NOTE 12- INCOME TAXES (Restated)

The Company did not record any income tax expense due to the net loss during the years ended February 28, 2015 and February 28, 2014. The actual tax benefit differs from the expected tax benefit computed by applying the combined United States corporate tax rate and the State of California tax rate of 40% to loss before income taxes as follows for the years ended February 28, 2015 and February 28, 2014:

	2015		2014
Current:
Federal	$	-	$	-
State		800		800

Total		800		800

Deferred
Federal		-		-
State		-		-

Total		-		-

Total Income Tax Provision	$	800	$	800

The provision for income tax is included with other expense in the accompanying consolidated financial statements.

	2015			2014

Expected tax benefit		34.0	%		34.0	%
State income taxes, net of federal benefit		6.0			6.0
Changes in valuation allowance		(40.0	)		(40.0	)
Total		-	%		-	%

The following table summarizes the significant components of our deferred tax asset at February 28, 2015 and February 28, 2014:

	2015			2014
Deferred tax asset
Primarily relating to net operating loss carry-forwards, but also reserves for inventory and accounts receivable, stock-based compensation and other		120,000,000			116,000
Valuation allowance		(120,000,000	)		(116,000,000	)
Net deferred tax asset	$	-		$	-

We recorded an allowance of 100% for deferred tax assets due to the uncertainty of its realization.

At February 28, 2015, we had operating loss carry-forwards of approximately $354,000,000 for federal purposes, which expire through 2035, and $57,000,000 for state purposes, which expire through 2020.

We follow FASB ASC 740 related to uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. At February 28, 2015 and February 28, 2014, we have no unrecognized tax benefits.

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of February 28, 2015 and February 28, 2014, we have no accrued interest and penalties related to uncertain tax positions.

We are subject to taxation in the U.S. and California. Our tax years for 2010 and forward are subject to examination by our tax authorities. We are not currently under examination by any tax authority.