INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 34% to pretax income from continuing operations as a result of the following for the years ended December 31, 2016 and 2015:



	December 31, 2016			December 31, 2015
Statutory tax on book income	$	(1,344,000	)	$	(7,656,000	)
Permanent differences	32,000			33,000
Net operating loss utilization	—			—
Change in valuation allowance	(9,306,753		)	13,114,000
Other	10,501,107			(185,000		)
Income tax expense (benefit)	$	(117,646	)	$	5,306,000

The components of income tax (benefit) expense for the years ended December 31, 2016 and 2015 are as follows:



	December 31, 2016		December 31, 2015
Current federal tax (expense)/benefit	$	117,646	$	—
Deferred federal tax (expense)/benefit	—		(5,306,000		)
Total federal tax (expense)/benefit	$	117,646	$	(5,306,000	)

The cumulative tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2016 and 2015 are presented below:



	December 31, 2016			December 31, 2015
Deferred tax assets:
Alternative minimum tax credits	$	—		$	—
Accrued compensation	464,000			393,000
Intangible Assets	1,990,000			232,000
Bad debt reserve	560,000			668,000
Contribution carryover	67,000			51,000
Net operating loss carry forwards	15,009,000			24,150,000
Less valuation allowance	(14,814,000		)	(24,120,753		)
Total deferred tax assets	$	3,276,000		$	1,373,247

	December 31, 2016			December 31, 2015
Deferred tax liabilities:
Gain on purchase	$	—		$	(108,247	)
Contingent liability	—			—
Accelerated tax depreciation	(3,276,000		)	(1,265,000		)
Impairment Expense	—			—
Other - income from partnership	—			—
Net deferred tax liabilities	$	(3,276,000	)	$	(1,373,247	)

Net Deferred tax assets and liabilities	$	—		$	—

The Company has determined that a valuation allowance of approximately $14,814,000 is necessary at December 31, 2016 to reduce the deferred tax assets to the amount that will more than likely not be realized.

The Company is subject to examination by Federal and State tax authorities for fiscal years 2013 through 2016.

At December 31, 2016, the Company had federal net operating loss carry-forwards ("NOLs") of approximately $44.1 million acquired as part of the Merger between World Waste and the Company's wholly-owned subsidiary Vertex Merger Sub, LLC and subsequent operating losses incurred by the Company. It is possible that the Company may be unable to use these NOLs in their entirety. The history of these NOLs and the related tax laws are complex and the Company is researching the facts and circumstances as to whether the Company will ultimately be able to utilize the benefit from these NOLs. The extent to which the Company will be able to utilize these carry-forwards in future periods is subject to limitations based on a number of factors, including the number of shares issued within a three-year look-back period, whether the merger is deemed to be a change in control, whether there is deemed to be a continuity of World Waste's historical business, and the extent of the Company's subsequent income. The net operating loss carryforward will begin to expire in 2026. Certain tax attributes are subject to an annual limitation as a result of an ownership change triggering event on May 2016 as defined under Internal Revenue Code Section 382.