NOTE 11 — INCOME TAX

The components of income tax provision (benefit) are as follows:

The Company has a net operating loss carryforward for federal tax purposes totaling approximately $32.3 million at April 30, 2021. Approximately $13.2 million expires through the year 2038, with approximately $19.1 million net operating losses incurred in fiscal 2021 through fiscal 2019 that do not expire and can be utilized to offset up to 80% of future taxable income under the Tax Cuts and Jobs Act described below. The Company has approximately $7.1 million of various state net operating loss carryforwards that expire through the year 2038; however, the Company’s business is currently conducted in states with no income tax, so these carryforwards may never be used.

The deferred tax assets and deferred tax liabilities are summarized as follows:

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company completed the accounting for the effects of the Act during the fiscal year April 30, 2019. The Company recognized an income tax benefit of 438,145 for the year ended April 30, 2020 as a result of the changes to tax laws and tax rates under the Act. The Act modified the application of alternative minimum tax credits previously being carried forward, to allow for refunds of the credits. The Company had been carrying forward a total of $438,000 in alternative minimum tax credits. As a result of the change, the Company received a federal tax refund during the fiscal years ended April 30, 2020 and April 30, 2021.

On August 10, 2020, acquired mineral rights totaling $10,249,632 (see Note 4 – Mineral Rights) in a tax-free merger under IRS Section 368. The Company recorded the assets at fair value for financial reporting purposes and retained the seller’s tax basis in those assets for tax purposes. As required by ASC 740, the Company has recognized the deferred tax impact of acquiring the mineral rights asset in this transaction, with the amount paid exceeding the tax basis of the asset on the acquisition date. This deferred tax liability partially offsets the deferred tax assets recognized by the Company.

As of April 30, 2021, the Company had deferred tax assets and liabilities arising principally from the acquisition of the mineral rights described above and the net operating loss carryforward for income tax purposes, multiplied by an expected blended federal and state tax rate of 21.0%. Due to the physical presence (nexus) of the Company in the states of Wyoming and Nevada, the Company no longer has significant income or loss apportioned to any taxable state. Any minor apportionment that may occur to any taxable state will be immaterial to current and future operations of the company. Therefore, the effective state tax rate used in the calculation of deferred tax is 0%. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefits of the deferred tax assets, a valuation allowance equal to 100% of the net deferred tax asset has been established at April 30, 2021.

The differences between the provision (benefit) for federal income taxes and federal income taxes computed using the U.S. statutory tax rate of 21% were as follows:

The Company has assessed its tax positions and has determined that it has not taken a position that would give rise to an unrecognized tax liability being reported. In the event that the Company is assessed penalties and/or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.

The Company files income tax returns in the U.S. federal jurisdiction and various states. For both federal and state income tax purposes, the Company’s fiscal 2018 through 2021 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations.