|
Note 9. 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. As noted below, there was no net deferred tax benefit or expense for the periods ended May 31, 2022, 2021, and 2020. Reconciliation of the federal statutory income tax rate of 21% to the effective income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
Years ended May 31, |
|
|
|
2022 |
|
2021 |
|
2020 |
|
Income tax provision at statutory rate: |
|
21.0 |
% |
21.0 |
% |
21.0 |
% |
Derivative loss |
|
— |
|
— |
|
(1.6) |
|
Non-deductible debt issuance costs |
|
— |
|
— |
|
(0.1) |
|
Non-deductible interest on convertible notes |
|
(0.5) |
|
(0.6) |
|
(1.2) |
|
Inducement interest expense |
|
(0.7) |
|
(1.5) |
|
(1.3) |
|
Other |
|
1.1 |
|
— |
|
(0.3) |
|
Credit carry-forward released |
|
(0.2) |
|
(0.1) |
|
(0.1) |
|
Non-deductible loss on induced conversion |
|
(3.7) |
|
(2.6) |
|
— |
|
Non-deductible debt discount amortization |
|
(0.3) |
|
(0.6) |
|
(0.3) |
|
IRC section 162(m) limitation |
|
(0.1) |
|
(1.1) |
|
(2.4) |
|
Stock-based compensation in excess of ASC 718 |
|
0.0 |
|
1.7 |
|
3.2 |
|
Non-deductible expense on induced conversion of debt |
|
(0.3) |
|
(1.2) |
|
(3.8) |
|
Valuation allowance |
|
(16.3) |
|
(15.0) |
|
(13.1) |
|
Effective income tax rate |
|
0.0 |
% |
0.0 |
% |
0.0 |
% |
Net deferred tax assets and liabilities, non-current, are comprised of the following:
|
|
|
|
|
|
|
|
|
As of May 31, |
|
|
2022 |
|
2021 |
Net operating loss |
|
$ |
106,965 |
|
$ |
74,258 |
Credits |
|
|
2,063 |
|
|
2,063 |
ASC 718 expense on NQO’s |
|
|
6,057 |
|
|
5,510 |
Charitable contribution carry forward |
|
|
14 |
|
|
14 |
Accrued vacation and payroll |
|
|
68 |
|
|
87 |
ASC 842 lease accounting |
|
|
— |
|
|
(3) |
Right of use asset |
|
|
(112) |
|
|
— |
Lease liability |
|
|
117 |
|
|
— |
Inventory |
|
|
2,138 |
|
|
146 |
Accrued expenses |
|
|
89 |
|
|
874 |
Amortization |
|
|
238 |
|
|
396 |
Fixed assets |
|
|
1 |
|
|
— |
Basis difference in acquired assets |
|
|
— |
|
|
(91) |
Valuation allowance |
|
|
(117,638) |
|
|
(83,254) |
Deferred tax asset, non-current |
|
$ |
— |
|
$ |
— |
Non-current asset |
|
|
117,638 |
|
|
83,254 |
Valuation allowance |
|
|
(117,638) |
|
|
(83,254) |
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 is not 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, 2022, 2021, and 2020, the Company had available net operating loss carry forwards of approximately $509.4 million, $352.0 million and $264.7 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, 2019 through 2021.
|