Note 7. Income Taxes

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


	Fiscal Year Ended
	February 28,		February 28,
	2018		2017
Current:
Federal	$	—	$	—
State		—		19

		—		19

Deferred:
Federal		—		—
State		—		—

		—		—

Total	$	—	$	19

The provision for income taxes differs from the amount computed by applying the federal statutory rate of 34% for the fiscal year ended February 28, 2017 and 24% for the fiscal year ended February 28, 2018 taxable income as follows (in thousands):


	Fiscal Year Ended
	February 28, 2018			February 28, 2017
Statutory U.S. federal income tax rate		(780	)	$	(370	)
State income taxes, net of federal benefit		(31	)		19
Tax rate adjustment – 34% to 21%		2,243			—
Valuation allowance		(1,593	)		530
Other		161			(160	)

Taxes at effective income tax rate	$	—		$	19

The income tax expense effective tax rate for fiscal 2018 was 0% compared to 1.8% for fiscal 2017. The higher effective rate in 2017 compared to the effective rate in 2018 was primarily due to state taxes owed related to the Lexel Imaging subsidiary which is located in Kentucky, due to profitability reported related to Lexel in fiscal 2017 with no offsetting state net operating losses. There was no income tax expense reported for fiscal 2018 due to net operating losses generated.

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 100% valuation allowance is needed due to recent taxable net operating losses 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):


	February 28,			February 28,
	2018			2017
Current deferred tax assets(liabilities):
Uniform capitalization costs	$	88		$	87
Inventory reserves		336			703
Accrued liabilities		70			127
Allowance for doubtful accounts		5			7
Other		(1	)		(3	)
Valuation Allowance		(498	)		(921	)

Net current deferred tax assets		—			—
Non-current deferred tax assets:
Amortization of intangibles		19			55
Deferred rent		14			67
Non-deductible losses		1,373			2,107
State net operating loss carry-forward		732			534
Federal net operating loss carry-forward		2,733			3,174
Federal tax credit carry forward		318			318
Foreign tax credit carry-forward		99			99
Basis difference of property, plant and equipment		33			106
Valuation allowance		(5,321	)		(6,460	)

Net non-current deferred tax assets		—			—

Net deferred tax assets	$	—		$	—

The Company has available federal and state net operating loss carryforwards of $13.0 million and $9.4 million in fiscal years ending February 28, 2018 and February 28, 2017, respectively. The net operating loss carryforwards expire at various dates through fiscal 2038, if not used.