NOTE 5 - INCOME TAXES

The provision for income taxes is as follows:

	Period from February 10, 2015 through February 28, 2015
	(in thousands)

Current:
Federal	$	-
State		2
	$	2
Deferred:
Federal	$	-
State		-
	$	-

Provision for income taxes	$	2

The following is a reconciliation of income taxes computed as the U.S. Federal statuary rate to the provision for income taxes:

Statuary Federal income tax rate	35.0	%
State taxes	-0.4	%
Permanent differences	-20.1	%
Change of valuation allowance	-15.0	%

Effective income tax rate	-0.5	%

The composition of the Company’s deferred tax assets and liabilities is as follows:

	Fiscal Year Ended
	February 28, 2015		March 1, 2014

	(in thousands)

Deferred tax assets:
Pension costs	$	2,244	$	2,759
Reserves not currently deductible for tax purposes		-		66
Stock-based compensation expense		182		-
Net operating loss carry forwards		75,421		79,145
Depreciation (Including Air Right)		2,413		7,193
AMT Credit		3,181		3,182
Accrued expenses		49		110
Other		46		82
Wind-down expenses		-		3,954
Lease claim		6,095		13,934

Total deferred tax assets	$	89,631	$	110,425
Valuation allowance		(89,483)		(59,868)
Deferred tax asset after valuation allowance	$	148	$	50,557

Deferred tax liabilities:
Intangibles	$	(139)	$	(156)
Write up of owned real estate		-		(50,401)
Other		(9)		-
Total deferred tax liabilities	$	(148)	$	(50,557)
Net deferred tax assets	$	-	$	-

Current deferred tax assets	$	-	$	-
Long term deferred tax assets		-		-
Total deferred tax assets	$	-	$	-

At February 28, 2015, the Company had state net operating loss carry forwards of approximately $151.7 million. These net operating losses expire between 2029 and 2034. The Company also had the New York State prior net operation loss conversion (“PNOLC”) subtraction pool of approximately $1.9 million. The conversion to the PNOLC under the New York State corporate tax reform does not have any material tax impact. The Company also had Federal net operating loss carry forwards of approximately $195.0. These net operating losses will expire in years through fiscal 2034.

Based on management assessment, it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategy. Accordingly a valuation allowance of approximately $59.9 million was recorded as of March 1, 2014. The valuation allowance was increased by approximately $29.6 million to approximately $89.5 million. The increase during the going concern period is approximately $0.2 million.