Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

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Income Taxes
9 Months Ended
Sep. 30, 2017
Income Taxes [Abstract]  
Income Taxes
NOTE 9 – Income Taxes

 

Income tax expense (benefit) for the three-month and nine-month periods ended September 30, 2017 and 2016 consisted of the following:

 

      Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
      2017     2016     2017     2016  
  Current:                        
  Federal   $ -     $ (249,000 )   $ 3,033     $ (816,000 )
  State     -       -       800       -  
  Foreign     4,453       -       6,056       -  
  Total   $ 4,453     $ (249,000 )   $ 9,889     $ (816,000 )

 

The following table presents a reconciliation of the income tax at statutory tax rate and the Company’s income tax at effective tax rate for the three-month and nine-month periods ended September 30, 2017 and 2016.

 

      Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
      2017     2016     2017     2016  
  Tax benefit at statutory rate   $ (472,974 )   $ (181,000 )   $ (1,541,054 )   $ (651,000 )
  Net operating loss carryforwards (NOLs)     385,320       -       1,255,500       (345,000 )
  Stock-based compensation expense     116,900       8,000       386,500       8,000  
  Amortization expense     4,500       (70,000 )     (8,400 )     (182,000 )
  Prepayment from related parties     -       -       -       383,000  
  Others     (29,293 )     (6,000 )     (82,657 )     (29,000 )
  Tax at effective tax rate   $ 4,453     $ (249,000 )   $ 9,889     $ (816,000 )

 

Deferred tax assets (liability) as of September 30, 2017 and December 31, 2016 consist of:

 

      September 30, 2017     December 31, 2016  
  Net operating loss carryforwards (NOLs)   $ 2,079,000     $ 519,000  
  R&D expenses     359,000       63,000  
  Stock-based compensation expense     387,000       8,000  
  Excess of tax amortization over book amortization     (926,000 )     (230,000 )
  Others     233,000       35,000  
        2,132,000       395,000  
  Valuation allowance     (2,132,000 )     (395,000 )
  Net   $ -     $ -  

 

Management does not believe the deferred tax assets will be utilized in the near future; therefore, a full valuation allowance is provided. As of September 30, 2017 and December 31, 2016, the Company had federal NOLs of approximately $4,926,000 and $843,000, respectively, available to reduce future federal taxable income, expiring in 2037. As of September 30, 2017 and December 31, 2016, the Company had State NOLs of approximately $5,121,000 and $1,836,000, respectively, available to reduce future State taxable income, expiring in 2037. As of September 30, 2017, the Company has Japan NOLs of approximately $340,000 available to reduce future Japan taxable income, expiring in 2019.

 

As of September 30, 2017 and December 31, 2016, the Company had approximately $37,000 and $37,000, of federal research and development tax credit, respectively, available to offset future federal income tax. The credit begins to expire in 2034 if not utilized. As of September 30, 2017 and December 31, 2016, the Company had approximately $39,000 and $39,000 of California state research and development tax credit, respectively, available to offset future California state income tax. The credit can be carried forward indefinitely.