Income Taxes

12 Months Ended

Mar. 31, 2019

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, 2019 and 2018, 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, 2019 and 2018, the Company had net deferred tax assets of approximately $0.8 million and $0.9 million, respectively. For the fiscal year ended March 31, 2019 we determined our effective tax rate to be approximately 20.1% and we recorded a tax provision of approximately $0.2 million On December 22, 2017 the Tax Cut and Jobs Act was enacted which reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. As a result of the Tax Cut and Jobs Act we 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. Upon completion of our analysis for all of the tax effects of the Tax Cut and Jobs Act we recognized an additional tax provision of approximately $0.3 million at March 31, 2018 primarily related to the revaluation of our net deferred tax assets.

The income tax provision (benefit) for federal, foreign, and state income taxes in the consolidated statements of income consisted of the following components for 2019 and 2018:

	2019			2018
Income tax provision (benefit):
Current:
Federal	$	(19,289	)	$	-
State		-			-
Total current Federal and State tax provision (benefit)		(19,289	)		-
Deferred:
Federal		159,881			587,995
State		18,888			(43,118	)
Total Deferred Federal and State provision (benefit)		178,769			544,877
Total income tax provision (benefit)	$	159,480		$	544,877

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

	2019		2018
United States	$	607,652	$	469,182
Foreign		183,375		228,181
	$	791,027	$	697,363

The actual tax provision differs from the “expected” tax expense for the years ended March 31, 2019 and 2018 (computed by applying the U.S. Federal Corporate tax rate of 21 percent to income before taxes) as follows:

	2019			2018
Expected tax expense	$	166,506		$	212,657
State income taxes, net of Federal income tax benefit		13,478			10,341
Permanent differences		8,282			12,716
Deemed Dividend		20,813			70,267
Change in income tax rate		-			346,062
Tax rate differential on foreign earnings		(20,813	)		(70,267	)
Other		(28,786	)		(36,899	)
Actual tax provision	$	159,480		$	544,877

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

	2019			2018
Deferred tax assets:
Federal net operating loss carryforward	$	236,476		$	263,231
State net operating loss carryforward		272,758			289,584
AMT credit carryforward		19,289			92,723
Inventory differences		176,967			190,327
Allowance for doubtful accounts		11,599			18,462
Reserve for sales returns		67,439			55,505
Stock option compensation expense		109,464			104,676
Stock warrants		23,018			22,802
Accrued expenses		7,944			7,215
Total deferred tax assets		924,954			1,044,525
Deferred tax liabilities:
Depreciation		(108,706	)		(76,364	)
Prepaid expenses		(57,882	)		(31,024	)
Net deferred tax assets	$	758,366		$	937,137

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, 2019 the analysis indicated that it is more likely than not that the deferred tax assets recorded will be realized.

At March 31, 2019, the Company has federal tax net operating loss carryforwards in the amount of approximately $1.1 million that begin to expire in the year 2025. 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 2019. In addition, the Company has state tax net operating loss carryforwards in the amount of approximately $5.2 million that will begin to expire beginning in 2024.

The Company is no longer subject to income tax examinations for fiscal years before 2016.