Annual report pursuant to section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
May 31, 2012
Income Taxes [Abstract]  
Income Taxes

8 - Income Taxes

Deferred taxes are recorded for all existing temporary differences in the Company’s assets and liabilities for income tax and financial reporting purposes. Due to the valuation allowance for deferred tax assets, as noted below, there was no net deferred tax benefit or expense for the periods ended May 31, 2012 and 2011, and for the period ended October 28, 2003 through May 31, 2012.

Reconciliation of the federal statutory income tax rate of 34 percent to the effective income tax rate is as follows for all periods presented:

 

                 
    2012     2011  
     

Income tax provision at statutory rate

     34.0 %      34.0 % 

State income taxes, net

     5.1       5.1  

Rate change

     0.0       5.3  

Other

     0.0       3.6  

Valuation allowance

     (39.1 )      (48.0 ) 
   

 

 

    

 

 

  
      0.0 %      0.0 % 
   

 

 

    

 

 

  

Net deferred tax assets and liabilities are comprised of the following as of May 31, 2012 and 2011:

 

                 
    2012     2011  

Deferred tax asset (liability) current:

                

Accrued salary and expenses

   $ 49,100     $ 10,500  

Warrant amortization

     —         (800 ) 

Valuation allowance

     (49,100 )     (9,700 ) 
   

 

 

    

 

 

  
     

Deferred tax asset (liability) non-current

   $ -0-     $ -0-  
   

 

 

    

 

 

  
     

Net operating loss

   $ 6,317,000     $ 4,112,700  
     

Expense on non-qualified stock options and OID amortization

     2,093,100       1,450,000  

Other

     96,500       58,000  

Valuation allowance

   $ (8,506,600 )    $ (5,620,700 ) 
    $ -0-     $ -0-  
   

 

 

    

 

 

  

The tax benefit for the period presented is offset by a valuation allowance established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related tax deferred assets will be recognized when management considers realization of such amounts to be more likely than not.

 

At May 31, 2012, the Company had available net operating loss carryforwards of approximately $16,000,000 which expire beginning in 2022.