Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.19.3
Income Taxes
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 10 - Income Taxes

 

Income tax expense for the three-month and nine-month periods ended September 30, 2019 and 2018 consisted of the following:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2019     2018     2019     2018  
Current:   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Federal   $ -     $ -     $ -     $ -  
State     -       -       1,600       2,400  
Foreign     -       -       1,635       1,662  
Total   $ -     $ -     $ 3,235     $ 4,062  

 

The following table presents a reconciliation of the Company's income tax at statutory tax rate and income tax at effective tax rate for the three-month and nine-month periods ended September 30, 2019 and 2018.

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2019     2018     2019     2018  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Tax benefit at statutory rate   $ (688,749 )   $ (524,572 )   $ (1,703,699 )   $ (1,266,726 )
Net operating loss carryforwards (NOLs)     543,562       574,508       1,235,409       1,287,325  
Foreign investment losses     107,200       34,551       290,900       49,200  
Stock-based compensation expense     154,400       84,574       292,900       223,019  
Amortization expense     58,700       (62,700 )     33,100       (66,100 )
Accrued R&D expense     -       -       -       (168,000 )
Accrued payroll     900       -       (40,900 )     -  
Accrued professional expense    

-

     

(47,900

)     -      

(47,900

)
Accrued consulting expense     (122,300 )     -       (122,300 )     -  
Others     (53,713 )     (58,461 )     17,825       (6,756 )
Tax expense at effective tax rate   $ -     $ -     $ 3,235     $ 4,062  

 

Deferred tax assets (liability) as of September 30, 2019 and December 31, 2018 consist approximately of:

 

    September 30,
2019
   

December 31,

2018

 
    (Unaudited)        
Net operating loss carryforwards (NOLs)   $ 6,234,000     $ 5,632,000  
Stock-based compensation expense     1,283,000       893,000  
Accrued expenses and unpaid expense payable     52,000       184,000  
Tax credit carryforwards     68,000       68,000  
Excess of tax amortization over book amortization     (629,000 )     (818,000 )
Others     357,000       131,000  
Gross     7,365,000       6,090,000  
Valuation allowance     (7,365,000 )     (6,090,000 )
Net   $ -     $ -  

 

Management does not believe the deferred tax assets will be utilized in the near future; therefore, a full valuation allowance is provided. The net change in deferred tax assets valuation allowance was an increase of approximately $1,275,000 (unaudited) for the nine months ended September 30, 2019.

 

As of September 30, 2019 and December 31, 2018, the Company had federal NOLs of approximately $8,243,000 available to reduce future federal taxable income, expiring in 2037, and additional federal NOLs of approximately $10,443,000 (unaudited) and $5,743,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of September 30, 2019 and December 31, 2018, the Company had State NOLs of approximately $24,328,000 (unaudited) and $21,049,000 respectively, available to reduce future state taxable income, expiring in 2039.

 

As of September 30, 2019 and December 31, 2018, the Company has Japan NOLs of approximately $337,000 (unaudited) and $319,000, respectively, available to reduce future Japan taxable income, expiring in 2029.

 

As of September 30, 2019 and December 31, 2018, the Company has Taiwan NOLs of approximately $2,189,000 (unaudited) and $879,000, respectively, available to reduce future Taiwan taxable income, expiring in 2029.

 

As of September 30, 2019 and December 31, 2018, the Company had approximately $37,000 (unaudited) and $37,000 of federal research and development tax credit, available to offset future federal income tax. The credit begins to expire in 2034 if not utilized. As of September 30, 2019 and December 31, 2018, the Company had approximately $39,000 (unaudited) and $39,000 of California state research and development tax credit available to offset future California state income tax. The credit can be carried forward indefinitely.

 

The Company's ability to utilize its federal and state NOLs to offset future income taxes is subject to restrictions resulting from its prior change in ownership as defined by Internal Revenue Code Section 382. The Company does not expect to incur the limitation on NOLs utilization in future annual usage.