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INCOME TAXES | 12 Months Ended
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Mar. 31, 2021
INCOME TAXES |
INCOME TAXES | NOTE 5 - INCOME TAXES We account for income taxes under ASC 740, Income Taxes. The following table reflects income and loss from continuing operations by location, and the provision for income taxes for the applicable fiscal years ended March 31:
|  | 2021 |  | 2020
U.S. operations |  | $ | 435,534 |  | $ | (403,419)
Foreign operations |  |  | (10,033) |  |  | (11,191)
Income (loss) before income taxes |  |  | 425,511 |  |  | (414,610)
Income tax provision (benefit) |  |  | 104,880 |  |  | (73,041)
Net income (loss) |  | $ | 320,631 |  | $ | (341,569)
The components of the provision (benefit) for income taxes consists of the following as of March 31:
|  | 2021 |  | 2020
Current: |  |  |  |  |  |
Federal |  |  | (76,185) |  |  | —
State |  |  | — |  |  | —
Total Current |  | $ | (76,185) |  | $ | —
Deferred: |  |  |  |  |  |
Federal |  |  | 148,151 |  |  | (26,328)
State |  |  | 32,914 |  |  | (46,713)
Total Deferred |  | $ | 181,065 |  | $ | (73,041)
Income tax provision (benefit) |  | $ | 104,880 |  | $ | (73,041)
On March 27, 2020, the U.S. federal government passed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. Under the CARES Act, Alternative Minimum Tax, or AMT, credit refunds are accelerated and fully refundable in tax returns through the year 2019. As a result of this provision, the Company recovered all of the AMT credits as refunds in the amount of $121,000 over the last two fiscal years. Our fiscal 2021 and 2020 taxes were measured at the U.S. statutory income tax rate of 21%. For the year ended March 31, 2021, the Company's tax expense was driven by certain reversing temporary differences, which reduced the Company’s net deferred tax assets. A reconciliation between income taxes computed at the U.S. federal statutory rate to the actual tax expense for income taxes reported in the Consolidated Statements of Operations and Comprehensive Income (Loss) follows for fiscal years ended March 31:
|  | 2021 |  | 2020 |
U.S. statutory income tax |  | $ | 89,358 |  | $ | (87,068) |
State income tax, net of federal benefit |  |  | 11,366 |  |  | (35,969) |
Change in state NOL, net of federal benefit |  |  | (10,487) |  |  | 31,208 |
Stock-based compensation |  |  | (4,830) |  |  | (17,587) |
Change in valuation allowance |  |  | 20,484 |  |  | 9,340 |
Global intangible income tax |  |  | — |  |  | 28,045 |
Other |  |  | (1,011) |  |  | (1,010) |
Provision (benefit) for income taxes |  | $ | 104,880 |  | $ | (73,041) |
Effective tax rate* |  |  | 24.6 | % |  | 17.6 | %
*Effective tax rate is calculated by dividing the income tax provision by income (loss) before income taxes. The following table summarizes the components of deferred income tax assets and liabilities at March 31:
|  | 2021 |  | 2020
Deferred tax assets: |  |  |  |  |  |
Net operating loss carryforward |  | $ | 3,571,600 |  | $ | 3,704,185
Compensation |  |  | 347,742 |  |  | 341,900
Stock based compensation awards |  |  | 238,120 |  |  | 213,854
Other items not currently deductible |  |  | 189,728 |  |  | 88,090
Depreciation |  |  | 38,490 |  |  | 68,486
AMT tax credits |  |  | — |  |  | 76,186
Total deferred tax assets |  |  | 4,385,680 |  |  | 4,492,701
Valuation allowance |  |  | (1,731,100) |  |  | (1,710,616)
Net deferred tax assets |  |  | 2,654,580 |  |  | 2,782,085
Deferred tax liabilities: |  |  |  |  |  |
Contract accounting methods |  |  | (720,165) |  |  | (666,605)
Total deferred tax liabilities |  |  | (720,165) |  |  | (666,605)
Deferred taxes, net |  | $ | 1,934,415 |  | $ | 2,115,480
In assessing the recoverability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We have determined that it is more likely than not that certain future tax benefits may not be realized. Accordingly, a valuation allowance has been recorded against deferred tax assets that are unlikely to be realized. Realization of the remaining deferred tax assets will depend on the generation of sufficient taxable income in the appropriate jurisdictions, the reversal of deferred tax liabilities, tax planning strategies and other factors prior to the expiration date of the carryforwards. A change in the estimates used to make this determination could require an increase or a reduction the valuation allowance currently recorded against those deferred tax assets. The valuation allowance on deferred tax assets was approximately $1.7 million at March 31, 2021 and 2020. We believe that it is more likely than not that the benefit from certain state and foreign NOL carryforwards and other deferred tax assets will not be realized. In the event future taxable income is below management’s estimates or is generated in tax jurisdictions different than projected, the Company could be required to increase or decrease the valuation allowance for those deferred tax assets. The following table summarizes carryforwards of net operating losses as of March 31, 2021:
|  |  |  |  | Begins to
|  | Amount |  | Expire:
Federal net operating losses |  | $ | 7,296,383 |  | 2026
State net operating losses |  | $ | 27,187,363 |  | 2032
The Internal Revenue Code provides for a limitation on the annual use of net operating loss carryforwards following certain ownership changes that could limit our ability to utilize these carryforwards on a yearly basis. We experienced an ownership change in connection with the acquisition of Ranor in 2006. Accordingly, our ability to utilize certain carryforwards relating to 2006 and prior is limited. Our remaining pre‑2006 net operating losses total approximately $0.4 million. At March 31, 2021, we have approximately $6.9 million of federal post‑2006 losses available for carryforward, without limitation. U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, we may not be able to take full advantage of these carryforwards for Federal or state income tax purposes. We have not accrued any penalties with respect to uncertain tax positions. We file income tax returns in the U.S. federal jurisdiction and various U.S. state jurisdictions. Our foreign subsidiary files separate income tax returns in China, the foreign jurisdiction in which it is located. Tax years 2017 and forward remain open for examination. We recognize interest and penalties accrued related to income tax liabilities in selling, general and administrative expense in our Consolidated Statements of Operations and Comprehensive (Loss) Income.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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