The potential benefit of net operating losses for the Company have not been recognized in the consolidated financial statements because the Company cannot be assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company did not incur any income tax expense to the Internal Revenue Services for the years ended February 29, 2020, or February 28, 2019. However, Rent Pay did have income tax expense of $16,962 to the South African Revenue Services for the year ended February 29, 2020 (2019 – $3,930). Given the short history of the Company and the uncertainty as to the likelihood of future taxable income, the Company has recorded a 100% valuation reserve against the anticipated recovery from the use of the net operating losses. The Company will evaluate the appropriateness of the valuation allowance on an annual basis and adjust the allowance as considered necessary. The Company’s US net operating loss is approximately $195,000 (2019 – $190,000) at February 29, 2020, which starts to expire in 2036.

The table below reconciles the US federal income tax rate to the effective rate for the years ended February 29, 2020, and February 28, 2019.

A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the years ended February 29, 2020, and February 28, 2019, is summarized as follows:

The unrecognized deferred tax assets include US net operating losses as follows:

The Company has US net operating losses available to offset future taxable income as follows: