Aspen Group, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Apr. 30, 2020

The components of income tax expense are as follows:


	For the Years Ended April 30,
	2020		2019
Current:
Federal	$	—	$	—
State	51,820		—
	51,820		—
Deferred:
Federal	—		—
State	—		—
	—		—
Total Income tax expense	$	51,820	$	—

Significant components of the Company's deferred income tax assets and liabilities are as follows:


	April 30,
	2020		2019
Deferred tax assets:
Net operating loss carryforward	$	11,044,236	$	9,033,235
Allowance for doubtful accounts	629,272		181,774
Deferred rent	606,594		180,154
Stock-based compensation	439,454		954,586
Contributions carryforward	11,275		60
Intangibles	86,897		—
Total deferred tax assets	12,817,728		10,349,809

Deferred tax liabilities:
Property and equipment	(417,780)		(234,336)
Intangibles	—		(64,439)
Total deferred tax liabilities	(417,780)		(298,775)

Deferred tax assets, net	$	12,399,948	$	10,051,034

Valuation allowance:
Beginning of year	(10,051,034)		(7,837,755)
Increase during period	(2,348,914)		(2,213,279)
Ending balance	(12,399,948)		(10,051,034)

Net deferred tax asset	$	—	$	—

As of April 30, 2020, 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 April 30, 2020 and 2019, the valuation allowance was approximately $12,400,000 and $10,100,000, 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 April 30, 2020, the Company had approximately $41,900,000 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 April 30, 2020, tax years 2017 through 2019 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,
	2020		2019
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	5.3	%	3.6	%
Federal and State Minimum Taxes	(0.9)	%	—	%
Permanent Differences	(0.3)	%	—	%
Change in Tax Rates - States	17.3	%	—	%
Change in Valuation Allowance	(41.9)	%	(23.8)	%
Other	(1.4)	%	(0.8)	%
Effective Income Tax Rate	(0.9)	%	0.0	%