Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.2
Income Taxes
12 Months Ended
May 31, 2020
Income Taxes
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, 2020, May 31, 2019 and May 31, 2018.
Reconciliation of the federal statutory income tax rate of 21% for the year ended May 31, 2020, the federal statutory blended rate of 21% for the year ended May 31, 2019 and the federal statutory rate of 28.6% for the year ended May 31, 2018, to the effective income tax rate is as follows for all periods presented:
 
    
2020
   
2019
   
2018
 
Income tax provision at statutory rate:
     21.0     21.0     28.6
State income taxes net
     —         —         —    
Rate change
     —         —         (34.8
Loss on debt extinguishment
     —         (0.5     —    
Derivative gain (loss)
     (1.6     0.6       1.0  
Valuation allowance release from asset acquisition
     —         4.8       —    
Non-deductible
debt issuance costs
     (0.1     —         (0.2
Non-deductible
interest on convertible notes
     (1.2     (0.3     (0.1
Inducement interest expense
     (1.3     (0.1     (2.0
Other
     (0.3     —         (1.1
Miscellaneous
     —         —         (0.1
Current year credits generated
     —         —         4.4  
Credit carry forward generated (released)
     (0.1     (3.8     4.1  
Non-deductible
debt discount amortization
     (0.3     —         —    
IRC 162(m) limitation
     (2.4     —         —    
Stock compensation in excess of ASC 718
     3.2       —         —    
Non-deductible legal settlement expense
     (3.8     —         —    
Valuation allowance
     (13.1     (16.9     0.3  
  
 
 
   
 
 
   
 
 
 
Effective income tax rate
     0.0%       4.8%       0.0%  
  
 
 
   
 
 
   
 
 
 
 
Net deferred tax assets and liabilities are comprised of the following as of May 31, 2020 and 2019:
 
    
2020
    
2019
 
Deferred tax asset (liability)
non-current:
     
Net operating loss
   $ 55,624,018      $ 39,996,561  
Credits
     2,062,692        2,062,692  
ASC 718 expense on NQO’s
     4,069,035        3,628,085  
Charitable contribution—carry forward
     —          —    
Accrued vacation & payroll
     111,514        —    
ASC 842 lease accounting
     (429      —    
Accrued expenses
     349,384        251,293  
Fixed assets
     (454      (340
Amortization
     372,877        329,360  
Debt discount
     —          (308,621
Basis difference in acquired assets
     (2,483,097      (2,826,919
Valuation allowance
     (60,105,540      (43,132,111
  
 
 
    
 
 
 
Deferred tax asset (liability)
non-current
   $ —        $ —    
  
 
 
    
 
 
 
Noncurrent asset (liabilities)
     60,105,540        43,132,111  
Valuation allowance
     (60,105,540      (43,132,111
  
 
 
    
 
 
 
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.
At May 31, 2020, May 31, 2019 and May 31, 2018 the Company had available net operating loss carry forwards of approximately $264.9 million, $190.5 million and $139.2 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, 2016 through 2019.