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Income Taxes
12 Months Ended
Feb. 28, 2018
Income Taxes

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.