Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Dec. 31, 2012
Income Taxes

Note 12 - Income Taxes


Income taxes are provided for temporary differences between financial and tax bases of assets and liabilities. The following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pretax loss with the benefit from income taxes for the years ended December 31, 2012 and 2011:


Rate Reconciliation




Federal income tax (benefit) at statutory rate (34%)



State income tax (benefit) , net of federal benefit



Foreign income tax benefit



Losses allocated to preferred members of GCE Mexico



Losses allocated to other subsidiaries



Share-based compensation



Expiration of operating loss and research credit carryforwards



Other differences



Change in valuation allowance



Income tax benefit




The components of deferred tax assets and liabilities are as follows at December 31, 2012 and 2011, using a combined deferred income tax rate of 40%:


Components of Net Deferred Taxes




Net operating loss carryforward

$     6,839,000 

$     7,263,000 

Share-based compensation



Accrued compensation and other liabilities



Impairment of long lived assets






Valuation allowance



Net deferred tax asset

$                      - 

$                      - 



The Company has available net operating losses of approximately $20,070,000 which can be utilized to offset future earnings of the Company. The utilization of the net operating losses are dependent upon the tax laws in effect at the time such losses can be utilized. The loss carryforwards expire between the years 2013 and 2032. Should the Company experience a significant change of ownership, the utilization of net operating losses could be reduced.


The Company and its subsidiaries file tax returns in the U.S. Federal jurisdiction and, in the state of California. The Company is no longer subject to U.S. federal tax examinations for tax years before and including December 31, 2008. The Company is no longer subject to examination by state tax authorities for tax years before and including December 31, 2007. During the years ended December 31, 2012 and 2011, the Company did not recognize interest and penalties.