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 2020, 2019, and 2018 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, 2021 and 2020 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,
	2021		2020
Expected income tax benefit	$	(66,419)	$	(96,174)
Effect of expenses deducted directly by Dr. Burzynski		66,419		96,174
Nondeductible expenses and other adjustments		(3,232)		19,462
Change in valuation allowance		3,232		(19,462)
State tax		—		—

Income tax expense	$	—	$	—

At May 31, 2021, the Company had a net deferred tax asset of $0, which includes a valuation allowance of $171,814. The Company’s ability to utilize net operating loss ("NOL") 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.

As a result of the Tax Cuts and Jobs Act of 2017 (the "Act"), NOL carryforwards generated in years beginning after December 31, 2017 would carryforward indefinitely, and would apply to 80% of future taxable income. Under the Act, carrybacks of NOLs were disallowed. In March 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted providing a five-year carryback for losses incurred in 2018, 2019, or 2020, which allows companies to modify tax returns up to five years prior to offset taxable income from those tax years. The CARES Act also suspended the NOL limit of 80% of taxable income, but the NOLs generated in 2018 and forward will still carryforward indefinitely.

As of May 31, 2021, the Company has net operating loss carryforwards in the amount of $520,951 that will expire between 2023 and 2038, and $94,338 that will carryforward indefinitely.