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Note 5 - Income Taxes
12 Months Ended
Nov. 30, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 5 Income Taxes

 

The components of the Company’s provision for income taxes are as follows:

 

  

2021

  

2020

 

Current

        

Federal

 $-  $- 

State

  40,000   15,000 

Deferred

  79,174   284,940 

Total

 $119,174  $299,940 

 

In fiscal 2021, the Company’s income included the $228,000 of PPP loan forgiveness, but it is excluded from federal and state tax calculations as a permanent difference, thereby reducing the federal and state effective rate from the customary statutory tax rate used to compute income tax expense at the federal rate of 21% and a state rate of 7.11%, which is net of the federal tax effect for fiscal 2020 and 2021. The effective tax rate for fiscal 2021 is 15.5% versus 128% for the fiscal 2020.

 

In 2020, the decrease in the net deferred tax asset was due to a change in the actual and expected use of net operating losses, (“NOLs”) that were expiring in 2021 through 2029.

 

A reconciliation of the expected income tax expense to the recorded income tax expense is as follows for the years ended November 30:

 

  

2021

  

2020

 
         

Federal income tax provision computed at federal statutory rate

 $89,446  $49,091 

State income taxes, net of federal tax provision

  40,000   16,620 

Change in valuation allowance, utilization of NOL's and expected future use of NOL's and other adjustments

  (10,272)  234,229 

Income Tax Provision

 $119,174  $299,940 

 

The components of the Company’s deferred tax assets and liabilities for federal and state income taxes consist of the following:

 

  

2021

  

2020

 

Deferred revenue

 $41,876  $45,771 

Marketing Fund net contributions

  165,600   111,552 

Allowance for doubtful accounts and notes receivable

  3,901   5,103 

Accrued expenses

  52,907   49,176 

Operating lease liability

  73,112   100,983 

Net operating loss carryforwards

  33,652   159,567 

Valuation allowance

  -   - 

Total Deferred Income Tax Asset

 $371,048  $472,152 
         

Depreciation and amortization

 $(473,971) $(471,895)

Right of use lease asset

  (61,191)  (85,197)

Total Deferred Income Tax Liabilities

 $(535,162) $(557,092)
         

Total Net Deferred Tax Liability

 $(164,114) $(84,940)

 

As of November 30, 2021 the Company has estimated realizable net operating loss carryforwards of approximately $160,000 expiring between 2022 and 2029 for U.S. federal income tax purposes. There are no remaining net operating loss carryforwards to be utilized for state taxes. The Company routinely reviews the future realization of tax assets based on projected future reversals of taxable temporary differences, available tax planning strategies and projected future taxable income. There is no valuation allowance established for 2021 and 2020 because it is expected that the NOLs will be utilized.

 

The Company’s income tax returns, which are filed as a consolidated return for the years ending November 30, 2018, 2019 and 2020 are subject to examination by the IRS and corresponding states, generally for three years after they are filed.