NOTE E.INCOME TAXES

The Company follows the provisions of FASB ASC 740, 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 months ended May 31, 2019 and 2018 differ from the amounts computed by applying the U.S. federal income tax rate of 21% to the pretax loss as a result of the following:


	Three Months Ended May 31,
	2019		2018

Expected income tax benefit	$	(98,346)	$	(86,011)
Effect of expenses deducted directly by Dr. Burzynski		98,346		86,011
Nondeductible expenses and other adjustments		2,809		6,056
Change in valuation allowance		(2,809)		(6,056)
State tax		—		—

Income tax expense	$	—	$	—

At May 31, 2019, the Company had a net deferred tax asset of $0, which includes a valuation allowance of $200,960. 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 May 31, 2019, the Company had net operating loss carryforwards available to offset future taxable income in the amount of $661,756 which may be carried forward and will expire if not used between 2022 and 2037.

As a result of the Tax Cuts and Jobs Act of 2017 (the "Act"), net operating loss carryforwards generated in years beginning after December 31, 2017 will carryforward indefinitely, and will apply to 80% of future taxable income. As of May 31, 2019, the Company has net operating loss carryforwards in the amount of $92,326 that will carryforward in accordance with the Act.