Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

9.   Income Taxes 

The Company accounts for taxes based on income under FASB Accounting Standard Codification ASC 740, Income Taxes. ASC 740 requires use of the liability method. ASC 740 establishes standards of financial accounting and reporting for the tax consequences of “revenues, expenses, gains, or losses that are included in taxable income.” The ASC Master Glossary defines taxable income as “the excess of taxable revenues over tax deductible expenses and exemptions for the year as defined by the governmental taxing authority.”   

The components of the net loss reported in these financial statements consist of the following:

	December 31, 2022			December 31, 2021
Components of Net Operating Loss
United States		(5,946,000	)		(2,933,000	)
Taiwan		(8,061,000	)		(956,000	)
Total		(14,007,000	)		(3,889,000	)

The components of the provision (benefit) for income taxes consist of the following:

	December 31, 2022			December 31, 2021
Components of the Provision (Benefit) for Income Taxes
Current - Federal and State		0			0
Deferred - Federal		2,837,000			13,000
Deferred - State		0			0
Total		2,837,000			13,000
Change in Valuation Allowance		(2,837,000	)		(13,000	)
Income Tax Expense		0			0

The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. The effect of a change in tax rates or laws on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date of the rate change. A valuation allowance is established to reduce the deferred tax assets to the amount that are more likely than not to be realized from operations.

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as income tax expense.

The components of the Company’s deferred tax asset and liabilities are as follows:

	December 31, 2022			December 31, 2021
Deferred Tax Assets (Liabilities)
Net Operating Loss Carryover		6,480,000			4,357,000
Share-Based Compensation		109,000			4,000
Research and Development Expenses		187,000			0
Depreciation and Allowance		606,000			243,000
Others		60,000			0
Valuation Allowance		(7,442,000	)		(4,605,000	)
Total		0			0

The Company has a valuation allowance against the full amount of its net deferred tax assets due to the uncertainty of realization of the deferred tax assets due to the operating loss history of the Company. The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized. The valuation allowance could be reduced or eliminated based on future earnings and future estimates of taxable income. 

A reconciliation of the statutory tax rates to the effective tax rates applicable to the Company is as follows:

	December 31, 2022			December 31, 2021
Reconciliation of Statutory Tax Rate to Effective Tax Rate
Statutory Federal Income Tax Rate		21	%		21	%
Change in Valuation Allowance		(21	)%		(21	)%
Effective Income Tax Rate		0	%		0	%

At December 31, 2022, we estimate net operating loss carryforwards of approximately $30,854,000 for federal income tax purposes expiring in 2023 through 2042. The ability of the Company to utilize these carryforwards may be difficult and directly dependent upon many factors outside of our control, including, but not limited to, changes in the legal and regulatory framework and the operational and corporate structure of the Company and shareholders, or sales or transfers of stock by or among shareholders. For example, if the Company experience a change of control as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended, the use of any existing tax attributes would be severely limited.  Also, obtaining value from the tax attributes is a function our return to profitable operations and the timeframe of that return. While we believe it is possible, there is no assurance that the Company will return to profitability in the future.

As of December 31, 2022, the Company had open tax years of 2021, 2020, 2019 and 2018 which are subject to examination by tax authorities.