Income Taxes

12 Months Ended

Feb. 28, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 16 – INCOME TAXES

For the year ended February 28, 2022, the Company had no income tax expense. For the year ended February 28, 2021, the Company recorded an income tax expense of $800 for state franchise taxes.

	FY2022		FY2021
Current:
Federal	$	-	$	-
State		-		800
Total current	$	-	$	800
Deferred:
Federal	$	-	$	-
State		-		-
Total deferred	$	-	$	-
Total Provision	$	-	$	800

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:

	FY2022			FY2021
Federal tax benefit at statutory rate		21	%		21	%
State tax benefit, net of federal benefit		7	%		7	%
Change in valuation allowance		(28	)%		(28)	%
Total		0	%		0	%

The following table summarizes our deferred tax asset at February 28, 2022, and February 28, 2021:

	FY2022			FY2021
Deferred tax asset
Net operating loss carryforwards	$	42,141,000		$	46,999,000
Gross deferred tax assets		42,141,000			46,999,000
Valuation allowance		(42,141,000	)		(46,999,000	)
Net deferred tax asset (liability)	$	-		$	-

The provisions of ASC Topic 740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. For the years ended February 28, 2022 and 2021, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not that the net deferred tax assets were not fully realizable. Accordingly, the Company established a full valuation allowance against its net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. During the years ended February 28, 2022 and 2021, the valuation allowance decreased by $4.8 million and $5.8 million, respectively.

At February 28, 2022, the Company had available Federal and state net operating loss carryforwards (“NOL”s) to reduce future taxable income. For Federal purposes the amounts available were approximately $168.4 million and for state purposes the amounts available were approximately $96.8 million. The Federal carryforwards expire on various dates through 2042 and the state carryforwards expire through 2039. Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s NOL may be limited as a result of changes in stock ownership.

The Company’s operations are based in California and it is subject to Federal and California state income tax. Tax years after 2017 are open to examination by United States and state tax authorities.

The Company adopted the provisions of ASC 740, which requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any tax benefit can be recorded in the financial statements. ASC 740 also provides guidance on the recognition, measurement, classification and interest and penalties related to uncertain tax positions. As of February 28, 2022 and 2021, no liability for unrecognized tax benefits was required to be recorded or disclosed.

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of February 28, 2022, and February 28, 2021, 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 2014 and forward are subject to examination by our tax authorities. We are not currently under examination by any tax authority.

The Company has failed to file its California tax returns for the years ended February 28, 2015 thru February 28, 2022 due to its inability to pay the minimum annual franchise tax payment of $800. The balance of accrued income taxes related to unpaid California franchise tax of $4,800 represents six years of minimum taxes due.