Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.0.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2021
INCOME TAXES  
INCOME TAXES

NOTE 16 – INCOME TAXES

For the years ended December 31, 2021, 2020, and 2019, components of our provision for income taxes are as follows:

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Provision for Income Taxes

    

2021

    

2020

    

2019

Federal Deferred Tax

​

$

—

​

$

(6,001,176)

​

$

13,787,654

State Deferred Tax

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​

90,342

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​

—

​

​

—

Provision for Income Taxes

​

$

90,342

​

$

(6,001,176)

​

$

13,787,654

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The following is a reconciliation of income taxes computed using the U.S. federal statutory rate to the provision for income taxes:

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Rate Reconciliation

    

2021

   

2020

   

2019

Pre-tax book income

​

$

3,413,234

​

$

(259,413,004)

​

$

43,284,205

Tax at federal statutory rate

​

$

716,779

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$

(54,476,731)

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$

9,089,683

Excess tax benefit from stock option exercises and restricted stock vesting

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​

(175,187)

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(1,109,379)

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4,055,418

Adjust prior estimates to tax return

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​

2,938,948

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(1,930,994)

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19

States taxes, net of federal benefit

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​

430,654

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(964,393)

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160,913

Adjustment for change in future effective tax rate (1)

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—

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—

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479,222

Valuation allowance

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​

(3,827,194)

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​

52,161,412

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​

—

Non-deductible expenses and other

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​

6,342

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​

318,909

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​

2,399

Provision for Income Taxes

​

$

90,342

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$

(6,001,176)

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$

13,787,654

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(1) The acquisition of the Northwest Shelf assets from Wishbone included properties in the State of New Mexico. The tax rates associated with the State of New Mexico adjusted our overall tax rate from 21% to 21.29%. This resulted in an additional tax expense during the year ended December 31, 2019 of $479,222.

The net deferred taxes consisted of the following as of December 31, 2021 and 2020:

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12/31/2021

    

12/31/2020

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Total

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Total

Deferred Tax Assets

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Net operating loss (NOL) carryforward

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60,155,112

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54,185,183

Equity compensation

​

691,076

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3,350,361

Asset retirement obligation

​

3,348,875

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4,604,906

Fair market value of derivatives

​

6,403,745

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888,266

Accrued expense

​

5,049

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—

Others

 

56,028

 

55,746

Gross Deferred Tax Assets

 

70,659,885

 

63,084,462

Less: valuation allowance

 

(48,334,217)

 

(52,161,412)

Net Deferred Tax Assets

 

22,325,668

 

10,923,050

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Deferred Tax Liabilities

 

  

 

  

Propety and equipment

 

(22,415,959)

 

(10,923,050)

Net Deferred Liabilties

 

(22,415,959)

 

(10,923,050)

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Net Deferred Tax Asset/(Liabilities)

 

(90,292)

 

—

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Note that the presentation of the December 31, 2020 income tax, rate reconciliation and deferred tax tables have been adjusted to conform to current year presentation. The total income tax expense, net deferred tax asset and deferred tax liability balances remain the same as prior year.

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As of December 31, 2021, the Company had net operating loss carryforwards for federal income tax reporting purposes of approximately $108.9 million which, if unused, will begin to expire in 2027 and fully expire in 2037 and an additional $176.7 million that can be carried forward indefinitely. Because of the change in ownership provisions of the Code, use of a portion of our federal NOLs may be limited in future periods. As of December 31, 2021, we carried a valuation allowance against our federal and state deferred tax assets of $48,334,217. We have considered both the positive and negative evidence in determining whether it was more likely than not that some portion or all of our deferred tax assets will be realized. The amount of deferred tax assets considered

realizable could, however, be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence is no longer present and additional weight is given to subjective positive evidence, including projections for growth. The valuation allowance along with $22,415,959 of deferred tax liabilities bring our net deferred position to a deferred tax liability of $90,292. The net deferred tax liability recognized on our balance sheet as of December 31, 2021 is attributable to certain state deferred tax liabilities associated with property and equipment.