Note 15 – Income Taxes

Monaker follows the guidance of ASC 740, “Income Taxes.” Deferred income taxes reflect the net effect of (a) temporary differences between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.

The provision for income taxes consists of the following components for the years ended February 28, 2017 and February 29, 2016:

The components of deferred income tax assets and liabilities for the years ended February 28, 2017 and February 29, 2016, are as follows:

The income tax provision differs from the expense that would result from applying statutory rates to income before income taxes principally because of the valuation allowance on net deferred tax assets for which realization is uncertain.

The effective tax rates for years ended February 28, 2017 and February 29, 2016 were computed by applying the federal and state statutory corporate tax rates as follows:

The valuation allowance has increased by $6,472,000 for fiscal year end 2017 primarily as a result of a current year operating loss of $6,472,000 including amortization of intangibles of $1,780,000.

The net operating loss (“NOL”) carry-forward balance as of February 28, 2017 is approximately $58 million expiring between 2025 and 2037. Management has reviewed the provisions of ASC 740 regarding assessment of their valuation allowance on deferred tax assets and based on that criteria determined that it does not have sufficient taxable income to offset those assets. Therefore, management has assessed the realization of the deferred tax assets and has determined that it is more likely than not that they will not be realized and has provided a full valuation allowance against these assets. The utilization of the NOL’s may be limited by Internal Revenue Code Section 382 which restricts annual utilization following a greater than 50% change in ownership.

At the adoption date the Company applied ASC 740 to all tax positions for which the statute of limitations remained open. As a result of the implementation of ASC 740, the Company did not recognize a material increase in the liability for uncertain tax positions as of February 28, 2017.