8. Income Taxes

Income tax provision (benefit) consists of the following:

			Two Months
	Year Ended		Ended		Year Ended
	March 31,		March 31,		January 31,
	2015		2014		2014
Current
Federal	$	147,945	$	-	$	-
State		67,769		2,866		19,513
		215,714		2,866		19,513
Deferred
Federal		(36,390)		3,855		-
State		(15,532)		1,099		-
		(51,922)		4,954		-

Provision for income taxes	$	163,792	$	7,820	$	19,513

The Company uses the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. As of March 31, 2015, the Company had federal and California tax net operating loss carryforwards of approximately $6.6 million and $6.6 million, respectively. The federal and California net operating loss carryforwards will expire at various dates from 2026 through 2035. Pursuant to Internal Revenue Code Sections 382 and 383, use of the Company’s net operating loss and credit carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period since the last ownership change. The Company may have had a change in control under these Sections. However, the Company does not anticipate performing a complete analysis of the limitation on the annual use of the net operating loss and tax credit carryforwards until the time that it projects it will be able to utilize these tax attributes.

Significant components of the Company’s deferred tax assets (liabilities) as of March 31, 2015, March 31, 2014 and January 31, 2014 are shown below. A valuation allowance of $4,447,029, $3,963,239 and $4,163,638 as of March 31, 2015, March 31, 2014 and January 31, 2014, respectively, has been established against the Company’s deferred tax assets as realization of such assets is uncertain. The Company’s effective tax rate is different from the federal statutory rate of 34% due primarily to operating losses that receive no tax benefit as a result of a valuation allowance recorded for such losses.

Deferred tax assets (liabilities) consist of the following:

	March 31, 2015		March 31, 2014		January 31, 2014

Current deferred tax assets:
State taxes - current		17,062		589		3,808
Stock options		2,177,276		1,675,822		1,649,986
Accrued payroll and related costs		1,529		1,529		1,529
Accrued hospital pool deficit		-		28,649		28,649
Other		65,920		-		-
Net current deferred tax assets before valuation allowance		2,261,787		1,706,589		1,683,972
Valuation Allowance		(2,234,631)		(1,706,589)		(1,683,972)
Net current deferred tax assets		27,156		-		-
						-
Noncurrent deferred tax (liabilities) assets:
Net operating loss carryforward		2,208,522		2,248,422		1,990,962
Property and equipment		(3,170)		-		-
Acquired intangible assets		(194,883)		(4,954)		-
Other		3,558		8,228		488,704
Net noncurrent deferred tax liabilities before valuation allowance		2,014,027		2,251,696		2,479,666
Valuation Allowance		(2,212,398)		(2,256,650)		(2,479,666)
Net noncurrent deferred tax liabilities		(198,371)		(4,954)		-
Net deferred tax liabilities	$	(171,215)	$	(4,954)	$	-

The provision for income taxes differs from the amount computed by applying the federal income tax rate as follows:

	Year Ended			Two Months Ended			Year Ended
	March 31, 2015			March 31, 2014			January 31, 2014
Tax provision at U.S. Federal statutory rates		34.0	%		34.0	%		34.0	%
State income taxes net of federal benefit		(3.2)	%		(0.4)	%		(0.3)	%
Non-deductible permanent items		(5.9)	%		(0.1)	%		(0.1)	%
Non-taxable entities		(4.3)	%		0.3	%		-
Other		0.5	%		(0.1)	%		3.2	%
Change in valuation allowance		(34.9)	%		(34.8)	%		(37.2)	%
Effective income tax rate		(13.8)	%		(1.1)	%		(0.4)	%

As of March 31, 2015, March 31, 2014, and January 31, 2014, the Company does not have any unrecognized tax benefits related to various federal and state income tax matters. The Company will recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The Company is subject to U.S. federal income tax as well as income tax of multiple state tax jurisdictions. The Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the years ended January 31, 2011 through 2015. The Company does not anticipate material unrecognized tax benefits within the next 12 months.