INCOME TAXES

12 Months Ended

Feb. 28, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

6. 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 are as follows:

	February 28,
	2023			2022
Deferred tax assets:
Allowance for doubtful accounts	$	57,200		$	90,900
Inventory overhead capitalization		170,100			203,500
Inventory valuation allowance		132,500			137,900
Inventory valuation allowance – noncurrent		112,200			103,200
Allowance for sales returns		27,200			27,200
Research and development capitalization		291,600			-
Net operating loss carryforward (1)		830,900			-
Accruals		1,069,100			953,600
Total deferred tax assets		2,690,800			1,516,300
Deferred tax liabilities:
Property, plant and equipment		(1,894,000	)		(1,397,600	)
Total deferred tax liabilities		(1,894,000	)		(1,397,600	)
Net deferred income tax assets	$	796,800		$	118,700

(1)  The Company’s net operating loss (“NOL”) carryforward was generated from losses incurred in fiscal 2023. The Company’s NOL can be carried forward indefinitely, but are limited to a 80% maximum offset of taxable income. Authoritative guidance requires a valuation allowance to be established when determining whether deferred tax assets are more likely-than-not to be realized. Based on the Company’s evaluation, we determined the net deferred tax assets do meet the requirements to be realized, and as such, no valuation allowance has been established.

The components of income tax expense (benefit) are as follows:

	February 28,
	2023			2022
Current:
Federal (1)	$	-		$	2,663,900
State (1)		-			623,700
		-			3,287,600
Deferred:
Federal		(719,700	)		(304,400	)
State		(202,300	)		(54,100	)
		(922,000	)		(358,500	)
Total income tax expense (benefit)	$	(922,000	)	$	2,929,100

(1)  The Company incurred losses in fiscal 2023, resulting in a net operating loss carryforward and reclassification from current to deferred.

The following reconciles our expected income tax rate to the U.S. federal statutory income tax rate:

	February 28,
	2023			2022
U.S. federal statutory income tax rate		21.0	%		21.0	%
U.S. state and local income taxes–net of federal benefit		5.7	%		5.5	%
Other		0.2	%		(0.4	)%
Total income tax expense		26.9	%		26.1	%

We file our tax returns in the U.S. and certain state jurisdictions in which we have nexus. We are no longer subject to income tax examinations by tax authorities for fiscal years before 2017.

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 statements of operations.