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, 2019

Note 13 – 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, 2019, May 31, 2018 and May 31, 2017.

Reconciliation of the federal statutory income tax rate of 21% for the year ended May 31, 2019,the federal statutory blended rate of 28.6%

for the year ended May 31, 2018 and the federal statutory rate of 34% for the year ended May 31, 2017, to the effective income tax rate is as follows for all periods presented:


	2019			2018			2017
Income tax provision at statutory rate:		21.0	%		28.6	%		34.0	%
State income taxes net		—			—			—
Rate Change		—			(34.8	)		—
Loss on debt extinguishment		(0.5	)		—			—
Derivative gain/loss		0.6			1.0			2.8
Valuation allowance release from Asset Acquisition		4.8			—			—
Non-deductible debt issuance costs		—			(0.2	)		—
Non-deductible interest on conversion		(0.3	)		(0.1	)		—
Inducement charge		(0.1	)		(2.0	)		(1.0	)
Other		—			(1.1	)		—
Miscellaneous		—			(0.1	)		(0.1	)
Current year credits generated		—			4.4			—
Credit carry forward generated (released)		(3.8	)		4.1			—
Valuation allowance		(16.9	)		0.3			(35.7	)
		4.8%			0%			0%

Net deferred tax assets and liabilities are comprised of the following as of May 31, 2019 and 2018:


	2019			2018
Deferred tax asset (liability) non-current:
Net Operating Loss		39,996,561			29,230,279
Credits		2,062,692			4,260,470
ASC 718 Expense on NQO’s		3,628,085			2,916,585
Charitable Contribution - Carry forward		—			—
Accrued Expenses		251,293			117,880
Fixed Assets		(340	)		174
Amortization		329,360			139,875
Capitalized Debt Issuance Costs		—			—
Debt Discount		(308,621	)		—
Basis difference in acquired assets		(2,826,919	)		—
Valuation allowance		(43,132,111	)		(36,665,263	)
		—			—
Noncurrent asset		43,132,111			36,665,263
Valuation Allowance		(43,132,111	)		(36,665,263	)
		—			—

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, 2019, May 31, 2018 and May 31, 2017 the Company had available net operating loss carry forwards of approximately $

190.5

million, $139.2 million and $95.6 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, 2015 through 2018.