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Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.2
Income Taxes
 12 Months Ended
Apr. 30, 2022
Income Tax Disclosure [Abstract]
Income Taxes Income TaxesThe components of income tax expense are as follows:
Years Ended April 30,
2022 2021
Current income tax expense:
Federal $ — $ —
State 27,400 32,644
Foreign 400,000 —
Current income tax expense 427,400 32,644
Deferred income tax expense:
Federal — —
State — —
Foreign — —
Deferred income tax expense — —
Income tax expense $ 427,400 $ 32,644
Significant components of the Company's deferred income tax assets and liabilities are as follows:
April 30,
2022 2021
Deferred tax assets:
Net operating loss carryforward $ 18,095,495 $ 15,737,351
Allowance for doubtful accounts 897,965 1,009,273
Deferred rent 192,284 252,479
Stock-based compensation 870,245 —
Contributions carryforward 11,089 11,013
Accrued compensation 43,176 —
Warrant amortization 17,888 —
Intangibles — —
Interest expense limitation carryforward 717,919 86,485
Total deferred tax assets 20,846,061 17,096,601
Deferred tax liabilities:
Property and equipment (1,000,092) (356,473)
Intangibles (463,074) (186,063)
Stock-based compensation — (1,778,017)
Total deferred tax liabilities (1,463,166) (2,320,553)
Deferred tax assets, net $ 19,382,895 $ 14,776,048
Valuation allowance:
Beginning of year (14,776,048) (12,399,948)
Increase during period (4,606,847) (2,376,100)
Ending balance (19,382,895) (14,776,048)
Net deferred tax asset $ — $ —

As of April30, 2022, as part of its periodic evaluation of the necessity to maintain a valuation allowance against its deferred tax assets, and after consideration of all factors, including, among others, projections of future taxable income, current year net operating loss carryforward utilization and the extent of the Company's cumulative losses in recent years, the Company determined that, on a more likely than not basis, it would not be able to use remaining deferred tax assets. Accordingly, the Company has determined to maintain a full valuation allowance against its net deferred tax assets. As of April30, 2022 and 2021, the valuation allowance was approximately $19,400,000 and $14,800,000, respectively. In the future, the utilization of the Company's net operating loss carryforwards may be subject to certain change of control limitations. If the Company determines it will be able to use some or all of its deferred tax assets in a future reporting period, the adjustment to reduce or eliminate the valuation allowance would reduce its tax expense and increase after-tax income.
At April30, 2022, the Company had approximately $69,700,000 of net operating loss carryforwards, $28,200,000 of which will expire from 2031 to 2038, the remainder will carryforward indefinitely. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of April30, 2022, tax years 2019 through 2021 remain open for IRS audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years. A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows:
The Company's effective income tax expense differs from the statutory federal income tax rate of 21% as follows:
April 30,
2022 2021
Statutory Rate applied to net loss before income taxes 21.0 % 21.0 %
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal tax benefit 4.2 % 4.4 %
Effect on change in federal tax rates — % — %
Federal and State Minimum Taxes — % (0.2) %
Permanent Differences (1.9) % (0.2) %
Foreign income tax (4.4) % — %
Change in Tax Rates - States 1.1 % (2.8) %
Change in Tax Credits — % — %
Change in Valuation Allowance (50.3) % (22.8) %
Other 25.6 % 0.3 %
Effective Income Tax Rate (4.7) % (0.3) %
The Company determined that it has a permanent establishment in Canada, as defined by article V(2)(c) of the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital (the “Treaty”), which would be subject to Canadian taxation as levied under the Income Tax Act. The Company is preparing to file Canadian T2 Corporation Income Tax Returns and related information returns under the Voluntary Disclosure Program with the Canada Revenue Agency ("CRA") to cover the 2013 through 2021 tax years during which a permanent establishment was in place. The Company will also file an annual Canadian T2 Corporation Income Tax return to report the ongoing activity of the permanent establishment for 2022 and future taxation years.
As of April30, 2022, the Company recorded a reserve of approximately $300,000 for the estimate of the 2013 through 2021 tax year foreign income tax liability. Additionally, for the 2022 tax year, the Company recorded a reserve of $100,000 for the related foreign income tax liability.