Income Taxes

12 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 9 - INCOME TAXES

The Company files separate tax returns in the United States and in Macau, China. The Macau Subsidiary has received approval from the Macau government to operate its business as a Macau Offshore Company (MOC), and is exempt from the Macau income tax. For the fiscal years ended March 31, 2017, 2016 and 2015, the Macau Subsidiary recorded no tax provision.

The U.S. Federal net operating loss carryforward is subject to an IRS Section 382 limitation. As of March 31, 2017 and 2016 the Company had net deferred tax assets of approximately $1.5 million and $2.4 million respectively.

The income tax provision (benefit) for federal, foreign, and state income taxes in the consolidated statements of income consisted of the following components for 2017, 2016 and 2015:

	2017		2016			2015
Income tax provision:
Current:
Federal	$	87,751	$	-		$	-
State		-		-			-
Total current Federal and State	$	87,751	$	-		$	-
Deferred:
Federal	$	849,983	$	(89,718	)	$	80,836
State		79,339		(11,658	)		11,865
Total Deferred Federal and State	$	929,322	$	(101,376	)	$	92,701
Total income tax (benefit) provision	$	1,017,073	$	(101,376	)	$	92,701

The United States and foreign components of income (loss) before income taxes are as follows:

	2017		2016		2015
United States	$	2,507,010	$	1,406,301	$	161,255
Foreign		216,261		195,713		101,604
	$	2,723,271	$	1,602,014	$	262,859

The actual tax (benefit) provision differs from the “expected” tax expense for the years ended March 31, 2017, 2016 and 2015 (computed by applying the U.S. Federal Corporate tax rate of 34 percent to income before taxes) as follows:

	2017			2016			2015
Expected tax expense	$	925,912		$	544,684		$	89,372
State income taxes, net of Federal income tax benefit		36,195			19,420			(97	)
Permanent differences		11,559			11,176			7,507
Deemed Dividend		73,521			80,207			37,563
Change in valuation allowance		-			(708,385	)		(91,034	)
Tax rate differential on foreign earnings		(73,529	)		(75,007	)		(39,272	)
Other		43,415			26,529			88,662
Actual tax (benefit) provision	$	1,017,073		$	(101,376	)	$	92,701

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

	2017			2016
Deferred tax assets:
Federal net operating loss carryforward	$	476,003		$	1,481,531
State net operating loss carryforward		242,418			277,673
AMT credit carryforward		139,754			52,004
Inventory differences		436,695			443,749
Allowance for doubtful accounts		46,837			19,614
Reserve for sales returns		79,026			112,100
Stock option compensation expense		93,178			80,489
Stock warrants		35,822			38,863
Accrued Vacation		10,767			11,212
Total deferred tax assets		1,560,500			2,517,235
Deferred tax liability:
Depreciation		(81,291	)		(108,704	)
Net deferred tax assets before valuation allowance		1,479,209			2,408,531
Valuation allowance		-			-
Net deferred tax assets	$	1,479,209		$	2,408,531

During the fiscal year ended March 31, 2016 the Company released the remaining valuation allowance on the Company’s deferred tax assets. The release of the valuation allowance was determined in accordance with the provisions of ASC 740, which require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. The analysis performed to assess the realizability of the deferred tax assets included an evaluation of the pattern and timing of the reversals of temporary differences and the length of carryback and carryforward periods available under the applicable federal and state laws; and the amount and timing of future taxable income. As of March 31, 2016 the analysis indicated that it is more likely than not that the deferred tax assets recorded will be realized. As a result, the remaining approximately $0.7 million of the valuation allowance was released during the fiscal year ended March 31, 2016.

At March 31, 2017, the Company has federal tax net operating loss carryforwards in the amount of approximately $1.4 million that begin to expire in the year 2029. The net operating loss carryforward is subject to an IRS Section 382 limitation. There will be approximately $160,000 per year available to use in beginning Fiscal 2018. In addition, the Company has state tax net operating loss carryforwards in the amount of approximately $5.6 million that will begin to expire beginning in 2025.

The Company is no longer subject to income tax examinations for fiscal years before 2014.