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Income Tax
 9 Months Ended
Dec. 31, 2024
Income Tax [Abstract]  
INCOME TAX

10 — INCOME TAX  

 

(a) Income Tax Expense

  

Income tax benefit for the three months ended December 31, 2024 was $0.4 million, and income tax expense for the three months ended December 31, 2023 amounted to $87,718. Income tax benefit for the nine months ended December 31, 2024 was $0.5 million, and income tax expense for the nine months ended December 31, 2023 amounted to $0.7 million. Significant components of the provision for income taxes are as follows:

 

   For the Nine Months Ended
December 31,		 
   2024   2023 
Current        
Federal  $101,808   $183,590 
State   120,932    182,860 
City   119,766    139,903 
Deferred          
Federal   (508,000)   166,500 
State   (202,000)   42,300 
City   (128,000)   24,500 
Foreign   (26,160)   (7,656)
Total  $(521,654)  $731,997 

 

The provision for income taxes is based on the following pretax income (loss):

 

   For the Nine Months Ended
December 31,		 
   2024   2023 
U.S.  $(2,412,980)  $1,973,031 
Canada   (115,517)   (33,146)
Total  $(2,528,497)  $1,939,885 

 

For the three months ended December 31, 2024, the total pre-tax loss was $1.1 million, which included $1.0 million pre-tax loss in the U.S. and $0.1 million pre-tax loss in Canada. For the three months ended December 31, 2023, the total pre-tax income was $0.1 million, which included $0.1 million pre-tax income in the U.S. and $33,146 pre-tax loss in Canada. For the nine months ended December 31, 2024, the total pre-tax loss was $2.5 million, which included $2.4 million pre-tax loss in the U.S. and $0.1 million pre-tax loss in Canada. For the nine months ended December 31, 2023, the total pre-tax income was $1.9 million, which included $2.0 million pre-tax income in the U.S. and $$0.1 million pre-tax loss in Canada.

 

The following table reconciles to the Company’s effective tax rate:

 

   For the Nine Months Ended
December 31		 
   2024   2023 
Pre-tax book (loss) income  $(2,528,497)  $1,939,885 
Federal Statutory rate   21.0%   21.0%
State income tax rate, net of federal income tax benefit   4.3%   8.0%
City income tax rate, net of federal income tax benefit   3.7%   5.0%
Foreign statutory rate   0.4%   (0.4)%
Permanent differences   (4.0)%   5.3%
Return to project adjustment   (4.8)%   (1.4)%
Total   20.6%   37.5%

 

Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. For the three months ended December 31, 2024 and 2023, the Company accrued nil and nil income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively. For the nine months ended December 31, 2024 and 2023, the Company accrued $63,812 and $55,604 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively.

United States

 

Income tax benefit for the three months ended December 31, 2024 amounted to $0.4 million and income tax expense for the three months ended December 31, 2023 amounted to $95,374. Income tax benefit for the nine months ended December 31, 2024 amounted to $0.5 million and income tax expense for the nine months ended December 31, 2023 amounted to $0.7 million.

 

Significant components of the provision for income taxes are as follows:

 

   For the Nine Months Ended
December 31,		 
   2024   2023 
Current        
Federal  $101,808   $183,590 
State   120,932    182,860 
City   119,766    139,903 
Deferred          
Federal   (508,000)   166,500 
State   (202,000)   42,300 
City   (128,000)   24,500 
Total  $(495,494)  $739,653 

 

Canada

 

Fly Toronto Corp, a subsidiary of the Company, was formed under the laws of Canada and conducts its business primarily in Canada.

 

Income tax benefit for the three months ended December 31, 2024 and 2023 amounted to $21,516 and $7,656, respectively. Income tax benefit for the nine months ended December 31, 2024 and 2023 amounted to $26,160 and $7,656, respectively. Significant components of the provision for income taxes are as follows:

 

   For the Nine Months Ended
December 31		 
   2024   2023 
Current        
Federal  $
—
   $
—
 
State   
—
    
—
 
City   
—
    
—
 
Deferred          
Federal   (14,807)   (4,334)
State   (11,353)   (3,322)
City   
—
    
—
 
Total  $(26,160)  $(7,656)

(b) Deferred Tax Assets (Liabilities)

 

Net DTAs as of December 31, 2024 and March 31, 2024 amounted to $497,939 and $35,199, respectively. Significant components of DTAs (DTLs), net are as follows:

 

   As of
December 31,
2024		   As of
March 31,
2024		 
Net operating loss carry forwards  $716,087   $40,332 
Inventory reserve   330,000    186,000 
Lease liability   5,216,000    5,810,000 
Less: Valuation allowance   
—
    
—
 
Total deferred tax assets (DTAs)  $6,262,087   $6,036,332 
Accumulated depreciation   (493,881)   (482,133)
ROU asset   (4,873,000)   (5,519,000)
Total deferred tax liabilities (DTLs)   (5,366,881)   (6,001,133)
Total deferred tax assets, net  $895,206   $35,199 
           
Deferred tax assets (liabilities) – U.S., net  $833,000   $(5,000)
Deferred tax assets – Canada, net  $62,206    40,199 

 

As of December 31, 2024 and March 31, 2024, the Company had approximately $6.3 million and $6.0 million, respectively, in the DTAs, which respectively included approximately $0.7 million and $40,332 related to net operating loss carryforwards that can be used to offset taxable income in future periods, $5.2 million and $5.8 million related to lease liability, and $0.3 million and $0.2 million related to inventory allowance.

 

As of December 31, 2024 and March 31, 2024, the Company had approximately $5.4 million and $6.0 million, respectively, which included $0.5 million and $0.5 million, respectively, in the DTLs that related to accumulated depreciation and $4.9 million and $5.5 million related to ROU assets.

 

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. As of December 31, 2024 and March 31, 2024, the Company recorded approximately $62,206 and $40,199, respectively, in the net DTAs. The tax losses in Canada can be carried forward for twenty years to offset future taxable profit. The tax losses of entities in Canada will begin to expire in 2044, if not utilized.   As of December 31, 2024, management considered it more likely than not that the Company will have sufficient taxable income in the future that will allow the Company to realize these net DTAs.

 

As a result of the Tax Cuts and Jobs Act (TCJA), US NOLs arising after December 31, 2017, may be carried forward indefinitely and can offset only up to 80% of taxable income in any future year.

 

Uncertain Tax Positions

 

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2024 and March 31, 2024, the Company did not have any significant unrecognized uncertain tax positions.