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INCOME TAXES
 12 Months Ended
Feb. 28, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 9: INCOME TAXES

 

The annual provision (benefit) for income taxes differs from amounts computed by applying the maximum U.S. Federal income tax rate of 21% to pre-tax income as follows:

 

           
   February 28,
2025		   February 29,
2024		 
Expected federal income tax  $322,159   $366,362 
State tax, net of federal   30,884    52,510 
Research and development tax credits   (151,529)   (161,525)
Permanent differences:          
Non-Deductible equity based compensation   52,007    42,751 
Other   7,157    3,019 
Income tax expense  $260,678   $303,117 

 

Components of the current and deferred tax expense are as follows:

 

   February 28,
2025		   February 29,
2024		 
Current:          
Federal   $548,743   $716,003 
State    78,543    123,743 
Total current income tax    627,286    839,746 
           
Deferred:          
Federal    (318,949)   (471,396)
State    (47,659)   (65,233)
Total deferred income tax    (366,608)   (536,629)
           
Income tax expense   $260,678   $303,117 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Massachusetts research and development tax credits have been fully reserved as management does not forsee utilizing such tax credits in the foreseeable future. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and projections for future taxable income over periods in which the deferred tax assets are deductible. Management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

 

The incorporation of the new tax laws for 2023, requires the Company to capitalize for income tax purposes research and development expenses incurred during the year and for such expenses to be amortized over a five-year period. As a result, a deferred tax asset “Capitalized R&D expenses – IRC Section 174” has been recorded.

 

The Company does not have any uncertain tax positions in 2025. There are no interest and penalties related to uncertain tax positions in 2025. As of February 28, 2025, open years related to the federal and state jurisdictions are 2024, 2023 and 2022.

 

The deferred tax asset and liability are comprised of the following:

 

           
   February 28,
2025		   February 29,
2024		 
Deferred tax asset          
Allowance for inventory   $92,000   $91,000 
Allowance for accounts receivable    3,000    3,000 
Capitalized R&D expenses – IRC Section 174    1,277,000    985,000 
Accrued expenses and other    154,000    177,000 
Research & Development tax credits - Massachusetts   383,000    303,000 
Sub-total deferred tax asset   1,909,000    1,559,000 
Less valuation allowance – Massachusetts R&D tax credits   (383,000)   (303,000)
Deferred tax asset – Long Term   $1,526,000   $1,256,000 
           
Deferred tax liability          
Building and leasehold depreciation    (132,000)   (230,000)
Deferred tax liability – Long Term   $(132,000)  $(230,000)