7. Income Tax

3 Months Ended

Jun. 30, 2014

Notes to Financial Statements

6. Income Tax

The provision for income tax is comprised of:

	Three Months Ended June 30,
	2014		2013
	(Unaudited)		(Unaudited)
Current:
Federal	$	2,000	$	20,000
State		4,000		7,000
Total current income tax		6,000		27,000
Deferred:
Federal		200,000		133,000
State		11,000		8,000
Total deferred income tax		211,000		141,000
Income tax expense	$	217,000	$	168,000

A reconciliation between the income tax provision at the statutory rate on income tax and the income tax provision for the three months ended is as follows:

		Three Months Ended June 30,
	2014			2013
	(Unaudited)			(Unaudited)
Federal tax at statutory rate	$	413,000		$	292,000
State taxes, net of federal benefit		12,000			9,000
Excess percentage depletion		(203,000	)		(135,000	)
Other adjustments, net		(5,000	)		2,000
Income tax expense	$	217,000		$	168,000
Effective rate expressed as a percentage of income before income tax		17.9	%		19.5	%

The overall effective tax rate expressed as a percentage of book income before income tax for the current three month period, as compared to the same period in the prior year, was lower due to an increase in the deduction for excess percentage depletion related to an increase in annualized oil and gas sales.

Net deferred tax assets and liabilities were comprised of:

	June 30,			March 31,
	2014			2014
	(Unaudited)
Deferred tax assets:
Statutory depletion carry-forward	$	2,406,000		$	2,190,000
Net operating loss carry-forward		14,000			-
Other accruals		67,000			103,000
Allowance for doubtful accounts		5,000			5,000
Gross deferred tax assets		2,492,000			2,298,000
Deferred tax liabilities:
Depletion, depreciation and intangible drilling costs		(7,187,000	)		(6,784,000	)
Gross deferred tax liabilities		(7,187,000	)		(6,784,000	)
Deferred tax liabilities, net	$	(4,695,000	)	$	(4,486,000	)

Projections of future income taxes and their timing require significant estimates with respect to future operating results. Accordingly, deferred taxes may change significantly as more information and data is gathered with respect to such events as changes in commodity prices, their effect on the estimate of oil and gas reserves and the depletion of these long-lived reserves.

The Company is subject to U.S. federal income tax and income tax from multiple state jurisdictions.

The Company's federal income tax returns for the prior three tax years of filings and state income tax returns for the prior four years of tax filings are still subject to examination by tax authorities.