6. Income Taxes

12 Months Ended

Apr. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 6 – Income Taxes

We are primarily subject to U.S. federal and California state jurisdictions. To our knowledge, all tax years remain open to examination by U.S. federal and state authorities.

In accordance with ASC 740, we are required to recognize the impact of an uncertain tax position in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained upon examination by the tax authorities. We had no unrecognized tax benefits from uncertain tax positions as of April 30, 2019 and 2018. It is also our policy, in accordance with authoritative guidance, to recognize interest and penalties related to income tax matters in interest and other expense in our consolidated statements of operations and comprehensive loss. We did not recognize interest or penalties related to income taxes for fiscal years ended April 30, 2019, 2018, and 2017, and we did not accrue for interest or penalties as of April 30, 2019 and 2018.

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. As a result of our cumulative losses, management has concluded that a full valuation allowance against our net deferred tax assets is appropriate.

At April 30, 2019, we had net deferred tax assets of $119,516. Due to uncertainties surrounding our ability to generate future taxable income to realize these tax assets, a full valuation has been established to offset our net deferred tax assets. Additionally, the future utilization of our net operating loss carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Section 382, as a result of ownership changes that may have occurred previously or that could occur in the future. A Section 382 analysis was completed as of the fiscal year ended April 30, 2018 and we subsequently reviewed ownership activity through April 30, 2019, which it was determined that no significant change in ownership had occurred. However, ownership changes occurring subsequent to April 30, 2019 may impact the utilization of net operating loss carry forwards and other tax attributes.

At April 30, 2019, we had federal net operating loss carry forwards of approximately $425,841. The federal net operating loss carry forwards generated prior to January 1, 2018 expire in fiscal years 2020 through 2038. The federal net operating loss generated after January 1, 2018 of $6,609 can be carried forward indefinitely and be available to offset up to 80% of future taxable income each year. We also have California state net operating loss carry forwards of approximately $273,581 at April 30, 2019, which begin to expire in fiscal year 2029.

The provision for income taxes on our loss from continuing operations for the fiscal years ended April 30, 2019, 2018 and 2017 are comprised of the following:

	2019			2018			2017
Federal income taxes at statutory rate	$	(1,120	)	$	(6,112	)	$	475
State income taxes		(48	)		155			309
Expiration and adjustments of deferred tax assets		2,507			1,840			1,693
Change in valuation allowance		(2,480	)		(57,599	)		(2,616	)
Stock-based compensation		1,309			1,584			–
Other, net		(452	)		6			139
Tax Cuts and Jobs Act		–			60,126			–
Income tax benefit	$	(284	)	$	–		$	–

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and deferred tax liabilities at April 30, 2019 and 2018 are as follows:

	2019			2018
Net operating losses	$	113,612		$	115,236
Stock-based compensation		3,416			4,828
Deferred revenue		1,610			2,852
Deferred rent		555			568
Other		1,256			879
Total deferred tax assets		120,449			124,363
Less valuation allowance		(119,516	)		(123,555	)
Total deferred tax assets, net of valuation allowance	$	933		$	808
Deferred tax liabilities:
Fixed assets		(933	)		(808	)
Total deferred tax liabilities		(933	)		(808	)
Net deferred tax assets	$	–		$	–

On May 1, 2018, we adopted ASC 606 (Note 2). Upon adoption, no change in retained earnings was recorded related to income taxes as we maintain a full valuation allowance. However, an adjustment of approximately $700 was recorded as a deferred tax liability and a corresponding reduction to the valuation allowance.

On May 1, 2017, we adopted ASU 2016-09. Upon adoption, we have excess tax benefits for which a benefit could not previously be recognized of approximately $2,400. The balance of the unrecognized excess tax benefits has been reversed with the impact recorded to retained earnings including any change to the valuation allowance as a result of the adoption. Due to the full valuation allowance on the U.S. deferred tax assets, there was no impact to the accompanying consolidated financial statements as a result of adopting ASU 2016-09 other than what is reflected in the accompanying Consolidated Statements of Stockholders’ Equity for the fiscal year ended April 30, 2018.

In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act includes a number of changes to existing U.S. tax laws that impact us, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% for tax years, effective January 1, 2018. We performed a review of the Tax Act for the fiscal year ended April 30, 2018, and based on the information available at that time, we recorded a provisional increase in tax expense and a corresponding decrease in net deferred tax assets of $60,126, which were fully offset by a valuation allowance.

We applied the guidance under Staff Accounting Bulletin No. 118 when accounting for the enactment-date effects of the Tax Act for the fiscal year ended April 30, 2018 as we had not completed our accounting for all the enactment-date income tax effects of the Tax Act under ASC 740 for the remeasurement of deferred tax assets and liabilities. We completed our accounting for the enactment-date income tax effects of the Tax Act during the quarter ended January 31, 2019. Upon further analyses of the Tax Act and Notices and regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service provisional amount recognized for the fiscal year ended April 30, 2018 did not change; therefore, there was no adjustment to tax expense.