Income Tax Disclosure |
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| Income Tax Disclosure | NOTE 11 - INCOME TAXES
The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial-statement carrying amounts of assets and liabilities and their respective tax bases, as well as for net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply when the temporary differences are recovered or settled.
The Company recognizes the effect of an uncertain tax position only when it is more likely than not that the position will be sustained upon examination by the applicable taxing authority. The Company recognizes interest related to uncertain tax positions in interest expense and penalties in operating expenses. As of May 31, 2026 and 2025, the Company had no material unrecognized tax benefits and had not accrued any related interest or penalties.
The Company assesses the realizability of its deferred tax assets by considering all available positive and negative evidence, including historical operating results, the scheduled reversal of temporary differences, projected future taxable income and available tax-planning strategies. Based on the Company’s history of cumulative losses, limited revenues and uncertainty regarding its ability to generate sufficient future taxable income, management determined that it was more likely than not that the deferred tax assets would not be realized. Accordingly, the Company recorded a full valuation allowance against its net deferred tax assets as of May 31, 2026 and 2025.
As of May 31, 2026, the Company had net operating loss carryforward for tax purposes of $1,274,170, compared with $1,406,712 as of May 31, 2025. According to current tax laws, the losses prior to 2028 can carryforward 20 years, and the losses in 2018 or later can carryforward indefinitely. The Company has losses of $43,526 prior to 2028 which can carryforward through fiscal year 2036. The losses of $1,230,644 in years of 2018 and later will carryforward indefinitely. There is a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally greater than a 50% change in ownership).
The components of the Company’s deferred tax assets were as follows:
Because the Company has recorded a full valuation allowance, the net deferred tax asset was zero as of both May 31, 2026 and May 31, 2025. The valuation allowance shown below equals the related deferred tax asset at each reporting date.
The income tax provision differs from the amount determined by applying the combined federal and state statutory income tax rate of 26.5% to income before income taxes for the year ended May 31, 2026, as follows:
The comparative May 31, 2025 NOL carryforward and related deferred tax asset have been revised to agree with the filed May 31, 2025 federal income tax return. The 2025 effective tax rate reconciliation below has not been revised because the correction to the ending NOL carryforward does not, by itself, change the 2025 book income, the 2025 book-to-tax adjustments, or the income tax provision previously reported for that year.
The income tax provision differs from the amount determined by applying the combined federal and state statutory income tax rate of 26.5% to loss before income taxes for the year ended May 31, 2025, as follows:
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