Cryo-Cell International, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Nov. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10—INCOME TAXES

The Company recorded the following income tax provision for the years ended November 30, 2019 and 2018.


	2019			2018
Current:
Federal	$	1,637,000		$	1,467,000
State		769,000			622,000
Foreign		108,000			108,000

Subtotal		2,514,000			2,197,000
Deferred:
Federal		(1,106,000	)		2,716,000
State		(307,000	)		(441,000	)
Foreign		—			—

Subtotal		(1,413,000	)		2,275,000

Income Tax Expense	$	1,101,000		$	4,472,000

As of November 201

and 2018, the tax effects of temporary differences that give rise to the deferred tax assets are as follows:


	2019			2018
Tax Assets:
Deferred income (Net of Discounts)	$	6,256,000		$	5,157,000
Tax over book basis in unconsolidated affiliate		1,224,000			1,214,000
Accrued payroll		82,000			257,000
Reserves and other accruals		1,589,000			868,000
Stock compensation		411,000			330,000
Depreciation and Amortization		450,000			428,000
Transaction costs		18,000			18,000
RSA Buy-out		1,095,000			1,210,000

Total Assets:		11,125,000			9,482,000
Tax Liabilities:
Unrealized gains on marketable securities		(117,000	)		(112,000	)
NOL’s credits, and other carryforward items		(282,000	)		(79,000	)

Total Liabilities:		(399,000	)		(191,000	)
Less: Valuation Allowance		(1,646,000	)		(1,634,000	)

Net Deferred Tax Asset	$	9,080,000		$	7,657,000

A valuation allowance covering the deferred tax assets of the Company for November 30, 2019 and November 30, 2018, 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 ($12,000)

and ($711,000) during the years ended November 30, 2019 and 2018, respectively. The change for year ended November 30, 2019 was primarily due to changes in statutory rates. The change for year ended November 30, 2018 was a result of the revaluation impact of the Tax Cuts and Jobs Act of 2017 which reduced the federal tax rate from 34% to 21%.

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, 2017 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, 2015 and 2016 and our expectations regarding the sustainability of these profits;

•

The Company’s three-year cumulative position as of November 30, 2017; and

•

The Company’s taxable income projection for fiscal years ending November 30, 2018, 2019 and 2020.

The

Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on December 22, 2017. The Tax Act makes significant changes to provision of the Internal Revenue Code, including changing the corporate tax rate to a flat 21% rate as of January 1, 2018. This requires the Company’s net deferred tax assets and liabilities to be revalued at the newly enacted U.S. corporate rate. The impact will be recognized in tax expense in the year of enactment. Based on evaluation, the Company’s discrete expense for the rate impact will be approximately $3.1 million. Based on the Company’s evaluation, the Tax Act is not expected to impact the recoverability of its deferred tax asset.

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
	2019			%			2018			%
Tax at Federal Statutory Rate		733,198			21.00			799,507			22.10
State Income Tax Effect		220,527			6.32			216,608			5.99
Valuation Allowance Release		—			0.00			—			0.00
Tax Compensation Differences		26,330			0.75			260,845			7.21
Permanent Disallowances		76,775			2.20			149,141			4.12
Impact of Tax Reform		—			0.00			3,078,094			85.08
Deferred Repricing		24,533			0.70			(28,337	)		(0.78	)
Other		19,278			(0.10	)		(3,354	)		(0.09	)
Foreign tax credits		(108,150	)		(3.10	)		(108,314	)		(2.99	)
Foreign tax withholding		108,150			3.10			108,314			2.99

Total income taxes	$	1,100,641			30.87		$	4,472,504			123.63

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, 2019 and 2018.

There was approximately $2,801,000 and $2,204,000 of U.S. income taxes paid for the fiscal years ended November 30, 2019 and November 30, 2018, respectively.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the years ended November 30, 2019 and 2018, the Company had no material 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, 2019:


Jurisdiction	Open Tax Years	Examinations in Process
United States – Federal Income Tax	2015 – 2018	N/A
United States – Various States	2013 – 2018	N/A