INCOME TAXES

6 Months Ended

Aug. 31, 2013

INCOME TAXES

INCOME TAXES

NOTE E.INCOME TAXES

The Company follows the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes.  The Company is not aware of any material unrecognized tax uncertainties as a result of tax positions previously taken.

The Company recognizes interest and penalties as interest expense when they are accrued or assessed.

The federal income tax returns of the Company for 2012, 2011, and 2010 are subject to examination by the IRS, generally for three years after they are filed.

The actual provision for income tax for the three and six month periods ended August 31, 2013 and 2012, respectively, differ from the amounts computed by applying the U.S. federal income tax rate of 34% to the pretax loss as a result of the following:

	Three Months Ended August 31,
	2013			2012
Expected income tax benefit	$	(376,214	)	$	(610,019	)
Effect of expenses deducted directly by Dr. Burzynski	376,214			610,019
Nondeductible expenses and other adjustments	14,464			75,953
Change in valuation allowance	(14,464		)	(75,953		)
State tax	—			—
Income tax expense	$	—		$	—

	Six Months Ended August 31,
	2013			2012
Expected income tax benefit	$	(837,609	)	$	(1,181,228	)
Effect of expenses deducted directly by Dr. Burzynski	837,609			1,181,228
Nondeductible expenses and other adjustments	31,017			49,971
Change in valuation allowance	(31,017		)	(49,971		)
State tax	—			—
Income tax expense	$	—		$	—

At August 31, 2013, the Company had a net deferred tax asset of $0, which includes a valuation allowance of $290,787. The Company’s ability to utilize net operating loss carryforwards and alternative minimum tax credit carryforwards will depend on its ability to generate adequate future taxable income.  The Company has no historical earnings on which to base an expectation of future taxable income.  Accordingly, a full valuation allowance for deferred tax assets has been provided.  At August 31, 2013, the Company had net operating loss carryforwards available to offset future taxable income in the amount of $714,299, which may be carried forward and will expire if not used between 2020 and 2034 in varying amounts.