XML 38 R20.htm IDEA: XBRL DOCUMENT v3.21.1
Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE M – INCOME TAXES
As of December 31, 2020, the Company had consolidated income tax net operating loss (“NOL”) carryforwards for federal tax purposes of approximately $196,960,000 and net operating loss carryforwards for foreign income tax purposes of approximately $61,781,635. The federal NOL carryforwards from 2005 through 2017 will expire in various years beginning 2025 and ending through the year 2036. From 2025 through 2027, approximately $47 million of the NOL will expire, and from 2028 through 2037, approximately $126 million of the NOL will expire. The NOL generated in 2018 through 2020 of approximately $24M will be carried forward indefinitely.
 
The components of the provision for income tax (benefits) are attributable to continuing operations as follows:
 
   
December 31, 2020
   
December 31, 2019
   
December 31, 2018
 
Current
               
Federal
  $—     $—     $—   
State
   —      —      —   
   
 
 
   
 
 
   
 
 
 
   $—     $—     $—   
   
 
 
   
 
 
   
 
 
 
Deferred
               
Federal
  $—     $—     $—   
State
   —      —      —   
   
 
 
   
 
 
   
 
 
 
   $—     $—     $—   
   
 
 
   
 
 
   
 
 
 
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
 
Deferred tax assets:
     
Net operating loss and tax credit carryforwards
  $66,867,637 
Capital loss carryforward
   5,683 
Accrued expenses
   253,374 
Start-up
costs
   5,837 
Excess of book over tax depreciation
   394,649 
Stock option and restricted stock award expense
   1,464,210 
Debt Extinguishment
   59,934 
Less: valuation allowance
   (68,859,984) 
   
 
 
 
   $191,340 
   
 
 
 
Deferred tax liability:
     
Property and equipment basis
  $48,545 
Prepaid expenses
   142,795 
   
 
 
 
   $191,340 
   
 
 
 
Net deferred tax asset
  $—   
   
 
 
 
As reflected above, we have recorded a net deferred tax asset of $0 at December 31, 2020. As required by the Accounting for Income Taxes topic in the ASC, we have evaluated whether it is more likely than not that the deferred tax assets will be realized. Based on the available evidence, we have concluded that it is more likely than not that those assets would not be realized without the recovery and rights of ownership or salvage rights of high-value shipwrecks or other forms of taxable income, thus a valuation allowance has been recorded as of December 31, 2020.
The change in the valuation allowance is as follows:
 
December 31, 2020
  $68,859,984 
December 31, 2019
   56,819,522 
   
 
 
 
Change in valuation allowance
  $12,040,462 
   
 
 
 
The federal and state income tax provision (benefit) is summarized as follows for the years ended:
 
   
December 31, 2020
   
December 31, 2019
   
December 31, 2018
 
Expected (benefit)
  $(4,429,419)   $(3,254,942)   $(1,923,757) 
Effects of:
               
U.S. income tax expense at the AMT 20% rate
   —      —      —   
State income taxes net of federal benefits
   (940,302)    (156,858)    (92,707) 
Nondeductible expense
   150,238    262,776    29,670 
Subpart F Income
   345,006    —      —   
Debt Extinguishment
   91,266    —      —   
Litigation funding
   2,482,252    —      —   
Change in valuation allowance
   4,815,784    5,170,161    3,765,560 
Foreign Rate Differential
   (2,514,825)    (2,021,137)    (1,778,766) 
   
 
 
   
 
 
   
 
 
 
   $—     $—     $—   
   
 
 
   
 
 
   
 
 
 
The Company’s effective income tax rate is lower than what would be expected if the federal statutory rate were applied to income before income taxes primarily because of certain expenses deductible for financial reporting purposes that are not deductible for tax purposes, research and development tax credits and operating loss carryforwards.
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 2017.