4. INCOME TAXES

12 Months Ended

Feb. 28, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

4.        INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  The tax effects of significant items comprising our net deferred tax assets and liabilities as of February 28 are as follows:

	2014			2013
Current:
Deferred tax assets:
Allowance for doubtful accounts	$	58,500		$	175,900
Inventory overhead capitalization		79,000			77,800
Inventory valuation allowance		9,500			9,500
Allowance for sales returns		38,000			38,000
Accruals		74,300			80,200
Deferred tax assets-current		259,300			381,400
Noncurrent:
Deferred tax assets:
Inventory valuation allowance	$	134,400		$	140,600
Capital loss carryforward		163,600			-
Subtotal deferred tax assets		298,000			140,600
Less valuation allowance		(163,600	)
Total net deferred tax assets		134,400			140,600
Deferred tax liabilities:
Property and equipment		(63,000	)		(63,700	)
Deferred tax liabilities		(63,000	)		(63,700	)
Net deferred tax asset-noncurrent	$	71,400		$	76,900

Management has assessed the evidence to estimate whether sufficient future capital gains will be generated to utilize the existing capital loss carryforward. As no current expectation of capital gains exists, Management has objectively determined that a valuation allowance is necessary to reduce the carrying value of deferred tax assets as it is “more likely than not” that such assets are unrealizable.

The amount of the deferred tax asset considered realizable, however, could be adjusted if future capital gains are generated during the carryforward period.  Management has determined that no valuation allowance is necessary to reduce the carrying value of other deferred tax assets as it is “more likely than not” that such assets are realizable.

The components of income tax expense are as follows:

	February 28,
	2014			2013
Current:
Federal	$	299,000		$	411,000
State		89,300			80,700
		388,300			491,700
Deferred:
Federal		133,200			(10,600	)
State		(5,600	)		(2,000	)
		127,600			(12,600	)
Total income tax expense	$	515,900		$	479,100

The following reconciles our expected income tax expense utilizing statutory tax rates to the actual tax expense:

	February 28,
	2014			2013
Tax expense at federal statutory rate	$	297,000		$	435,900
State income tax–net of federal tax benefit		70,100			50,400
Change in capital loss valuation allowance		163,600			-
Other		(14,800	)		(7,200	)
Total income tax expense	$	515,900		$	479,100

We file our tax returns in the U.S. and certain state jurisdictions. We are no longer subject to income tax examinations by tax authorities for fiscal years before 2011. We are currently the subject of an income tax examination for fiscal year 2012 by the IRS.

Based upon a review of our income tax filing positions, we believe that our positions would be sustained upon an audit and do not anticipate any adjustments that would result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded. We classify interest and penalties associated with income taxes as a component of income tax expense on the statement of earnings.