Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.5.0.2
Income Taxes
 12 Months Ended
May 31, 2016
Income Taxes

Note 12 – 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, 2015 and 2016.

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

 

     2016     2015  

Income tax provision at statutory rate

      34.0 %      34.0 % 

State income taxes, net

      —          —     

Rate change

      —          (0.6 ) 

Derivative gain/loss

      0.9        (1.2 ) 

Loss on debt conversion

      (0.8 )      —     

Inducement charge

      (1.0 )      —     

Miscellaneous

      (0.5 )      —     

Valuation allowance

      (32.9 )      (32.2 ) 
  

 

 

    

 

 

  
     0.0 %      0.0 % 
  

 

 

    

 

 

  

Net deferred tax assets and liabilities are comprised of the following as of May 31, 2016 and 2015:

 

     2016      2015  

Deferred tax asset (liability) current:

      

Accrued salary and expenses

    $ 378,321       $ 219,100   

Valuation allowance

      (378,321 )       (219,100 ) 
  

 

 

     

 

 

  
   $ —         $ —     
  

 

 

     

 

 

  

Deferred tax asset (liability) non-current:

      

Net operating loss

    $ 23,510,608       $ 16,857,600   

Debt discount

      —           (902,700 ) 

Expense on non-qualified stock options

      3,873,597         3,073,500   

Other

      202,812         211,700   
  

 

 

     

 

 

  

Valuation allowance

      (27,587,017 )       (19,240,100 ) 
  

 

 

     

 

 

  
   $ —         $ —     
  

 

 

     

 

 

  

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, 2016, the Company had available net operating loss carry forwards of approximately $69,149,000, which expire beginning in 2022.

The Company’s income tax returns remain subject to examination by all tax jurisdictions for tax years May 31, 2013 through 2015.