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PROVISION FOR INCOME TAXES
 12 Months Ended
Mar. 31, 2013
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
NOTE 12 —PROVISION FOR INCOME TAXES
 
The Company accounts for taxes in accordance with ASC 740, “Income Taxes”, which requires the recognition of tax benefits or expense on the temporary differences between the tax basis and book basis of its assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.
 
Tax years 2011 through 2013 remain open to examination by federal and state tax jurisdictions. The Company has various foreign subsidiaries for which tax years 2007 through 2013 remain open to examination in certain foreign tax jurisdictions.
 
The Company’s income tax benefit for the years ended March 31, 2013 and 2012 consists of federal, state and local taxes attributable to GCP, which does not file a consolidated income tax return with the Company, and foreign taxes. As of March 31, 2013, the Company had federal net operating loss carryforwards of approximately $79,100,000 for U.S. tax purposes, which expire through 2033, and foreign net operating loss carryforwards of approximately $19,700,000, which carry forward without limit of time. Utilization of the U.S. tax losses may be limited by the “change of ownership” rules as set forth in section 382 of the Internal Revenue Code.
 
The pre-tax income, on a financial statement basis, from foreign sources totaled $412,182 for the year ended March 31, 2013 and the pre-tax loss, on a financial statement basis, from foreign sources totaled $154,328 for the year ended March 31, 2012.
 
The Company did not have any undistributed earnings from foreign subsidiaries at March 31, 2013 and 2012.
The following table reconciles the income tax benefit and the federal statutory rate of 34%.
  
 
 
Years ended March 31,
 
 
 
2013
 
2012
 
 
 
%
 
%
 
Computed expected tax benefit, at 34%
 
 
34.00
 
 
34.00
 
Increase in valuation allowance
 
 
(34.39)
 
 
(43.34)
 
Effect of foreign rate differential
 
 
(2.96)
 
 
(2.17)
 
Taxes included in minority interest
 
 
(3.81)
 
 
(1.87)
 
Other
 
 
(1.56)
 
 
4.39
 
State and local taxes, net of federal benefit
 
 
6.00
 
 
6.00
 
 
 
 
 
 
 
 
 
Income tax benefit
 
 
(2.72)
 
 
(2.99)
 
 
In connection with the investment in GCP, the Company recorded a deferred tax liability on the ascribed value of the acquired intangible assets of $2,222,222, increasing the value of the asset. The deferred tax liability is being reversed and a deferred tax benefit is being recognized over the amortization period of the intangible asset (15 years). For each of the years ended March 31, 2013 and 2012, the Company recognized $148,152 of income tax benefit.
 
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities are presented below.
  
 
 
March 31,
 
 
 
2013
 
2012
 
Deferred income tax assets:
 
 
 
 
 
 
 
Foreign currency transactions
 
$
103,000
 
$
105,000
 
Accounts receivable
 
 
5,000
 
 
38,000
 
Inventory
 
 
280,000
 
 
164,000
 
Stock based compensation
 
 
1,967,000
 
 
1,854,000
 
Amortization of intangibles
 
 
1,463,000
 
 
1,306,000
 
Net operating loss carryforwards — U.S.
 
 
31,623,000
 
 
30,012,000
 
Net operating loss carryforwards — foreign
 
 
1,957,000
 
 
1,916,000
 
Other
 
 
2,000
 
 
2,000
 
 
 
 
 
 
 
 
 
Total gross assets
 
 
37,400,000
 
 
35,397,000
 
Less: Valuation allowance
 
 
(37,400,000)
 
 
(35,397,000)
 
 
 
 
 
 
 
 
 
Net deferred asset
 
$
—
 
$
—
 
 
 
 
 
 
 
 
 
Deferred income tax liability:
 
 
 
 
 
 
 
Intangible assets acquired in acquisition of subsidiary
 
$
(629,444)
 
$
(629,444)
 
Intangible assets acquired in investment in GCP
 
 
(1,037,012)
 
 
(1,185,164)
 
 
 
 
 
 
 
 
 
Net deferred income tax liability
 
$
(1,666,456)
 
$
(1,814,608)
 
   
The Company has recorded a full valuation allowance against its deferred tax assets as it believes it is more likely than not that such deferred tax assets will not be realized. The valuation allowance for deferred tax assets as of March 31, 2013 and 2012 was approximately $37,400,000 and $35,397,000, respectively. The net change in the total valuation allowance for the years ended March 31, 2013 and 2012 was $2,003,000 and $2,250,000, respectively. The Company does not offset its deferred tax assets and liabilities because its deferred tax assets and liabilities are in different taxable entities which do not file consolidated returns.