NOTE 18 — INCOME TAXES:
Reconciliation between actual tax expense (benefit) and income taxes computed by applying the U.S. federal income tax rate and state income tax rate to income from continuing operations before income taxes is as follows:
| February 28, 2017 | February 29, 2016 | ||||
| Computed at U.S. and state statutory rates (40%) | $ | (1,387,422) | $ | (1,616,023) | |
| Permanent differences | 83,606 | 143,946 | |||
| Changes in valuation allowance | 1,303,816 | 1,472,077 | |||
| Total | $ | - | $ | - | |
Tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred liabilities are presented below:
| February 28, 2017 | February 29, 2016 | ||||
| Deferred tax assets: | |||||
| Net operating loss carryforwards | $ | 10,425,780 | $ | 10,217,121 | |
| Oil and gas properties | 32,488 | (944,342) | |||
| Stock based compensation | 88,723 | 88,723 | |||
| Other | (32,618) | (150,945) | |||
| Less valuation allowance | (10,514,373) | (9,210,557) | |||
| Total | $ | - | $ | - | |
At February 28, 2017, the Company had a net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately $26,064,450, which will begin to expire, if unused, beginning in 2024. The valuation allowances increased by $1,303,816 and $1,472,077 for the years ended February 28, 2017 and February 29, 2016, respectively. Section 382 Rule of the Internal Revenue Code will place annual limitations on the Company’s NOL carryforward.
The above estimates are based upon management’s decisions concerning certain elections that could change the relationship between net income and taxable income. Management decisions are made annually and could cause the estimates to vary significantly. The Company’s files federal income tax returns with the United States Internal Revenue Service and state income tax returns in various state tax jurisdictions. As a general rule, the Company’s tax returns for the fiscal years after 2011 currently remain subject to examinations by appropriate tax authorities. None of our tax returns are under examination at this time.