Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. INX Inc (1020017) 10-Q published on Nov 17, 2011 at 4:22 pm
Reporting Period: Sep 29, 2011
In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other: Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 permits registrants to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test included in U.S. GAAP. A registrant would not be required to calculate the fair value of a reporting unit unless it is determined that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for years beginning after December 15, 2011, with early adoption permitted. Management will adopt this guidance for its annual and interim goodwill impairment testing during 2012.
On November 1, 2011, the Company announced that it had entered into a Plan of Merger Agreement with Presidio, Inc., a Georgia corporation (“Parent”) and Indigo Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Upon the closing of the Plan of Merger Agreement, INX common stock, excluding shares owned by INX, Parent or Merger Sub and other than those shares with respect to which appraisal rights are properly exercised and not withdrawn but including shares issued pursuant to a restricted stock award or a restricted stock unit award and otherwise subject to a risk of forfeiture, will be cancelled and automatically converted into the right to receive $8.75 in cash, without interest.
On November 4, 2011, Jean Neustadt, III, on behalf of himself and purportedly other stockholders, filed a class action suit in the Court of Chancery of the State of Delaware, captioned Jean Neustadt, III v. INX, Inc., et al., C.A. No. 7017 (the “Neustadt Complaint”). The plaintiff in the Neustadt Complaint alleges, among other things, that INX and the members of the board of directors breached their fiduciary duties to INX’s public stockholders by authorizing the merger for inadequate consideration and pursuant to an inadequate process. The Neustadt Complaint seeks, among other things, an order enjoining the defendants from consummating the merger, an award for compensatory damages and an award of fees, expenses and costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $1,340, or 7.7% to $18,732 from $17,392. As a percentage of total revenue, these expenses decreased to 19.0% in 2011 versus 20.5% in 2010. 2011 expenses increased primarily due to increased compensation costs, higher professional fees and higher stock based compensation expense related to the appointment of new members to the Board of Directors.
Income Tax Expense (Benefit). Income tax expense (benefit) decreased $2,243 to a benefit of $1,423 in 2011 compared to expense of $820 in 2010. The income tax benefit is the result of a change in our effective tax rate.The effective tax rate was 120%. The primary reason that the tax rate differs from the 34% Federal statutory corporate rate is the impact of permanent tax differences including meals and entertainment, stock compensation and state tax expense.
Income Tax Benefit. Income tax benefit was $2,617 in 2011 compared to $4,443 in 2010. An income tax benefit was recognized for the 2011 loss compared to the release of the valuation reserve in the second quarter of 2010 as discussed further under “Deferred Tax Assets” below. For the nine month period ended September 30, 2011, the effective tax rate was 272%. The primary reason that the tax rate differs from the 34% Federal statutory corporate rate is the impact of permanent tax differences including meals and entertainment, stock compensation and state tax expense. For the nine month period ended September 30, 2010, before considering the impact of releasing the valuation allowance, the effective tax rate was 45%. The primary reason that the tax rate differs from the 34% federal statutory corporate rate is the impact of permanent tax differences including meals and entertainment, stock compensation and non-deductible goodwill. In addition as noted previously, the Company released the valuation allowance in full and recognized an income tax benefit of $5,492.