Note 7. Taxes on Income

Provision (benefit) for income taxes in the consolidated statements of income consisted of the following components (in thousands):


	Fiscal Year Ended
	February 28, 2015			February 28, 2014
Current:
Federal	$	391		$	(2,337	)
State		(114	)		(25	)

		277			(2,362	)

Deferred:
Federal		883			1,632
State		120			244

		1,003			1,876

Total	$	1,280		$	(486	)

The provision for income taxes differs from the amount computed by applying the federal statutory rate of 34% to income before income taxes as follows (in thousands):


	Fiscal Year Ended
	February 28, 2015			February 28, 2014
Statutory U.S. federal income tax rate	$	(1,327	)	$	(2,022	)
State income taxes, net of federal benefit		(114	)		(69	)
Research and experimentation credits		(15	)		(50	)
Valuation allowance		2,739			1,556
Non-deductible expenses		19			12
Other		(22	)		87

Taxes at effective income tax rate	$	1,280		$	(486	)

The income tax expense effective tax rate for fiscal 2015 was 27% compared to 8% for fiscal 2014. The higher effective rate in 2015 compared to the effective rate in 2014 was primarily due to the valuation allowance the Company recognized on deferred tax benefits not expected to be realized, research and experimentation credits, the unrealized loss on investments and various other permanent items.

The deferred tax assets were reduced by a valuation allowance because in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses, the sale of profitable divisions and the limited taxable income in the carry back periods.

The sources of the temporary differences and carry forwards, and their effect on the net deferred tax asset consisted of the following (in thousands):


	Fiscal Year Ended
	February 28,			February 28,
	2015			2014
Current deferred tax assets (liabilities):
Uniform capitalization costs	$	123		$	159
Inventory reserves		183			41
Accrued liabilities		119			59
Allowance for doubtful accounts		19			15
Other		(10	)		(32	)
Valuation Allowance		(434	)		—

Net current deferred tax assets		—			242
Non-current deferred tax assets:
Amortization of intangibles		185			241
Deferred rent		155			200
Unrealized loss on investments		1,035			—
State net operating loss carry-forward		381			351
Federal net operating loss carry-forward		1,908			1,369
Foreign tax credit carry-forward		99			99
Basis difference of property, plant and equipment		97			56
Valuation allowance		(3,860	)		(1,556	)

Net non-current deferred tax assets		—			760

Net deferred tax assets	$	—		$	1,002

Current asset Non-current asset	$	— —		$	242 760

	$	—		$	1,002

The Company has available federal and state net operating loss carryforwards of $1.9 million and $0.3 million, respectively. The net operating loss carryforwards expire in fiscal 2035, if not used.