6.Income Taxes
As of March 31, 2017 and 2016, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.
Tax years 2013 through 2017 are subject to examination by the federal and state taxing authorities. There are no income tax examinations currently in process.
Reconciliation between our effective tax rate and the United States statutory rate is as follows:
| Year Ended March 31, 2017 | Year Ended March 31, 2016 | |||
| Expected federal tax rate | 34.0% | 34.0% | ||
| State income taxes, net of federal tax benefit | 5.5% | 5.5% | ||
| Non-deductible expenses | (5.2%) | 121.2% | ||
| Federal R&D tax credits, net | 0.0% | 0.0% | ||
| Utilization of net operating losses |
| (34.3%) |
| (160.7%) |
| Change in valuation allowance | 0.0% | 0.0% | ||
| Effective tax rate | 0.0% | 0.0% |
The following is a summary of the significant components of our deferred tax assets as of March 31, 2017 and 2016:
| (in thousands) | March 31, 2017 | March 31, 2016 | ||
| Deferred Tax Assets: | ||||
| Net operating loss carryforwards | $ 9,305 | $ 9,276 | ||
| Capital loss carry forward | - | - | ||
| Tax credit carry forward | 306 | 306 | ||
| Inventory and receivable allowances | 147 | 37 | ||
| Accrued expenses deductible when paid | 111 | 42 | ||
| Deferred tax assets | 9,869 | 9,661 | ||
| Deferred Tax Liabilities: |
|
| ||
| Depreciation and amortization | (191) | (210) | ||
| Deferred tax liabilities | (191) | (210) | ||
| Net deferred tax assets | 9,678 | 9,451 | ||
| Valuation allowance | (9,678) | (9,451) | ||
| Net deferred tax assets | $ - | $ - |
Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of the assets and liabilities using the enacted tax rate in effect in the years in which the differences are expected to reverse. A 100% valuation allowance has been recorded against the deferred tax asset as it is more likely than not, based upon our analysis of all available evidence, that the tax benefit of the deferred tax asset will not be realized.
As of March 31, 2017, we have the following unused net operating loss and tax credit carryforwards available to offset future federal and state taxable income, both of which expire at various times as noted below:
| (in thousands) | Net Operating Losses | Investment & Research Credits | Expiration Dates | |||
| Federal | $ 26,672 |
| $ - | 2020 to 2037 | ||
| State | $ 6,192 |
| $ - | 2032 to 2037 |
Approximately $1,400,000 of the above Federal net operating loss carryforwards relate to stock compensation. The related tax benefit of approximately $553,000 will be credited to additional paid-in capital upon realization.