Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.21.2
Income Taxes
6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 14 - Income Taxes

 

Income tax expense for the three-month and six-month periods ended June 30, 2021 and 2020 consisted of the following:

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2021     2020     2021     2020  
Current:   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Federal   $
                   -
    $
                   -
    $
                  -
    $
                   -
 
State    
-
     
-
      1,600       1,600  
Foreign     (26 )     11       1,669       1,663  
Total   $ (26 )   $ 11     $ 3,269     $ 3,263  

 

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, 2021 and 2020.

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2021     2020     2021     2020
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Tax benefit at statutory rate   $ (332,734 )   $ (388,531 )   $ (1,424,074 )   $ (1,003,820 )
Foreign investment losses (gains)     (8,497 )     (37,148 )     443,037       98,290  
Stock-based compensation expense     33,100       94,300       390,500       191,900  
Amortization expense     23,425       12,617       46,055       25,333  
Accrued payroll     73,800       30,800       130,700       75,900  
Unrealized exchange losses (gains)     (98,807 )     (108,870 )     200,896       (28,194 )
Others     23,574       65,211       43,269       74,563  
Valuation allowance     286,113       331,632       172,886       569,291  
Tax expense at effective tax rate   $ (26 )   $ 11     $ 3,269     $ 3,263  

 

Deferred tax assets (liabilities) as of June 30, 2021 and December 31, 2020 consist approximately of:

 

    June 30,
2021
   

December 31,
2020

 
    (Unaudited)        
Net operating loss carryforwards (NOLs)   $ 8,931,000     $ 8,018,000  
Stock-based compensation expense     2,544,000       2,024,000  
Accrued expenses and unpaid expense payable     500,000       309,000  
Tax credit carryforwards     68,000       68,000  
Unrealized investment loss    
-
      144,000  
Unrealized exchange losses     (18,000 )     (193,000 )
Excess of tax amortization over book amortization     (475,000 )     (577,000 )
Others     155,000       (173,000 )
Gross     11,705,000       9,620,000  
Valuation allowance     (11,705,000 )     (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 $2,085,000 (unaudited) for the six months ended June 30, 2021.

 

As of June 30, 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 $18,245,000 (unaudited) and $16,743,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of June 30, 2021 and December 31, 2020, the Company had State NOLs of approximately $27,363,000 (unaudited) and $27,461,000, respectively, available to reduce future state taxable income, expiring in 2041.

 

As of June 30, 2021 and December 31, 2020, the Company has Japan NOLs of approximately $373,000 (unaudited) and $392,000, respectively, available to reduce future Japan taxable income, expiring in 2031.

 

As of June 30, 2021 and December 31, 2020, the Company has Taiwan NOLs of approximately $1,687,000 (unaudited) and $2,405,000, respectively, available to reduce future Taiwan taxable income, expiring in 2031.

 

As of June 30, 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 June 30, 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.