Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes



There was no provision for income taxes for 2019 and 2018 due to net operating losses and doubt as to the entity’s ability to continue as a going concern resulting in a 100% valuation allowance. Years from 2016 forward are open to examination by tax authorities in the United States. Years from 2018 forward are open to examination by Canadian tax authorities.


The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate of 21% (2019 – 21%) on operations due primarily to permanent differences attributable to organizational expenses.


    Fiscal Year Ended
December 31,2019
    Fiscal Year Ended
December 31, 2018
Income tax (benefit) expense computed at statutory rates   $ (629,000 )   $ (7,986,000 )
Non-deductible items     69,000       3,807,000  
Change in statutory, foreign tax, foreign exchange rates and other     172,000       943,000  
Change in valuation allowance     388,000       3,236,000  
Total   $     $  


The significant components of the net deferred tax asset were as follows:


    December 31,  
    2019     2018  
Deferred tax assets           $    
Net operating loss carryforwards   $ 2,174,000     $ 5,410,000  
Asset retirement obligation     331,000       236,000  
Oil and gas properties     (430,000 )     (716,000 )
Property and equipment     )     (7,000 )
Total deferred tax assets (liabilities)     2,075,000       4,923,000  
Less: Valuation allowance     (2,075,000 )     (4,923,000 )
Net deferred tax assets (liabilities)   $     $  


A valuation allowance has been established to offset deferred tax assets. The Company’s accumulated net operating losses in the United States were approximately $2.2 million at December 31, 2019 and begin to expire if not utilized beginning in the year 2033. The Company’s accumulated non-capital tax losses in Canada were approximately $27.5 million at December 31, 2019 and will expire in 2039. The Tax Cuts and Jobs Act was signed into law on December 22, 2017 and reduced the corporate income tax rate from 34% to 21%. The Company’s deferred tax assets, liabilities, and valuation allowance have been adjusted to reflect the impact of the new tax law.