9 INCOME TAXES

12 Months Ended

Feb. 28, 2014

Income Tax Disclosure [Abstract]

9 INCOME TAXES

NOTE 9:   INCOME TAXES

Income tax expense (benefit) consists of the following:

	Current		Deferred			Total
Year ended February 28, 2014:
U.S. federal	$	—		177,185			177,185
State		4,356		48,916			53,272
Total income tax expense (benefit)	$	4,356		226,101			230,457
Year ended February 28 2013:
U.S. federal	$	—		(219,972	)		(219,972	)
State		50,273		24,919			75,192
Total income tax expense (benefit)	$	50,273		(195,053	)		(144,780	)

The income tax expense (benefit) differs from the expected amount of income tax expense (benefit) determined by applying a combined U.S. federal and state income tax rate of 40% to pretax income for the years ended February 28, 2014 and 2013 as follows:

	2014			2013
Expected tax expense	$	296,161		$	195,137
Permanent differences		5,158			3,990
True up of state tax payable		29,138			39,238
Change in valuation allowance		(100,000	)		(383,145	)
Income tax expense (benefit)	$	230,457		$	(144,780	)

Deferred tax assets are as follows:

	February 28,
	2014			2013
Deferred tax assets:
NOL carryforwards	$	32,864		$	469,136
Inventory reserves		-			(11,280	)
Depreciation		(30,173	)		(51,305	)
Accrued expenses		6,374			41,510
Stock compensation		460,796			319,148
Other		25,373			54,125
Valuation allowance		-			(100,000	)
Net deferred tax assets	$	495,233		$	721,334

The valuation allowance for deferred tax assets as of February 28, 2014 and 2013 was $0 and $100,000 , respectively.  The net change in the total valuation allowance was a decrease of $100,000 and $383,145 for the years ended February 28, 2014 and 2013, respectively. The valuation allowance at February 28, 2013 was, in part, related to Federal and state net operating loss carryforwards that, in the judgment of management, were not more-likely-than-not to be realized.  In assessing the realization of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment.  As of February 28, 2014, the Company has approximately $48,000 and $152,000 of remaining NOL carryforwards for federal and state purposes, respectively, which expire in various years through 2027.  Based upon the level of historical taxable income and projections for future taxable income over the periods in which the items underlying the Company’s deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced.

The Company includes interest and penalties, if any, arising from the underpayment of income taxes in the consolidated statements of income in the provision for income taxes. As of February 28, 2014 and 2013, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by major taxing jurisdictions are fiscal years 2010 through 2013 for federal purposes and fiscal years 2009 through 2013 for state purposes.