It dawned on me this morning when I woke up that the IRS section of the 10K would be the most likely section to have some information in regards to a Reverse Merger. Due to the huge carryover losses that the new merging company would be receiving. I realized that the necessary valuations of the Tax benefits would be a complex thing and have to be addressed. I also realized that they would have to be forthcoming with the IRS and that the info there would have to be concrete. So I went to Page 27 & top of page 28. Item 11 ...IRS.
This gets very interesting! There are 3 paragraphs below. The first paragraph talks about a 96 million dollar loss carryover that we all knew about. The second paragraph gets more interesting as it now starts to discuss Section 382 of the IRS tax code. If you google it that has to do with tax loss allowances in regards to mergers & reverse mergers.
Then in the 3rd paragraph the company provides valuation allowances of $36,800,000 for 2009 & $37,000,000 for 2010 for those Taxloss Carryovers!! Thats $73,000,000! Now IMHO they are tring to hide this by using the term "not more likely than not" to confuse??? There is no meaning in that phrase as I have tried to look it up. More likely than not means better than 50/50 by definition. If its not more like than not that could mean its a 100% chance of happening because its not just better than 50/50 its much better than 50/50. Again why did they put valuations on the carryover tax losses for 2009 & 2010? My opinion is GFME is closing its books with the IRS and merging plain and simple! They had to valuate the carryover losses before the merger can be done. These are just my thoughts but again full audits done plus executives in place and now putting a valuation on the carryover losses for 2009 & 2010 of $73,000,000? Also addressing the section 382 IRS code which deals with carryover losses and reverse mergers. Looks like an R/M to me. Love to hear any thoughts I know we have a lot of smart people on this board.
Read the sections below from 10k ending December 31, 2010.
At December 31, 2010, the Company had net operating loss carry-forwards of $96.7 million. The timing and manner in which the remaining operating loss carry-forwards may be utilized in any year will be limited to the Company's ability to generate future earnings and by limitations imposed due to change in ownership. Current net operating loss carry-forwards will expire principally in the years 2021 through 2030. As the Company has not generated any significant operating revenues during recent years and no assurance can be made of future earnings, a valuation allowance in the amount of the deferred tax asset has been recorded. The change in the valuation allowance was $(225,000) in 2010 and $53,000 in 2009. There was no current or deferred provision for income taxes for the years ended December 31, 2010 and 2009.
Substantial changes in the Company’s ownership have occurred, and therefore there is an annual limitation of the amount of the Company’s net operating loss carry forward which can be utilized under Section 382. The remainder of the net operating loss carry-forward also likely might effectively be obviated if certain future events were to occur that would invoke additional Section 382 provisions. Future use of the net operating loss carry-forward therefore is extremely speculative and should not be presumed absent extensive analysis of the complex Section 382 provisions.
The Company believes it is not more likely than not that the net operating loss carry-forward will be utilized in the future. Consequently, the Company has provided valuation allowances of $36,874,000 and $37,099,000 for the years ended December 31, 2010 and December 31, 2009, respectively.
