9 INCOME TAXES

12 Months Ended

Feb. 28, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 9:   INCOME TAXES

Income tax expense (benefit) consists of the following:

	Current			Deferred		Total
Year ended February 28, 2018:
U.S. federal	$	(2,970	)		-		(2,970	)
State		9,667			-		9,667
Total income tax expense (benefit)	$	6,697			-		6,697
Year ended February 28 2017:
U.S. federal	$	(261,967	)		501,492		239,525
State		(25,884	)		88,498		62,614
Total income tax expense	$	(287,851	)		589,990		302,139

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 (loss) for the years ended February 28, 2018 and February 28, 2017 as follows:

	2018			2017
Expected tax (benefit) provision	$	212,520		$	(627,328	)
State Income tax (benefit) provision		40,088			(105,566	)
Other		28,468			(46,965	)
Change in tax rate		282,408			-
Permanent differences		1,215			-
Change in valuation allowance		(558,002	)		1,081,998
Income tax provision	$	6,697		$	302,139

Deferred tax assets are as follows:

	February 28,			February 28,
	2018			2017
Deferred tax assets:
NOL carryforwards	$	158,318		$	379,326
Depreciation		(23,600	)		(80,545	)
Reserves and accrued expenses		70,171			202,471
Stock compensation		-			645,673
Other		406,293			75,728
Valuation allowance		(611,182	)		(1,222,653	)
Net deferred tax assets	$	-		$	-

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. statutory corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. U.S. GAAP requires that deferred income tax assets and liabilities be remeasured at the income tax rate expected to apply when those temporary differences reverse, and that the effects of any change to such income tax rate be recognized in the period when the change was enacted.

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. statutory corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. U.S. GAAP requires that deferred income tax assets and liabilities be remeasured at the income tax rate expected to apply when those temporary differences reverse, and that the effects of any change to such income tax rate be recognized in the period when the change was enacted.

In connection with the Company's initial analysis of the impact of the TCJA, the Company recorded a discrete net tax expense of $282,408 in the year ended February 28, 2018. This net expense is primarily due to the remeasurement of the Company's existing deferred tax assets and liabilities. Due to the Company having a full valuation allowance related to their deferred taxes, the $282,408 discrete tax expense associated with the remeasurement is equally offset by the valuation allowance causing an overall net zero impact on the Company's current tax rate.

The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. To the extent that a company's accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.


We recorded the effects of the TCJA for year ended February 28, 2018 using our best estimates and the information available to us through the date the financial statements were issued. However, our analysis is ongoing and as such, the income tax effects that we have recorded are provisional.

The valuation allowance for deferred tax assets as of February 28, 2018 and February 28, 2017 $611,182 and $1,222,653, respectively.  The net change in the total valuation allowance was an increase of $558,002 and $1,081,998 for the years ended February 28, 2018 and February 28, 2017, respectively. 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, projected future taxable income, and tax-planning strategies in making this assessment.  It was determined that it was more likely than not that a full valuation allowance was necessary as of February 28, 2018.

At February 28, 2018, the Company had unused net operating loss carryovers of approximately $496,000 and $927,000 for federal and state tax purposes, respectively, which expires beginning in 2037. 

The Company includes interest and penalties, if any, arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of February 28, 2018 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 2014 through 2017 for federal purposes and fiscal years 2013 through 2017 for state purposes.