Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Nov. 30, 2012
Income Taxes [Abstract]  
INCOME TAXES

NOTE 6 - INCOME TAXES.

The Company recorded the following income tax provision for the years ended November 30, 2012 and 2011.

 

                 
    2012     2011  

Current:

                

Federal

   $ —       $ —    

State

     —         —    

Foreign

     169,000       172,000  

Subtotal

     169,000       172,000  

Deferred:

                

Federal

     1,561,700       —    

State

     157,300       —    

Foreign

     —         —    
     

Subtotal

     1,719,000       —    
     

Income Tax Provision

   $ 1,888,000     $ 172,000  
   

 

 

    

 

 

  

 

As of November 2012 and 2011 the tax effects of temporary differences that give rise to the deferred tax assets are as follows:

 

                         
    2012  
    Current     Non-current     Total  

Tax Assets:

                        

Deferred income (Net of Discounts)

   $ 214,000     $ 3,366,000     $ 3,580,000  

NOL’s, credits, and other carryforward items

     —         3,284,000       3,284,000  

Tax over book basis in unconsolidated affiliate

     —         1,227,000       1,227,000  

Accrued payroll

     41,000       —         41,000  

Reserves and other accruals

     1,232,000       —         1,232,000  

Stock compensation

     —         383,000       383,000  

Depreciation and Amortization

     —         37,000       37,000  

RSA Buy-out

     —         1,163,000       1,163,000  
   

 

 

    

 

 

    

 

 

  
       

Total Assets:

     1,487,000       9,460,000       10,947,000  

Less: Valuation Allowance

     (1,487,000 )      (9,460,000 )      (10,947,000 ) 
   

 

 

    

 

 

    

 

 

  

Net Deferred Tax Asset

   $ —       $ —         —    
   

 

 

    

 

 

    

 

 

  
   
    2011  
    Current     Non-current     Total  

Tax Assets:

                        

Deferred income (Net of Discounts)

   $ 215,000     $ 3,811,000     $ 4,026,000  

NOL’s, credits, and other carryforward items

     —         3,223,000       3,223,000  

Tax over book basis in unconsolidated affiliate

     —         1,247,000       1,247,000  

Accrued payroll

     28,000       —         28,000  

Reserves and other accruals

     890,000       —         890,000  

Deferred compensation

     —         27,000       27,000  

Stock compensation

     —         77,000       77,000  
   

 

 

    

 

 

    

 

 

  
       

Total Assets:

     1,133,000       8,385,000       9,518,000  
       

Tax Liabilities:

                        

Depreciation and amortization

   $ —       ($ 43,000 )    ($ 43,000 ) 

Less: Valuation Allowance

     (923,000 )      (6,833,000 )      (7,756,000 ) 
   

 

 

    

 

 

    

 

 

  

Net Deferred Tax Asset (Liability)

   $ 210,000     $ 1,509,000     $ 1,719,000  
   

 

 

    

 

 

    

 

 

  

A valuation allowance covering the deferred tax assets of the Company for November 30, 2012 and November 30, 2011, has been provided as the Company does not believe it is more likely than not that all of the future income tax benefits will be realized. The valuation allowance increased by approximately $3,191,000 and $784,000, respectively, for the years ended November 30, 2012 and 2011. The 2012 increase was a result of a full valuation allowance being applied against the deferred tax assets as management had concluded in the second quarter of 2012 to fully reserve the deferred income tax assets as it is more likely than not that the deferred tax assets will not be realized. The decision resulted in a charge to income tax expense of $1,719,000 for the year ended November 30, 2012. The 2011 increase was predominantly a result of an increased deferred tax asset related to accrued expenses and foreign tax credits.

The Company has unused net operating losses available for carryforward as of November 30, 2012 of approximately $5,654,000 to offset future federal taxable income. The net operating loss carryfowards expire during 2022 through 2030. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating losses if there has been an “ownership change”. Such an “ownership change” as described in Section 382 of the Internal Revenue code may limit the Company’s utilization of its net operating loss carryforwards. Management has completed an internal analysis of potential ownership changes and has concluded that no ownership changes have occurred through November 30, 2012 which would potentially limit the utilization of the net operating losses.

A reconciliation of the income tax provision with the amount of tax computed by applying the federal statutory rate to pretax income follows:

 

                                 
    For the Years Ended November 30, 2012  
    2012     %     2011     %  

Tax at Federal Statutory Rate

     (1,560,000 )      (34.0 )      (712,000 )      (34.0 ) 

State Income Tax Effect

     (167,000 )      (3.6 )      (76,000 )      (3.6 ) 

Increase in valuation allowance

     3,191,000       69.5       784,000       37.4  

Permanent Disallowances

     424,000       9.2       176,000       8.4  

Capital loss expirations

     0       0       0       0  

Foreign tax credits

     (169,000 )      (3.7 )      (172,000 )      (8.2 ) 

Foreign tax withholding

     169,000       3.7       172,000       8.2  

Other

     0       0       0       0  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total income taxes

   $ 1,888,000       41.1     $ 172,000       8.2  
   

 

 

    

 

 

    

 

 

    

 

 

  

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the years ended November 30, 2012 and 2011, the Company had no uncertain tax positions and therefore there are no provisions for interest or penalties related to uncertain tax positions.

 

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The table below summarizes the open tax years and ongoing tax examinations in major jurisdictions as of November 30, 2012:

 

         

Jurisdiction

   Open Tax Years   Examinations in Process
     

United States – Federal Income Tax

   2008 - 2011   N/A
     

United States – Various States

   2007 - 2011   N/A