NOTE 12 – INCOME TAXES
For financial reporting purposes, income before income taxes for fiscal 2017, fiscal 2016 includes the following components:
| August 31, 2017 | August 31, 2016 | |||
| Pre-tax income: | ||||
| $ 288,546 | $ 71,739 | |||
| Income before income taxes | $ 288,546 | $ 71,739 |
The components of the provision for income taxes for fiscal 2017 and fiscal 2016 are as follows:
| August 31, 2017 | August 31, 2016 | |||
| Federal tax | 111,611 | - | ||
| State tax | 107,471 | - | ||
| Total tax provision | $ 219,082 | $ - |
The net deferred tax asset generated by the loss carry-forward generated in previous fiscal years has been fully utilized during the year ended August 31, 2017. Deferred tax liability resulting from intangible assets that are non-deductible for tax purposes was recorded as a liability on the merger date.
The income tax benefit differs from the amount computed by applying the federal income tax rate of 34% to net earnings before income taxes. The provision for income tax consists of the following:
| August 31, | August 31, | |||
| 2017 | 2016 | |||
| Federal income tax/benefit attributable to: | ||||
| Current operations | $ 111,611 | $ 24,391 | ||
| Non-deductible entertainment | 11,121 | 31,059 | ||
| Penalties | 7,310 | - | ||
| Prior year adjustments | - | 17,810 | ||
| State tax, net of Federal benefit | 72,375 | 9,516 | ||
| Incentive stock options | 126,734 | - | ||
| Reorganization costs | 43,620 | - | ||
| Less: valuation of allowance | - | (82,776) | ||
| Less: utilization of allowance | (261,160) | |||
| Net provision for Federal income taxes | $ 111,611 | $ - |
The cumulative tax effect at the expected rate of 43% of significant items comprising our net deferred tax amount is as follows:
| August 31, 2017 | August 31, 2016 | |||
| Deferred tax attributable to: | ||||
| Net operating loss carryover | $ - | $ 149,622 | ||
| Stock-based compensation | 143,611 | 75,133 | ||
| Issuance of restricted stock | 58,683 | - | ||
| Depreciation, amortization and other | (1,596,386) | 2,197 | ||
| Valuation allowance | - | (226,952) | ||
| Net deferred tax liability | $ (1,394,092) | $ - |
The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of August 31, 2017 and 2016, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by major taxing jurisdictions are for the years ended August 31, 2016, 2015 and 2014.