• Filing Date: 2016-07-14
  • Form Type: 10-K
  • Description: Annual report
v3.5.0.2
7. FEDERAL INCOME TAX
12 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
7. FEDERAL INCOME TAX

The Company accounts for income taxes under ASC 740-10, which provides for an asset and liability approach of accounting for income taxes.  Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

 

The components of income tax expense for the years ended March 31, 2016 and 2015 consist of the following:

 

    2016     2015  
Current tax provision   $ (619,000 )   $ (280,000 )
Deferred tax benefit     (180,000 )     -  
Valuation allowance     799,000       280,000  
Total income tax provision   $ -     $ -  

 

Significant components of the Company's estimated deferred tax assets and liabilities as of March 31, 2016 and 2015 are as follows:

    2016     2015  
Deferred tax assets:            
Net operating loss carryforwards   $ 619,000     $ 280,000  
Deferred tax     180,000          
Total deferred tax asset     799,000       280,000  
Valuation allowance     (799,000 )     (280,000 )
    $ -     $ -  

 

As of March 31, 2016, we had approximately $3,260,000 of federal net operating loss carry forwards.  These carry forwards, if not used, will begin to expire in 2028.  Future utilization of our net operating loss carry forwards is subject to certain limitations under Section 382 of the Internal Revenue Code.  The Company believes that the issuance of its common stock in exchange for Multiplayer Online Dragon, Inc. January 30, 2015 resulted in an “ownership change” under the rules and regulations of Section 382.  Accordingly, our ability to utilize our net operating losses generated prior to this date is limited to approximately $10,000 annually. 

 

To the extent that the tax deduction is included in a net operating loss carry forward and is in excess of amounts recognized for book purposes, no benefit will be recognized until the loss carry forward is recognized.  Upon utilization and realization of the carry forward, the corresponding change in the deferred asset and valuation allowance will be recorded as additional paid-in capital.

 

The Company provides for a valuation allowance when it is more likely than not that we will not realize a portion of the deferred tax assets.  The Company has established a valuation allowance against our net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets.  Therefore, we have not reflected any benefit of such deferred tax assets in the accompanying financial statements. Our net deferred tax asset and valuation allowance increased by $519,000 in the year ended March 31, 2016.

 

The Company reviewed all income tax positions taken or that we expect to be taken for all open years and determined that our income tax positions are appropriately stated and supported for all open years.  The Company is subject to U.S. federal income tax examinations by tax authorities for years after 2012 due to unexpired net operating loss carryforwards originating in and subsequent to that year.  The Company may be subject to income tax examinations for the various taxing authorities which vary by jurisdiction.