v3.25.2
Income Taxes
 12 Months Ended
May 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense for the fiscal years ended May 31, 2025, 2024, and 2023 consisted of the following (in thousands):
May 31, 2025May 31, 2024May 31, 2023
Current expense (benefit)
Federal
$— $— $— 
Foreign
— — — 
State
102 96 18 
Total current expense
102 96 18 
Deferred expense (benefit)
Federal
— — (540)
Foreign
— — — 
State
— — — 
Total deferred (benefit) expense
— — (540)
Total income tax (benefit) expense
$102 $96 $(523)
The following table reconciles the statutory rate to our effective tax rate for the fiscal years ended May 31, 2025, 2024, and 2023:
May 31, 2025May 31, 2024May 31, 2023
Expected income tax rate at the U.S. statutory rate21.0 %21.0 %21.0 %
Stock-based compensation(0.9)%2.0 %(6.0)%
State income taxes, net of federal tax benefit— %(0.1)%— %
Convertible debt instruments(12.1)%(2.1)%— %
Change in valuation allowance (7.5)%(19.8)%(13.0)%
Other, net(0.5)%(1.1)%(0.8)%
Effective income tax rate— %(0.1)%1.2 %
Deferred income taxes reflect the temporary differences between the amounts at which assets and liabilities are recorded for financial reporting purposes and the amounts utilized for tax purposes. The primary components of the temporary differences that gave rise to the Company's deferred tax assets and liabilities for the fiscal years ended May 31, 2025 and 2024 are as follows (in thousands):
May 31, 2025May 31, 2024
Deferred tax assets
Net operating loss$59,963 $42,810 
Stock-based compensation2,006 2,758 
Capitalized research and development13,088 4,039 
Interest expense12,759 4,854 
Convertible debt instruments— 3,101 
Lease liability17,587 29,508 
Other824 662 
Deferred tax assets, gross106,227 87,732 
Less: valuation allowance(65,856)(47,005)
Total deferred tax assets, net40,371 40,727 
Deferred tax liabilities
Property and equipment(18,887)(6,202)
Right of use assets(21,484)(34,525)
Other— — 
Total deferred tax liability, net(40,371)(40,727)
Net deferred tax asset$— $— 
The Company had $399.6 million, $284.8 million, and $114.8 million of federal and state tax net operating losses as of May 31, 2025, 2024, and 2023, respectively. At May 31, 2025, $346.5 million is available indefinitely to offset future income. The remaining carryforward amounts expire at varying dates beginning in 2028.
A valuation allowance is provided when it is more likely than not that some portion or the entire net deferred tax asset will not be realized. The Company has recorded an increase in the valuation allowance of $18.9 million and $31.3 million as of May 31, 2025 and 2024, respectively.
The valuation allowance is primarily attributable to deferred tax assets for net operating losses that management believes are more likely than not to expire prior to being realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e., capital or ordinary) during the period in which the temporary differences become deductible. Management considers, among other things, the scheduled reversals of deferred tax liabilities and the history of positive taxable income in evaluating the realizability of the deferred tax assets. Management believes that it is not likely that the results of future operations will generate sufficient taxable income to
realize its deferred tax assets. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards that could be used annually to offset future taxable income.
The Company is subject to U.S. federal and various state and local income tax. Tax years ending May 31, 2022 through May 31, 2025 are open to examination by the major taxing jurisdictions to which the Company is subject, as carryforward attributes generated in these years may still be adjusted upon examination by the Internal Revenue Service ("IRS") or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other taxing jurisdictions for any tax years.