Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

The following lists our current accounting policies involving significant management judgment and provides a brief description of these policies:

Consolidation

The accompanying consolidated financial statements represent the consolidated operations of the Company and GEM, its wholly-owned subsidiary.  All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

Recognition of Income on Energy Efficiency Contracts

We recognize income on energy efficiency contracts ratably over the life of the contract, based upon our share of the savings associated with the contract.

Cash

Cash and cash equivalents include cash on hand and money market demand deposits with banks.

Receivables

We currently provide Energy Efficiency services to a few customers.  Unsecured credit is extended based on an evaluation of each customer's financial condition. Uncollectible accounts receivable are charged directly against earnings when they are determined to be uncollectible.  Use of this method does not result in a material difference from the valuation method required by generally accepted accounting principles.

Cost of Revenue

Cost of revenue includes costs such as amortized costs of capitalized projects, impairment of projects that don’t meet our expectations of energy savings and costs of maintenance such as bulb replacement including labor.

Estimates

Management uses estimates and assumptions in preparing financial statements.  Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  Actual results could differ from those estimates.  Costs to complete or estimated profits on uncompleted lump-sum contracts are management’s best estimate based on facts and circumstances at that time.

Deferred Costs

We capitalize costs associated with contracts that will generate future revenues from energy savings. These contracts will span between five and ten years.  These deferred costs are amortized as a component of cost of revenue over the life of the contract, using the straight-line method. We evaluate deferred costs regularly on our projects that we have expended resources on. If, after a period of service, the deferred cost does not meet our or client’s expectations, then we record an impairment expense on our statement of income.

Impairment of long-lived assets

We account for impairment of plant and equipment and amortizable intangible assets in accordance with the standard of “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires us to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.

Concentration of Customers

For the year ended December 31, 2013, one customer accounted for approximately 57.15% of our total contract revenue. For the year ended December 31, 2012, one customer accounted for approximately 97% of our total contract revenue.  Based upon the change of our business strategy, we will seek to conduct business with customers in high energy cost metropolitan areas.

Share-Based Compensation

We account for equity based compensation transactions with our employees under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 718, “Compensation, Stock Compensation” (“Topic No. 718”).  Topic No. 718 requires the recognition of the fair value of equity-based compensation in net income.  The fair value of our option based equity instruments are estimated using a Black-Scholes option valuation model.  This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award.  In addition, the calculation of equity-based compensation costs requires that we estimate the number of awards that will be forfeited during the vesting period.  The fair value of equity-based awards granted to our employees is amortized over the vesting period of the award and we elected to use the straight-line method for awards granted after the adoption of Topic No. 718.

We account for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”).  Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

Cost of revenue

Cost of revenue consists of amortized deferred project costs and other direct costs.

Income taxes

We follow Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 109, ASC 740- “Accounting for Income Taxes” (“ASC 704”).  This standard requires the use of an asset and liability approach for financial accounting for and reporting of income taxes.  If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

Research and development

Costs incurred in connection with the development of new products and manufacturing methods are charged to selling, general and administrative expenses as incurred. For the years ended December 31, 2013 and 2012, research and development costs were $29,425 and $0, respectively.

Warranty costs

We accrue for estimated warranty costs at the time of revenue recognition and record the expense of such accrued liabilities as a component of cost of sales.  Estimated warranty costs are based on historical product data and anticipated future costs.  Should actual failure rates differ significantly from estimates, the impact of these unforeseen costs would be recorded as a change in estimate in the period identified.

Earnings Per Share

Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of shares of our common stock outstanding during the period.  Diluted earnings per share reflect the potential dilution that could occur if our share-based awards and convertible securities, if any, were exercised or converted into common stock.  The dilutive effect of our share-based awards is computed using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period.  The incremental shares (difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. For the years ended December 31, 2013 and December 31, 2012, all common stock equivalents were anti-dilutive.

Recently Issued Accounting Pronouncements

We do not believe any recently issued accounting pronouncements issued by the FASB and the SEC will have a material impact on our present or future consolidated financial statements.