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INCOME TAXES
 12 Months Ended
Feb. 28, 2026
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

9. INCOME TAXES

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising our net deferred tax assets and liabilities are as follows:

 

   February 28, 
   2026   2025 
Deferred tax assets:        
Allowance for credit losses  $29,600   $30,300 
Inventory overhead capitalization   182,700    115,000 
Inventory valuation allowance   96,900    116,200 
Inventory valuation allowance – noncurrent   217,300    198,200 
Allowance for sales returns   27,200    27,200 
Research and development capitalization   -    457,600 
Net operating loss carryforward (1)   109,300    1,141,200 
Disallowed interest (2)   2,001,300    1,655,500 
Accruals   12,100    136,500 
Total deferred tax assets   2,676,400    3,877,700 
           
Deferred tax liabilities:          
Property, plant, and equipment   (1,121,600)   (1,341,600)
Total deferred tax liabilities   (1,121,600)   (1,341,600)
           
Valuation allowance (3)   (1,554,800)   - 
Net deferred tax assets  $-   $2,536,100 
(1) The Company’s net operating loss (“NOL”) carryforward was generated from losses incurred in fiscal 2025. The Company’s NOL can be carried forward indefinitely but are limited to an 80% maximum offset of taxable income.
(2) The Company’s disallowed interest was generated from interest expense that was not deductible for tax purposes due to a maximum allowable deduction of 30% of taxable income. The disallowed interest is carried forward to be deducted against future income, subject to the 30% limitation.
(3) In evaluating the need for a valuation allowance and the realizability of deferred tax assets, the Company utilized the framework contained in ASC 740, “Income Taxes,” pursuant to which management analyzed all positive and negative evidence available at the balance sheet date to determine whether all or some portion of the deferred tax assets will not be realized. Under this guidance, a valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. In conclusion, management placed significant emphasis on guidance in ASC 740, which includes that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. Based upon available evidence, it was concluded on a more-likely-than-not basis that certain deferred tax assets were not realizable as of February 28, 2026. Accordingly, a valuation allowance has been recorded to offset these deferred tax assets.

 

The reconciliation of taxes at the federal statutory rate to our provision for income taxes for the year ended February 28, 2026 was as follows:

 

   February 28, 2026 
   Amount   Percentage 
U.S. federal statutory income tax rate  $1,122,800    21.0%
Tax credits          
Research and development   (60,000)   (1.1)%
Nontaxable or nondeductible items   9,400    0.2%
U.S. state and local income taxes, net of federal benefit   326,500    6.1%
Changes in valuation allowance   1,554,800    29.1%
Other   68,100    1.2%
Effective tax rate  $3,021,600    56.5%

The components of income tax expense (benefit) are as follows:

 

   Year Ended February 28, 
   2026   2025 
Current:        
Federal (1)  $187,800   $- 
State and local (1)   129,000    - 
    316,800    - 
Deferred:          
Federal   2,452,200    (1,439,500)
State and local   252,600    (151,900)
    2,704,800    (1,591,400)
Total income tax expense (benefit)  $3,021,600   $(1,591,400)
(1)The Company incurred losses in fiscal 2025, resulting in a net operating loss carryforward and reclassification from current to deferred.

 

The following reconciles our expected income tax rate to the U.S. federal statutory income tax rate:

 

   Year Ended February 28, 
   2026   2025 
U.S. federal statutory income tax rate   21.0%   21.0%
U.S. state and local income taxes–net of federal benefit   6.1%   6.6%
Valuation allowance   29.1%   -%
Other   0.3%   (4.4)%
Total income tax expense   56.5%   23.2%

 

We file our tax returns in the U.S. and certain state jurisdictions in which we have nexus. We are no longer subject to income tax examinations by tax authorities for the fiscal years before 2020.