INCOME TAXES

12 Months Ended

Feb. 28, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

17. INCOME TAXES

The Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The income tax expense (benefit) consisted of the following for the fiscal years ended February 28, 2023 and February 28, 2022:

	February 28, 2023		February 28, 2023
Total current	$	—	$	—
Total deferred		—		—
Total	$	—	$	—

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The following is a reconciliation of the expected statutory federal income tax provision to the actual income tax benefit for the fiscal years ended February 28, 2023 and February 28, 2022:

	February 28, 2023
Federal statutory rate	$	(3,803,000	)
State income tax benefit, net of federal benefit		(859,400	)
Non deductible interest		415,800
Non deductible stock based compensation		155,400
Change in valuation allowance		4,091,200
Total	$	—

	February 28, 2022
Federal statutory rate	$	(13,061,500	)
State income tax benefit, net of federal benefit		(2,954,400	)
Non deductible interest		4,027,800
Non deductible settlement losses		8,515,100
Non deductible stock based compensation		169,400
Non deductible changes in fair value of instruments		(95,800	)
Other non deductible expenses		600
Change in valuation allowance		3,398,800
Total	$	—

For the year ended February 28, 2023 and February 28, 2022, the expected tax benefit, temporary timing differences and long-term timing differences are calculated at the 21% statutory rate.

Significant components of the Company’s deferred tax assets and liabilities were as follows for the fiscal years February 28, 2023 and February 28, 2022:

	February 28, 2023			February 28, 2022
Deferred tax assets:
Net operating loss carryforwards	$	12,651,115		$	8,445,915
Debt discount					114,000
Total deferred tax assets		12,651,115			8,559,915
Deferred tax liabilities:
Depreciation		—			—
Deferred revenue		—			—
Total deferred tax liabilities		—			—
Net deferred tax assets:
Less valuation allowance		(12,651,115	)		(8,559,915	)
Net deferred tax assets (liabilities)	$	—		$	—

The Company has incurred losses since inception, therefore, the Company has no federal tax liability.  Additionally there are limitations imposed by certain transactions which are deemed to be ownership changes which occurred in the Company on August 28, 2017.  The net deferred tax asset generated by the loss carryforward has been fully reserved.  The cumulative net operating loss carryforward was approximately $44,448,800 at February 28, 2023 and $28,200,000 at February 28, 2022, that is available for carryforward for federal income tax purposes and begin to expire in 2030.

Although the Company has tax loss carry-forwards, there is uncertainty as to utilization prior to their expiration.  Accordingly, the future income tax asset amounts have been fully reserved by a valuation allowance.

The Company has maintained a full valuation allowance against its deferred tax assets at February 28, 2023 and February 28, 2022. A valuation allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Since the Company cannot be assured of realizing the net deferred tax asset, a full valuation allowance has been provided.

The Company does not have any uncertain tax positions at February 28, 2023 and February 28, 2022 that would affect its effective tax rate. The Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense.

The Company’s tax returns for the years ended February 28, 2022, and February 28, 2021, and February 29, 2020 are open for examination under Federal statute of limitations.