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INCOME TAXES | 12 Months Ended
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May 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company recorded income tax benefit of $0.5 million for the year ended May 31, 2023, compared to income tax expense of $0.5 million for the year ended May 31, 2022. The Company’s effective tax rate was 1.2% and (2.4)%, for the years ended May 31, 2023 and 2022 respectively.
(in thousands) |  | For the Fiscal Year Ended
|  | May 31, 2023 |  | May 31, 2022
Current expense / (benefit) |  |  |  |
Federal |  | $ | — |  |  | $ | — |
Foreign |  | — |  |  | — |
State |  | 18 |  |  | — |
Total current expense |  | $ | 18 |  |  | $ | — |
Deferred expense / (benefit) |  |  |  |
Federal |  | $ | (540) |  |  | $ | 540 |
Foreign |  | — |  |  | — |
State |  | — |  |  | — |
Total deferred (benefit) expense |  | $ | (540) |  |  | $ | 540 |
Total income tax (benefit) expense |  | $ | (523) |  |  | $ | 540 |
The following table reconciles the statutory rate to our effective tax rate:
|  | May 31, 2023 |  | May 31, 2022
Expected income tax expense (benefit) at U.S. Statutory Rate |  | 21.0 | % |  | 21.0 | %
Stock-based compensation |  | (6.0) | % |  | — | %
State income taxes, net of federal tax benefit |  | — | % |  | 4.5 | %
Change in valuation allowance |  | (13.0) | % |  | (27.0) | %
Other, net |  | (0.8) | % |  | (0.9) | %
Income tax expense / (benefit) |  | 1.2 | % |  | (2.4) | %
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 are as follows for the year ended May 31, 2023, and 2022:
(in thousands) |  | May 31, 2023 |  | May 31, 2022
Deferred Tax Assets: |  |  |  |
Net Operating Loss |  | $ | 15,137 |  |  | $ | 11,971 |
Stock-Based Compensation |  | 3,068 |  |  | — |
Capitalized Research and Development |  | 897 |  |  | — |
Lease Liability |  | 1,875 |  |  | 2,080 |
Other |  | 360 |  |  | 248 |
Gross Deferred Tax Assets |  | 21,337 |  |  | 14,298 |
Less: Valuation Allowances |  | (15,697) |  |  | (9,346) |
Total Net Deferred Tax Asset |  | $ | 5,640 |  |  | $ | 4,953 |
Deferred Tax Liabilities: |  |  |  |
Property, Plant, and Equipment |  | $ | (3,712) |  |  | $ | (3,407) |
Right of Use Assets |  | (1,929) |  |  | (2,086) |
Other |  | — |  |  | — |
Total Net Deferred Tax Liability |  | (5,640) |  |  | (5,493) |
Net deferred tax assets (liabilities) |  | $ | — |  |  | $ | (540) |
The Company had $114.8 million and $83.6 million of federal and state tax net operating losses at May 31, 2023 and 2022, respectively. At May 31, 2023, $99.3 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 $6.3 million and $6.2 million as of May 31, 2023 and 2022, respectively. The Company has provided a valuation allowance for the portion of the deferred tax assets that it has determined are not more likely than not to be recognized. 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 income tax. Tax years ending May 31, 2021 through May 31, 2023 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.

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