Annual report pursuant to Section 13 and 15(d)

NOTE 11. INCOME TAXES

NOTE 11. INCOME TAXES

12 Months Ended

Dec. 31, 2016

NOTE 11. INCOME TAXES

There was no provision for income taxes for 2016 and 2015 due to a 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 2012 forward are open to IRS examination.

The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate (35%) on operations due primarily to permanent differences attributable to organizational expenses.

	Fiscal Year Ended December 31, 2016			Fiscal Year Ended December 31, 2015

Income tax expense computed at statutory rates	$	(656,523	)	$	(649,815	)
Non-deductible items		219,438			66,313
Change in valuation allowance		437,085			583,502

Total	$	—		$	—

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

	December 31, 2015
	Gross Values				Tax Effect
Deferred tax assets
Book impairment	$	668,073		$	$	233,826
Net operating loss carryforwards		5,911,319				2,068,962
Asset retirement obligation		—				—
Other		—				—
Total deferred tax assets		6,579,392				2,302,788

Deferred tax liabilities
O&G Properties		(2,211,892	)			(774,162	)
Other		—				—
Total deferred tax liabilities		(2,211,892	)			(774,162	)
Less: Valuation allowance		(4,367,500	)			(1,528,626	)
Net deferred tax assets (liabilities)	$	—		$	$	—

	December 31, 2016
	Gross Values			Tax Effect
Deferred tax assets				$
Book Impairment	$	668,073		$	233,825
Net operating loss carryforwards		7,120,879			2,492,308
Asset retirement obligation		—			—
Other		—			—
Total deferred tax assets		7,788,952			2,726,133

Deferred tax liabilities
O&G Properties		(6,496,717	)		(2,273,851	)
Other		—			—
Total deferred tax liabilities		(6,496,717	)		(2,273,851	)
Less: Valuation allowance		(1,292,235	)		(452,282	)
Net deferred tax assets (liabilities)	$	—		$	—

A valuation allowance has been established to offset deferred tax assets. The Company’s accumulated net operating losses were approximately $7.8 million at December 31, 2016 and begin to expire if not utilized beginning in the year 2032.