Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.21.1
Income Taxes
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 14 - Income Taxes

 

Income tax expense for the three-month periods ended March 31, 2021 and 2020 consisted of the following:

 

    Three Months Ended
March 31,
 
    2021     2020  
Current:   (Unaudited)     (Unaudited)  
Federal   $ -     $ -  
State     1,600       1,600  
Foreign     1,695       1,652  
Total   $ 3,295     $ 3,252  

 

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, 2021 and 2020.

 

    Three Months Ended
March 31,
 
    2021     2020  
    (Unaudited)     (Unaudited)  
Tax benefit at statutory rate   $ (1,091,340 )   $ (615,289 )
Net operating loss carryforwards (NOLs)     (113,227 )     237,659  
Foreign investment losses     451,534       135,438  
Stock-based compensation expense     357,400       97,600  
Amortization expense     22,630       12,716
Accrued payroll     61,900       45,100  
Unrealized exchange losses     299,703       80,676  
Others     14,695       9,352  
Tax expense at effective tax rate   $ 3,295     $ 3,252  

 

Deferred tax assets (liability) as of March 31, 2021 and December 31, 2020 consist approximately of:

 

    March 31,
2021
    December 31,
2020
 
    (Unaudited)        
Net operating loss carryforwards (NOLs)   $ 8,302,000     $ 8,018,000  
Stock-based compensation expense     2,500,000       2,024,000  
Accrued expenses and unpaid expense payable     382,000       309,000  
Tax credit carryforwards     68,000       68,000  
Unrealized investment loss     266,000       144,000  
Unrealized exchange losses (gain)     80,000       (193,000 )
Excess of tax amortization over book amortization     (505,000 )     (577,000 )
Others     (140,000 )     (173,000 )
Gross     10,953,000       9,620,000  
Valuation allowance     (10,953,000 )     (9,620,000 )
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 $1,333,000 (unaudited) for the three months ended March 31, 2021.

 

As of March 31, 2021 and December 31, 2020, 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 $17,107,000 (unaudited) and $16,743,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of March 31, 2021 and December 31, 2020, the Company had State NOLs of approximately $26,363,000 (unaudited) and $27,461,000 respectively, available to reduce future state taxable income, expiring in 2041.

 

As of March 31, 2021 and December 31, 2020, the Company has Japan NOLs of approximately $369,000 (unaudited) and $392,000, respectively, available to reduce future Japan taxable income, expiring in 2031.

 

As of March 31, 2021 and December 31, 2020, the Company has Taiwan NOLs of approximately $1,433,000 (unaudited) and $2,405,000, respectively, available to reduce future Taiwan taxable income, expiring in 2031.

 

As of March 31, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, 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.