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INCOME TAXES | 12 Months Ended
--- | ---
May 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 7: INCOME TAXES Provision for income taxes for the years ended May 31 consists of the following: SCHEDULE OF PROVISION FOR INCOME TAXES
|  | 2024 |  |  | 2023 |
|  | For the Year Ended May 31, |
|  | 2024 |  |  | 2023 |
Current: |  |  |  |  |  |  |  |
U.S. Federal |  | $ | - |  |  | $ | - |
Foreign Taxes Subsidiaries |  |  | (41,000 | ) |  |  | (50,000 | )
State and local |  |  | (1,000 | ) |  |  | (1,000 | )
Total current |  |  | (42,000 | ) |  |  | (51,000 | )
Deferred: |  |  |  |  |  |  |  |
U.S. Federal |  |  | - |  |  |  | - |
State and local |  |  | - |  |  |  | - |
Total deferred |  |  | - |  |  |  | - |
Income tax expense |  | $ | (42,000 | ) |  | $ | (51,000 | )
Provision for income taxes differs from the amounts computed by applying the U.S. Federal income tax rate applicable for each year (21% for 2024 and 2023) to pretax income as a result of the following: SCHEDULE OF EFFECTIVE INCOME TAX RECONCILIATION
|  | 2024 |  |  | 2023 |
|  | For the Year Ended May 31, |
|  | 2024 |  |  | 2023 |
Computed “expected” tax benefit |  | $ | 1,247,000 |  |  |  | 1,490,000 |
Increase (reduction) in income taxes resulting from: |  |  |  |  |  |  |  |
Change in valuation allowance |  |  | (1,428,000 | ) |  |  | (1,973,000 | )
State income taxes, net of federal benefit |  |  | 459,000 |  |  |  | 583,000 |
Permanent tax differences and other |  |  | (148,000 | ) |  |  | (17,000 | )
Stock based compensation benefit |  |  | - |  |  |  | (5,000 | )
Foreign taxes of subsidiaries |  |  | (172,000 | ) |  |  | (129,000 | )
Income tax expense |  | $ | (42,000 | ) |  | $ | (51,000 | )
The tax effect of significant temporary differences is presented below: SCHEDULE OF DEFERRED TAX ASSETS
|  | 2024 |  |  | 2023 |
|  | May 31, |
|  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accounts receivable, principally due to allowance for credit losses |  | $ | 5,000 |  |  | $ | 8,000 |
Inventory valuation |  |  | 131,000 |  |  |  | 188,000 |
Compensated absences |  |  | 144,000 |  |  |  | 118,000 |
Net operating loss carryforwards |  |  | 6,658,000 |  |  |  | 5,817,000 |
Tax credit carryforwards |  |  | 1,380,000 |  |  |  | 1,239,000 |
Deferred rent expense/capitalized leases |  |  | 11,000 |  |  |  | 11,000 |
Stock options |  |  | 1,561,000 |  |  |  | 1,296,000 |
Sec 174 capitalized costs |  |  | 501,000 |  |  |  | 284,000 |
Losses of foreign subsidiaries and other, net |  |  | 2,000 |  |  |  | - |
Accumulated depreciation and amortization |  |  | (24,000 | ) |  |  | (21,000 | )
Total deferred tax assets |  |  | 10,369,000 |  |  |  | 8,940,000 |
Less valuation allowance |  |  | (10,369,000 | ) |  |  | (8,940,000 | )
Net deferred tax asset |  | $ | - |  |  | $ | - |
The Company has provided a valuation allowance of approximately $10,369,000 and $8,940,000 as of May 31, 2024 and 2023, respectively. The net change in the valuation allowance for the years ended May 31, 2024 and 2023 was an increase of $1,429,000 and $1,973,000, respectively. The Company has recorded a full valuation allowance against its United States and foreign deferred tax assets in each of the years ended May 31, 2024 and 2023 because the Company’s management believes that it is more likely than not that these assets will not be realized. On May 31, 2024, the Company has Federal income tax net operating loss carryforwards of approximately $24,384,000. On May 31, 2024, the Company has California state income tax net operating loss carryforwards of approximately $22,014,000. For tax reporting purposes, operating loss carryforwards are available to offset future taxable income; such carryforwards expire in varying amounts beginning in 2024 and 2038 for federal and state purposes, respectively. Federal net operating losses beginning in 2018 have no expiration date. On May 31, 2024, the Company has Federal research and development tax credit carryforward of approximately $888,000. The Federal credits begin to expire in 2028. The Company also had similar credit carryforwards for state purposes of $623,000 on May 31, 2024, which do not expire. Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss (“NOL”) and credit carryforwards may be limited by statute because of a cumulative change in ownership of more than 50%. Pursuant to Sections 382 and 383 of the IRC, the annual use of the Company’s NOLs and credit carryforwards would be limited if there is a cumulative change of ownership (as that term is defined in Section 382(g) of the IRC of greater than 50% in a three-year period). Management has not performed an analysis to determine if the Company has had a cumulative change in ownership of greater than 50%. For the year ended May 31, 2024, the Company performed an analysis and has not identified any uncertain tax positions as defined under ASC 740. Should such position be identified in the future, and should the Company owe interest and penalties as a result of this, these would be recognized as interest expense and other expense, respectively, in the consolidated financial statements. The Company is no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal 2018.

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