13. Income Taxes

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Note 13 - Income Taxes

Significant components of the income tax benefit (expense) are summarized as follows:

	2013		2012
Current provision:
Federal	$	0	$	0
State		0		0
Deferred provision:
Federal		0		(327,000	)
State		0		(69,000	)
	$	0	$	(396,000	)

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate on income before income taxes for the years ended December 31, 2013 and 2012 follows:

	2013			2012
Federal statutory rate		34.0	%		34.0	%
Book derivative (income) expense		12.0			(3.3	)
Change in valuation allowance		(46.1	)		(16.7	)
Intangibles impairment		--			--
Stock compensation expense		(1.1	)		(2.8	)
Goodwill impairment		--			(16.0	)
State income taxes, net of  federal income tax benefit		1.3			0.9
Officers’ life insurance		0.3			--
Meals & Entertainment		(0.1	)		(0.2	)
Other		(0.3	)		(0.2	)
		0	%		(4.3	)%

The Company provides for income taxes using the liability method in accordance with FASB ASC Topic 740 “Income Taxes”.  Deferred income taxes arise from the differences in the recognition of income and expenses for tax purposes.  Deferred tax assets and liabilities are comprised of the following at December 31, 2013 and 2012:

	2013			2012
Deferred income tax assets:
Operating loss carry forward	$	2,740,000		$	1,526,000
Acquired NOL – Ecological acquisition		164,910			164,910
Accrued compensation		96,000			48,000
Allowance for doubtful accounts		100,000			7,000
Trading securities		0			0
Intangible assets		1,860,000			0
Investment in equity-method investee		0			0
Total deferred tax assets		4,960,910			1,745,910
Less:  valuation allowance		(4,960,910	)		( 1,745,910	)
Deferred income tax assets	$	0		$	0
Deferred income tax liabilities:
Property and equipment	$	(85,000	)	$	(85,000	)
Total deferred tax liabilities	$	(85,000	)	$	( 85,000	)
Net deferred income taxes:
Current	$	0		$	0
Non-current		0			0
	$	0		$	0

A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company provided a valuation allowance for all current deferred tax assets ($2,936,000), which is primarily comprised of net operating loss carry forwards of ($2,740,000) and a full valuation allowance for the noncurrent deferred tax asset of $2,024,910 representing the impairment of goodwill and intangible assets for the Energy Solutions segment and net operating loss carry forwards acquired in the Ecological acquisition on December 31, 2012.  Management made the assessment at the end of both 2013 and 2012 that a full valuation allowance for the these deferred tax assets should be provided based on consideration of recent net operating losses and the results of goodwill impairment tests in both 2013 and 2012, that it was no longer, at this time, more likely than not that the deferred tax assets would be recoverable.  Management will continue to monitor the status of the recoverability of deferred tax assets.  At December 31, 2013, the Company has an income tax net operating loss carry forward of approximately $673,000 that begins to expire in 2031, an income tax net operating loss carry forward of approximately $3,193,000 that begins to expire in 2032, and an income tax net operating loss carry forward of approximately $3,082,000 that begins to expire in 2033.