NOTE E.INCOME TAXES

The Company follows the provisions of FASB ASC 740, 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 2017, 2016, and 2015 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 months ended August 31, 2018 and 2017 differ from the amounts computed by applying the U.S. federal income tax rate of 21% and 34%, respectively, to the pretax loss as a result of the following:


	Three Months Ended August 31,
	2018		2017

Expected income tax benefit	$	(94,431)	$	(144,753)
Effect of expenses deducted directly by Dr. Burzynski		94,431		144,753
Nondeductible expenses and other adjustments		6,474		13,327
Change in valuation allowance		(6,474)		(13,327)
State tax		—		—

Income tax expense	$	—	$	—


	Six Months Ended August 31,
	2018		2017

Expected income tax benefit	$	(180,442)	$	(301,566)
Effect of expenses deducted directly by Dr. Burzynski		180,442		301,566
Nondeductible expenses and other adjustments		12,530		32,321
Change in valuation allowance		(12,530)		(32,321)
State tax		—		—

Income tax expense	$	—	$	—

At August 31, 2018, the Company had a net deferred tax asset of $0, which includes a valuation allowance of $194,102. 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, 2018, the Company had net operating loss carryforwards available to offset future taxable income in the amount of $721,423 which may be carried forward and will expire if not used between 2022 and 2039.