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INCOME TAX EXPENSE (Tables) | 12 Months Ended
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Dec. 31, 2022
INCOME TAX EXPENSE |
Schedule of components of income tax expense | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the years ended December 31,
​ |  | 2020 |  | 2021 |  | 2022
​ | ​ | US$ | ​ | US$ | ​ | US$
Current: | ​ | ​ | ​ | ​ | ​ | ​
U.S. | ​ | ​ | ​ | ​ | ​ | ​
Federal |  | — |  | 1,290,009 |  | 672,064
State and local |  | — |  | 367,441 |  | (168,846)
Total current |  | — |  | 1,657,450 |  | 503,218
Deferred: |  |  |  |  |  |
U.S. | ​ | ​ | ​ | ​ | ​ | ​
Federal |  | — |  | 96,804 |  | (96,804)
State and local |  | — |  | (52,641) |  | 52,641
Total deferred |  | — |  | 44,163 |  | (44,163)
Income tax expense |  | — |  | 1,701,613 |  | 459,055
​
Schedule of reconciliation between the income tax expense and the actual provision | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the years ended December 31, |
​ |  | 2020 |  | 2021 |  | 2022 |
​ | ​ | US$ | ​ | US$ | ​ | US$ |
Loss before income tax |  | (42,397,279) |  | (71,476,322) |  | (79,512,792) | ​
PRC statutory income tax rate | ​ | 25 | % | 25 | % | 25 | %
Income tax credit computed at PRC statutory income tax rate | ​ | (10,599,320) |  | (17,869,081) |  | (19,878,198) | ​
Impact of PRC preferential income tax rate as qualified TASE | ​ | 4,239,728 | ​ | 7,147,633 | ​ | 7,951,279 | ​
Difference in income tax rates of overseas entities | ​ | 5,286,487 | ​ | 10,549,985 | ​ | 10,560,029 | ​
Research and development super-deduction(a) | ​ | (718,979) |  | (569,016) |  | (1,724,740) | ​
Research and development tax credits | ​ | — | ​ | — | ​ | (569,575) | ​
Non-deductible expenses | ​ | 1,238 |  | 1,054 |  | 3,695 | ​
Foreign derived intangible income deduction | ​ | — | ​ | — | ​ | (487,183) | ​
Changes in valuation allowance | ​ | 1,790,846 |  | 2,277,418 |  | 4,517,358 | ​
State tax | ​ | — | ​ | 291,500 | ​ | 76,127 | ​
Others | ​ | — | ​ | (127,880) | ​ | 10,263 | ​
Income tax expense | ​ | — | ​ | 1,701,613 | ​ | 459,055 | ​
Note (a): Due to the impacts of research and development super-deduction, the Group’s subsidiary, Adagene (Suzhou) Limited, did not have any income taxes for the years ended December 31, 2020, 2021, and 2022.
Schedule of tax effects of temporary differences that give rise to the deferred tax balances | ​
​ | ​ | ​ | ​ | ​
​ | ​ | As of December 31,
​ |  | 2021 |  | 2022
​ | ​ | US$ | ​ | US$
Deferred tax assets: | ​ | ​ | ​ |
Net operating loss carry forward | ​ | 4,949,000 |  | 8,217,976
Tax credit carry forward | ​ | — | ​ | 391,843
Capitalized research and development expenses | ​ | — | ​ | 756,197
Capitalized inventory | ​ | 95,589 | ​ | 94,954
Unrealized foreign exchange gain/losses | ​ | 39,166 | ​ | 116,238
Accrued expenses | ​ | — | ​ | 29,702
Amortization of right-of-use assets and interest of lease liabilities | ​ | — | ​ | 546
Depreciation and amortization of property, equipment and software | ​ | 79 |  | —
Gross deferred tax assets | ​ | 5,083,834 |  | 9,607,456
Less: valuation allowance | ​ | (5,007,139) |  | (9,524,497)
Deferred tax assets | ​ | 76,695 |  | 82,959
​
​ | ​ | ​ | ​ | ​
Deferred tax liabilities: | ​ | ​ | ​ | ​
Depreciation and amortization of property, equipment and software |  | (120,858) |  | (82,959)
Deferred tax liabilities |  | (120,858) |  | (82,959)
Total deferred tax liabilities, net |  | (44,163) |  | —
​
Schedule of movement of the valuation allowance | ​
​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2022
​ | ​ | US$ | ​ | US$
Balance as of January 1 |  | 2,729,721 |  | 5,007,139
Addition |  | 2,277,418 |  | 4,517,358
Balance as of December 31 |  | 5,007,139 |  | 9,524,497
​

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