Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.20.2
Income Taxes
3 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 11 - Income Taxes

 

Income tax expense for the three-month periods ended March 31, 2020 and 2019 consisted of the following:

 

    Three Months Ended
March 31,
 
    2020     2019  
Current:   (Unaudited)     (Unaudited)  
Federal   $ -     $ -  
State     1,600       1,600  
Foreign     1,652       1,633  
Total   $ 3,252     $ 3,233  

 

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 periods ended March 31, 2020 and 2019.

 

    Three Months Ended
March 31,
 
    2020     2019  
    (Unaudited)     (Unaudited)  
Tax benefit at statutory rate   $ (615,289 )   $ (605,770 )
Net operating loss carryforwards (NOLs)     237,659       209,242  
Foreign investment losses     135,438       116,500  
Stock-based compensation expense     97,600       65,700  
Amortization expense     12,716       (12,800 )
Accrued payroll     45,100       107,600  
Unrealized exchange losses     80,676       63,825  
Others     9,352       58,936  
Tax expense at effective tax rate   $ 3,252     $ 3,233  

 

Deferred tax assets (liability) as of March 31, 2020 and December 31, 2019 consist approximately of:

 

    March 31,
2020
   

December 31,

2019

 
    (Unaudited)        
Net operating loss carryforwards (NOLs)   $ 6,888,000     $ 6,388,000  
Stock-based compensation expense     1,679,000       1,549,000  
Accrued expenses and unpaid expense payable     110,000       53,000  
Tax credit carryforwards     68,000       68,000  
Excess of tax amortization over book amortization     (609,000 )     (619,000 )
Unrealized exchange losses     (15,000 )     (106,000 )
Others     (85,000 )     (104,000 )
Gross     8,036,000       7,229,000  
Valuation allowance     (8,036,000 )     (7,229,000 )
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 $807,000 (unaudited) for the three months ended March 31, 2020.

 

As of March 31, 2020 and December 31, 2019, 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 $12,186,000 (unaudited) and $11,314,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of March 31, 2020 and December 31, 2019, the Company had State NOLs of approximately $22,070,000 (unaudited) and $21,117,000 respectively, available to reduce future state taxable income, expiring in 2040.

 

As of March 31, 2020 and December 31, 2019, the Company has Japan NOLs of approximately $353,000 (unaudited) and $350,000, respectively, available to reduce future Japan taxable income, expiring in 2030.

 

As of March 31, 2020 and December 31, 2019, the Company has Taiwan NOLs of approximately $2,150,000 (unaudited) and $1,898,000, respectively, available to reduce future Taiwan taxable income, expiring in 2030.

 

As of March 31, 2020 and December 31, 2019, 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 March 31, 2020 and December 31, 2019, 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.