Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Dec. 31, 2017

NOTE 11. INCOME TAXES

There was no provision for income taxes for 2017 and 2016 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 2015 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, 2017			Fiscal Year Ended December 31, 2016

Income tax expense computed at statutory rates	$	(1,141,449	)	$	(656,523	)
Non-deductible items		536,470			219,438
Change in valuation allowance		604,979			437,085

Total	$	—		$	—

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

	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)	$	—		$	—

	December 31, 2017
	Gross Values			Tax Effect
Deferred tax assets				$
Book Impairment	$	668,073		$	140,295
Net operating loss carryforwards		8,924,934			1,874,236
Asset retirement obligation		—			—
Other		—			—
Total deferred tax assets		9,593,007			2,014,531

Deferred tax liabilities
O&G Properties		(1,556,593	)		(326,884	)
Other		—			—
Total deferred tax liabilities		(1,556,593	)		(326,884	)
Less: Valuation allowance		(8,036,415	)		(1,687,647	)
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 $9.6 million at December 31, 2017 and begin to expire if not utilized beginning in the year 2033. 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.