Note 9 - INCOME TAXES

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor were any interest expense or penalties recognized during the year ended December 31, 2016 and 2015.

The US operating entity Yosen Group is subject to the US federal income tax at 34%. Yosen Group does not conduct any operations and only incurs public company expenses, such as legal fees, accounting fees, investor relations expenses and filing fees. In 2016, the US operating subsidiaries incurred a net operating loss of $169,515 and $163,069. As a result, $57,635 and $55,443 of deferred tax assets and valuation allowance were recorded for 2016 and 2015.

The PRC operating subsidiaries, Zhejiang and Lamapai entities are subject to the PRC income tax at 25%. In 2016 and 2015, PRC operating subsidiaries incurred a net operating loss of $1,513,562 and $531,923. Management believes it is more likely than not that the subsidiaries will not be able to benefit from the deferred tax assets in association with the operating losses. As a result, $378,391 and $132,981 of deferred tax assets and valuation allowance were recorded in the year ended December 31, 2016.

The components of deferred income tax assets and liabilities as of December 31, 2016 and 2015 are as follows:

Reconciliation of the differences between the statutory US Federal income tax rate and the effective rate is as follows for 2016 and 2015.