Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.22.4
Income Taxes
9 Months Ended
Sep. 30, 2022
Income Taxes [Abstract]  
Income Taxes

NOTE 16 - Income Taxes

 

Income tax expense for the three-month and six-month periods ended September 30, 2022 and 2021 consisted of the following:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2022     2021     2022     2021  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Current:                        
Federal   $
         -
    $
           -
    $              -     $      -  
State    
          -
     
-
      1,600       1,600  
Foreign    
-
      (12 )     -       1,657  
Total   $
            -
    $ (12 )   $ 1,600     $ 3,257  

 

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 months and nine months periods ended September 30, 2022 and 2021.

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2022     2021     2022     2021  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Tax expense (benefit) at statutory rate   $ (1,089,179 )   $ 991,321     $ (2,495,186 )   $ (432,753 )
Net operating loss carryforwards (NOLs)    
 
     
-
     
-
     
-
 
Foreign investment losses (gains)     (445,209 )     (1,329,427 )     (818,077 )     (886,390 )
Stock-based compensation expense     12,500       33,900       214,000       424,400  
Amortization expense     24,600       21,740       68,200       67,795  
Accrued payroll     (83,400 )     15,300       72,000       155,700  
Unrealized exchange losses (gains)     252,712       (4,537 )     557,470       196,359  
Others     (542,700 )     9,288       (1,040,000 )     42,857  
Valuation allowance     1,870,676     262,403       3,443,193       435,289  
Tax expense (benefit) at effective tax rate   $
-
    $ (12 )   $ 1,600     $ 3,257  

 

Deferred tax assets (liability) as of September 30, 2022 and December 31, 2021 consist approximately of:

 

    September 30,
2022
    December 31,
2021
 
    (Unaudited)        
Net operating loss carryforwards (NOLs)   $ 12,863,000     $ 9,802,000  
Stock-based compensation expense     3,042,000       2,757,000  
Accrued expenses and unpaid expense payable     639,000       634,000  
Tax credit carryforwards     68,000       68,000  
Unrealized exchange losses (gain)     470,000       (44,000 )
Excess of tax amortization over book amortization     (364,000 )     (468,000 )
Others     (115,000 )     (186,000 )
Gross     16,603,000       12,563,000  
Valuation allowance     (16,603,000 )     (12,563,000 )
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 $1,578,000 for the nine months ended September 30, 2022.

 

As of September 30, 2022 and December 31, 2021, 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 $37,494,000 and $21,147,000, respectively, were generated and will be carried forward indefinitely to reduce future federal taxable income. As of September 30, 2022 and December 31, 2021, the Company had State NOLs of approximately $46,791,000 and $31,370,000 respectively, available to reduce future state taxable income, expiring in 2042.

 

As of September 30, 2022 and December 31, 2021, the Company has Japan NOLs of approximately $358,000 and $358,000, respectively, available to reduce future Japan taxable income, expiring in 2031.

 

As of September 30, 2022 and December 31, 2021, the Company has Taiwan NOLs of approximately $2,943,000 and $3,279,000, respectively, available to reduce future Taiwan taxable income, expiring in 2031.

 

As of September 30, 2022 and December 31, 2021, the Company had approximately $37,000 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, 2022 and December 31, 2021, the Company had approximately $39,000 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.