30,
	2010		2010
Federal income tax provision (benfit)	$	-	$	-
State income tax provision (benfit)		-		-
	$	-	$	-

The income tax provision (benefit) related to income (loss) from continuing operations before income taxes and extraordinary items vary from the federal statutory rate as follows:

	Years Ended
	September 30,
	2011			2010
Statutory federal rate		-35.0	%		-35.0	%
State income taxes net of federal income tax benefit		-5.2	%		-5.2	%
Permanent differences for tax purposes		19.4	%		-9.3	%
Change in valuation allowance		20.8	%		49.5	%
		0.0	%		0.0	%

Significant components of the Company’s deferred tax assets that are included in other assets in the accompanying financial statements are as follows:

	September 30,
	2011			2010
Deferred tax assets:
Net operating loss carry-forwards	$	13,671,000		$	13,739,000
Reserves for uncollectible receivables		124,000			130,000
Accrued but unpaid bonuses		437,000			283,000
Derivative liabilities		-			1,741,000
Difference between book and tax amortization		158,000			135,000
Other temporary differences		283,000			-
Total deferred tax assets		14,673,000			16,028,000
Valuation allowance		(14,673,000	)		(16,028,000	)
Net deferred tax asset	$	-		$	-

At September 30, 2011, the Company had available net operating loss carryovers of approximately $34.4 million that may be applied against future taxable income and expires at various dates between 2014 and 2031, subject to certain limitations. The Company has a deferred tax asset arising substantially from the benefits of such net operating loss deduction and has recorded a valuation allowance for the full amount of this deferred tax asset since it is more likely than not that some or all of the deferred tax asset may not be realized.  The valuation allowance for the deferred tax asset decreased by $1.6 million and increased by $3.0 million during the fiscal years ended September 30, 2011 and 2010 respectively.  The net change in the valuation allowance is due principally to derivative liabilities (in 2010).

The Company acquired vFinance, Inc. and subsidiaries during fiscal year 2008 and increased its consolidated tax net operating loss carry-forwards by approximately $12 million from vFinance pre-acquisition net operating losses.  However, pursuant to Internal Revenue Code Section 382, the amount of taxable income that can be offset by these pre-acquisition net operating losses of both the Company and vFinance, Inc. is limited due to the ownership change that occurred during the year.  The deferred tax asset derived from these tax loss carry-forwards have been included in consolidated deferred tax assets- net operating loss carry-forwards, and a full valuation allowance has been established since it is not more likely than not that such benefits will be recovered.

The group’s consolidated tax return for the tax year ended September 30, 2008 is currently under examination by the Internal Revenue Service.  The Company’s management does not believe that the consolidated tax return being examined contains any significant errors, omissions, material misstatements, or unsustainable tax positions that could subject it to an assessment of tax, penalties and interest.  Further, the Company’s management believes that there are sufficient net operating losses within the consolidated group to absorb any adjustments that might be proposed by the Internal Revenue Service.  Accordingly, the Company has not recorded any liability, including contingent liabilities, or adjusted its tax provision, including deferred tax assets and the valuation allowance to reflect the possibility of a proposed adjustment.