Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 13. INCOME TAXES

 

There was no provision for income taxes for 2020 and 2019 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 2019 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.

 

      1       1  
    Fiscal Year Ended
December 31, 2020		     Fiscal Year Ended
December 31, 2019		  
             
Income tax (benefit) expense computed at statutory rates   $ (2,078,000 )   $ (629,000 )
Non-deductible items     85,000       69,000  
Change in statutory, foreign tax, foreign exchange rates and other     (2,427,000 )     172,000  
Change in valuation allowance     4,420,000       388,000  
Total   $ —     $ —  

 

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

 

      2020       2019  
    December 31,  
    2020     2019  
Deferred tax assets           $    
Net operating loss carryforwards   $ 5,772,000     $ 2,174,000  
Asset retirement obligation     679,000       331,000  
Oil and gas properties     (644,000 )     (430,000 )
Property and equipment     6,000     —  
Other     —       —  
Total deferred tax assets (liabilities)     5,813,000       2,075,000  
Less: Valuation allowance     (5,813,000 )     (2,075,000 )
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, 2020 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, 2020 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.