You bring up a good point and now would be a good time to clear up some of the misconceptions. There are some very strict limitations when it comes to acquiring a company and using any tax loss carryovers (NOL's). First and foremost, if you purchase a subsidiary that has NOL carryforwards, for every year the NOL's usage is limited to the income of that subsidiary. In other words it would in no way be beneficial in reducing the tax bite attributable to PTSC's taxable income. The only advantage would be that the post-tax income of the subsidiary would be higher than would be the case if there were no NOL's.

In addition to the above you've got to remember that a company can only have an NOL carryover if they had taxable losses in the past - meaning they were losing money. This means we would have to find a company that is turning the corner - had losses in the past but is expected to be profitable in the future. While this is altogether possible, in fact desirable because the losses would probably put us in a stronger position in negotiating a purchase price, it of course has the inherent risk that predicting the future can be a little tough, as aptly demonstrated this week.

A better alternative for NOL usage is to actually merge the 2 companies. If done properly the NOL survives and can be used in the future. Downside to this is you are now exposing the assets of PTSC to any potential legal and/or financial problems the target company may bring with it, i.e. if someone brings suit against the acquired company and wins, PTSC assets would be exposed to paying for any losses resulting from the suit.

Hope that helps.