Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.2
INCOME TAXES
12 Months Ended
Apr. 30, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

6. INCOME TAXES

 

The following is a geographical breakdown of the Company’s loss before the provision for income taxes:

 

    April 30, 2022     April 30, 2021  
Pre-tax loss:                
Federal   $ (12,362,059 )   $ (5,046,567 )
Foreign     -       -  
Total pre-tax income (loss)   $ (12,362,059 )   $ (5,046,567 )

 

 

Significant components of the Company’s deferred tax assets are as follows:

 

    April 30, 2022     April 30, 2021  
Deferred income tax asset:                
Net operating loss carryover   $ 8,376,539     $ 3,360,381  
Stock compensation     1,722,003       994,264  
Total deferred tax asset     10,098,542       4,354,645  
Fixed assets     (21,611 )     -  
Valuation allowance     (10,076,931 )     (4,354,645 )
Deferred income tax asset, net of allowance   $ -     $ -  

 

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate for the years ended April 30, 2022 and 2021, is as follows:

 

    2022     2021  
Tax benefit at U.S. Federal statutory tax rate     21.0 %     21.0 %
State income tax, net of federal benefit     12.3 %     18.6 %
Increase (decrease) in tax rate resulting from:                
Change in valuation allowance     -46.3 %     -34.5 %
Stock compensation     13.0 %     -2.9 %
Other     0.0 %     -2.2 %
Effective tax rate     0.0 %     0.0 %

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not the Company’s deferred tax assets will be realized. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making such assessment. Given historical generation of and expected future taxable losses, the Company determined it is not more likely than not to utilize its deferred tax assets. Therefore, a full valuation allowance was maintained, as of the years ended April 30, 2022 and 2021, of $10,076,931 and $4,354,645, respectively.

 

At April 30, 2022, the Company maintained US Federal and state net operating loss (“NOL”) carryovers of approximately $29,110,836 and $32,362,154 respectively. Federal and state NOLs begin to expire in various years depending on relevant jurisdiction. In accordance with Internal Revenue Code §382 (“IRC §382”), the future deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control as defined by applicable regulations. The Company has yet to complete a formal study to confirm NOLs are not limited in utilization per IRC §382 and may reduce applicable deferred tax assets upon completion of such a study, in future periods.

 

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company had no uncertain tax positions as of April 30, 2022.

 

The Company’s policy is to recognize interest and penalties related to income tax matters in the provision for income taxes. As of April 30, 2022, no interest or penalties have been recorded pertaining to uncertain tax positions.

 

The Company is subject to taxation in the United States and various U.S. state jurisdictions. All tax years remain open to examination by the Internal Revenue Service and relevant state authorities.

 

On December 27, 2020, the Consolidated Appropriations Act, 2021 (“CAA 2021”) which included a number of provisions including, but not limited to the extension of numerous employment tax credits, the extension of the Section 179D deduction, enhanced business meals deductions, and the deductibility of expenses paid with Paycheck Protection Program loan funds that are forgiven, was signed into law. Accordingly, the effects of the CAA 2021 have been incorporated into the income tax provision for the year ended April 30, 2022. These provisions did not have a material impact on the income tax provision.