Annual report pursuant to Section 13 and 15(d)

Income Tax

Income Tax
12 Months Ended
Apr. 30, 2019
Income Tax Disclosure [Abstract]  
Income Tax



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


    Year Ended April 30,  
    2019     2018  
Federal   $ -     $ -  
State and local     -       2,800  
Total current     -       2,800  
Federal   $ 435,345     $ (438,145 )
State and local     -       -  
Total deferred     435,345       (438,145 )
Total income tax expense (benefit)   $ 435,345     $ (435,345 )


The Company has a net operating loss carryforward for federal tax purposes totaling approximately $48.0 million, which, after a $30.0 million write-down in fiscal 2018 for an IRC Section 382 ownership change upon a merger, leaves approximately $18.0 million of available net operating loss carryforward at April 30, 2019. Approximately $13.2 million expires through the year 2038, with approximately $4.8 million net operating losses incurred in 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 $315,000 of various state net operating loss carryforwards that expire through the year 2038.


The deferred tax assets are summarized as follows:


    April 30, 2019     April 30, 2018  
Net operating loss carryover   $ 3,777,000     $ 1,905,000  
Stock-based compensation     1,753,000       1,580,000  
Capitalized exploration costs     341,000       163,145  
Accrued remediation costs     3,000       -  
Alternative minimum tax credit carryover     438,000       438,000  
Subtotal     6,312,000       4,086,145  
Less: valuation allowance     (6,312,000 )     (3,648,000 )
Net deferred tax asset   $ -     $ 438,145  


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 ended April 30, 2018. The Company did not incur any income tax benefit or provision for the year ended April 30, 2019 as a result of the changes to tax laws and tax rates under the Act. The Company’s net deferred tax asset was reduced by approximately $2,021,000 during the fiscal year ended April 30, 2018, which consisted primarily of the re-measurement of federal deferred tax assets and liabilities from 35% to 21%.


The Company has not completed its assessment of the ownership of the alternative minimum tax credit carryforward and therefore did not record a benefit for the potential refund for alternative minimum tax credit for the tax year ended April 30, 2019.


As of April 30, 2019, the Company had deferred tax assets arising principally from 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 change in the physical presence (nexus) of the Company subsequent to the sale of Dataram assets, 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, 2019.


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:


    Year Ended April 30,  
      2019               2018          
Federal income tax expense (benefit) based on statutory rate   $ (1,598.000 )     21.0 %   $ (4,130,000 )     29.7 %
State income tax expense (benefit), net of federal taxes     -       - %     (119,000 )     .8 %
Change in effective state tax rate     340,000       (4.5 )%     -       - %
Change in prior year estimate     (971,000 )     12.8 %     -       - %
Impairment of Goodwill     -       - %     2,072,000       (14.7 )%
Net operating loss decrease under IRC Section 382     -       - %     10,579,000       (75.1 )%
Impact of tax law change and other     -       - %     2,021,000       (14.5 )%
Increase (decrease) in valuation allowance     2,664,000       (35.0 )%     (10,858,000 )     76.9 %
Total taxes on income (loss)   $ 435,000       (5.7 )%   $ (435,000 )     3.1 %


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 2016 through 2019 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations.