Income Taxes

12 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10 - 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, 2018 and 2017, 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, 2018 and 2017, the Company had net deferred tax assets of approximately $0.9 million and $1.5 million, respectively. On December 22, 2017 the Tax Act was enacted which reduces the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. As a result of the Tax Act we have determined our blended rate for the fiscal year ending March 31, 2018 was approximately 28.4% and we recorded a tax provision of approximately $0.2 million. As of March 31, 2018 we have completed our analysis for all of the tax effects of the Tax Act and have recognized an additional tax provision of approximately $0.3 million primarily related to the revaluation of our net deferred tax assets.

The income tax provision for federal, foreign, and state income taxes in the consolidated statements of income consisted of the following components for 2018 and 2017:

	2018			2017
Income tax provision:
Current:
Federal	$	-		$	87,751
State		-			-
Total current Federal and State	$	-		$	87,751
Deferred:
Federal	$	587,995		$	849,983
State		(43,118	)		79,339
Total Deferred Federal and State	$	544,877		$	929,322
Total income tax provision	$	544,877		$	1,017,073

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

	2018		2017
United States	$	469,182	$	2,507,010
Foreign		228,181		216,261
	$	697,363	$	2,723,271

The actual tax provision differs from the “expected” tax expense for the years ended March 31, 2018 and 2017 (computed by applying the U.S. Federal Corporate tax rate of 34 percent to income before taxes) as follows:

	2018			2017
Expected tax expense	$	212,657		$	925,912
State income taxes, net of Federal income tax benefit		10,341			36,195
Permanent differences		12,716			11,559
Deemed Dividend		70,267			73,521
Change in income tax rate		346,062			-
Tax rate differential on foreign earnings		(70,267	)		(73,529	)
Other		(36,899	)		43,415
Actual tax provision	$	544,877		$	1,017,073

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

	2018			2017
Deferred tax assets:
Federal net operating loss carryforward	$	263,231		$	476,003
State net operating loss carryforward		289,584			242,418
AMT credit carryforward		92,723			139,754
Inventory differences		190,327			436,695
Allowance for doubtful accounts		18,462			46,837
Reserve for sales returns		55,505			79,026
Stock option compensation expense		104,676			93,178
Accrued expenses		30,017			46,589
Total deferred tax assets		1,044,525			1,560,500
Deferred tax liabilities:
Depreciation		(76,364	)		(81,291	)
Prepaid expenses		(31,024	)		-
Net deferred tax assets	$	937,137		$	1,479,209

The company performed an analysis 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, 2018 the analysis indicated that it is more likely than not that the deferred tax assets recorded will be realized.

At March 31, 2018, 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 is approximately $0.2 million per year available to use beginning in 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 2015.