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, 2020

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.

- 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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