Annual report pursuant to Section 13 and 15(d)

6. INCOME TAXES

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6. INCOME TAXES
12 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
INCOME TAXES

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

At March 31, 2017 and 2016, the Company had cumulative federal operating loss carry forwards of $1,070,288 and $631,215, respectively, which will begin to expire in 2036. Certain tax attributes may be subject to an annual limitation as a result of the Acquisition Agreement, which could constitute a change in ownership as defined under Internal Revenue Code Section 382.

 

Deferred tax assets are recognized to the extent that these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income and tax-planning.

 

The components of the provision for income tax expenses for the periods ended March 31, 2017 and 2016, are as follows:

 

    March 31, 2017   March 31, 2016
Current:                
Federal   $ —       $ —    
State     100       —    
      100       —    
                 
Deferred:                
Federal     —         (219 )
State     —         (21 )
      —         (240 )
                 
Total provision / (benefit) for income taxes   $ 100     $ (240 )

  

Components of the net deferred tax asset, including a valuation allowance, at March 31, 2017 and 2016, are as follows:

 

         
   

As of

March 31, 2017

 

As of

March 31, 2016

Deferred tax assets:                
Net operating loss carryforward   $ 398,147     $ 235,443  
Less: Valuation allowance     (398,147 )     (235,443 )
                 
Net deferred tax asset   $ —       $ —    

 

The valuation allowance for deferred tax assets as of March 31, 2017 and 2016, was $398,147 and $235,443, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment.

 

The Company is subject to United States federal and state income taxes at an approximate rate of 34% and 3.3%, respectively. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

 

   

As of March 31,

2017

  As of March 31, 2016
         
Statutory rate     37.3 %     37.3 %
State taxes     (0.03 %)     —    
Permanent differences     (0.03 %)     —    
Valuation allowance     (37.22 %)     (37.35 %)
                 
Total     0.02 %     (0.05 %)

 

The components of income tax expense for the year ended March 31, 2017 and 2016, are as follows:

 

    For the year ended
March 31, 2017
 

 

For the year ended
March 31, 2016

         
Current tax expense   $ 100     $ —    
Deferred tax benefit     —         (240 )
                 
Total income tax (benefit) / expense   $ 100     $ (240 )