INCOME TAXES
The components of Income/(loss) before income taxes consisted of the following:
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| | | | |
| | March 31, 2017 |
US | | $ | (2,913,073 | ) |
Foreign | | (1,520,659 | ) |
Total | | $ | (4,433,732 | ) |
As of March 31, 2017, the Company is expected to have net operating loss carryforwards of $2 million for federal tax purposes, which will expire in 2037.
Income tax expenses attributable to income for continuing operations consists of:
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| | |
| March 31, 2017 |
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Federal: |
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Current | — |
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Deferred | (791,171 | ) |
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Foreign: |
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Current | — |
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Deferred | 421,925 |
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State and local: |
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Current | — |
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Deferred | (258,265 | ) |
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Change in valuation allowance | 627,511 |
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Income tax provision/(benefit) | — |
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Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of the asset and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that gave rise to the deferred tax assets and liabilities are as follows:
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| | |
| March 31, 2017 |
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Deferred tax assets: |
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Stock Compensation | 224,984 |
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Net operating losses | 823,898 |
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Fixed assets | 554 |
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| 1,049,436 |
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Total gross deferred tax asset | 1,049,436 |
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Less: valuation allowance | (1,049,436 | ) |
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Net deferred tax asset | — |
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In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carryback potential, and tax planning strategies in making these assessments.
Based upon the above criteria, the Company believes that it is more likely than not that the remaining net deferred tax assets will not be realized. Accordingly, the Company has recorded a full valuation allowance of approximately $1.0 million against the deferred tax asset that is not realizable.
The Company recognizes interest accrued to unrecognized tax benefits and penalties as income tax expense. The Company accrued no penalties and interest during the year ended March 31, 2017, and as of March 31, 2017 has not recognized any penalties and interest.
A reconciliation of the statutory Federal Income tax rate and effective tax rate of the provision for income taxes is as follows:
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| | |
| March 31, 2017 |
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Federal statutory rate | 34 | % |
Permanent items | (3.68 | )% |
Foreign rate differential | (4.11 | )% |
Write off UK non operating losses due to liquidation | (15.82 | )% |
State taxes | 3.69 | % |
Increase in valuation allowance | (14.2 | )% |
Other | 0.12 | % |
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Effective income tax rate | — | % |
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The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of March 31, 2017, open years related to the Federal jurisdiction are fiscal years ending 2016, 2015 and 2014. Open years related to the foreign jurisdiction are 2015 and 2014.
The Company has no open tax audits for the returns that were filed, with any tax authority as of March 31, 2017. Accordingly, there were no material uncertain tax positions in any of the jurisdictions that the Company operated in.