Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 13 - Income Taxes

 

Income tax expense for the three-month and six-month periods ended June 30, 2020 and 2019 consisted of the following:

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2020     2019     2020     2019  
Current:   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Federal   $              -     $             -     $           -     $          -  
State     -       -       1,600       1,600  
Foreign     11       -       1,663       1,635  
Total   $ 11     $ -     $ 3,263     $ 3,235  

 

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 six-month periods ended June 30, 2020 and 2019.

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2020     2019     2020     2019  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Tax benefit at statutory rate   $ (388,531 )   $ (409,180 )   $ (1,003,820 )   $ (1,014,950 )
Net operating loss carryforwards (NOLs)     331,632       395,912       569,291       604,580  
Foreign investment losses (gains)     (37,148 )     67,200       98,290       183,700  
Stock-based compensation expense     94,300       72,800       191,900       138,500  
Amortization and depreciation expense     12,617       (12,800 )     25,333       (25,600 )
Accrued payroll     30,800       (149,400 )     75,900       (41,800 )
Unrealized exchange losses (gains)     (108,870 )     22,868       (28,194 )     87,267  
Others     65,211       12,600       74,563       71,538  
Tax expense at effective tax rate   $ 11     $ -     $ 3,263     $ 3,235  

 

Deferred tax assets (liabilities) as of June 30, 2020 and December 31, 2019 consist approximately of:

 

    June 30,
2020
   

December 31,

2019

 
    (Unaudited)        
Net operating loss carryforwards (NOLs)   $ 7,274,000     $ 6,388,000  
Stock-based compensation expense     1,804,000       1,549,000  
Accrued expenses and unpaid expense payable     214,000       53,000  
Tax credit carryforwards     68,000       68,000  
Excess of tax amortization over book amortization     (599,000 )     (619,000 )
Unrealized exchange losses     (147,000 )     (106,000 )
Others     (61,000 )     (104,000 )
Gross     8,553,000       7,229,000  
Valuation allowance     (8,553,000 )     (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 $1,324,000 (unaudited) for the six months ended June 30, 2020.

 

As of June 30, 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 $13,535,000 (unaudited) and $11,314,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of June 30, 2020 and December 31, 2019, the Company had State NOLs of approximately $23,509,000 (unaudited) and $21,117,000 respectively, available to reduce future state taxable income, expiring in 2040 and 2039, respectively.

 

As of June 30, 2020 and December 31, 2019, the Company has Japan NOLs of approximately $352,000 (unaudited) and $350,000, respectively, available to reduce future Japan taxable income, expiring through 2031.

 

As of June 30, 2020 and December 31, 2019, the Company has Taiwan NOLs of approximately $2,413,000 (unaudited) and $1,898,000, respectively, available to reduce future Taiwan taxable income, expiring in 2030 and 2029, respectively.

 

As of June 30, 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 June 30, 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.