Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.2
Income Taxes
 12 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11 – Income Taxes

 

As of March 31, 2020, the Company has net operating loss carryforwards of approximately $9.1 million available to reduce future taxable income, if any, for federal and state income tax purposes. Under the Tax Cuts and Jobs Act, all federal NOLs incurred after December 31, 2017 are carried forward indefinitely for federal tax purposes. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") signed in to law on March 27, 2020, provided that NOLs generated in a taxable year beginning in 2018, 2019, or 2020, may now be carried back five years and forward indefinitely. In addition, the limitation of NOL utilization up to 80% of taxable income limitation is temporarily removed, allowing NOLs to fully offset taxable income. $25,523 of the federal NOL will expire in 2037. The state net operating loss carryforwards will begin to expire in 2037.

 

Under the Internal Revenue Code ("IRC") Section 382, annual use of the Company's net operating loss carryforwards to offset taxable income may be limited based on cumulative changes in ownership. The Company has not completed an analysis to determine whether any such limitations have been triggered as of March 31, 2020. The Company has no income tax affect due to the recognition of a full valuation allowance on the expected tax benefits of future loss carry forwards based on uncertainty surrounding realization of such assets.

 

The federal and state tax returns beginning with the year ended December 31, 2017 are currently open for examination under the applicable federal and state income tax statutes of limitations.

 

The Company's provision for income taxes differs from the result obtained when applying the statutory rate of 21% to pre-tax book loss due to nondeductible expenses, the impact of the federal statutory tax rate change disclosed above, offset by a decrease in our valuation allowance.

 

The tax effects of the temporary differences and carry forwards that give rise to deferred tax assets consist of the following:

 

    As of March 31,  
    2020     2019  
Deferred tax assets:            
Accrued Vacation   $ 2,489     $ -  
Stock-based compensation     544,158       41,608  
Net operating loss     2,410,744       568,496  
Total deferred income tax assets     2,957,391       610,104  
                 
Deferred income tax liabilities:                
Fixed Assets     (532 )     -  
Development Technology     (20,017 )     (24,541 )
Total deferred income tax liabilities     (20,549 )     (24,541 )
                 
Net deferred income tax assets     2,936,842       585,563  
Valuation allowance     (2,936,842 )     (585,563 )
Deferred tax asset, net of allowance   $ -     $ -  

 

A reconciliation of the statutory income tax rates and the Company's effective tax rate is as follows:

 

    For the year ended March 31,  
    2020     2019  
Statutory federal income tax rate     21.0 %     21.0 %
State taxes, net of federal tax benefit     4.9 %     4.7 %
Stock-based compensation     (1.2 )%     (5.1 )%
Amortization of debt discount     - %     (6.0 )%
Change in fair value of warrant liability     - %     (3.6 )%
Deferred tax true-up     (0.3 )%     (12.1 )%
Change in valuation allowance     (24.5 )%     1.0 %
Income taxes provision (benefit)     - %     - %

 

The Company has not identified any uncertain tax positions requiring a reserve as of March 31, 2020 and 2019. The Company's policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The Company did not accrue either interest or penalties for the years ended March 31, 2020 and 2019.

 

The Company has not been under tax examination in any jurisdiction for the years ended March 31, 2020 and 2019.