Quarterly report [Sections 13 or 15(d)]

Income Taxes

v3.25.1
Income Taxes
 9 Months Ended
Feb. 28, 2025
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 20: Income Taxes

 

The following table summarizes the Company’s income tax accrued for the three and nine months ended February 28, 2025 and 2024:

 

The Company accounts for income taxes under FASB ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

 

The components of the income tax provision include:

 

    Three Months Ended  
    February 28,
2025		     February 29,
2024		  
Revenue   $ 3,854,603     $ 4,926,457  
Directly attributable costs     (1,746,724 )     (2,799,498 )
Deferred     2,107,879       2,126,959  
Tax rate     21 %     21 %
Tax expense   $ 442,655     $ 446,662  

 

    Nine Months Ended  
    February 28,
2025		     February 29,
2024		  
Revenue   $ 12,821,038     $ 15,238,198  
Directly attributable costs     (5,981,378 )     (8,665,694 )
Deferred     6,839,660       6,572,504  
Tax rate     21 %     21 %
Tax expense   $ 1,436,329     $ 1,380,226  

 

Note: Change in uncertain tax position with all tax expense recorded in current year due to change in estimate. No prior year net operating loss was considered.

Due to the accrual of taxes related to Section 280E of the Internal Revenue Code, as amended, the Company has an uncertain tax accrual that is currently being expensed as a change in estimate. The Company has net operating losses that it believes are available to it to offset this expense; however, there can be no assurance under current interpretations of tax laws for cannabis companies that the Company will be allowed to use these net operating losses to offset Section 280E tax expenses.

 

During the three months ended February 28, 2025, the Company received a notification from the Internal Revenue Service (“IRS”) that the Company has been assessed the amount of $111,441, consisting of estimated tax owed of $71,959, penalties of $26,771, and interest of $12,711 for failure to file its tax return for the year ended May 31, 2022. The Company made a good faith payment to the IRS in the amount of $5,000 pursuant to this notice during the three months ended February 28, 2025. The accounting firm responsible for this tax filing on behalf of the Company has been terminated, and the Company is pursuing this firm for recovery of penalties and interest assessed.