Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
May 31, 2020 | Aug. 24, 2020 | Nov. 30, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | PATRIOT SCIENTIFIC CORP | ||
Entity Central Index Key | 0000836564 | ||
Document Type | 10-K | ||
Document Period End Date | May 31, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --05-31 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 999,791 | ||
Entity Common Stock, Shares Outstanding | 401,392,948 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 | ||
Entity Small Business | true | ||
Entity Emerging Growth | false | ||
Entity file number | 000-22182 | ||
Entity state of incorporation | DE | ||
Shell Company | false | ||
Interactive Data Current | Yes |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | May 31, 2020 | May 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 571,921 | $ 787,086 |
Restricted cash and cash equivalents | 177,247 | 198,843 |
Investments in marketable securities | 0 | 750,000 |
Prepaid expenses and other current assets | 10,162 | 28,003 |
Refundable income taxes | 26,078 | 26,078 |
Total current assets | 785,408 | 1,790,010 |
Property and equipment, net | 326 | 814 |
Deferred income taxes | 0 | 26,078 |
Investment in affiliated company | 32,884 | 107,861 |
Total assets | 818,618 | 1,924,763 |
Current liabilities: | ||
Accounts payable | 2,444 | 8,868 |
Accrued expenses and other | 180,151 | 219,344 |
Total current liabilities | 182,595 | 228,212 |
Total liabilities | 182,595 | 228,212 |
Stockholders' equity | ||
Common stock, $0.00001 par value: 600,000,000 shares authorized: 438,242,618 shares issued and 401,392,948 shares outstanding at May 31, 2020 and 2019 | 4,382 | 4,382 |
Additional paid-in capital | 77,444,062 | 77,444,062 |
Accumulated deficit | (62,186,553) | (61,126,025) |
Common stock held in treasury, at cost - 36,849,670 shares at May 31, 2020 and 2019 | (14,625,868) | (14,625,868) |
Total stockholders' equity | 636,023 | 1,696,551 |
Total liabilities and stockholders' equity | $ 818,618 | $ 1,924,763 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | May 31, 2020 | May 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in Dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in Dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 600,000,000 | 600,000,000 |
Common stock, shares issued | 438,242,618 | 438,242,618 |
Common stock, shares outstanding | 401,392,948 | 401,392,948 |
Common stock held in treasury, at cost | 36,849,670 | 36,849,670 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Operating expenses: | ||
Selling, general and administrative | $ 996,019 | $ 734,062 |
Total operating expenses | 996,019 | 734,062 |
Other income (expense): | ||
Interest income | 12,068 | 28,711 |
Equity in loss of affiliated company | (74,977) | (91,512) |
Total other expense, net | (62,909) | (62,801) |
Loss before provision for income taxes | (1,058,928) | (796,863) |
Provision for income taxes | 1,600 | 1,600 |
Net loss | $ (1,060,528) | $ (798,463) |
Basic loss per common share | $ 0 | $ 0 |
Diluted loss per common share | $ 0 | $ 0 |
Weighted average number of common shares outstanding - basic | 398,548,318 | 398,548,318 |
Weighted average number of common shares outstanding - diluted | 398,548,318 | 398,548,318 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Treasury Stock | Total |
Beginning balance, shares at May. 31, 2018 | 401,392,948 | ||||
Beginning balance, value at May. 31, 2018 | $ 4,382 | $ 77,444,062 | $ (60,327,562) | $ (14,625,868) | $ 2,495,014 |
Net loss | (798,463) | (798,463) | |||
Ending balance, shares at May. 31, 2019 | 401,392,948 | ||||
Ending balance, value at May. 31, 2019 | $ 4,382 | 77,444,062 | (61,126,025) | (14,625,868) | 1,696,551 |
Net loss | (1,060,528) | (1,060,528) | |||
Ending balance, shares at May. 31, 2020 | 401,392,948 | ||||
Ending balance, value at May. 31, 2020 | $ 4,382 | $ 77,444,062 | $ (62,186,553) | $ (14,625,868) | $ 636,023 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Operating activities: | ||
Net loss | $ (1,060,528) | $ (798,463) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 488 | 489 |
Equity in loss of affiliated company | 74,977 | 91,512 |
Deferred income taxes | 26,078 | 26,078 |
Changes in operating assets and liabilities: | ||
Prepaid income tax | 0 | 2,285 |
Prepaid expenses and other current assets | 17,841 | (22,716) |
Refundable income taxes | 0 | (26,078) |
Accounts payable, accrued expenses and other | (45,617) | (33,873) |
Net cash used in operating activities | (986,761) | (760,766) |
Investing activities: | ||
Proceeds from sales of marketable securities | 1,000,000 | 0 |
Purchases of marketable securities | (250,000) | (750,000) |
Crossflo acquisition liability | 0 | 177,246 |
Net cash provided by (used in) investing activities | 750,000 | (572,754) |
Net decrease in cash, cash equivalents and restricted cash | (236,761) | (1,333,520) |
Cash, cash equivalents and restricted cash, beginning of year | 985,929 | 2,319,449 |
Cash, cash equivalents and restricted cash, end of year | 749,168 | 985,929 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for income taxes | $ 1,600 | $ 1,600 |
Reconciliation of Cash, Cash Eq
Reconciliation of Cash, Cash Equivalents, and Restricted Cash and Cash - USD ($) | May 31, 2020 | May 31, 2019 | May 31, 2018 |
Reconciliation of cash, cash equivalents and restricted cash | |||
Cash and Cash Equivalents | $ 571,921 | $ 787,086 | |
Restricted Cash | 177,247 | 198,843 | |
Total cash, cash equivalents and restricted cash | $ 749,168 | $ 985,929 | $ 2,319,449 |
1. Organization and Business
1. Organization and Business | 12 Months Ended |
May 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | 1. Organization and Business Patriot Scientific Corporation (the “Company”, “Patriot”, “we”, “us”, or “our”), was organized under Delaware law on March 24, 1992 and is the successor by merger to Patriot Financial Corporation, a Colorado corporation, incorporated on June 10, 1987. In September 2008, we acquired Patriot Data Solutions Group, Inc. formerly known as Crossflo Systems, Inc. (“PDSG”) which engaged in data-sharing services and products primarily in the public safety and government sector. During April 2012, we sold substantially all of the assets of PDSG. In June 2005, we entered into a joint venture agreement with Technology Properties Limited, Inc. (“TPL”) to form Phoenix Digital Solutions, LLC (“PDS”), a Delaware limited liability company organized on June 7, 2005. Through a commercialization agreement dated June 7, 2005, as amended in July 2012, PDS holds the rights to certain patents contributed by its two members, Patriot and TPL. Pursuant to the commercialization agreement, PDS would pursue the commercialization of our patented microprocessor technologies through broad and open licensing and by litigating against those who may be infringing on the members patents. License fees received by PDS would be distributed to its members, as defined in the commercialization agreement. While PDS has not generated significant license revenues since September 2013, on November 4, 2019, the Supreme Court of the United States denied our application to review a lower court’s decision that was adverse to our patented microprocessor technologies. As result of this denial to review the lower court’s decision, our patented microprocessor technologies are no longer enforceable, and we have no other options to appeal the lower court’s adverse decision. As a result, there are no future licensing opportunities or sources of revenue from PDS and we need to either pursue a new line of business, liquidate the Company in a dissolution under Delaware law, or seek protection under the provisions of the U.S. Bankruptcy Code. On April 12, 2019, we entered into an agreement with Artius Bioconsulting LLC (“Artius”), to evaluate the potential of establishing a systems integration company that develops a blockchain-based technology platform that could be implemented throughout the drug development process. Pursuant to the agreement, during fiscal year 2019 and 2020, we paid Artius $58,000 and $83,597, respectively, for its consulting services to evaluate the potential new line of business. Based on the Company’s evaluation of multiple strategic alternatives, including blockchain-based technologies, the Company determined that the merger with Mosaic ImmunoEngineering, as discussed below, would provide the best opportunity for its shareholders moving forward. On August 19, 2020, Patriot Scientific Corporation (referred to as “Parent” in the transaction), entered into a stock purchase agreement (the “Stock Purchase Agreement”) among Parent, PTSC Sub One Inc., a Delaware corporation (as “Buyer” and together with the Parent, the “Buyer Parties”), Mosaic ImmunoEngineering Inc., a Delaware corporation (the “Target”), certain stockholders of the Target set for therein (as “Sellers”), and Steven King (as the “Sellers’ Representative” and together with the Target and Sellers, the “Seller Parties”) pursuant to which, Buyer will buy from Sellers 630,000 shares of its Class A common stock (“Class A Stock”), par value $0.0001 per share, and 70,000 shares of its Class B common stock (“Class B Stock”), par value $0.0001 per share, together the Class A Stock and Class B Stock shall collectively be referred to as “Target Common Stock”, representing 100% of the issued and outstanding common stock of the Target as of August 19, 2020. Upon closing, in exchange for the Target Common Stock, the holders of the Class A Stock shall receive 630,000 shares of the Parent’s preferred stock to be designated Series A Convertible Preferred Stock (“Series A Preferred”) and holders of the Class B Stock shall receive 70,000 shares of the Parent’s preferred stock to be designated Series B Convertible Preferred Stock (“Series B Preferred”). Each share of the Series A Preferred; shall (a) convert into 5,097.053 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, and (c) have no dividend rate. Each share of the Series B Preferred; shall (a) convert into 5,734.185 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, (c) have no dividend rate, and (d) shall possess certain anti-dilution protections as defined in the Series B Certificate of Designations. On a fully diluted, as converted basis, the Sellers shall own 90% of the issued and outstanding common stock of the Parent (see Note 10). Reclassifications Certain reclassifications have been made to the prior period consolidated financial statements to conform to the classifications used in the current year. These reclassifications had no net impact on consolidated net loss and financial position. Liquidity and Management’s Plans The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. At May 31, 2020, the Company has an accumulated deficit of $62,186,553, and has incurred recurring losses and used significant amounts of cash in its operations. As of May 31, 2020, the Company had cash and cash equivalents of $571,921 and working capital of $602,813. In addition, PDS has not generated significant license revenues since September 2013 and we do not expect any future license revenue from PDS. Therefore, our ability to continue our operations and new line of business is highly dependent on the amount of cash and cash equivalents on hand combined with our ability to raise additional capital to fund future operations. We anticipate, based on currently proposed plans and assumptions that our cash on hand will not satisfy our operational and capital requirements through twelve months from the date of filing on this Form 10-K. There are a number of uncertainties associated with our ability to raise additional capital and we have no current arrangements with respect to any additional financing. In addition, the continuation of disruptions caused by COVID-19 may cause investors to slow down or delay their decision to deploy capital based on volatile market conditions which will adversely impact our ability to fund future operations. Consequently, there can be no assurance that any additional financing on commercially reasonable terms, or at all, will be available when needed. The inability to obtain additional capital will delay our ability to continue to conduct our business operations. Any additional equity financing may involve substantial dilution to our then existing stockholders. If we are unable to raise additional capital, we may either liquidate the Company in a dissolution under Delaware law, or seek protection under the provisions of the U.S. Bankruptcy Code. The above matters raise substantial doubt regarding our ability to continue as a going concern. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
May 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Consolidation The consolidated balance sheets at May 31, 2020 and 2019 and consolidated statements of operations for the fiscal years ended May 31, 2020 and 2019 include our accounts and those of our wholly owned and inactive subsidiary PDSG which includes Crossflo Systems, Inc. (“Crossflo”). All significant intercompany accounts and transactions have been eliminated. Financial Instruments and Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash, cash equivalents, and investments in marketable securities. We invest our cash and cash equivalents primarily in money market funds and certificates of deposit. Cash and cash equivalents are maintained with high quality financial institutions, the composition and maturities of which are regularly monitored by management. At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation. We perform ongoing evaluations of these financial institutions to limit our concentration of risk exposure. Fair Value of Financial Instruments Our financial instruments consist principally of cash and cash equivalents, investments in marketable securities, accounts payable and accrued expenses and other. The carrying value of these financial instruments approximates fair value because of the immediate or short-term maturity of the instruments. The fair value of certain of our cash equivalents is determined based on quoted prices in active markets for identical assets or Level 1 inputs. The fair value of our investments in certificates of deposit is determined based on quoted prices in non-active markets for identical assets or Level 2 inputs. We believe that the carrying values of all other financial instruments approximate their current fair values due to their nature and respective durations. Cash Equivalents, Restricted Cash, and Marketable Securities We consider all highly liquid investments acquired with a maturity of three months or less from the purchase date to be cash equivalents. Restricted cash and cash equivalents at May 31, 2020 is comprised of amounts previously held by a third party in conjunction with the Company’s acquisition of Crossflo. Restricted cash and cash equivalents at May 31, 2019 consist of a savings account held as collateral for our corporate credit card account plus amounts previously held by a third party in conjunction with the Company’s acquisition of Crossflo. Investments in Marketable Securities We determine the appropriate classification of our investments at the time of purchase and reevaluate such designation at each balance sheet date. Our investments in marketable securities have been classified and accounted for as held-to-maturity based on management’s investment intentions relating to these securities. Held-to-maturity marketable securities are stated at amortized cost which approximates fair value. We follow the authoritative guidance to assess whether our investments with unrealized loss positions are other than temporarily impaired. Realized gains and losses and declines in fair value judged to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations. Property, Equipment and Depreciation Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from three to five years. Repairs and maintenance are charged to expense when incurred. Investment in Affiliated Companies We have a 50% ownership interest in PDS. We account for our investment using the equity method of accounting since the investment provides us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s Board of Directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize our share of net earnings or losses of the investee and is recognized in the consolidated statements of operations in the caption “Equity in earnings (loss) of affiliated company” and also is adjusted by contributions to and distributions from PDS. PDS, as an unconsolidated equity investee, recognizes revenue from technology license agreements at the time a contract is entered into, the license method is determined (paid-in-advance or on-going royalty), performance obligations under the license agreement are satisfied, and the realization of revenue is assured which is generally upon the receipt of the license proceeds. PDS may at times enter into license agreements whereby contingent revenues are recognized as one or more contractual milestones are met. We review our investment in PDS to determine whether events or changes in circumstances indicate that the carrying amount may not be recoverable. The primary factors we consider in our determination are the financial condition, operating performance and near term prospects of PDS. If the decline in value is deemed to be other than temporary, we would recognize an impairment loss. We own 100% of the preferred stock of Holocom (see Note 5). Prior to impairment, this investment was accounted for at cost since we do not have the ability to exercise significant influence over the operating and financial policies of Holocom. Treasury Stock We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity. Income Taxes We follow authoritative guidance in accounting for uncertainties in income taxes. This authoritative guidance prescribes a recognition threshold and measurement requirement for the financial statement recognition of a tax position that has been taken or is expected to be taken on a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under this guidance we may only recognize tax positions that meet a “more likely than not” threshold. We follow authoritative guidance to evaluate whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. We assess our deferred tax assets annually under more likely than not scenarios in which they may be realized through future income. We have determined that it was more likely than not that all of our deferred tax assets will not be realized in the future due to our continuing pre-tax and taxable losses. As a result of this determination, we have recorded a full valuation allowance against our deferred tax assets. Assessment of Contingent Liabilities We may be involved in various legal matters, disputes, and patent infringement claims which arise in the ordinary course of our business. We accrue for any estimated losses at the time when we can make a reliable estimate of such loss and it is probable that it has been incurred. By their very nature, contingencies are difficult to estimate. We continually evaluate information related to all contingencies to determine that the basis on which we have recorded our estimated exposure is appropriate. Income (Loss) Per Share Basic income (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. For the fiscal year ended May 31, 2019, potential common shares of 1,600,000 related to our outstanding options were not included in the calculation of diluted loss per share as we recorded a net loss. Had we reported net income for the year ended May 31, 2019, no shares of common stock would have been included in the calculation of diluted income per share using the treasury stock method. There were no outstanding options as of May 31, 2020. In connection with our acquisition of Crossflo, which became a part of PDSG, we issued 2,844,630 escrow shares that are contingent upon certain representations and warranties made by Crossflo at the time of the merger agreement (see Note 9). We exclude these escrow shares from the basic income (loss) per share calculations and would have included the escrowed shares in the diluted income per share calculations if we reported net income. Use of Estimates The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying footnotes. Actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including, but not limited to, fair values of investments in marketable securities, the use, recoverability, and /or realizability of certain assets, including investments in affiliated companies, and deferred tax assets. Intellectual Property Rights PDS historically relied on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We have seven U.S., nine European, and three Japanese patents all of which expired between August 2009 and October 4, 2016. On November 4, 2019, the Supreme Court of the United States denied our application to review a lower court’s decision that was adverse to our patents. As result of this denial to review the lower court’s decision, our patented microprocessor technologies are no longer enforceable, and we have no other options to appeal the lower court’s adverse decision. Recent Accounting Pronouncements In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 provides guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The issue addressed in ASU 2016-15 that will affect the Company is classifying distributions received from equity method investments. The guidance provides an accounting policy election for classifying distributions received from equity method investments using either a cumulative earnings approach or a nature of distributions approach. The Company adopted this standard on June 1, 2018. The adoption did not have a material effect on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard on June 1, 2018 by using the retrospective transition method, which required the following disclosures and changes to the presentation of its consolidated financial statements: cash, cash equivalents and restricted cash reported on the consolidated statements of cash flows now includes restricted cash of $198,843 as of May 31, 2019, as well as previously reported cash and cash equivalents. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income and simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. The accounting standard update also updates certain presentation and disclosure requirements. The Company adopted ASU 2016-01 during the fiscal year ended May 31, 2019. Implementation of this guidance did not have a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, as amended ("ASC 842"), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. ASU 2018-13 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The Company adopted ASC 842 effective June 1, 2019 using a modified retrospective method and will not restate comparative periods. As permitted under the transition guidance, the Company will carry forward the assessment of whether its contracts contain or are leases, classification of its leases and remaining lease terms. Implementation of this guidance did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which removes, modifies, and adds various disclosure requirements on fair value measurements in Topic 820. ASU 2018-13 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this update and delay adoption of the additional disclosures until their effective date. The Company does not expect a significant impact from adopting this update on its consolidated financial statements. |
3. Cash, Cash Equivalents, Rest
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities | 12 Months Ended |
May 31, 2020 | |
Cash and Cash Equivalents [Abstract] | |
Cash, Cash Equivalents, Restricted Cash and Marketable Securities | 3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities We follow authoritative guidance to account for our marketable securities as held-to-maturity. Under this authoritative guidance we are required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We determine fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment or valuations by third party professionals. The three levels of inputs that we may use to measure fair value are: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). The following tables detail the fair value measurements within the fair value hierarchy of our cash, cash equivalents and investments in marketable securities: Fair Value Measurements at May 31, 2020 Using Fair Value at Quoted Prices Significant Other Significant Cash and cash equivalents: Cash $ 571,921 $ 571,921 $ – $ – Restricted cash and cash equivalents 177,247 177,247 – – Total $ 749,168 $ 749,168 $ – $ – Fair Value Measurements at May 31, 2019 Using Fair Value at Quoted Prices Significant Other Significant Cash and cash equivalents: Cash $ 49,149 $ 49,149 $ – $ – Money market funds 237,937 237,937 – – Certificates of deposit 500,000 – 500,000 – Restricted cash and cash equivalents 198,843 198,843 – – Investments in marketable securities: Certificates of deposit 750,000 – 750,000 – Total $ 1,735,929 $ 485,929 $ 1,250,000 $ – We purchase certificates of deposit with varying maturity dates. The following table summarizes the purchase date maturities, gross unrealized gains or losses and fair value of the certificates of deposit as of May 31, 2019: May 31, 2019 Cost Gross Unrealized Fair Maturity Due in three months or less $ 500,000 $ – $ 500,000 Due in greater than three months 750,000 – 750,000 Total $ 1,250,000 $ – $ 1,250,000 |
4. Property and Equipment
4. Property and Equipment | 12 Months Ended |
May 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 4. Property and Equipment Property and equipment consisted of the following at May 31, 2020 and 2019: 2020 2019 Computer equipment and software $ 9,082 $ 9,082 Furniture and fixtures 3,147 3,147 12,229 12,229 Less: accumulated depreciation (11,903 ) (11,415 ) Net property and equipment $ 326 $ 814 Depreciation expense related to property and equipment was $488 and $489 for the fiscal years ended May 31, 2020 and 2019, respectively. |
5. Investment in Affiliated Com
5. Investment in Affiliated Companies | 12 Months Ended |
May 31, 2020 | |
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | |
Investment in Affiliated Companies | 5. Investment in Affiliated Companies Phoenix Digital Solutions, LLC On June 7, 2005, we entered into a Master Agreement (the “Master Agreement”) with TPL, and Charles H. Moore, an individual co-inventor of the technology (“Moore”). Pursuant to the Master Agreement, we and TPL entered into the Limited Liability Company Operating Agreement of PDS (the “LLC Agreement”). Pursuant to the Master Agreement, we caused certain of our respective interests in the Microprocessor Patents to be licensed to PDS, a joint venture limited liability company owned 50% by us and 50% by TPL, and PDS engaged TPL to commercialize the Microprocessor Patents pursuant to a Commercialization Agreement among PDS, TPL and us (the “Commercialization Agreement”). Under the Commercialization Agreement, PDS granted to TPL the exclusive right to grant licenses and sub-licenses of the Microprocessor Patents and to pursue claims against violators of the Microprocessor Patents, in each case, on behalf of PDS, us, TPL and Moore, and TPL agreed to use reasonable best efforts to commercialize the Microprocessor Patents in accordance with a mutually agreed business plan. Pursuant to the Commercialization Agreement, PDS agreed to a reimbursement policy with regard to TPL’s expenses incurred in connection with the commercialization of the Microprocessor Patents. All proceeds generated by TPL in connection with the commercialization of the Microprocessor Patents were paid directly to PDS. On March 20, 2013, TPL filed a petition under Chapter 11 of the United States Bankruptcy Code. On March 5, 2018, TPL’s Motion for Entry of Final Decree Closing Chapter 11 was granted. In the event we are required to provide funding to PDS that is not reciprocated by TPL, our ownership percentage in PDS will increase and we will have a controlling financial interest in PDS, in which case, we will consolidate PDS in our consolidated financial statements. If we determine that it is appropriate to consolidate PDS, we would measure the assets, liabilities and noncontrolling interests of PDS at their fair values at the date that we have the controlling financial interest. Based on our analysis of current authoritative accounting guidance with respect to our investment in PDS, we continue to account for our investment in PDS under the equity method of accounting, and accordingly have recorded our share of PDS’s net loss during the fiscal years ended May 31, 2020 and 2019 of $74,977 and $91,512, respectively, as a decrease in our investment. We have recorded our share of PDS’s net loss as “Equity in loss of affiliated company” in the accompanying consolidated statements of operations for the fiscal years ended May 31, 2020 and 2019. PDS’s balance sheets at May 31, 2020 and 2019 and statements of operations for the years ended May 31, 2020 and 2019 are as follows: Balance Sheets Assets: 2020 2019 Cash $ 68,531 $ 237,655 Total assets $ 68,531 $ 237,655 Liabilities and Members’ Equity: 2020 2019 Payables $ 2,763 $ 21,933 Members’ equity 65,768 215,722 Total liabilities and members’ equity $ 68,531 $ 237,655 Statements of Operations 2020 2019 Expenses $ 149,154 $ 182,223 Loss before provision for income taxes and foreign taxes (149,154 ) (182,223 ) Provision for income taxes and foreign taxes 800 800 Net loss $ (149,954 ) $ (183,023 ) We review our investment in PDS to determine whether events or changes in circumstances indicate that the carrying amount may not be recoverable. The primary factors we consider in our determination are the financial condition, operating performance and near-term prospects of PDS. If a decline in value is deemed to be other than temporary, we would recognize an impairment loss. Holocom, Inc. We currently own 2,100,000 shares of preferred stock, equivalent to an approximate 46% ownership interest on an after converted basis, in Holocom, Inc. (“Holocom”), a California corporation that manufactures products that protect information transmitted over secure networks. The shares are convertible at our option into shares of Holocom’s common stock on a one-to-one basis. The preferred stock entitles us to receive non-cumulative dividends at the per annum rate of $0.04 per share, when and if declared by the Board of Directors of Holocom, as well as a liquidation preference of $0.40 per share, plus an amount equal to all declared but unpaid dividends. In 2010, we determined that the inability of Holocom to meet its business plan, raise capital, and the general economic environment were indicators of impairment on our investment and we wrote-off our cost basis investment in Holocom. At May 31, 2020 and 2019, our investment in Holocom was valued at $0. |
6. Accrued Expenses and Other
6. Accrued Expenses and Other | 12 Months Ended |
May 31, 2020 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other | 6. Accrued Expenses and Other At May 31, 2020 and 2019, accrued expenses and other consisted of the following: 2020 2019 Crossflo acquisition liability $ 177,244 $ 177,244 Compensation and benefits 2,907 42,100 Total $ 180,151 $ 219,344 |
7. Stockholders' Equity
7. Stockholders' Equity | 12 Months Ended |
May 31, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | 7. Stockholders’ Equity Share Repurchases During July 2006, we commenced our Board of Director approved stock buyback program in which we repurchase our outstanding common stock from time to time on the open market. The repurchase plan has no maximum number of shares and is solely at the discretion of the Board of Directors. The repurchase plan has no set expiration date. There were no share repurchases during the fiscal years ended May 31, 2020 and 2019. 2006 Stock Option Plan The 2006 Stock Option Plan, as amended, which expired in March 2016, provided for the granting of options to acquire up to 10,000,000 shares, with a limit of 8,000,000 Incentive Stock Option (“ISO”) shares of our common stock to either full or part time employees, directors and our consultants at a price not less than the fair market value on the date of grant. In the case of a significant stockholder, the option price of the share is not less than 110 percent of the fair market value of the shares on the date of grant. Any option granted under the 2006 Stock Option Plan must be exercised within ten years of the date they are granted (five years in the case of a significant stockholder). As of May 31, 2020, there were no options outstanding under the 2006 Stock Option Plan and no additional grants can be made under the 2006 Stock Option Plan. Share-based Compensation The fair value of share-based awards to employees and directors is calculated using the Black-Scholes option pricing model, even though this model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from our stock options. The Black-Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any individual grant is based on the U.S. Treasury rate that corresponds to the pricing term of the grant effective as of the date of the grant. The expected volatility is based on the historical volatilities of our common stock. These factors could change in the future, affecting the determination of share-based compensation expense in future periods. A summary of option activity for the fiscal year ended May 31, 2020 is presented below: Shares Weighted Weighted Aggregate Options outstanding at June 1, 2019 1,600,000 $ 0.03 – – Options granted – – – – Options exercised – – – – Options forfeited/expired (1,600,000 ) 0.03 – – Options outstanding at May 31, 2020 – $ – – $ – Options vested and expected to vest at May 31, 2020 – $ – – $ – Options exercisable at May 31, 2020 – $ – – $ – |
8. Income Taxes
8. Income Taxes | 12 Months Ended |
May 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes The provision (benefit) for income taxes is as follows for the years ended May 31: 2020 2019 Current: Federal $ (26,078 ) $ (26,078 ) State 1,600 1,600 Total current (24,478 ) (24,478 ) Deferred: Federal 26,078 26,078 State – – Total deferred 26,078 26,078 Total provision $ 1,600 $ 1,600 The reconciliation of the effective income tax rate to the Federal statutory rate is as follows for the years ended May 31: 2020 2019 Statutory federal income tax rate 21.00 % 21.00 % State income tax rate, net of Federal effect (0.12 )% (0.16 )% Stock option expense (0.69 )% (1.77 )% Other – (0.04 )% Change in valuation allowance (20.34 )% (19.23 )% Effective income tax rate (0.15 )% (0.20 )% Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of our deferred tax assets are as follows as of May 31: 2020 2019 Deferred tax assets (liabilities): State taxes $ 336 $ 336 Accrued expenses (397 ) 9,570 Investment in affiliated company 442,065 442,065 Basis difference in property and equipment (72 ) (92 ) Stock based compensation expense – 10,315 Impairment of note receivable 231,180 231,180 Capital loss carryover – 104 Net operating loss carryforwards 7,691,740 7,330,976 Credit carryover 31,552 83,708 Valuation allowance (8,396,404 ) (8,082,084 ) Net deferred tax asset $ – $ 26,078 We have federal and state net operating loss carryforwards available to offset future taxable income of approximately $27,239,000 and $22,303,000, respectively, at May 31, 2020. These carryforwards begin to expire in the years ending May 31, 2025 and 2028, respectively. We have refundable alternative minimum tax credits of $26,078 and $52,156 at May 31, 2020 and 2019, respectively. During the year ended May 31, 2020, we collected $26,078 of such credits, and we expect to collect the remaining $26,078 during the year ending May 31, 2021. We follow authoritative guidance which defines criteria that an individual tax position must meet for any part of the benefit of that position to be recognized in a company’s financial statements and also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense. Interest and penalties relating to underpayment of income taxes are recorded in general and administrative expense. As of May 31, 2020, we are subject to U.S. Federal income tax examinations for the tax years May 31, 2007 through May 31, 2019, and we are subject to state and local income tax examinations for the tax years May 31, 2007 through May 31, 2019 due to the carryover of net operating losses related to PDSG from previous years. We have no liability relating to unrecognized tax benefits under the authoritative guidance for the fiscal years ended May 31, 2020 and 2019. Our continuing practice is to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We do not expect our unrecognized tax benefits to change significantly over the next twelve months. |
9. Commitments and Contingencie
9. Commitments and Contingencies | 12 Months Ended |
May 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 9. Commitments and Contingencies Patent Litigation We, TPL, and PDS (collectively referred to as “Plaintiffs”) were Plaintiffs in proceedings in the U.S. District Court for the Northern District of California where the Plaintiffs allege infringement of the US 5,809,336 patent (the “‘336 patent”) by: Huawei Technologies Co. Ltd., LG Electronics, Nintendo Co. Ltd., Samsung Electronics Co. Ltd., and ZTE Corporation (collectively referred to as the “Defendants”). This litigation was proceeding in front of District Court Judge Vince Chhabria. These proceedings relate to the proceedings filed by the Plaintiffs in February 2008 in the U.S. District Court for the Northern District of California alleging infringement of the US 5,440,749 patent (the “‘749 patent”), the US 5,530,890 patent (the “‘890 patent”) and the ‘336 patent against Amazon.com Inc., Barnes & Noble Inc., Garmin Ltd., Huawei Technologies Co. Ltd., Kyocera Corporation, LG Electronics, Nintendo Co. Ltd., Novatel Wireless Inc., Samsung Electronics Co. Ltd., Sierra Wireless Inc., and ZTE Corporation. We have settled with all defendants except those named in the first paragraph to this footnote. On September 18, 2015, a Markman hearing was held before U.S. Magistrate Judge Grewal and, on September 22, 2015, he issued a claim construction report and recommendation. On September 25, 2015, as a result of the claim construction report and recommendation, Plaintiffs and defendants, with the exception of Huawei Technologies Co. Ltd., (“Huawei”) agreed to stay all proceedings pending resolution of Plaintiffs’ objections to the claim construction report and recommendation. Plaintiffs further stipulated that, under the claim construction provided by the report and recommendation, defendants’ products do not infringe the ‘336 patent, and, in the event that the Court does not materially modify the claim construction, Plaintiffs and defendants ask that the Court enter a final judgment of non-infringement. After Plaintiffs and Huawei filed opposing letter briefs with the Court, U.S. Magistrate Judge Grewal stayed the action against Huawei pending resolution of Plaintiffs’ objections to the claim construction. On October 6, 2015, Plaintiffs filed objections to the claim construction with District Court Judge Chhabria. Judge Chhabria rejected those objections on November 9, 2015. Based on that order, the parties stipulated to a judgment of non-infringement as to the ‘336 patent and such judgment was entered on November 13, 2015. On December 7, 2015, Plaintiffs filed notices of appeal with the U.S. Federal Circuit appealing the district court’s claim construction. Plaintiffs filed their opening appellate brief on March 10, 2016. Defendants filed their response brief on May 23, 2016, with Plaintiffs filing their reply brief on June 23, 2016. On March 3, 2017, the U.S. Court of Appeals for the Federal Circuit rendered its decision modifying the claim construction that was issued in September 2016 by the U.S. District Court for the Northern District of California and has remanded the matter to the District Court for further proceedings. On May 23, 2017, a case management conference was held in front of District Court Judge Chhabria, who ordered that Plaintiffs amend their infringement contentions on or before June 16, 2017. Judge Chhabria further ordered that Defendants submit any motion for summary judgment based on the amended infringement contentions and the modified claim construction by August 1, 2017. On June 5, 2017, the law firm of Banys, P.C., who had served as local counsel for PDS, withdrew as counsel. PDS continued to be represented by the law firm of Nelson Bumgardner, P.C. On June 16, 2017, Plaintiffs timely amended their infringement contentions. On July 13, 2017, all remaining counsel for each of Patriot, TPL, and PDS moved to withdraw as counsel and further moved to extend all currently pending case deadlines by 60 days for Plaintiffs to seek new counsel. On September 13, 2017, the law firm of Bunsow De Mory LLP was entered before the U.S. District Court for the Northern District of California as successor counsel in representation of Patriot, PDS, and TPL. The Defendants moved for summary judgment of non-infringement on September 29, 2017, and the Court held a hearing on Defendants’ motion on November 30, 2017. The Court granted Defendants’ motion and entered judgment of non-infringement on December 13, 2017. Defendant Samsung submitted a bill of costs seeking $30,170 in taxable costs in the underlying district court proceedings; Plaintiffs filed an objection to significant portions of that request. On March 1, 2018, the Clerk of the District Court taxed costs in the amount $829. Plaintiffs filed notices of appeal in these district court matters on January 5, 2018. The appeals were docketed and consolidated under lead case No. 18-1439, captioned as Technology Properties Limited v. Huawei Technologies Co., Ltd in the United States Court of Appeals for the Federal Circuit. Oral argument proceeded on February 4, 2019. The Court affirmed the lower court’s determination without written opinion pursuant to Federal Circuit Rule 36 on February 6, 2019. Plaintiffs filed a Petition for Rehearing En Banc on March 8, 2019 which was denied by the Court on April 10, 2019. On September 6, 2019, Plaintiffs filed a petition for a writ of certiorari with the Supreme Court of the United States as a result of the United States Court of Appeals outcome. On November 4, 2019, the Supreme Court of the United States denied our petition for a writ of certiorari with respect to patent litigation previously before the United States Court of Appeals for the Federal Circuit that alleged infringement of the ‘336 patent against the Defendants (see Note 1). Employment Contract In connection with Cliff Flowers’ appointment as the Chief Financial Officer of the Company, and commencing on September 17, 2007, we entered into an employment agreement with Mr. Flowers for an initial 120-day term if not terminated pursuant to the agreement, with an extension period of one year and on a continuing basis thereafter. On December 30, 2016, we entered into an amended and restated employment agreement with Mr. Flowers. Pursuant to the amended December 30, 2016 agreement, if Mr. Flowers was terminated without cause or resigns with good reason any time after two years of continuous employment, he was entitled to receive an amount equal to 1.25 times his annual base salary. Mr. Flowers was also entitled to certain payments upon a change of control of the Company if the surviving corporation did not retain him. All such payments were conditional upon the execution of a general release. On October 1, 2019, Mr. Flowers and the Company signed a Separation Agreement and General Release of all Claims (“Separation Agreement”). Pursuant to the Separation Agreement, Mr. Flowers resigned on September 30, 2019 and agreed to severance compensation of $327,750 in lieu if any amounts owed under his amended and restated employment agreement, payable in seven equal monthly installments commencing October 30, 2019. As of May 31, 2020, all amounts have been paid to Mr. Flowers. There were no known disagreements with Mr. Flowers regarding our operations, policies or practices. The Board appointed Carlton M. Johnson to assume all management roles on an interim basis. Guarantees and Indemnities We have made certain guarantees and indemnities, under which we may be required to make payments to a guaranteed or indemnified party. We indemnify our directors, officers, employees, consultants and other agents to the maximum extent permitted under the laws of the State of Delaware. The duration of the guarantees and indemnities varies, and in many cases is indefinite. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments we could be obligated to make. Historically, we have not been obligated to make any payments for these obligations and no liabilities have been recorded for these guarantees and indemnities in the accompanying consolidated balance sheets. Escrow Shares On August 31, 2009, we gave notice to the former shareholders of Crossflo and Union Bank of California (the “Escrow Agent”) under Section 2.5 of the Agreement and Plan of Merger between us and Crossflo (the “Agreement”), outlining damages incurred by us in conjunction with the acquisition of Crossflo, and seeking the return of 2,844,630 shares of our common stock held by the Escrow Agent. Subsequently, former shareholders of Crossflo representing a majority of the escrowed shares responded in protest to our claim, delaying the release of the escrowed shares until a formal resolution is reached. In the event we fail to prevail in our claim against the escrowed shares, we may be obligated to deposit into escrow approximately $256,000 of cash consideration due to the decline in our average stock price over the one-year escrow period, calculated in accordance with the Section 2.5 of the Agreement. We have evaluated the potential for loss regarding our claim and believe that it is probable that the resolution of this issue will not result in a material obligation to the Company, although there is no assurance of this. Accordingly, we have not recorded a liability for this matter. Operating Lease Our current facility operating lease is on a month to month basis. Rent expense for fiscal years ended May 31, 2020 and 2019 was $9,300 and $9,320, respectively. |
10. Subsequent Events
10. Subsequent Events | 12 Months Ended |
May 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 10. Subsequent Events On August 19, 2020, Patriot Scientific Corporation (referred to as “Parent” in the transaction), entered into a stock purchase agreement (the “Stock Purchase Agreement”) among Parent, PTSC Sub One Inc., a Delaware corporation (as “Buyer” and together with the Parent, the “Buyer Parties”), Mosaic ImmunoEngineering Inc., a Delaware corporation (the “Target”), certain stockholders of the Target set for therein (as “Sellers”), and Steven King (as the “Sellers’ Representative” and together with the Target and Sellers, the “Seller Parties”) pursuant to which, Buyer will buy from Sellers 630,000 shares of its Class A common stock (“Class A Stock”), par value $0.0001 per share, and 70,000 shares of its Class B common stock (“Class B Stock”), par value $0.0001 per share, together the Class A Stock and Class B Stock shall collectively be referred to as “Target Common Stock”, representing 100% of the issued and outstanding common stock of the Target as of August 19, 2020. Upon closing, in exchange for the Target Common Stock, the holders of the Class A Stock shall receive 630,000 shares of the Parent’s preferred stock to be designated Series A Convertible Preferred Stock (“Series A Preferred”) and holders of the Class B Stock shall receive 70,000 shares of the Parent’s preferred stock to be designated Series B Convertible Preferred Stock (“Series B Preferred”). Each share of the Series A Preferred; shall (a) convert into 5,097.053 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, and (c) have no dividend rate. Each share of the Series B Preferred; shall (a) convert into 5,734.185 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, (c) have no dividend rate, and (d) shall possess certain anti-dilution protections as defined in the Series B Certificate of Designations. On a fully diluted, as converted basis, the Sellers shall own 90% of the issued and outstanding common stock of the Parent. Mr. Steven King, an affiliate of Artius (Note 1), is a founder of Mosaic ImmunoEngineering Inc. and owns 161,000 shares of Class A Stock of Sellers. The Company’s new line of business will focus on biotechnology and the bridging of immunology and engineering to develop novel immunotherapies to treat and prevent cancer and infectious diseases. The technology has broad potential for the treatment of many different types of cancer and the lead product candidates are supported by numerous research publications and university grant funding. We have evaluated subsequent events after the consolidated balance sheet date and through the filing date of this Annual Report, and based on our evaluation, management has determined that no subsequent events have occurred that would require recognition in the accompanying consolidated financial statements or disclosure in the notes thereto other than as disclosed in the accompanying notes. |
2. Summary of Significant Acc_2
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
May 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Consolidation | Basis of Consolidation The consolidated balance sheets at May 31, 2020 and 2019 and consolidated statements of operations for the fiscal years ended May 31, 2020 and 2019 include our accounts and those of our wholly owned and inactive subsidiary PDSG which includes Crossflo Systems, Inc. (“Crossflo”). All significant intercompany accounts and transactions have been eliminated. |
Financial Instruments and Concentrations of Credit Risk | Financial Instruments and Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash, cash equivalents, and investments in marketable securities. We invest our cash and cash equivalents primarily in money market funds and certificates of deposit. Cash and cash equivalents are maintained with high quality financial institutions, the composition and maturities of which are regularly monitored by management. At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation. We perform ongoing evaluations of these financial institutions to limit our concentration of risk exposure. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Our financial instruments consist principally of cash and cash equivalents, investments in marketable securities, accounts payable and accrued expenses and other. The carrying value of these financial instruments approximates fair value because of the immediate or short-term maturity of the instruments. The fair value of certain of our cash equivalents is determined based on quoted prices in active markets for identical assets or Level 1 inputs. The fair value of our investments in certificates of deposit is determined based on quoted prices in non-active markets for identical assets or Level 2 inputs. We believe that the carrying values of all other financial instruments approximate their current fair values due to their nature and respective durations. |
Cash Equivalents, Restricted Cash, and Marketable Securities | Cash Equivalents, Restricted Cash, and Marketable Securities We consider all highly liquid investments acquired with a maturity of three months or less from the purchase date to be cash equivalents. Restricted cash and cash equivalents at May 31, 2020 is comprised of amounts previously held by a third party in conjunction with the Company’s acquisition of Crossflo. Restricted cash and cash equivalents at May 31, 2019 consist of a savings account held as collateral for our corporate credit card account plus amounts previously held by a third party in conjunction with the Company’s acquisition of Crossflo. |
Investments in Marketable Securities | Investments in Marketable Securities We determine the appropriate classification of our investments at the time of purchase and reevaluate such designation at each balance sheet date. Our investments in marketable securities have been classified and accounted for as held-to-maturity based on management’s investment intentions relating to these securities. Held-to-maturity marketable securities are stated at amortized cost which approximates fair value. We follow the authoritative guidance to assess whether our investments with unrealized loss positions are other than temporarily impaired. Realized gains and losses and declines in fair value judged to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations. |
Property, Equipment and Depreciation | Property, Equipment and Depreciation Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from three to five years. Repairs and maintenance are charged to expense when incurred. |
Investment in Affiliated Companies | Investment in Affiliated Companies We have a 50% ownership interest in PDS. We account for our investment using the equity method of accounting since the investment provides us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s Board of Directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize our share of net earnings or losses of the investee and is recognized in the consolidated statements of operations in the caption “Equity in earnings (loss) of affiliated company” and also is adjusted by contributions to and distributions from PDS. PDS, as an unconsolidated equity investee, recognizes revenue from technology license agreements at the time a contract is entered into, the license method is determined (paid-in-advance or on-going royalty), performance obligations under the license agreement are satisfied, and the realization of revenue is assured which is generally upon the receipt of the license proceeds. PDS may at times enter into license agreements whereby contingent revenues are recognized as one or more contractual milestones are met. We review our investment in PDS to determine whether events or changes in circumstances indicate that the carrying amount may not be recoverable. The primary factors we consider in our determination are the financial condition, operating performance and near term prospects of PDS. If the decline in value is deemed to be other than temporary, we would recognize an impairment loss. We own 100% of the preferred stock of Holocom (see Note 5). Prior to impairment, this investment was accounted for at cost since we do not have the ability to exercise significant influence over the operating and financial policies of Holocom. |
Treasury Stock | Treasury Stock We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity. |
Income Taxes | Income Taxes We follow authoritative guidance in accounting for uncertainties in income taxes. This authoritative guidance prescribes a recognition threshold and measurement requirement for the financial statement recognition of a tax position that has been taken or is expected to be taken on a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under this guidance we may only recognize tax positions that meet a “more likely than not” threshold. We follow authoritative guidance to evaluate whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. We assess our deferred tax assets annually under more likely than not scenarios in which they may be realized through future income. We have determined that it was more likely than not that all of our deferred tax assets will not be realized in the future due to our continuing pre-tax and taxable losses. As a result of this determination, we have recorded a full valuation allowance against our deferred tax assets. |
Assessment of Contingent Liabilities | Assessment of Contingent Liabilities We may be involved in various legal matters, disputes, and patent infringement claims which arise in the ordinary course of our business. We accrue for any estimated losses at the time when we can make a reliable estimate of such loss and it is probable that it has been incurred. By their very nature, contingencies are difficult to estimate. We continually evaluate information related to all contingencies to determine that the basis on which we have recorded our estimated exposure is appropriate. |
Income (Loss) Per Share | Income (Loss) Per Share Basic income (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. For the fiscal year ended May 31, 2019, potential common shares of 1,600,000 related to our outstanding options were not included in the calculation of diluted loss per share as we recorded a net loss. Had we reported net income for the year ended May 31, 2019, no shares of common stock would have been included in the calculation of diluted income per share using the treasury stock method. There were no outstanding options as of May 31, 2020. In connection with our acquisition of Crossflo, which became a part of PDSG, we issued 2,844,630 escrow shares that are contingent upon certain representations and warranties made by Crossflo at the time of the merger agreement (see Note 9). We exclude these escrow shares from the basic income (loss) per share calculations and would have included the escrowed shares in the diluted income per share calculations if we reported net income. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying footnotes. Actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including, but not limited to, fair values of investments in marketable securities, the use, recoverability, and /or realizability of certain assets, including investments in affiliated companies, and deferred tax assets. |
Intellectual Property Rights | Intellectual Property Rights PDS historically relied on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We have seven U.S., nine European, and three Japanese patents all of which expired between August 2009 and October 4, 2016. On November 4, 2019, the Supreme Court of the United States denied our application to review a lower court’s decision that was adverse to our patents. As result of this denial to review the lower court’s decision, our patented microprocessor technologies are no longer enforceable, and we have no other options to appeal the lower court’s adverse decision. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 provides guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The issue addressed in ASU 2016-15 that will affect the Company is classifying distributions received from equity method investments. The guidance provides an accounting policy election for classifying distributions received from equity method investments using either a cumulative earnings approach or a nature of distributions approach. The Company adopted this standard on June 1, 2018. The adoption did not have a material effect on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard on June 1, 2018 by using the retrospective transition method, which required the following disclosures and changes to the presentation of its consolidated financial statements: cash, cash equivalents and restricted cash reported on the consolidated statements of cash flows now includes restricted cash of $198,843 as of May 31, 2019, as well as previously reported cash and cash equivalents. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income and simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. The accounting standard update also updates certain presentation and disclosure requirements. The Company adopted ASU 2016-01 during the fiscal year ended May 31, 2019. Implementation of this guidance did not have a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, as amended ("ASC 842"), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. ASU 2018-13 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The Company adopted ASC 842 effective June 1, 2019 using a modified retrospective method and will not restate comparative periods. As permitted under the transition guidance, the Company will carry forward the assessment of whether its contracts contain or are leases, classification of its leases and remaining lease terms. Implementation of this guidance did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which removes, modifies, and adds various disclosure requirements on fair value measurements in Topic 820. ASU 2018-13 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this update and delay adoption of the additional disclosures until their effective date. The Company does not expect a significant impact from adopting this update on its consolidated financial statements. |
3. Cash, Cash Equivalents, Re_2
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities (Tables) | 12 Months Ended |
May 31, 2020 | |
Cash and Cash Equivalents [Abstract] | |
Schedule of fair value of cash, cash equivalents and investments in marketable securities | The following tables detail the fair value measurements within the fair value hierarchy of our cash, cash equivalents and investments in marketable securities: Fair Value Measurements at May 31, 2020 Using Fair Value at Quoted Prices Significant Other Significant Cash and cash equivalents: Cash $ 571,921 $ 571,921 $ – $ – Restricted cash and cash equivalents 177,247 177,247 – – Total $ 749,168 $ 749,168 $ – $ – Fair Value Measurements at May 31, 2019 Using Fair Value at Quoted Prices Significant Other Significant Cash and cash equivalents: Cash $ 49,149 $ 49,149 $ – $ – Money market funds 237,937 237,937 – – Certificates of deposit 500,000 – 500,000 – Restricted cash and cash equivalents 198,843 198,843 – – Investments in marketable securities: Certificates of deposit 750,000 – 750,000 – Total $ 1,735,929 $ 485,929 $ 1,250,000 $ – |
Schedule of maturities, gross unrealized gains or losses and fair value of certificates of deposit | We purchase certificates of deposit with varying maturity dates. The following table summarizes the purchase date maturities, gross unrealized gains or losses and fair value of the certificates of deposit as of May 31, 2019: May 31, 2019 Cost Gross Unrealized Fair Maturity Due in three months or less $ 500,000 $ – $ 500,000 Due in greater than three months 750,000 – 750,000 Total $ 1,250,000 $ – $ 1,250,000 |
4. Property and Equipment (Tabl
4. Property and Equipment (Tables) | 12 Months Ended |
May 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consisted of the following at May 31, 2020 and 2019: 2020 2019 Computer equipment and software $ 9,082 $ 9,082 Furniture and fixtures 3,147 3,147 12,229 12,229 Less: accumulated depreciation (11,903 ) (11,415 ) Net property and equipment $ 326 $ 814 |
5. Investment in Affiliated C_2
5. Investment in Affiliated Company (Tables) | 12 Months Ended |
May 31, 2020 | |
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | |
Balance Sheets of Affiliates | PDS’s balance sheets at May 31, 2020 and 2019 and statements of operations for the years ended May 31, 2020 and 2019 are as follows: Balance Sheets Assets: 2020 2019 Cash $ 68,531 $ 237,655 Total assets $ 68,531 $ 237,655 Liabilities and Members’ Equity: 2020 2019 Payables $ 2,763 $ 21,933 Members’ equity 65,768 215,722 Total liabilities and members’ equity $ 68,531 $ 237,655 Statements of Operations 2020 2019 Expenses $ 149,154 $ 182,223 Loss before provision for income taxes and foreign taxes (149,154 ) (182,223 ) Provision for income taxes and foreign taxes 800 800 Net loss $ (149,954 ) $ (183,023 ) |
6. Accrued Expenses and Other (
6. Accrued Expenses and Other (Tables) | 12 Months Ended |
May 31, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other | At May 31, 2020 and 2019, accrued expenses and other consisted of the following: 2020 2019 Crossflo acquisition liability $ 177,244 $ 177,244 Compensation and benefits 2,907 42,100 Total $ 180,151 $ 219,344 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 12 Months Ended |
May 31, 2020 | |
Equity [Abstract] | |
Schedule of Stock Options Activity | A summary of option activity for the fiscal year ended May 31, 2020 is presented below: Shares Weighted Weighted Aggregate Options outstanding at June 1, 2019 1,600,000 $ 0.03 – – Options granted – – – – Options exercised – – – – Options forfeited/expired (1,600,000 ) 0.03 – – Options outstanding at May 31, 2020 – $ – – $ – Options vested and expected to vest at May 31, 2020 – $ – – $ – Options exercisable at May 31, 2020 – $ – – $ – |
8. Income Taxes (Tables)
8. Income Taxes (Tables) | 12 Months Ended |
May 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of provisions for income taxes | The provision (benefit) for income taxes is as follows for the years ended May 31: 2020 2019 Current: Federal $ (26,078 ) $ (26,078 ) State 1,600 1,600 Total current (24,478 ) (24,478 ) Deferred: Federal 26,078 26,078 State – – Total deferred 26,078 26,078 Total provision $ 1,600 $ 1,600 |
Schedule of effective income tax rate | The reconciliation of the effective income tax rate to the Federal statutory rate is as follows for the years ended May 31: 2020 2019 Statutory federal income tax rate 21.00 % 21.00 % State income tax rate, net of Federal effect (0.12 )% (0.16 )% Stock option expense (0.69 )% (1.77 )% Other – (0.04 )% Change in valuation allowance (20.34 )% (19.23 )% Effective income tax rate (0.15 )% (0.20 )% |
Schedule of deferred tax assets and liabilities | Significant components of our deferred tax assets are as follows as of May 31: 2020 2019 Deferred tax assets (liabilities): State taxes $ 336 $ 336 Accrued expenses (397 ) 9,570 Investment in affiliated company 442,065 442,065 Basis difference in property and equipment (72 ) (92 ) Stock based compensation expense – 10,315 Impairment of note receivable 231,180 231,180 Capital loss carryover – 104 Net operating loss carryforwards 7,691,740 7,330,976 Credit carryover 31,552 83,708 Valuation allowance (8,396,404 ) (8,082,084 ) Net deferred tax asset $ – $ 26,078 |
1. Organization and Business (D
1. Organization and Business (Details Narrative) - USD ($) | May 31, 2020 | May 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated deficit | $ (62,186,553) | $ (61,126,025) |
Cash and cash equivalents | 571,921 | $ 787,086 |
Working capital | $ 602,813 |
2. Summary of Significant Acc_3
2. Summary of Significant Accounting Policies (Details Narrative) - shares | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Estimated life of Property, Equipment | 3-5 years | |
Crossflo [Member] | ||
Shares held in escrow | 2,844,630 | |
Options [Member] | ||
Antidilutive shares | 0 | 1,600,000 |
PDS [Member] | ||
Percentage of investment in affiliated company | 50.00% |
3. Cash, Cash Equivalents, Re_3
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities (Details - Fair Value) - USD ($) | May 31, 2020 | May 31, 2019 |
Fair value of assets | $ 749,168 | $ 1,735,929 |
Cash [Member] | ||
Fair value of assets | 571,921 | 49,149 |
Restricted Cash and Cash Equivalents [Member] | ||
Fair value of assets | 177,247 | 198,843 |
Money Market Funds [Member] | ||
Fair value of assets | 237,937 | |
Certificates of Deposit [Member] | ||
Fair value of assets | 500,000 | |
Marketable Securities: Certificates of Deposits [Member] | ||
Fair value of assets | 750,000 | |
Fair Value Inputs Level 1 | ||
Fair value of assets | 749,168 | 485,929 |
Fair Value Inputs Level 1 | Cash [Member] | ||
Fair value of assets | 571,921 | 49,149 |
Fair Value Inputs Level 1 | Restricted Cash and Cash Equivalents [Member] | ||
Fair value of assets | 177,247 | 198,843 |
Fair Value Inputs Level 1 | Money Market Funds [Member] | ||
Fair value of assets | 237,937 | |
Fair Value Inputs Level 1 | Certificates of Deposit [Member] | ||
Fair value of assets | 0 | |
Fair Value Inputs Level 1 | Marketable Securities: Certificates of Deposits [Member] | ||
Fair value of assets | 0 | |
Fair Value Inputs Level 2 | ||
Fair value of assets | 0 | 1,250,000 |
Fair Value Inputs Level 2 | Cash [Member] | ||
Fair value of assets | 0 | 0 |
Fair Value Inputs Level 2 | Restricted Cash and Cash Equivalents [Member] | ||
Fair value of assets | 0 | 0 |
Fair Value Inputs Level 2 | Money Market Funds [Member] | ||
Fair value of assets | 0 | |
Fair Value Inputs Level 2 | Certificates of Deposit [Member] | ||
Fair value of assets | 500,000 | |
Fair Value Inputs Level 2 | Marketable Securities: Certificates of Deposits [Member] | ||
Fair value of assets | 750,000 | |
Fair Value Inputs Level 3 | ||
Fair value of assets | 0 | 0 |
Fair Value Inputs Level 3 | Cash [Member] | ||
Fair value of assets | 0 | 0 |
Fair Value Inputs Level 3 | Restricted Cash and Cash Equivalents [Member] | ||
Fair value of assets | $ 0 | 0 |
Fair Value Inputs Level 3 | Money Market Funds [Member] | ||
Fair value of assets | 0 | |
Fair Value Inputs Level 3 | Certificates of Deposit [Member] | ||
Fair value of assets | 0 | |
Fair Value Inputs Level 3 | Marketable Securities: Certificates of Deposits [Member] | ||
Fair value of assets | $ 0 |
3. Cash, Cash Equivalents, Re_4
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities (Details - Maturities) | May 31, 2019USD ($) |
Cost | $ 1,250,000 |
Gross Unrealized Gains/(Losses) | 0 |
Total fair value of investment | 1,250,000 |
Due in three months or less | |
Cost | 500,000 |
Gross Unrealized Gains/(Losses) | 0 |
Total fair value of investment | 500,000 |
Due in greater than three months [Member] | |
Cost | 750,000 |
Gross Unrealized Gains/(Losses) | 0 |
Total fair value of investment | $ 750,000 |
4. Property and Equipment (Deta
4. Property and Equipment (Details) - USD ($) | May 31, 2020 | May 31, 2019 |
Property and Equipment, Gross | $ 12,229 | $ 12,229 |
Less: accumulated depreciation | (11,903) | (11,415) |
Net property and equipment | 326 | 814 |
Computer equipment and software | ||
Property and Equipment, Gross | 9,082 | 9,082 |
Furniture and Fixtures | ||
Property and Equipment, Gross | $ 3,147 | $ 3,147 |
4. Property and Equipment (De_2
4. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 488 | $ 489 |
5. Investment in Affiliated C_3
5. Investment in Affiliated Company (Details - balance sheet) - PDS [Member] - USD ($) | May 31, 2020 | May 31, 2019 |
Cash | $ 68,531 | $ 237,655 |
Total assets | 68,531 | 237,655 |
Payables | 2,763 | 21,933 |
Members' equity | 65,768 | 215,722 |
Total liabilities and members' equity | $ 68,531 | $ 237,655 |
Joint venture ownership percentage | 50.00% |
5. Investment in Affiliated C_4
5. Investment in Affiliated Company (Details - Statements of Operations) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Provision for income taxes and foreign taxes | $ 1,600 | $ 1,600 |
PDS [Member] | ||
Expenses | 149,154 | 182,223 |
Loss before provision for income taxes and foreign taxes | (149,154) | (182,223) |
Provision for income taxes and foreign taxes | 800 | 800 |
Net loss | $ (149,954) | $ (183,023) |
5. Investment in Affiliated C_5
5. Investment in Affiliated Company (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Investment in affiliated company | $ 32,884 | $ 107,861 |
PDS [Member] | ||
Equity interest percentage | 50.00% | |
Increase (decrease) in investment | $ (74,977) | (91,512) |
Holocom [Member] | ||
Equity interest percentage | 46.00% | |
Investment in affiliated company | $ 0 | $ 0 |
Holocom [Member] | Preferred Stock [Member] | ||
Equity shares owned | 2,100,000 |
6. Accrued Expenses and Other_2
6. Accrued Expenses and Other (Details) - USD ($) | May 31, 2020 | May 31, 2019 |
Payables and Accruals [Abstract] | ||
Crossflo acquisition liability | $ 177,244 | $ 177,244 |
Compensation and benefits | 2,907 | 42,100 |
Accrued expenses | $ 180,151 | $ 219,344 |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details - Option activity) - Options [Member] | 12 Months Ended |
May 31, 2020USD ($)$ / sharesshares | |
Number of Options | |
Number of Options Outstanding, Beginning | shares | 1,600,000 |
Number of Options Granted | shares | 0 |
Number of Options Exercised | shares | 0 |
Number of Options Forfeited/Expired | shares | (1,600,000) |
Number of Options Outstanding, Ending | shares | 0 |
Options vested and expected to vest, Ending | shares | 0 |
Number of Options Exercisable, Ending | shares | 0 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 0.03 |
Weighted Average Exercise Price Granted | $ / shares | |
Weighted Average Exercise Price Exercised | $ / shares | |
Weighted Average Exercise Price Forfeited/Expired | $ / shares | 0.03 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | |
Weighted Average Exercise Price, Options vested and expected to vest, Ending | $ / shares | |
Weighted Average Exercise Price Exercisable | $ / shares | |
Aggregate Intrinsic Value | |
Aggregate Intrinsic Value Outstanding, Beginning | $ | $ 0 |
Aggregate Intrinsic Value Outstanding, Ending | $ | 0 |
Aggregate Intrinsic Value Options vested and expected to vest | $ | 0 |
Aggregate Intrinsic Value Exercisable | $ | $ 0 |
7. Stockholders' Equity (Deta_2
7. Stockholders' Equity (Details Narrative) - shares | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Equity [Abstract] | ||
Shares repurchased | 0 | 0 |
Options authorized under the plan | 10,000,000 |
8. Income Taxes (Details - Prov
8. Income Taxes (Details - Provision) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Current: | ||
Federal | $ (26,078) | $ (26,078) |
State | 1,600 | 1,600 |
Total current | (24,478) | (24,478) |
Deferred: | ||
Federal | 26,078 | 26,078 |
State | 0 | 0 |
Total deferred | 26,078 | 26,078 |
Total provision | $ 1,600 | $ 1,600 |
8. Income Taxes (Details - Reco
8. Income Taxes (Details - Reconcilation) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Statutory federal income tax rate | 21.00% | 21.00% |
State income tax rate, net of Federal effect | (0.12%) | (0.16%) |
Stock option expense | (0.69%) | (1.77%) |
Other | 0.00% | (0.04%) |
Change in valuation allowance | (20.34%) | (19.23%) |
Effective income tax rate | (0.15%) | (0.20%) |
8. Income Taxes (Details - Defe
8. Income Taxes (Details - Deferred tax assets) - USD ($) | May 31, 2020 | May 31, 2019 |
Deferred tax assets (liabilities): | ||
State taxes | $ 336 | $ 336 |
Accrued expenses | (397) | |
Accrued expenses | 9,570 | |
Investment in affiliated company | 442,065 | 442,065 |
Basis difference in property and equipment | (72) | (92) |
Stock based compensation expense | 0 | 10,315 |
Impairment of note receivable | 231,180 | 231,180 |
Capital loss carryover | 0 | 104 |
Net operating loss carryforwards | 7,691,740 | 7,330,976 |
Credit carryover | 31,552 | 83,708 |
Valuation allowance | (8,396,404) | (8,082,084) |
Net deferred tax asset | $ 0 | $ 26,078 |
8. Income Taxes (Details Narrat
8. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Refundable alternative minimum tax credits | $ 26,078 | $ 52,156 |
Federal [Member] | ||
Operating loss carryforwards | $ 27,239,000 | |
Operating loss carryforwards, expiration date | May 31, 2025 | |
State [Member] | ||
Operating loss carryforwards | $ 22,303,000 | |
Operating loss carryforwards, expiration date | May 31, 2028 |
9. Commitments and Contingenc_2
9. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rental expense | $ 9,300 | $ 9,320 |