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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

13. INCOME TAXES

 

The Company had no federal income tax expense for the year ended December 31, 2025 and the year ended December 31, 2024 due to its history of operating losses. The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:

 

  

Year-Ended

December 31, 2025

  

Year-Ended

December 31, 2024

 
Federal statutory tax rate   -21%   -21%
State tax rate, net of federal benefit   -7%   -7%
Total federal and state tax rate   -28%   -28%
Valuation allowance   28%   28%
Effective tax rate   -%   -%

 

Deferred tax assets and liabilities consist of the following:

 

   December 31, 2025   December 31, 2024 
         
Net deferred tax assets:          
Net operating loss carryforwards  $6,125,600   $5,358,900 
Stock-based compensation   668,700    3,525,900 
Asset retirement obligation   21,819,700    - 
Capital loss carryforward   1,926,900    - 
Gross deferred tax assets   30,540,900    8,884,800 
Less: valuation allowance   (9,125,300)   (7,710,300)
Total deferred tax assets   21,415,600    1,174,500 
Deferred tax liabilities:          
Derivative income   -    1,108,000 
Fixed assets   16,600    66,500 
Asset retirement obligation   21,399,000    - 
Total deferred tax liabilities   21,415,600    1,174,500 
           
Net deferred income tax assets (liabilities)  $-   $- 

 

 

The provisions of ASC Topic 740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. For the year ended December 31, 2025 and the year ended December 31, 2024, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not that the net deferred tax assets were not fully realizable. Accordingly, the Company established a full valuation allowance against its net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. During the year ended December 31, 2025 and the year ended December 31, 2024, the valuation allowance changed by $1.4 million and $0.8 million, respectively.

 

At December 31, 2025 and December 31, 2024, the Company had available federal and state net operating loss carryforwards (“NOLs”) to reduce future taxable income. Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s NOLs may be limited as a result of changes in stock ownership. For federal purposes, after considering limitations under Section 382, the net operating loss amounts available were approximately $23.5 million and $19.2 million as of December 31, 2025 and December 31, 2024, respectively. For state purposes, after considering limitations under Section 382, the net operating loss amounts available were approximately $18.4 million and $16.5 million as of December 31, 2025 and December 31, 2024, respectively. NOLs incurred subsequent to the latest change in control are not subject to the Section 382 limitation. The federal carryforwards generated prior to December 31, 2017 expire on various dates through 2037, and federal carryforwards generated after December 31, 2017 do not expire but are limited to 80% utilization in a given period.