CytoDyn Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

May 31, 2021

Note 16. 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. Other than approximately a $2.8 million benefit from a basis difference in the acquired assets of ProstaGene, due to the valuation allowance for deferred tax assets, as noted below, there was no other net deferred tax benefit or expense for the periods ended May 31, 2021, May 31, 2020 and May 31, 2019.

Reconciliation of the federal statutory income tax rate of 21% for the years ended May 31, 2021, May 31, 2020 and May 31, 2019, to the effective income tax rate is as follows for all periods presented:


	Years ended May 31,
	2021		2020		2019
Income tax provision at statutory rate:	21.0	%	21.0	%	21.0	%
State income taxes net	—		—		—
Rate change	—		—		—
Loss on debt extinguishment	—		—		(0.5)
Derivative gain (loss)	—		(1.6)		0.6
Valuation allowance release from asset acquisition	—		—		4.8
Non-deductible debt issuance costs	—		(0.1)		—
Non-deductible interest on convertible notes	(0.6)		(1.2)		(0.3)
Inducement interest expense	(1.5)		(1.3)		(0.1)
Other	—		(0.3)		—
Credit carry forward generated (released)	(0.1)		(0.1)		(3.8)
Non-deductible loss on extinguishment of debt	(2.6)		—		—
Non-deductible debt discount amortization	(0.6)		(0.3)		—
IRC section 162(m) limitation	(1.1)		(2.4)		—
Stock compensation in excess of ASC 718	1.7		3.2		—
Non-deductible legal settlement expense	(1.2)		(3.8)		—
Valuation allowance	(15.0)		(13.1)		(16.9)
Effective income tax rate	0.0	%	0.0	%	4.8	%

Net deferred tax assets and liabilities are comprised of the following as of May 31, 2021 and 2020:


	May 31,
	2021		2020
Deferred tax asset (liability) non-current:
Net operating loss	$	74,258	$	55,624
Credits		2,063		2,063
ASC 718 expense on NQO’s		5,510		4,069
Charitable contribution—carry forward		14		—
Accrued vacation & payroll		87		112
ASC 842 lease accounting		(3)		—
Inventory reserve		146
Accrued expenses		874		349
Fixed assets		(0)		(1)
Amortization		396		373
Debt discount		—		—
Basis difference in acquired assets		(91)		(2,483)
Valuation allowance		(83,254)		(60,106)
Deferred tax asset (liability) non-current	$	—	$	—
Noncurrent asset (liabilities)		83,254		60,106
Valuation allowance		(83,254)		(60,106)
Deferred tax asset (liability) non-current	$	—	$	—

The income 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.

As of May 31, 2021, May 31, 2020 and May 31, 2019 the Company had available net operating loss carry forwards of approximately $353.6 million, $264.9 million and $190.5 million, respectively, which expire beginning in 2023.

The Company’s income tax returns remain subject to examination by all tax jurisdictions for tax years ended May 31, 2018 through 2020.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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