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Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 8 – Income Taxes

 

There was no current or deferred income tax expense (benefit) for the year ended December 31, 2011 and the nine month transition period ended December 31, 2010.  

 

The following table sets forth a reconciliation of the provision for income taxes to the statutory federal rate:

 

    Year Ended December 31,  
    2012     2011  
Statutory tax rate     34.0 %     34.0 %
Derivative instruments     (94.8 )%     7.8 %
Oil costs and long-lived assets     30.7 %     (0.3 )%
Non-deductible expenses     14.9 %     (5.1 )%
Change in valuation allowance     15.2 %     (36.4 )%
Effective tax rate     0.0 %     0.0 %

 

Significant components of the deferred tax assets and liabilities are as follows:

 

    Year Ended December 31,  
    2012     2011  
Non-current deferred tax asset:                
Oil costs and long-lived assets   $ 698,339     $ 609,215  
Derivative instruments     612,139       927,333  
Net operating loss carry-forward     8,010,770       7,960,080  
Valuation allowance     (9,321,248 )     (9,496,628 )
    $ -     $ -  

 

At December 31, 2012 we have a net operating loss carry forward of approximately $23,549,000 expiring in 2021-2028 that is subject to certain limitations on an annual basis. A valuation allowance has been established against net operating losses where it is more likely than not that such losses will expire before they are utilized.

 

The Company incurred a change of control as defined by the Internal Revenue Code. Accordingly, the rules will limit the utilization of the Company’s net operating losses. The limitation is determined by multiplying the value of the stock immediately before the ownership change by the applicable long-term exempt rate. It is estimated that $10.2 million of net operating losses will be subject to an annual limitation. Any unused annual limitation may be carried over to later years. The amount of the limitation may under certain circumstances be increased by the built-in gains in assets held by the Company at the time of the change that are recognized in the five-year period after the change.