Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

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Income Taxes
9 Months Ended
Dec. 31, 2018
Income Taxes [Abstract]  
Income Taxes

NOTE 8 - Income Taxes

 

Income tax expense (benefit) for the three-month and nine-month periods ended December 31, 2018 and 2017 consisted of the following:

 

      Three Months Ended
December 31,
    Nine Months Ended
December 31,
 
      2018     2017     2018     2017  
  Current:                        
  Federal   $ 61     $ -     $ 61     $ 3,033  
  State     -       -       -       -  
  Foreign     -       (1,370 )     -       3,101  
  Total   $ 61     $ (1,370 )   $ 61     $ 6,134  

  

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 nine-month periods ended December 31, 2018 and 2017.

 

      Three Months Ended
December 31,
    Nine Months Ended
December 31,
 
      2018     2017     2018     2017  
  Tax benefit at statutory rate   $ (432,800 )   $ (751,766 )   $ (1,404,700 )   $ (2,082,820 )
  Net operating loss carryforwards (NOLs)     196,400       505,100       1,311,500       1,484,000  
  Stock-based compensation expense     75,800       208,300       240,900       594,800  
  Amortization expense     26,000       (2,800 )     (38,400 )     30,700  
  Accrued R&D expense     -       -       (168,000 )     -  
  Others     134,661       39,796       58,761       (20,546 )
  Tax expense (benefit) at effective tax rate   $ 61     $ (1,370 )   $ 61     $ 6,134  

 

Deferred tax assets (liability) as of December 31, 2018 and March 31, 2018 consist of:

 

      December 31,
2018
    March 31,
2018
 
  Net operating loss carryforwards (NOLs)   $ 5,632,000     $ 2,339,000  
  Stock-based compensation expense     893,000       566,000  
  Accrued expenses and unpaid payable     184,000       268,000  
  Tax credit carryforwards     68,000       68,000  
  Excess of tax amortization over book amortization     (818,000 )     (635,000 )
  Others     131,000       235,000  
  Gross     6,090,000       2,841,000  
  Valuation allowance     (6,090,000 )     (2,841,000 )
  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 $3,249,000 for the nine months ended December 31, 2018.

 

As of December 31, 2018 and March 31, 2018, the Company had federal NOLs of approximately $19,201,000 and $7,643,000, respectively, available to reduce future federal taxable income, expiring in 2038. As of December 31, 2018 and March 31, 2018, the Company had State NOLs of approximately $21,049,000 and $8,985,000, respectively, available to reduce future state taxable income, expiring in 2038.

 

As of December 31, 2018 and March 31, 2018, the Company has Japan NOLs of approximately $319,000 and $339,000 available to reduce future Japan taxable income, expiring in 2028.

 

As of December 31, 2018 and March 31, 2018, the Company has Taiwan NOLs of approximately $253,000 and $0 available to reduce future Taiwan taxable income, expiring in 2028. As of December 31, 2018 and March 31, 2018, 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 December 31, 2018 and March 31, 2018, 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.