NOTE 8 INCOME TAXES

The following table presents the current and deferred income tax provision (benefit) for federal and state income taxes:

Current income taxes are based upon the year’s income taxable for federal and state tax reporting purposes. Deferred income taxes (benefits) are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes.

Deferred tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected to affect taxable income. The Company’s deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers would be limited under the Internal Revenue Code should a significant change in ownership occur within a three year period. There were no depreciation differences.

At March 31, 2017 and 2016, the Company had net operating loss carryforwards of approximately $16,762,992 and $2,095,960, respectively, which begin to expire in 2029. The deferred tax assets arising from the net operating loss carryforwards are approximately $16,763,000 and $789,000 as of March 31, 2017 and 2016, respectively. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income and tax planning strategies in making this assessment. Based on management’s analysis, they concluded not to retain a deferred tax asset since it is uncertain whether the Company can utilize this asset in future periods. Therefore, they have established a full reserve against this asset. The change in the valuation allowance in 2017 and 2016 was approximately $5,519,204and $90,992 respectively.

A reconciliation of the expected tax computed at the U.S. statutory federal income tax rate to the total benefit for income taxes at March 31, 2017, 2016 is as follows:

The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of March 31, 2017 and 2016, the Company had no accrued interest and penalties related to uncertain tax positions.

The Company is subject to taxation in the U.S. and Minnesota. Our tax years for 02014 and forward are subject to examination by tax authorities. The Company is not currently under examination by any tax authority.

Management has evaluated tax positions in accordance with FASB ASC 740, and has not identified any tax positions, other than those discussed above, that require disclosure

The Company has not filed tax returns for 2014, 2015, 2016, and 2017. The Company’s subsidiaries, Gel-Del Technologies, Inc., and Cosmeta Corp have not filed tax returns for tax years 2013, 2014, 2015, 2016, and 2017. It should be noted that the tax liability for all the companies for those years is likely to be none or minimal as a result of net operating losses recorded in those years. Gel-Del Technologies, Inc. and Cosmeta Corp file consolidated returns. There are penalties for not filing timely returns. These penalties have not been determined at this time, however, due to the operating losses, penalties are expected to be minimal.