Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
May. 31, 2015 | Aug. 24, 2015 | Nov. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | PATRIOT SCIENTIFIC CORP | ||
Entity Central Index Key | 836,564 | ||
Document Type | 10-K | ||
Document Period End Date | May 31, 2015 | ||
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 | Smaller Reporting Company | ||
Entity Public Float | $ 15,993,650 | ||
Entity Common Stock, Shares Outstanding | 401,392,948 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | May. 31, 2015 | May. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 2,679,360 | $ 4,716,208 |
Restricted cash and cash equivalents | 21,229 | 21,123 |
Marketable securities | 2,455,106 | 1,701,647 |
Prepaid income tax | 4,785 | 0 |
Prepaid expenses and other current assets | 15,582 | 203,146 |
Current assets of discontinued operations | 0 | 57,477 |
Total current assets | 5,176,062 | 6,699,601 |
Property and equipment, net | 2,440 | 2,775 |
Other assets | 3,036 | 3,036 |
Investment in affiliated company | 0 | 95,981 |
Total assets | 5,181,538 | 6,801,393 |
Current liabilities: | ||
Accounts payable | 38,459 | 224,059 |
Accrued expenses and other | 57,305 | 62,485 |
Income tax payable | 0 | 3,599 |
Total current liabilities | 95,764 | 290,143 |
Cumulative losses in excess of investment in affiliated company | 69,342 | 0 |
Total liabilities | $ 165,106 | $ 290,143 |
Commitments and contingencies | ||
Stockholders' equity | ||
Preferred stock, $0.00001 par value; 5,000,000 shares authorized: none outstanding | $ 0 | $ 0 |
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, 2015 and 2014 | 4,382 | 4,382 |
Additional paid-in capital | 77,444,062 | 77,400,852 |
Accumulated deficit | (57,806,144) | (56,268,116) |
Common stock held in treasury, at cost - 36,849,670 shares at May 31, 2015 and 2014 | (14,625,868) | (14,625,868) |
Total stockholders' equity | 5,016,432 | 6,511,250 |
Total liabilities and stockholders' equity | $ 5,181,538 | $ 6,801,393 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | May. 31, 2015 | May. 31, 2014 |
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, 2015 | May. 31, 2014 | |
Operating expenses: | ||
Selling, general and administrative | $ 1,437,802 | $ 1,660,090 |
Total operating expenses | 1,437,802 | 1,660,090 |
Other income (expense): | ||
Interest income | 10,080 | 5,832 |
Other income | 60 | 0 |
Realized loss on marketable securities | 0 | (347) |
Equity in earnings (loss) of affiliated company | (106,923) | 104,677 |
Total other income (expense), net | (96,783) | 110,162 |
Loss from continuing operations before income taxes | (1,534,585) | (1,549,928) |
Provision for income taxes | 1,570 | 5,999 |
Loss from continuing operations | (1,536,155) | (1,555,927) |
Income (loss) from discontinued operations, net | (1,873) | 89,060 |
Net loss | $ (1,538,028) | $ (1,466,867) |
Basic and diluted income (loss) per common share: | ||
Loss from continuing operations | $ 0 | $ 0 |
Income (loss) from discontinued operations | 0 | 0 |
Net loss | $ 0 | $ 0 |
Weighted average number of common shares outstanding - basic | 398,548,318 | 401,448,304 |
Weighted average number of common shares outstanding - diluted | 398,548,318 | 401,448,304 |
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, 2013 | 405,247,405 | ||||
Beginning balance, value at May. 31, 2013 | $ 4,382 | $ 77,338,434 | $ (54,801,249) | $ (14,404,394) | $ 8,137,173 |
Share-based compensation | 62,418 | 62,418 | |||
Purchase of common stock for treasury, shares | (3,854,457) | ||||
Purchase of common stock for treasury, value | (221,474) | (221,474) | |||
Net loss | (1,466,867) | (1,466,867) | |||
Ending balance, shares at May. 31, 2014 | 401,392,948 | ||||
Ending balance, value at May. 31, 2014 | $ 4,382 | 77,400,852 | (56,268,116) | (14,625,868) | 6,511,250 |
Share-based compensation | 43,210 | 43,210 | |||
Net loss | (1,538,028) | (1,538,028) | |||
Ending balance, shares at May. 31, 2015 | 401,392,948 | ||||
Ending balance, value at May. 31, 2015 | $ 4,382 | $ 77,444,062 | $ (57,806,144) | $ (14,625,868) | $ 5,016,432 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Operating activities: | ||
Net income (loss) | $ (1,538,028) | $ (1,466,867) |
Less: Net income (loss) from discontinued operations | (1,873) | 89,060 |
Net loss from continuing operations | (1,536,155) | (1,555,927) |
Adjustments to reconcile net loss before discontinued operations to net cash used in operating activities: | ||
Depreciation | 2,054 | 2,303 |
Share-based compensation | 43,210 | 62,418 |
Accrued interest income added to investments | (4,645) | (2,104) |
Equity in (earnings) loss of affiliated company | 106,923 | (104,677) |
Realized loss on sale of marketable securities | 0 | 347 |
Changes in operating assets and liabilities: | ||
Accounts receivable - affiliated company | 0 | 16,538 |
Prepaid income tax | (4,783) | 0 |
Prepaid expenses and other current assets | 187,564 | (8,245) |
Accounts payable, accrued expenses, and other | (190,780) | 8,809 |
Income taxes payable | (3,599) | 3,599 |
Net cash used in operating activities of continuing operations | (1,400,211) | (1,576,939) |
Net cash provided by operating activities of discontinued operations | 55,604 | 72,266 |
Net cash used in operating activities | (1,344,607) | (1,504,673) |
Investing activities: | ||
Proceeds from sales of marketable securities | 1,951,078 | 1,197,619 |
Purchases of marketable securities | (2,700,000) | (2,703,151) |
Purchases of property and equipment | (1,719) | 0 |
Distributions from affiliated company | 58,400 | 375,000 |
Net cash used in investing activities | (692,241) | (1,130,532) |
Financing activities: | ||
Repurchase of common stock for treasury | 0 | (221,474) |
Net cash used in financing activities | 0 | (221,474) |
Net decrease in cash and cash equivalents | (2,036,848) | (2,856,679) |
Cash and cash equivalents, beginning of year | 4,716,208 | 7,572,887 |
Cash and cash equivalents, end of year | 2,679,360 | 4,716,208 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash payments for income taxes | 9,954 | 3,900 |
Cash receipts from income tax refunds | $ 0 | $ 1,500 |
1. Organization and Business
1. Organization and Business | 12 Months Ended |
May. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. Organization and Business | Patriot Scientific Corporation (the Company, PTSC, 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 . n January 2010, we sold the assets of Verras Medical, Inc. and in August 2010 we sold the Vigilys business line both formerly associated with PDSG. D Through our joint venture PDS we pursue the commercialization of our patented microprocessor technologies through broad and open licensing and by litigating against those who may be infringing on our patents. Liquidity and Managements Plans Cash shortfalls currently experienced by PDS will have an adverse effect on our liquidity. To date, we have determined that it is in the best interests of the Moore Microprocessor Patent (MMP) licensing program that we provide our 50% share of capital to provide for PDS expenses including legal retainers and litigation related payments in the event license revenues received by PDS are insufficient to meet these needs. We believe it is likely that contributions to PDS to fund working capital will continue to be required. PDS had been incurring significant third-party costs for expert testimony, depositions and other related litigation costs. We could be required to make capital contributions to PDS for any future litigation related costs in the event that PDS does not receive sufficient licensing revenues to pay these expenses. Our current liquid cash resources as of May 31, 2015, are expected to provide the funds necessary to support our operations through at least the next twelve months. The cash flows from our interest in PDS represent our only significant source of cash generation. In the event of a continued decrease or interruption in MMP portfolio licensing we will incur a significant reduction to our cash position. It is highly unlikely that we would be able to obtain any additional sources of financing to supplement our cash and cash equivalents and short-term investment position of $5,134,466 at May 31, 2015. On March 20, 2013, TPL filed a petition under Chapter 11 of the United States Bankruptcy Code. We have been appointed to the creditors committee and have been closely monitoring the progress in this matter as it relates to our interest in PDS. A Joint Plan of Reorganization (the Joint Plan) between TPL and the creditors committee was confirmed by the Bankruptcy Court on February 11, 2015 with the entered confirmation order becoming final on April 2, 2015. The Joint Plan provides that the Effective Date, which remains pending, will be the later of (i) the first business day that is at least 30 days after the entry of the confirmation order or (ii) the first Business Day on which the reorganized TPL has sufficient cash to make all payments required under the Plan on the Effective Date. 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. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
May. 31, 2015 | |
Accounting Policies [Abstract] | |
2. Summary of Significant Accounting Policies | Basis of Consolidation The consolidated balance sheets at May 31, 2015 and 2014 and consolidated statements of operations for the fiscal years ended May 31, 2015 and 2014 includes our accounts and those of our wholly owned subsidiary PDSG which includes Crossflo Systems, Inc. (Crossflo), and our inactive subsidiary Plasma Scientific Corporation. All significant intercompany accounts and transactions have been eliminated. PDSG is being presented as discontinued operations in the consolidated statements of operations for all periods presented. See Discontinued Operations below for additional information. Discontinued Operations On February 17, 2012 our board of directors authorized management to sell the assets of PDSG due to the inability of PDSG to meet its business plan and continuing projected negative cash flows. In accordance with authoritative guidance we have classified the assets, liabilities, operations and cash flows of PDSG as discontinued operations for all periods presented. During March 2012, we entered into an interim agreement with the purchaser of the assets of PDSG which required the purchaser to pay PDSG $93,450 to subsidize the April 2012 expenses of PDSG during the sale transaction negotiations. On April 30, 2012, we negotiated a sale transaction in which we sold substantially all of the assets of PDSG in exchange for a royalty on PDSG revenues for a period of three years. From April 30, 2012 to May 31, 2015, the gain on the asset sale of PDSG is approximately $101,000. Summarized operating results of discontinued operations for the fiscal years ended May 31, 2015 and 2014 are as follows: May 31, 2015 May 31, 2014 Gain (loss) on sale of discontinued operations $ (1,873 ) $ 89,060 Income (loss) before income taxes $ (1,873 ) $ 89,060 Income (loss) from discontinued operations $ (1,873 ) $ 89,060 PDSG activity for the fiscal year ended May 31, 2015 and 2014 consists of PDSG royalty revenues of $7,127 and $89,060, respectively. Additional activity for the fiscal year ended May 31, 2015 includes a $9,000 write-off of the receivable due to PDSG on the balance of the sale of Vigilys assets. The following table summarizes the carrying amount of the major classes of assets and liabilities of PDSG classified as discontinued operations at May 31, 2015 and May 31, 2014: May 31, 2015 May 31, 2014 Current assets: Other current assets $ $ 57,477 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 mutual 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 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 marketable securities 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 Short-Term Marketable Securities We consider all highly liquid investments acquired with a maturity of three months or less to be cash equivalents. Restricted cash and cash equivalents at May 31, 2015 and 2014 consist of a savings account held as collateral for our corporate credit card account. At May 31, 2015 and 2014 our short-term marketable securities in the amount of $2,455,106 and $1,701,647 consist of certificates of deposit with various financial institutions, with maturity dates of twelve months or less. 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 managements investment intentions relating to these securities. Held-to-maturity marketable securities are stated at amortized cost. Unrealized gains and losses, net of deferred taxes, are recorded as a component of other comprehensive income (loss). 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. Major betterments and renewals are capitalized, while routine repairs and maintenance are charged to expense when incurred. Investment in Affiliated Company We have a 50% 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 investees 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. At May 31, 2015, our share of loss in PDS exceeds our investment in PDS by $69,342. This amount is recorded as Cumulative losses in excess of investment in affiliated company on our consolidated balance sheet at May 31, 2015, due to our intent to fund the working capital requirements of PDS. At May 31, 2015, our investment in PDS is presented as a liability pursuant to accounting principles generally accepted in the United States of America. In the event our investment in PDS was to reflect an asset balance, we would review our investment in PDS to determine whether events or changes in circumstances indicate that an asset carrying amount may not be recoverable. The primary factors we would consider in our determination are the financial condition, operating performance and near term prospects of the investee. If the decline in value is deemed to be other than temporary, we would recognize an impairment loss. 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 placed a full valuation allowance against our deferred tax assets. We follow authoritative guidance to adjust our effective tax rate each quarter to be consistent with the estimated annual effective tax rate. We are also required to record the tax impact of certain discrete items, unusual or infrequently occurring, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections. Assessment of Contingent Liabilities We are 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. Earnings (Loss) Per Share Basic earnings per share for continuing and discontinued operations includes no dilution and is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share for continuing and discontinued operations reflect the potential dilution of securities that could share in the earnings of an entity. For the fiscal years ended May 31, 2015 and 2014 potential common shares of 3,335,000 and 1,335,000, respectively, related to our outstanding options were not included in the calculation of diluted loss per share for continuing and discontinued operations as we recorded a loss. Had we reported net income for the years ended May 31, 2015 and 2014 2,000,000 and no additional shares, respectively, of common stock would have been included in the calculation of diluted income per share for continuing and discontinued operations. For the fiscal years ended May 31, 2015 and 2014, we excluded the PDSG escrow shares of 2,844,630 in the calculation of diluted loss per share for continuing and discontinued operations as we recorded a loss. In connection with our acquisition of Crossflo, which became a part of PDSG, we issued 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 include the escrowed shares in the diluted income per share calculations. Use of Estimates The preparation of 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, deferred tax assets, and share-based compensation. Share-Based Compensation Intellectual Property Rights PDS, our investment in affiliated company, relies on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We have one unexpired U.S. patent issued in 1998 on our microprocessor technology. This patent will expire in September 2015. We also have three European and two Japanese patents all expiring in October 2016. We also have six U.S. patents, six European, and one Japanese patent all of which expired between August 2009 and July 21, 2015. These patents, while expired, may have certain retrospective statutory benefits that will fully diminish six years after the patent expiration date. The patent useful life for purposes of negotiating licenses is finite and these patents are subject to legal challenges, which in combination with the limited life, could adversely impact the stream of revenues. A successful challenge to the ownership of the technology or the proprietary nature of the intellectual property would materially damage business prospects. Any issued patent may be challenged and invalidated. Recent Accounting Pronouncements In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-15, "Presentation of Financial Statements Going Concern." ASU 2014-15 provides guidance in generally accepted accounting principles about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for annual reporting periods ending after December 15, 2016 and for annual periods and interim periods thereafter (fiscal year 2017 for the Company). Early adoption is permitted. We have not yet determined the potential effects of the adoption of ASU 2014-15 on our consolidated financial statements. |
3. Cash, Cash Equivalents, Rest
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities | 12 Months Ended |
May. 31, 2015 | |
Cash and Cash Equivalents [Abstract] | |
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities | We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Restricted cash and cash equivalents at May 31, 2015 and 2014 consist of deposits in a savings account required to be held as collateral for our corporate credit card. At May 31, 2015 and 2014, our current portion of marketable securities in the amount of $2,455,106 and $1,701,647, respectively, consists of the par value plus accrued interest of our time deposits. These marketable securities are classified as held-to-maturity and are reported at amortized cost, which approximates fair market value. We follow authoritative guidance 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, 2015 Using Quoted Prices Significant in Active Other Significant Fair Value at Markets for Observable Unobservable May 31, Identical Assets Inputs Inputs 2015 (Level 1) (Level 2) (Level 3) Cash and cash equivalents: Cash $ 297,259 $ 297,259 $ $ Money market funds 2,382,101 2,382,101 Restricted cash and cash equivalents 21,229 21,229 Marketable securities: Short-term: Certificates of deposit 2,455,106 2,455,106 Total $ 5,155,695 $ 2,700,589 $ 2,455,106 $ Fair Value Measurements at May 31, 2014 Using Quoted Prices Significant in Active Other Significant Fair Value at Markets for Observable Unobservable May 31, Identical Assets Inputs Inputs 2014 (Level 1) (Level 2) (Level 3) Cash and cash equivalents: Cash $ 340,555 $ 340,555 $ $ Money market funds 4,375,653 4,375,653 Restricted cash and cash equivalents 21,123 21,123 Marketable securities: Short-term: Certificates of deposit 1,701,647 1,701,647 Total $ 6,438,978 $ 4,737,331 $ 1,701,647 $ We purchase certificates of deposit with varying maturity dates greater than three months. The following table summarizes the maturities, gross unrealized gains or losses and fair value of the certificates of deposit as of May 31, 2015: May 31, 2015 Cost Gross Unrealized Gains/(Losses) Fair Maturity Due in one year or less $ 2,455,106 $ $ 2,455,106 We purchase certificates of deposit with varying maturity dates greater than three months. The following table summarizes the maturities, gross unrealized gains or losses and fair value of the certificates of deposit as of May 31, 2014: May 31, 2014 Cost Gross Unrealized Gains/(Losses) Fair Maturity Due in one year or less $ 1,701,647 $ $ 1,701,647 |
4. Property and Equipment
4. Property and Equipment | 12 Months Ended |
May. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
4. Property and Equipment | Property and equipment consisted of the following at May 31, 2015 and 2014: 2015 2014 Computer equipment and software $ 24,919 $ 25,767 Furniture and fixtures 20,665 21,176 45,584 46,943 Less: accumulated depreciation (43,144 ) (44,168 ) Net property and equipment $ 2,440 $ 2,775 Depreciation expense related to property and equipment was $2,054 and $2,303 for the years ended May 31, 2015 and 2014, respectively. |
5. Investment in Affiliated Com
5. Investment in Affiliated Company | 12 Months Ended |
May. 31, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
5. Investment in Affiliated Company | Phoenix Digital Solutions, LLC On June 7, 2005, we entered into a Master Agreement (the Master Agreement) with TPL, and Charles H. Moore (Moore), the co-inventor of the technology which is the subject of the MMP portfolio of microprocessor patents, pursuant to which the parties resolved all legal disputes between them. Pursuant to the Master Agreement, we and TPL entered into the Limited Liability Company Operating Agreement of PDS (the LLC Agreement) into which we and Moore contributed our rights to certain of our technologies. We and TPL each own 50% of the membership interests of PDS, and each member has the right to appoint one member of the three member management committee. The two appointees are required to select a mutually acceptable third member of the management committee. There had not been a third management committee member since May 2010, however, as a result of our initiation of arbitration seeking the appointment of a third member, on December 16, 2014, an independent manager to the PDS management committee was selected by the arbitrator (see Note 9). Pursuant to the LLC Agreement, we and TPL initially agreed to establish a working capital fund for PDS of $4,000,000, of which our contribution was $2,000,000. The working capital fund was increased to a maximum of $8,000,000 as license revenues are achieved. We and TPL are obligated to fund future working capital requirements at the discretion of the management committee of PDS in order to maintain working capital of not more than $8,000,000. If the management committee determines that additional capital is required, neither we nor TPL are required to contribute more than $2,000,000 in any fiscal year. No such contributions were made during the fiscal years ended May 31, 2015 and 2014. Distributable cash and allocation of profits and losses have been allocated to the members in the priority defined in the LLC Agreement. PDS previously reimbursed TPL for payment of all legal and third-party expert fees and other related third-party costs and expenses, although the majority of third-party costs are now paid directly by PDS. During the fiscal years ended May 31, 2015 and 2014, PDS expensed $1,247,969 and $2,300,323, respectively, pursuant to the agreement. These expenses are recorded in the accompanying PDS statements of operations presented below net of $20,546 and $400,708, for fiscal 2015 and 2014, respectively, of legal fee reversals previously expensed and recorded as accounts payable to TPL as the statute of limitations had expired. On July 11, 2012, we entered into the Program Agreement with PDS, TPL, and Alliacense, and an Agreement (the TPL Agreement) with TPL. Pursuant to the Program Agreement, PDS engaged Alliacense to negotiate MMP portfolio licenses and to pursue claims against violators of the MMP portfolio on behalf of PDS, TPL, and the Company. The Program Agreement continued through the useful life of the MMP portfolio patents. Pursuant to the TPL Agreement, we and TPL agreed to certain allocations of obligations in connection with the engagement of Alliacense. On July 24, 2014, the Program Agreement was amended with PDS and Alliacense entering into the Amended Alliacense Services and Novation Agreement (the Novation Agreement). Pursuant to the Novation Agreement certain performance goals and incentives were established for Alliacense. The Novation Agreement also provided for the addition of a second licensing company, which was engaged on October 10, 2014, to complement the MMP licensing commercialization. However, Alliacense fulfilled only a portion of its obligations under the Novation Agreement associated with the deployment of the second licensing company and on May 11, 2015, Alliacense was terminated by PDS. On July 17, 2012, we entered into an Agreement with PDS, TPL, and Alliacense whereby we agreed to certain additional allocations of obligations relating to the Program Agreement. Pursuant to the Program Agreement, PDS had committed to Alliacense a quarterly amount of $500,000 which represented the licensing services fees due Alliacense, subject to a contingency arrangement which provided for a percentage on future revenues, for its efforts to secure licensing agreements on behalf of PDS. During fiscal 2014, PDS discontinued these payments which were formally eliminated by terms of the Novation Agreement. These payments had replaced the quarterly amounts previously paid to TPL pursuant to the Commercialization Agreement. During the fiscal year ended May 31, 2014 PDS expensed $956,353 pursuant to this contractual obligation. These expenses are recorded in the accompanying PDS statement of operations for the fiscal year ended May 31, 2014 presented below. Pursuant to the Program Agreement, PDS was contractually obligated to pay Alliacense litigation support fees relating to Alliacenses special work and effort regarding internal costs related to MMP maintenance and litigation support including support in the U.S. District Court and the complaints filed on behalf of TPL, PDS and us with the ITC. During the fiscal years ended May 31, 2015 and 2014, PDS reversed $(24,598) and expensed $184,435, respectively, pursuant to this contractual obligation. Future litigation support payments to Alliacense relating to the ITC litigation had been subject to a contingency arrangement which provided for a percentage of future recoveries in these actions. The Novation Agreement eliminated the Program Agreements litigation support activity by Alliacense. These reversals and expenses are recorded in the accompanying PDS statements of operations for the fiscal years ended May 31, 2015 and 2014 presented below. Pursuant to the Novation Agreement, the PDS paid Alliacense licensing fees of $155,600 during the fiscal year ended May 31, 2015. During the fiscal years ended May 31, 2015 and 2014, PDS paid Alliacense $323,000 and $300,000, respectively, against multiple outstanding disputed items in connection with a settlement of these items (see Note 9). During January 2013, TPL and Moore settled their litigation. Terms of the settlement include the payment by PDS to Moore of a consulting fee of $250,000 for four years or until the completion of all outstanding MMP litigation whichever comes first. Per terms of the agreement PDS paid Moore $150,000 on the settlement date and will pay Moore $16,667 per month from August 2013 through January 2014 and $20,833 per month beginning February 2014 through January 2017. During the fiscal years ended May 31, 2015 and 2014, PDS paid Moore $249,996 and $183,334, respectively, pursuant to this contractual obligation. These expenses are recorded in the accompanying PDS statements of operations for the fiscal years ended May 31, 2015 and 2014 presented below. During the fiscal year ended May 31, 2014, we expensed $92,050 of legal fees on behalf of PDS. We are accounting for our investment in PDS under the equity method of accounting, and accordingly have recorded our share of PDSs net loss during the fiscal year ended May 31, 2015 of $106,923 as a decrease in our investment. We have recorded our share of PDSs net income during the fiscal year ended May 31, 2014 of $104,677 as an increase in our investment. Cash distributions of $58,400 and $375,000 received from PDS during the years ended May 31, 2015 and 2014, respectively, have been recorded as a reduction in our investment. We have recorded our share of PDSs net income and loss as Equity in earnings (loss) of affiliated company in the accompanying consolidated statements of operations for the years ended May 31, 2015 and 2014, respectively. During the fiscal years ended May 31, 2015 and 2014, PDS entered into licensing agreements with third parties, pursuant to which PDS recognized revenues of $1,820,000 and $5,022,000, respectively. On March 20, 2013, TPL filed a petition under Chapter 11 of the United States Bankruptcy Code. A Joint Plan of Reorganization (the Joint Plan) between TPL and the creditors committee was confirmed by the Bankruptcy Court on February 11, 2015 with the entered confirmation order becoming final on April 2, 2015. The Joint Plan provides that the Effective Date, which remains pending, will be the later of (i) the first business day that is at least 30 days after the entry of the confirmation order or (ii) the first Business Day on which the reorganized company has sufficient cash to make all payments required under the Plan on the Effective Date. We have been appointed to the creditors committee and have been closely monitoring the progress in this matter as it relates to our interest in PDS. 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. PDSs balance sheets at May 31, 2015 and 2014 and statements of operations for the years ended May 31, 2015 and 2014 are as follows: Balance Sheets Assets: 2015 2014 Cash $ 442,621 $ 1,063,536 Prepaid expenses 26,644 247,776 Total assets $ 469,265 $ 1,311,312 Liabilities and Members Equity (Deficit): 2015 2014 Related party payables and accrued expenses $ 607,949 $ 1,107,560 Income tax payable 11,790 Members equity (deficit) (138,684 ) 191,962 Total liabilities and members equity (deficit) $ 469,265 $ 1,311,312 Statements of Operations 2015 2014 Revenues $ 1,820,000 $ 5,022,000 Expenses 1,673,046 4,393,655 Operating income 146,954 628,345 Income before provision for income taxes and foreign taxes 146,954 628,345 Provision for income taxes and foreign taxes 360,800 418,990 Net income (loss) $ (213,846 ) $ 209,355 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. |
6. Accrued Expenses and Other
6. Accrued Expenses and Other | 12 Months Ended |
May. 31, 2015 | |
Payables and Accruals [Abstract] | |
6. Accrued Expenses and Other | At May 31, 2015 and 2014, accrued expenses and other consisted of the following: 2015 2014 Accrued lease obligation $ 2,478 $ 2,088 Compensation and benefits 54,827 60,397 $ 57,305 $ 62,485 |
7. Stockholders' Equity
7. Stockholders' Equity | 12 Months Ended |
May. 31, 2015 | |
Equity [Abstract] | |
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 year ended May 31, 2015. The following table summarizes share repurchases during the year ended May 31, 2014: 2014 Number of shares repurchased 3,854,457 Aggregate cost $ 221,474 Share-based Compensation Summary of Assumptions and Activity 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 particular 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 stock-based compensation expense in future periods. Year Ended May 31, 2015 Year Ended May 31, 2014 Expected term 5 yrs 5 yrs Expected volatility 94% 88% Risk-free interest rate 1.51% 1.05% A summary of option activity for the year ended May 31, 2015 is presented below: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Options outstanding at June 1, 2014 1,335,000 $ 0.11 Options granted 2,000,000 $ 0.03 Options exercised $ Options forfeited $ 3,335,000 $ 0.06 3.65 $ 3,335,000 $ 0.06 3.65 $ 3,335,000 $ 0.06 3.65 $ The weighted average grant date fair value of options granted during the fiscal year ended May 31, 2015 was $0.02 per option. The aggregate intrinsic value in the table above represents the differences in market price at the close of the fiscal year ($0.03 per share on May 31, 2015) and the exercise price of outstanding, in-the-money options (those options with exercise prices below $0.03) on May 31, 2015. The following table summarizes employee and director stock-based compensation expense for the fiscal years ended May 31, 2015 and 2014, which was recorded as follows: Year Ended Year Ended May 31, 2015 May 31, 2014 Selling, general and administrative expense $ 43,210 $ 62,418 2006 Stock Option Plan The 2006 Stock Option Plan, as amended, which expires in March 2016, provides 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). During the fiscal years ended May 31, 2015 and 2014, we granted options to employees and directors to purchase 2,000,000 and 760,000 shares, respectively, of our common stock under this plan, none of which were ISOs. As of May 31, 2015, options to purchase 3,335,000 shares of common stock are outstanding under the 2006 Stock Option Plan. |
8. Income Taxes
8. Income Taxes | 12 Months Ended |
May. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
8. Income Taxes | The provision for income taxes from continuing operations is as follows for the years ended May 31: 2015 2014 Current: Federal $ 1,599 $ 1,170 State (29 ) 4,829 Total current 1,570 5,999 Deferred: Federal (612,594 ) (492,332 ) State 104,012 (129,766 ) Total deferred (508,582 ) (622,098 ) Valuation allowance 508,582 622,098 Total deferred Total provision $ 1,570 $ 5,999 The reconciliation of the effective income tax rate to the Federal statutory rate is as follows for the years ended May 31: 2015 2014 Statutory federal income tax rate 35.0% 35.0% State income tax rate, net of Federal effect % (0.2% ) Change in tax rate (1.0% ) (1.0% ) Stock option expense % (0.3% ) Other (0.1% ) (0.1% ) Change in valuation allowance (34.0% ) (33.8% ) Effective income tax rate (0.1% ) (0.4% ) 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 from continuing operations are as follows as of May 31: 2015 2014 Current deferred tax assets: State taxes $ 815 $ 1,642 Accrued expenses 14,930 16,441 Prepaids (1,448 ) Less: valuation allowance (15,745 ) (16,635 ) Total net current deferred tax asset Long-term deferred tax assets (liabilities): Investment in affiliated company 1,203,000 1,242,400 Basis difference in property and equipment (377 ) (718 ) Basis difference in intangibles 18,335 18,334 Stock based compensation expense 246,139 247,688 Impairment of note receivable 331,896 331,896 Capital loss carryover 225,603 225,454 Net operating loss carryforwards 9,709,955 9,156,427 Credit carryover 107,017 110,615 Valuation allowance (11,841,568 ) (11,332,096 ) Total net long-term deferred tax asset Net deferred tax asset $ $ We have federal and state net operating loss carryforwards available to offset future taxable income of approximately $22,744,000 and $22,365,000, respectively, at May 31, 2015. These carryforwards begin to expire in the years ending May 31, 2025 and 2015, respectively. 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 companys 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, 2015, we are subject to U.S. Federal income tax examinations for the tax years May 31, 2003 through May 31, 2015, and we are subject to state and local income tax examinations for the tax years May 31, 2003 through May 31, 2015 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, 2015 and 2014. 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, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
9. Commitments and Contingencies | Patent Litigation On February 8, 2008, we, TPL and Alliacense Ltd. were named as defendants in separate lawsuits filed in the United States District Court for the Northern District of California by HTC Corporation, and Acer, Inc., and affiliated entities of each of them. (Those cases were deemed related and are referred to herein as the N.D. Cal. Case). HTC and Acer The Court issued a first claim construction ruling in the N.D. Cal. Case on June 12, 2012, which preserved our ability to proceed on our infringement claims against Acer and HTC. Thereafter, Chief District Judge James Ware retired and the N.D. Cal. Case was reassigned to Magistrate Judge Paul S. Grewal, who held a supplemental claim construction hearing on November 30, 2012. Judge Grewal then issued a supplemental claim construction ruling on December 5, 2012, which preserved our ability to proceed with our infringement claims. On September 6, 2013 Acer entered into an MMP portfolio license agreement that also provided for the dismissal of all claims in the N.D. Cal Case, as well as the filing of a joint motion to terminate Acer as a respondent in the ITC 853 Investigation (described more fully below). On September 19, 2013 the 890 patent was dropped from the N.D. Cal Case pursuant to stipulation by all parties. A jury trial was held in the N.D. Cal. Case against HTC, beginning on September 23, 2013. On October 3, 2013, the jury returned a verdict in favor of us and TPL, finding that HTC had infringed the 336 patent with damages of $958,560. HTC appealed the jury verdict and we filed cross appeals regarding the period available for infringement damages related to the 890 patent. On January 7, 2015, the parties filed a stipulated motion to voluntarily dismiss the HTC appeal and our cross appeals on the basis of having reached a settlement agreement. The Federal Circuit granted that motion and dismissed the appeal the same day. On July 24, 2012 complaints were filed on behalf of us, TPL, and PDS (collectively referred to as Plaintiffs) against Acer, Inc., Amazon.com, Inc., Barnes & Noble, Inc., Garmin, Ltd., HTC Corporation, Huawei Technologies Co., Ltd., Kyocera Corporation, LG Electronics, Nintendo Co., Ltd., Novatel Wireless, Inc., Samsung Electronics Co., Ltd., Sierra Wireless, Ltd. and ZTE Corporation with the U.S. International Trade Commission ("ITC") (ITC Investigation No. 337-TA-853, or the 853 Investigation) alleging infringement of the 336 patent. We also filed new parallel proceedings in the U.S. District Court for the Northern District of California alleging infringement of the US 5,440,749 patent (the 749 patent), and the 890 and 336 patents 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 subsequently reached a settlement with Sierra Wireless, Inc. Trial proceedings before the ITC began on June 3, 2013 and concluded the following week. Settlements were subsequently reached with Kyocera Corporation, Amazon.com, Inc., and Acer, Inc. An Initial Determination (ID) was rendered on September 6, 2013 finding that none of the remaining Respondents had infringed the 336 patent. We filed a petition for review of the ID with the full ITC on September 23, 2013. On February 20, 2014, the ITC provided notice affirming the September 6, 2013 ID. We have chosen not to file an appeal of the ITC decision to the United States Court of Appeals for the Federal Circuit. All of the district court actions against the new parties (i.e., all respondents other than Acer and HTC) that have not previously settled and which had been stayed pending resolution of the 853 Investigation are proceeding in front of Judge Vince Chhabria, with Judge Grewal handling all pretrial matters. On February 4, 2015 Barnes & Noble, Inc. filed a motion asserting that our cause of action on the 336 patent was barred by the Kessler doctrine because of the ITCs finding of non-infringement. A hearing was held on March 17, 2015 in the U.S. District Court for the Northern District of California regarding the matter. On May 31, 2015 Judge Grewal denied this motion. Barnes & Noble asked Judge Chhabria to reconsider this ruling but on July 22, 2015, Plaintiffs and Barnes & Noble filed a notice of settlement stating that Plaintiffs and Barnes & Noble had reached a settlement in principle. This mooted a hearing in front of Judge Chhabria regarding Barnes & Nobles motion. On April 10, 2015 multiple defendants in the District Court action filed a motion arguing for invalidity of the 749 patent. A hearing was held on May 19, 2015 regarding this matter and on July 28, 2015, Judge Grewal denied this motion as moot. On June 30, 2015 a hearing was held on Samsung and LGs motion to strike Plaintiffs infringement contentions. On July 11, 2015, Judge Grewal granted in part Samsung and LGs motion and ordered Plaintiffs to provide amended infringement contentions in accordance with the Courts order. On July 1, 2015 the parties in the Novatel Wireless, Inc. action filed a stipulated motion to voluntarily dismiss all claims and counterclaims on the basis of a settlement agreement having been reached. The California district court granted that motion on July 14, 2015. On July 27, 2015 Plaintiffs and Defendants filed a stipulation whereby each party withdrew their claims regarding the 749 and 890 patents with prejudice. On August 26, 2015 Plaintiffs and Garmin entered into a settlement and license agreement. Alliacense Disputes PDS and Alliacense had been involved in multiple disputes regarding amounts asserted by Alliacense as owed by PDS. The disputed amounts included sums for past services and advances. On July 24, 2014, PDS and Alliacense entered into the Novation Agreement, which included provisions for resolving all of the claims in dispute for $623,000. Of that amount, $300,000 was paid by PDS to Alliacense in November 2013, with the balance paid by PDS to Alliacense in two payments of $161,500 each on June 20, 2014 and July 25, 2014. The Novation Agreement also provided for the addition of a second licensing company, however, Alliacense fulfilled only a portion of its obligations under the Novation Agreement associated with the deployment of the second licensing company and on May 11, 2015 Alliacense was terminated by PDS. PDS Arbitration- Independent Managing Member In January 2014, our representative to the PDS management committee filed with the American Arbitration Association (AAA) a demand for arbitration pursuant to the terms of the LLC Agreement. The demand sought the appointment of a third member, referred to as the independent manager member to the PDS management committee. On December 16, 2014, the AAA appointed arbitrator selected an independent managing member from one of the nominees submitted by Patriot, thereby filling the open management committee seat. PDS Arbitration - Alliacense Performance In June 2015, our representative to the PDS management committee filed with the Judicial Arbitration and Mediation Services (JAMS) a demand for arbitration pursuant to Alliacenses non-performance under terms of the Novation Agreement. The demand seeks a declaration of the respective rights and obligations of the parties under the Novation Agreement. 401(k) Plan We have a retirement plan that complies with Section 401(k) of the Internal Revenue Code. All employees are eligible to participate in the plan. We match 100% of elective deferrals subject to a maximum of 4% of the participants eligible earnings. Our participants vest 33% per year over a three year period in their matching contributions. Our matching contributions during the fiscal years ended May 31, 2015 and 2014 were $15,935 and $10,610, respectively. Employment Contracts In connection with Mr. Flowers appointment as the Chief Financial Officer, 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. Pursuant to the agreement, if Mr. Flowers is terminated without cause or resigns with good reason any time after two years of continuous employment, he is entitled to receive an amount equal to twelve months of his annual base salary. Mr. Flowers is also entitled to certain payments upon a change of control of the Company if the surviving corporation does not retain him. All such payments are conditional upon the execution of a general release. 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 and agents to the maximum extent permitted under the laws of the State of Delaware. In connection with our facility lease, we have indemnified our lessor for certain claims arising from the use of the facility. 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 We lease our facility through an operating lease that expires in March 2016. Rental expense is presented in the following table: Year Ended Year Ended May 31, 2015 May 31, 2014 Rental expense $ 38,889 $ 36,444 Future minimum payments under our operating lease commitment as of May 31, 2015 amount to $32,219. |
10. Subsequent Events
10. Subsequent Events | 12 Months Ended |
May. 31, 2015 | |
Subsequent Events [Abstract] | |
10. Subsequent Events | We have evaluated subsequent events after the balance sheet date 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 herein and in the accompanying notes. |
2. Summary of Significant Acc17
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
May. 31, 2015 | |
Accounting Policies [Abstract] | |
Basis of Consolidation | Basis of Consolidation The consolidated balance sheets at May 31, 2015 and 2014 and consolidated statements of operations for the fiscal years ended May 31, 2015 and 2014 includes our accounts and those of our wholly owned subsidiary PDSG which includes Crossflo Systems, Inc. (Crossflo), and our inactive subsidiary Plasma Scientific Corporation. All significant intercompany accounts and transactions have been eliminated. PDSG is being presented as discontinued operations in the consolidated statements of operations for all periods presented. See Discontinued Operations below for additional information. |
Discontinued Operations | Discontinued Operations On February 17, 2012 our board of directors authorized management to sell the assets of PDSG due to the inability of PDSG to meet its business plan and continuing projected negative cash flows. In accordance with authoritative guidance we have classified the assets, liabilities, operations and cash flows of PDSG as discontinued operations for all periods presented. During March 2012, we entered into an interim agreement with the purchaser of the assets of PDSG which required the purchaser to pay PDSG $93,450 to subsidize the April 2012 expenses of PDSG during the sale transaction negotiations. On April 30, 2012, we negotiated a sale transaction in which we sold substantially all of the assets of PDSG in exchange for a royalty on PDSG revenues for a period of three years. From April 30, 2012 to May 31, 2015, the gain on the asset sale of PDSG is approximately $101,000. Summarized operating results of discontinued operations for the fiscal years ended May 31, 2015 and 2014 are as follows: May 31, 2015 May 31, 2014 Gain (loss) on sale of discontinued operations $ (1,873 ) $ 89,060 Income (loss) before income taxes $ (1,873 ) $ 89,060 Income (loss) from discontinued operations $ (1,873 ) $ 89,060 PDSG activity for the fiscal year ended May 31, 2015 and 2014 consists of PDSG royalty revenues of $7,127 and $89,060, respectively. Additional activity for the fiscal year ended May 31, 2015 includes a $9,000 write-off of the receivable due to PDSG on the balance of the sale of Vigilys assets. The following table summarizes the carrying amount of the major classes of assets and liabilities of PDSG classified as discontinued operations at May 31, 2015 and May 31, 2014: May 31, 2015 May 31, 2014 Current assets: Other current assets $ $ 57,477 |
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 mutual 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 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 marketable securities 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 Short-Term Marketable Securities | Cash Equivalents, Restricted Cash, and Short-Term Marketable Securities We consider all highly liquid investments acquired with a maturity of three months or less to be cash equivalents. Restricted cash and cash equivalents at May 31, 2015 and 2014 consist of a savings account held as collateral for our corporate credit card account. At May 31, 2015 and 2014 our short-term marketable securities in the amount of $2,455,106 and $1,701,647 consist of certificates of deposit with various financial institutions, with maturity dates of twelve months or less. |
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 managements investment intentions relating to these securities. Held-to-maturity marketable securities are stated at amortized cost. Unrealized gains and losses, net of deferred taxes, are recorded as a component of other comprehensive income (loss). 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. Major betterments and renewals are capitalized, while routine repairs and maintenance are charged to expense when incurred. |
Investment in Affiliated Company | Investment in Affiliated Company We have a 50% 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 investees 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. At May 31, 2015, our share of loss in PDS exceeds our investment in PDS by $69,342. This amount is recorded as Cumulative losses in excess of investment in affiliated company on our consolidated balance sheet at May 31, 2015, due to our intent to fund the working capital requirements of PDS. At May 31, 2015, our investment in PDS is presented as a liability pursuant to accounting principles generally accepted in the United States of America. In the event our investment in PDS was to reflect an asset balance, we would review our investment in PDS to determine whether events or changes in circumstances indicate that an asset carrying amount may not be recoverable. The primary factors we would consider in our determination are the financial condition, operating performance and near term prospects of the investee. If the decline in value is deemed to be other than temporary, we would recognize an impairment loss. |
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 placed a full valuation allowance against our deferred tax assets. We follow authoritative guidance to adjust our effective tax rate each quarter to be consistent with the estimated annual effective tax rate. We are also required to record the tax impact of certain discrete items, unusual or infrequently occurring, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections. |
Assessment of Contingent Liabilities | Assessment of Contingent Liabilities We are 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. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings per share for continuing and discontinued operations includes no dilution and is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share for continuing and discontinued operations reflect the potential dilution of securities that could share in the earnings of an entity. For the fiscal years ended May 31, 2015 and 2014 potential common shares of 3,335,000 and 1,335,000, respectively, related to our outstanding options were not included in the calculation of diluted loss per share for continuing and discontinued operations as we recorded a loss. Had we reported net income for the years ended May 31, 2015 and 2014 2,000,000 and no additional shares, respectively, of common stock would have been included in the calculation of diluted income per share for continuing and discontinued operations. For the fiscal years ended May 31, 2015 and 2014, we excluded the PDSG escrow shares of 2,844,630 in the calculation of diluted loss per share for continuing and discontinued operations as we recorded a loss. In connection with our acquisition of Crossflo, which became a part of PDSG, we issued 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 include the escrowed shares in the diluted income per share calculations. |
Use of Estimates | Use of Estimates The preparation of 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, deferred tax assets, and share-based compensation. |
Share-Based Compensation | Share-Based Compensation |
Intellectual Property Rights | Intellectual Property Rights PDS, our investment in affiliated company, relies on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We have one unexpired U.S. patent issued in 1998 on our microprocessor technology. This patent will expire in September 2015. We also have three European and two Japanese patents all expiring in October 2016. We also have six U.S. patents, six European, and one Japanese patent all of which expired between August 2009 and July 21, 2015. These patents, while expired, may have certain retrospective statutory benefits that will fully diminish six years after the patent expiration date. The patent useful life for purposes of negotiating licenses is finite and these patents are subject to legal challenges, which in combination with the limited life, could adversely impact the stream of revenues. A successful challenge to the ownership of the technology or the proprietary nature of the intellectual property would materially damage business prospects. Any issued patent may be challenged and invalidated. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-15, "Presentation of Financial Statements Going Concern." ASU 2014-15 provides guidance in generally accepted accounting principles about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for annual reporting periods ending after December 15, 2016 and for annual periods and interim periods thereafter (fiscal year 2017 for the Company). Early adoption is permitted. We have not yet determined the potential effects of the adoption of ASU 2014-15 on our consolidated financial statements. |
2. Summary of Significant Acc18
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
May. 31, 2015 | |
Accounting Policies [Abstract] | |
Summary of Operating results of discontinued operations | May 31, 2015 May 31, 2014 Gain (loss) on sale of discontinued operations $ (1,873 ) $ 89,060 Income (loss) before income taxes $ (1,873 ) $ 89,060 Income (loss) from discontinued operations $ (1,873 ) $ 89,060 |
Carrying amount of assets and liability as discontinued operations | May 31, 2015 May 31, 2014 Current assets: Other current assets $ $ 57,477 |
3. Cash, Cash Equivalents, Re19
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities (Tables) | 12 Months Ended |
May. 31, 2015 | |
Cash and Cash Equivalents [Abstract] | |
Schedule of fair value of cash, cash equivalents and investments in marketable securities | Fair Value Measurements at May 31, 2015 Using Quoted Prices Significant in Active Other Significant Fair Value at Markets for Observable Unobservable May 31, Identical Assets Inputs Inputs 2015 (Level 1) (Level 2) (Level 3) Cash and cash equivalents: Cash $ 297,259 $ 297,259 $ $ Money market funds 2,382,101 2,382,101 Restricted cash and cash equivalents 21,229 21,229 Marketable securities: Short-term: Certificates of deposit 2,455,106 2,455,106 Total $ 5,155,695 $ 2,700,589 $ 2,455,106 $ Fair Value Measurements at May 31, 2014 Using Quoted Prices Significant in Active Other Significant Fair Value at Markets for Observable Unobservable May 31, Identical Assets Inputs Inputs 2014 (Level 1) (Level 2) (Level 3) Cash and cash equivalents: Cash $ 340,555 $ 340,555 $ $ Money market funds 4,375,653 4,375,653 Restricted cash and cash equivalents 21,123 21,123 Marketable securities: Short-term: Certificates of deposit 1,701,647 1,701,647 Total $ 6,438,978 $ 4,737,331 $ 1,701,647 $ |
Schedule of maturities, gross unrealized gains or losses and fair value of certificates of deposit | May 31, 2015 Cost Gross Unrealized Gains/(Losses) Fair Maturity Due in one year or less $ 2,455,106 $ $ 2,455,106 May 31, 2014 Cost Gross Unrealized Gains/(Losses) Fair Maturity Due in one year or less $ 1,701,647 $ $ 1,701,647 |
4. Property and Equipment (Tabl
4. Property and Equipment (Tables) | 12 Months Ended |
May. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | 2015 2014 Computer equipment and software $ 24,919 $ 25,767 Furniture and fixtures 20,665 21,176 45,584 46,943 Less: accumulated depreciation (43,144 ) (44,168 ) Net property and equipment $ 2,440 $ 2,775 |
5. Investment in Affiliated C21
5. Investment in Affiliated Company (Tables) | 12 Months Ended |
May. 31, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Balance Sheets of Affiliates | PDSs balance sheets at May 31, 2015 and 2014 and statements of operations for the years ended May 31, 2015 and 2014 are as follows: Balance Sheets Assets: 2015 2014 Cash $ 442,621 $ 1,063,536 Prepaid expenses 26,644 247,776 Total assets $ 469,265 $ 1,311,312 Liabilities and Members Equity (Deficit): 2015 2014 Related party payables and accrued expenses $ 607,949 $ 1,107,560 Income tax payable 11,790 Members equity (deficit) (138,684 ) 191,962 Total liabilities and members equity (deficit) $ 469,265 $ 1,311,312 Statements of Operations 2015 2014 Revenues $ 1,820,000 $ 5,022,000 Expenses 1,673,046 4,393,655 Operating income 146,954 628,345 Income before provision for income taxes and foreign taxes 146,954 628,345 Provision for income taxes and foreign taxes 360,800 418,990 Net income (loss) $ (213,846 ) $ 209,355 |
6. Accrued Expenses and Other (
6. Accrued Expenses and Other (Tables) | 12 Months Ended |
May. 31, 2015 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other | At May 31, 2015 and 2014, accrued expenses and other consisted of the following: 2015 2014 Accrued lease obligation $ 2,478 $ 2,088 Compensation and benefits 54,827 60,397 $ 57,305 $ 62,485 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 12 Months Ended |
May. 31, 2015 | |
Equity [Abstract] | |
Schedule of Share Repurchases | 2014 Number of shares repurchased 3,854,457 Aggregate cost $ 221,474 |
Share-based compensation assumptions | Year Ended May 31, 2015 Year Ended May 31, 2014 Expected term 5 yrs 5 yrs Expected volatility 94% 88% Risk-free interest rate 1.51% 1.05% |
Schedule of Stock Options Activity | Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Options outstanding at June 1, 2014 1,335,000 $ 0.11 Options granted 2,000,000 $ 0.03 Options exercised $ Options forfeited $ 3,335,000 $ 0.06 3.65 $ 3,335,000 $ 0.06 3.65 $ 3,335,000 $ 0.06 3.65 $ |
Schedule of Share-based Compensation, Allocation of Recognized Period Cost | Year Ended Year Ended May 31, 2015 May 31, 2014 Selling, general and administrative expense $ 43,210 $ 62,418 |
8. Income Taxes (Tables)
8. Income Taxes (Tables) | 12 Months Ended |
May. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of provisions for income taxes | 2015 2014 Current: Federal $ 1,599 $ 1,170 State (29 ) 4,829 Total current 1,570 5,999 Deferred: Federal (612,594 ) (492,332 ) State 104,012 (129,766 ) Total deferred (508,582 ) (622,098 ) Valuation allowance 508,582 622,098 Total deferred Total provision $ 1,570 $ 5,999 |
Schedule of effective income tax rate | 2015 2014 Statutory federal income tax rate 35.0% 35.0% State income tax rate, net of Federal effect % (0.2% ) Change in tax rate (1.0% ) (1.0% ) Stock option expense % (0.3% ) Other (0.1% ) (0.1% ) Change in valuation allowance (34.0% ) (33.8% ) Effective income tax rate (0.1% ) (0.4% ) |
Schedule of deferred tax assets and liabilities | 2015 2014 Current deferred tax assets: State taxes $ 815 $ 1,642 Accrued expenses 14,930 16,441 Prepaids (1,448 ) Less: valuation allowance (15,745 ) (16,635 ) Total net current deferred tax asset Long-term deferred tax assets (liabilities): Investment in affiliated company 1,203,000 1,242,400 Basis difference in property and equipment (377 ) (718 ) Basis difference in intangibles 18,335 18,334 Stock based compensation expense 246,139 247,688 Impairment of note receivable 331,896 331,896 Capital loss carryover 225,603 225,454 Net operating loss carryforwards 9,709,955 9,156,427 Credit carryover 107,017 110,615 Valuation allowance (11,841,568 ) (11,332,096 ) Total net long-term deferred tax asset Net deferred tax asset $ $ |
9. Commitments and Contingenc25
9. Commitments and Contingencies (Tables) | 12 Months Ended |
May. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of operating leases | Year Ended Year Ended May 31, 2015 May 31, 2014 Rental expense $ 38,889 $ 36,444 |
2. Summary of Significant Acc26
2. Summary of Significant Accounting Policies (Details - Discontinued operations) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Accounting Policies [Abstract] | ||
Gain (loss) on sale of discontinued operations | $ (1,873) | $ 89,060 |
Income (loss) before income taxes | (1,873) | 89,060 |
Income (loss) from discontinued operations | $ (1,873) | $ 89,060 |
2. Summary of Significant Acc27
2. Summary of Significant Accounting Policies (Details - Discontinued assets) - USD ($) | May. 31, 2015 | May. 31, 2014 |
Accounting Policies [Abstract] | ||
Other current assets | $ 0 | $ 57,477 |
2. Summary of Significant Acc28
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Gain on sale of assets of discontinued operations | $ 101,000 | |
Marketable securities | $ 2,455,106 | $ 1,701,647 |
Estimated life of Property, Equipment | 3-5 years | |
Cumulative losses in excess of investment in affiliated company | $ 69,342 | 0 |
PDSG | ||
Royalty revenues | 7,127 | $ 89,060 |
Write-off of receivable | $ 9,000 | |
Options [Member] | ||
Common shares not included in calculation of diluted net loss per share | 3,335,000 | 1,335,000 |
PDSG Escrow shares | ||
Common shares not included in calculation of diluted net loss per share | 2,844,630 | 2,844,630 |
PDS [Member] | ||
Ownership interest | 50.00% | |
Cumulative losses in excess of investment in affiliated company | $ 69,342 |
3. Cash, Cash Equivalents, Re29
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities (Details) - USD ($) | May. 31, 2015 | May. 31, 2014 |
Cash and cash equivalents: | ||
Cash | $ 297,259 | $ 340,555 |
Money market funds | 2,382,101 | 4,375,653 |
Restricted cash and cash equivalents | 21,229 | 21,123 |
Short-term: | ||
Certificates of deposit | 2,455,106 | 1,701,647 |
Total | 5,155,695 | 6,438,978 |
Fair Value Inputs Level 1 | ||
Cash and cash equivalents: | ||
Cash | 297,259 | 340,555 |
Money market funds | 2,382,101 | 4,375,653 |
Restricted cash and cash equivalents | 21,229 | 21,123 |
Short-term: | ||
Certificates of deposit | 0 | 0 |
Total | 2,700,589 | 4,737,331 |
Fair Value Inputs Level 2 | ||
Cash and cash equivalents: | ||
Cash | 0 | 0 |
Money market funds | 0 | 0 |
Restricted cash and cash equivalents | 0 | 0 |
Short-term: | ||
Certificates of deposit | 2,455,106 | 1,701,647 |
Total | 2,455,106 | 1,701,647 |
Fair Value Inputs Level 3 | ||
Cash and cash equivalents: | ||
Cash | 0 | 0 |
Money market funds | 0 | 0 |
Restricted cash and cash equivalents | 0 | 0 |
Short-term: | ||
Certificates of deposit | 0 | 0 |
Total | $ 0 | $ 0 |
3. Cash, Cash Equivalents, Re30
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities (Detail 1) - Due in one year or less - USD ($) | May. 31, 2015 | May. 31, 2014 |
Certificates of deposit | ||
Cost | $ 2,455,106 | $ 1,701,647 |
Fair Value | $ 2,455,106 | $ 1,701,647 |
3. Cash, Cash Equivalents, Re31
3. Cash, Cash Equivalents, Restricted Cash and Marketable Securities (Details Narrative) - USD ($) | May. 31, 2015 | May. 31, 2014 |
Cash and Cash Equivalents [Abstract] | ||
Current portion of marketable securities | $ 2,455,106 | $ 1,701,647 |
4. Property and Equipment (Deta
4. Property and Equipment (Details) - USD ($) | May. 31, 2015 | May. 31, 2014 |
Property and Equipment, Gross | $ 45,584 | $ 46,943 |
Less: accumulated depreciation | (43,144) | (44,168) |
Net property and equipment | 2,440 | 2,775 |
Computer equipment and software | ||
Property and Equipment, Gross | 24,919 | 25,767 |
Furniture and Fixtures | ||
Property and Equipment, Gross | $ 20,665 | $ 21,176 |
4. Property and Equipment (De33
4. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 2,054 | $ 2,303 |
5. Investment in Affiliated C34
5. Investment in Affiliated Company (Details - balance sheet) - USD ($) | May. 31, 2015 | May. 31, 2014 |
Total assets | $ 469,265 | $ 1,311,312 |
Total liabilities and members' equity | 469,265 | 1,311,312 |
Cash [Member] | ||
Total assets | 442,621 | 1,063,536 |
Prepaid Expenses [Member] | ||
Total assets | 26,644 | 247,776 |
Accounts Payable and Accrued Liabilities [Member] | ||
Total liabilities and members' equity | 607,949 | 1,107,560 |
Income tax payable [Member] | ||
Total liabilities and members' equity | 0 | 11,790 |
Members equity [Member] | ||
Total liabilities and members' equity | $ (138,684) | $ 191,962 |
5. Investment in Affiliated C35
5. Investment in Affiliated Company (Details - Income) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Equity Method Investments and Joint Ventures [Abstract] | ||
Revenues | $ 1,820,000 | $ 5,022,000 |
Expenses | 1,673,046 | 4,393,655 |
Operating income | 146,954 | 628,345 |
Income before provision for income taxes and foreign taxes | 146,954 | 628,345 |
Provision for income taxes and foreign taxes | 360,800 | 418,990 |
Net income (loss) | $ (213,846) | $ 209,355 |
5. Investment in Affiliated C36
5. Investment in Affiliated Company (Details Narrative) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
TPL | ||
Legal fees paid | $ 1,247,969 | $ 2,300,323 |
Legal fees reversed | 20,546 | 400,708 |
Alliacense | ||
Licensing agreements | 956,353 | |
Legal fees paid | 184,435 | |
Legal fees reversed | (24,598) | |
Litigation fees paid | 323,000 | $ 300,000 |
Licensing fees paid | $ 155,600 |
5. Investment in Affiliated C37
5. Investment in Affiliated Company (Details Narrative PDS) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Net income (loss) from PDS | $ (106,923) | $ 104,677 |
Cash distributions received from PDS | 58,400 | 375,000 |
PDS [Member] | Third parties | ||
Proceeds from licensing agreement | 1,820,000 | 5,022,000 |
PTSC | ||
Net income (loss) from PDS | (106,923) | 104,677 |
Cash distributions received from PDS | $ 58,400 | $ 375,000 |
6. Accrued Expenses and Other38
6. Accrued Expenses and Other (Details) - USD ($) | May. 31, 2015 | May. 31, 2014 |
Payables and Accruals [Abstract] | ||
Accrued lease obligation | $ 2,478 | $ 2,088 |
Compensation and benefits | 54,827 | 60,397 |
Accrued Expenses and Other, Total | $ 57,305 | $ 62,485 |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details - shares repurchased) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Aggregate cost | $ 221,474 | |
Share repurchases | ||
Number of shares repurchased | 0 | 3,854,457 |
Aggregate cost | $ 221,474 |
7. Stockholders' Equity (Deta40
7. Stockholders' Equity (Details - assumptions) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Stockholders Equity Details - Assumptions | ||
Expected term | 5 years | 5 years |
Expected volatility | 94.00% | 88.00% |
Risk-free interest rate | 1.51% | 1.05% |
7. Stockholders' Equity (Deta41
7. Stockholders' Equity (Details - Option activity) - 12 months ended May. 31, 2015 - Options [Member] - USD ($) None in scaling factor is -9223372036854775296 | Total |
Number of Options Outstanding, Beginning | 1,335,000 |
Number of Options Granted | 2,000,000 |
Number of Options Exercised | 0 |
Number of Options Forfeited | |
Number of Options Outstanding, Ending | 3,335,000 |
Options vested and expected to vest, Ending | 3,335,000 |
Number of Options Exercisable, Ending | 3,335,000 |
Weighted Average Exercise Price Outstanding, Beginning | $ .11 |
Weighted Average Exercise Price Granted | .03 |
Weighted Average Exercise Price Outstanding, Ending | .06 |
Weighted Average Exercise Price, Options vested and expected to vest, Ending | .06 |
Weighted Average Exercise Price Exercisable | $ .06 |
Weighted Average Remaining Contractual Life (in years) Outstanding | 3 years 7 months 24 days |
Weighted Average Remaining Contractual Life (in years) Options vested and expected to vest | 3 years 7 months 24 days |
Weighted Average Remaining Contractual Life (in years) Exercisable | 3 years 7 months 24 days |
Aggregate Intrinsic Value Outstanding, Ending | |
Aggregate Intrinsic Value Options vested and expected to vest | |
Aggregate Intrinsic Value Exercisable |
7. Stockholders' Equity (Deta42
7. Stockholders' Equity (Details - Share based compensation expense) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Equity [Abstract] | ||
Selling, general, and administrative expense | $ 43,210 | $ 62,418 |
7. Stockholders' Equity (Deta43
7. Stockholders' Equity (Details Narrative) | 12 Months Ended |
May. 31, 2015$ / shares | |
Stockholders Equity Details Narrative | |
Weighted average grant date fair value of options granted | $ .02 |
8. Income Taxes (Details - Prov
8. Income Taxes (Details - Provision) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Current: | ||
Federal | $ 1,599 | $ 1,170 |
State | (29) | 4,829 |
Total current | 1,570 | 5,999 |
Deferred: | ||
Federal | (612,594) | (492,332) |
State | 104,012 | (129,766) |
Total deferred | (508,582) | (622,098) |
Valuation allowance | 508,582 | 622,098 |
Total deferred | 0 | 0 |
Total provision | $ 1,570 | $ 5,999 |
8. Income Taxes (Details - Reco
8. Income Taxes (Details - Reconcilation) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Statutory federal income tax rate | 35.00% | 35.00% |
State income tax rate, net of Federal effect | 0.00% | (0.20%) |
Change in tax rate | (1.00%) | (1.00%) |
Stock option expense | 0.00% | (0.30%) |
Other | (0.10%) | (0.10%) |
Change in valuation allowance | (34.00%) | (33.80%) |
Effective income tax rate | (0.10%) | (0.40%) |
8. Income Taxes (Details - Defe
8. Income Taxes (Details - Deferred tax assets) - USD ($) | May. 31, 2015 | May. 31, 2014 |
Current deferred tax assets: | ||
State taxes | $ 815 | $ 1,642 |
Accrued expenses | 14,930 | 16,441 |
Prepaids | 0 | (1,448) |
Less: valuation allowance | (15,745) | (16,635) |
Total net current deferred tax asset | 0 | 0 |
Long-term deferred tax assets (liabilities): | ||
Investment in affiliated company | 1,203,000 | 1,242,400 |
Basis difference in property and equipment | (377) | (718) |
Basis difference in intangibles | 18,335 | 18,334 |
Stock based compensation expense | 246,139 | 247,688 |
Impairment of note receivable | 331,896 | 331,896 |
Capital loss carryover | 225,603 | 225,454 |
Net operating loss carryforwards | 9,709,955 | 9,156,427 |
Credit carryover | 107,017 | 110,615 |
Valuation allowance | (11,841,568) | (11,332,096) |
Total net long-term deferred tax asset | 0 | 0 |
Net deferred tax asset | $ 0 | $ 0 |
8. Income Taxes (Details Narrat
8. Income Taxes (Details Narrative) - May. 31, 2015 - USD ($) | Total |
Federal [Member] | |
Operating loss carryforwards | $ 22,744,000 |
Operating loss carryforwards, expiration date | May 31, 2025 |
State [Member] | |
Operating loss carryforwards | $ 22,365,000 |
Operating loss carryforwards, expiration date | May 31, 2015 |
9. Commitments and Contingenc48
9. Commitments and Contingencies (Details) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rental expense | $ 38,889 | $ 36,444 |
9. Commitments and Contingenc49
9. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Patriot's matching contributions to the 401K plan | $ 15,935 | $ 10,610 |