NOTE G – INCOME TAXES

During the

nine

-month

period ended

September

30, 2020, we generated a federal net operating loss (“NOL”) carryforward of $5.2 million and generated $4.3 million of foreign NOL carryforwards. As of

September

2020, we had consolidated income tax NOL carryforwards for federal tax purposes of approximately $185.0 million and net operating loss carryforwards for foreign income tax purposes of approximately $53.2 million. The federal NOL carryforwards from 2005 forward will expire in various years beginning in 2025 and ending through the year 2038.

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. We have recorded a net deferred tax asset of $0 at

September

30, 2020. As required by the

Accounting for Income Taxes

topic in the ASC, we have concluded it is more likely than not that those assets would not be realizable without the recovery and rights of ownership or salvage rights of high value shipwrecks or substantial profits from our mining operations and thus a valuation allowance has been recorded as of

September

30, 2020. There was no U.S. income tax expense

for the three months ended September 30. 2020 due to the generation of net operating losses.

The increase in the valuation allowance as of

September

30, 2020 is due to the generation of approximately $0.8 million in net operating loss

year-to-date.

The change in the valuation allowance is as follows:


September 30, 2020	$	57,645,289
December 31, 2019		56,819,522

Change in valuation allowance	$	825,767

Our estimated annual effective tax rate as of

September

30, 2020 is 15.216% while our

September

30, 2020 effective tax rate

is 0.0% because of the

full valuation allowance.

We have not recognized a material adjustment in the liability for unrecognized tax benefits and have not recorded any provisions for accrued interest and penalties related to uncertain tax positions. The earliest tax year still subject to examination by a major taxing jurisdiction is 2016.