Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Nov. 30, 2016
Income Tax Disclosure [Abstract]  
Income Taxes


The Company recorded the following income tax provision for the years ended November 30, 2016 and 2015.


     2016      2015  




   $ 432,000      $ —    


     212,000        63,000  


     109,000        150,000  


     753,000        213,000  




     (1,662,000      (6,761,000


     (250,000      (609,000


     —          —    


     (1,912,000      (7,370,000

Income Tax (Benefit) Expense

   $ (1,159,000    $ (7,157,000








As of November 2016 and 2015 the tax effects of temporary differences that give rise to the deferred tax assets are as follows:


     Total Non-current  

Tax Assets:


Deferred Income (Net of Discounts)

   $ 4,917,000  

NOL’s, Credits, and Other Carryforward Items


Tax Over Book Basis in Unconsolidated Affiliate


Accrued Payroll


Reserves and Other Accruals


Stock Compensation


Depreciation and Amortization


RSA Buy-out





Total Assets:


Tax Liabilities:


Unrealized Gains on AFS Securities





Total Liabilities:


Less: Valuation Allowance





Net Deferred Tax Asset




     Current      Non-current      Total  

Tax Assets:


Deferred income (Net of Discounts)

   $ 218,000      $ 4,406,000      $ 4,624,000  

NOL’s, credits, and other carryforward items

     —          1,137,000        1,137,000  

Tax over book basis in unconsolidated affiliate

     —          1,686,000        1,686,000  

Accrued payroll

     55,000        —          55,000  

Reserves and other accruals

     1,063,000        —          1,063,000  

Stock compensation

     —          618,000        618,000  

Depreciation and Amortization

     —          7,000        7,000  

RSA Buy-out

     —          810,000        810,000  










Total Assets:

     1,336,000        8,664,000        10,000,000  

Tax Liabilities:


Unrealized gains on AFS securities

        (103,000      (103,000










Total Liabilities:

        (103,000      (103,000

Less: Valuation Allowance

        (2,630,000      (2,630,000










Net Deferred Tax Asset

   $ 1,336,000      $ 5,931,000        7,267,000  










A valuation allowance covering the deferred tax assets of the Company for November 30, 2016 and November 30, 2015, 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 changed by approximately ($329,000) and ($7,887,000) during the years ended November 30, 2016 and 2015, respectively. As of November 30, 2015, we had a valuation allowance against our deferred tax assets of $9,897,000. The 2015 change was primarily a result of NOL usage and assets relating to deferred revenue. The change for year ended November 30, 2016 was primarily a result of Nyberg’s RSA Buy Out, impairment of the PrepaCyte’s intangible assets, and a partial release of the valuation allowance.

During the last quarter of the year ended November 30, 2016, the Company bought out a revenue sharing agreement extinguishing $875,000 of their RSA deferred tax asset and capitalizing the full amount of $3,400,000 to be amortized over the next fifteen years. Positive evidence exists for the realization of the deferred tax asset further allowing the company to release the $875,000, tax effected at $329,000, from their valuation allowance for the current year.

The Company evaluates the recoverability of our deferred tax assets as of the end of each quarter, weighing all positive and negative evidence, and are required to establish and maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

The positive evidence that weighed in favor of releasing the allowance as of November 30, 2016 and ultimately outweighed the negative evidence against releasing the allowance was the following:


    Identifiable sources of future income relating to the Company’s deferred revenue accounts.


    Certainty as to the amount available of deferred tax assets and nature in which the deferred tax assets reverse;


    Profitability for years ended November 30, 2014 and 2015 and our expectations regarding the sustainability of these profits;


    The Company’s three-year cumulative position as of November 30, 2016; and


    The Company’s taxable income projection for fiscal years ending November 30, 2017, 2018 and 2019.

As of August 31, 2015, we concluded that the positive evidence in favor of releasing the allowance outweighed the negative evidence against releasing the allowance and that it was more likely than not that our deferred tax assets, except the deferred tax assets relating to the foreign tax credit carryforwards, investment in Saneron CCEL Therapeutics, Inc., capital loss carryforwards, and deferred revenue: RSA, would be realized. Further positive evidence and analysis as of November 30, 2016 allowed the Company to conclude that an additional amount of the valuation allowance to be released relating to the Nyberg RSA Buy Out and therefore the only valuation allowance as of year-end was for the investment in Saneron CCEL Therapeutics, Inc., capital loss carryforwards, and deferred revenue: RSA.

The Company has utilized all of its unused net operating losses available for carryforward as of November 30, 2016 to offset future federal taxable income. 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. An analysis has been performed on the net operating loss carryforwards as of November 30, 2016 and it has been concluded that no ownership changes have occurred through November 30, 2016 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, 2016  
     2016      %      2015      %  

Tax at Federal Statutory Rate

     (880,000      34.0        272,000        34.0  

State Income Tax Effect

     (94,000      3.6        29,000        3.6  

Change in Valuation Allowance

     —          0.0        264,000        33.0  

Valuation Allowance Release

     (329,000      (12.7      (8,151,000      (1,019.5

Permanent Disallowances

     184,000        (7.3      160,000        20  


     (40,000      1.6        269,000        33.6  

Foreign tax credits

     (109,000      4.3        (150,000      (18.8

Foreign tax withholding

     109,000        (4.3      150,000      18.8  













Total income taxes

   $ (1,159,000      44.7      $ (7,157,000      (895.3














The Company adopted the accounting standard for uncertain tax positions, ASC 740-10, on December 1, 2007. As required by the standard, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Increases or decreases to the unrecognized tax benefits could result from management’s belief that a position can or cannot be sustained upon examination based on subsequent information or potential lapse of the applicable statute of limitation for certain tax positions. There were no uncertain tax positions as of November 30, 2016 and 2015.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the years ended November 30, 2016 and 2015, the Company had 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, 2016:



   Open Tax Years   

Examinations in Process

United States – Federal Income Tax

   2012 - 2015    For the Year Ended November 30, 2014

United States – Various States

   2011 - 2015    N/A