Income Taxes

12 Months Ended

Jul. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 10 – Income Taxes:

The Company has incurred losses since inception, which have generated net operating loss (“NOL”) carryforwards. The NOL carryforwards arise from both United States and Canadian sources. Pre-tax (loss) arising from domestic operations (United States) were ($34,291,142) and ($10,680,333) for the years ended July 31, 2020 and 2019, respectively. Pre-tax profits (losses) arising from foreign operations (Canada) were $59,049 and ($326,461) for the years ended July 31, 2020 and 2019, respectively.

As of July 31, 2020, the Company has NOL carryforwards in Generex Biotechnology Corporation of approximately $215.9 million, which expire in 2021 through 2038, and $27.5 million will not expire. Generex Pharmaceuticals Inc. has NOL carryforwards of approximately $34.4 million, which expire in 2024 through 2040. NGIO has NOL carryforwards of approximately $35.7 million which expire in 2021 through 2038. Regentys Corporation has NOL carryforwards of approximately $6.5 million of which $5.0 million will expire 2033 through 2038. Olaregen Therapeutics, Inc. has NOL carryforwards of $3.9 million which will not expire. Veneto has NOL carryforwards of $10.1 million which will not expire. Some of these loss carryforwards are subject to limitation due to the acquisition of Regentys, Olaregen, Veneto and NGIO and may be limited in future years due to certain structural ownership changes which have occurred over the last several years related to the Company’s equity and convertible debenture financing transactions.

For the years ended July 31, 2020 and 2019, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses and other temporary differences for which no benefit was recorded.

Deferred income taxes consist of the following: 

	July 31,
	2020			2019
Net operating loss carryforwards	$	67,782,365		$	64,308,679
Accrued Expenses		2,398,682			1,090,537
Other temporary differences		1,054,768			721,653
Intangible assets		1,793,382			2,173,419
Total Deferred Tax Assets		73,029,197			68,294,288
Valuation Allowance		(73,029,197	)		(68,294,288
Total Deferred Tax Liabilities		—			—
Net Deferred Income Taxes	$	—		$	—

The valuation allowance for deferred tax assets as of July 31, 2020 and 2019 was $73,029,000 and $68,294,000. The net change in the total valuation allowance for the years ended July 31, 2020 and 2019 was an increase of $4,735,000 and $6,581,000, respectively. 

A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the years ended July 31, 2020 and 2019 is as follows:  

	July 31,
	2020			2019
Federal statutory rate		(21.0	)%		(21.0	)%
Increase (decrease) in income taxes resulting from:
Change in fair value of purchase consideration		3.2			(40.2	)
Expiration of net operating loss carryforward					9.9
Impairment of long-lived assets		3.3			—
Other		0.7			2.4
Change in valuation allowance		13.8			48.9
Effective tax rate		—	%		—	%

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES Act, but due to sustained losses, the NOL carryback provision of the CARES Act would not yield a benefit to us.

As of July 31, 2020, the Company had no tax benefits which have not been fully allowed for, and no adjustment to its financial position, results of operations or cash flows was required. The Company does not expect that unrecognized tax benefits will increase within the next twelve months. The Company records interest and penalties related to tax matters within other expense on the accompanying consolidated statement of operations. These amounts are not material to the consolidated financial statements for the years presented. Generally, tax years 2017 to 2020 remain open to examination by the Internal Revenue Agency or other tax jurisdictions to which the Company is subject. The Company’s Canadian tax returns are subject to examination by federal and provincial taxing authorities in Canada. Generally, tax years 2012 to 2020 remain open to examination by the Canada Revenue Agency or other tax jurisdictions to which the Company is subject.