| INCOME TAXES |
NOTE 10 - INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax Positions”. Management believes that there were no unrecognized tax benefits, or tax positions that would result in uncertainty regarding the deductions taken, as of August 31, 2015 and August 31, 2014. ASC Subtopic 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were penalties and related interest of $0 for the nine months ended August 31 2015, and $586 for the nine months ended August 31 2014. Penalties are recorded in selling, general and administrative expenses.
The charitable contributions portion of the deferred tax asset and the loss carry forward as of August 31, 2015 has $337,838 and $9,493,327, respectively, that has been reclassified as a long-term asset, based on an estimate of the amount that will be realizable in periods greater than twelve months from August 31, 2015.
At August 31, 2015 and November 30, 2014, respectively, the Company had temporary differences arising from the following:
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August 31, 2015 |
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Classified As |
Type |
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Amount |
|
Deferred Tax |
|
Short-Term
Asset |
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Long-Term
Asset |
Depreciation |
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$ |
(1,135,934 |
) |
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$ |
(419,201 |
) |
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$ |
— |
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|
$ |
(419,201 |
) |
Reserve for bad debts |
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7,635 |
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2,817 |
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|
2,817 |
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|
— |
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Reserve for returns |
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328,205 |
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121,120 |
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|
121,120 |
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— |
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Reserve for obsolete inventory |
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347,558 |
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128,262 |
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128,262 |
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— |
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Vacation accrual |
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109,528 |
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40,420 |
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40,420 |
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— |
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Accrued bonus |
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222,000 |
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81,927 |
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81,927 |
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Charitable contributions |
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1,101,720 |
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406,575 |
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68,737 |
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337,838 |
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Section 263A costs |
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76,942 |
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28,395 |
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28,395 |
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— |
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Loss carry forward |
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27,587,233 |
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10,180,700 |
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687,373 |
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9,493,327 |
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Net deferred tax asset (liability) |
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$ |
10,571,015 |
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$ |
1,159,051 |
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$ |
9,411,964 |
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November 30, 2014 |
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Classified As |
Type |
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Amount |
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Deferred Tax |
|
Short-Term
Asset |
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Long-Term
(Liability) |
Depreciation |
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$ |
(685,154 |
) |
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$ |
(252,883 |
) |
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$ |
— |
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$ |
(252,883 |
) |
Reserve for bad debts |
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25,124 |
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9,272 |
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9,272 |
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— |
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Reserve for returns |
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2,942,544 |
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1,085,907 |
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1,085,907 |
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— |
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Reserve for obsolete inventory |
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608,504 |
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224,560 |
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224,560 |
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— |
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Vacation accrual |
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148,751 |
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54,895 |
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54,895 |
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— |
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Charitable contributions |
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1,100,940 |
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406,287 |
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132,853 |
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273,434 |
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Section 263A costs |
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128,079 |
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47,266 |
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47,266 |
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— |
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Loss carry forward |
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22,933,333 |
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8,296,176 |
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1,328,532 |
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6,967,644 |
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Net deferred tax asset (liability) |
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$ |
9,871,480 |
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$ |
2,883,285 |
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$ |
6,988,195 |
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Income tax (benefit) expense is made up of the following components:
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Three Months Ended |
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Nine Months Ended |
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August 31, 2015 |
August 31, 2014 |
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August 31, 2015 |
August 31, 2014 |
Continuing Operations |
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Current tax - Federal |
$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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Current tax - State & Local |
(9,165 |
) |
2,000 |
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(5,138 |
) |
6,000 |
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Deferred tax |
142,554 |
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(116,105 |
) |
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(728,093 |
) |
(550,788 |
) |
Tax - Continuing Operations |
$ |
133,389 |
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$ |
(114,105 |
) |
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$ |
(733,231 |
) |
$ |
(544,788 |
) |
Discontinued Operations |
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Current tax - Federal |
— |
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— |
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— |
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— |
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Current tax - State & Local |
— |
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— |
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— |
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— |
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Deferred tax |
(73,211 |
) |
508,441 |
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28,558 |
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(2,180,468 |
) |
Tax - Discontinued Operations |
$ |
(73,211 |
) |
$ |
508,441 |
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$ |
28,558 |
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$ |
(2,180,468 |
) |
Prepaid and refundable income taxes are made up of the following components:
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Prepaid and refundable income taxes |
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Federal |
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State &
Local |
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Total |
August 31, 2015 |
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$ |
— |
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$ |
16,766 |
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$ |
16,766 |
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November 30, 2014 |
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$ |
167,075 |
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$ |
286,523 |
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$ |
453,598 |
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A reconciliation of the provision for (benefit from) income taxes computed at the statutory rate to the effective rate for the three months ended August 31, 2015, and August 31, 2014 is as follows:
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Three Months Ended |
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Three Months Ended |
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August 31, 2015 |
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August 31, 2014 |
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Amount |
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Percent of Pretax Income |
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Amount |
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Percent of Pretax Income |
Continuing Operations |
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(Benefit from) provision for income taxes at federal statutory rate |
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$ |
104,879 |
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34.00 |
% |
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$ |
(106,493 |
) |
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34.00 |
% |
Changes in provision (benefit) for income taxes resulting from: |
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State income taxes, net of federal income tax benefit |
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8,946 |
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2.90 |
% |
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(9,083 |
) |
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2.90 |
% |
Non-deductible expenses and other adjustments |
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19,564 |
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6.34 |
% |
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1,471 |
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(0.47 |
)% |
(Benefit from) provision for income taxes at effective rate |
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133,389 |
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43.24 |
% |
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(114,105 |
) |
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36.43 |
% |
Discontinued Operations |
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Provision for (benefit from) income taxes at federal statutory rate |
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$ |
(67,457 |
) |
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34.00 |
% |
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$ |
474,525 |
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34.00 |
% |
Changes in benefit from income taxes resulting from: |
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State income taxes, net of federal income tax benefit |
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(5,754 |
) |
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2.90 |
% |
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40,474 |
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2.90 |
% |
Non-deductible expenses and other adjustments |
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— |
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— |
% |
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(6,558 |
) |
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(0.47 |
)% |
Provision for (benefit from) income taxes at effective rate for Discontinued Operations |
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$ |
(73,211 |
) |
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36.90 |
% |
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$ |
508,441 |
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36.43 |
% |
Total benefit from income taxes at effective rate |
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$ |
60,178 |
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54.67 |
% |
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$ |
394,336 |
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36.43 |
% |
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Nine Months Ended |
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Nine Months Ended |
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August 31, 2015 |
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August 31, 2014 |
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Amount |
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Percent of Pretax Income |
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Amount |
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Percent of Pretax Income |
Continuing Operations |
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Benefit from income taxes at statutory rate |
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$ |
(772,616 |
) |
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34.00 |
% |
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$ |
(503,868 |
) |
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34.00 |
% |
Increases in taxes resulting from: |
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State income taxes, net of federal income tax benefit |
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(65,900 |
) |
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2.90 |
% |
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(42,977 |
) |
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2.90 |
% |
Non-deductible expenses and other adjustments |
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105,285 |
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(4.63 |
)% |
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2,057 |
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(0.14 |
)% |
Benefit from income taxes at effective rate |
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$ |
(733,231 |
) |
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32.27 |
% |
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(544,788 |
) |
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36.76 |
% |
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Discontinued Operations |
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Provision for (benefit from) income taxes at federal statutory rate |
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$ |
30,092 |
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34.00 |
% |
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$ |
(2,016,693 |
) |
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34.00 |
% |
Changes in (benefit) provision for income taxes resulting from: |
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State income taxes, net of federal income tax benefit |
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2,567 |
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2.90 |
% |
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(172,012 |
) |
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2.90 |
% |
Non-deductible expenses and other adjustments |
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(4,101 |
) |
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(4.63 |
)% |
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8,237 |
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(0.14 |
)% |
Provision for (benefit from) income taxes at effective rate |
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$ |
28,558 |
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32.27 |
% |
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$ |
(2,180,468 |
) |
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36.76 |
% |
Total benefit from income taxes at effective rate |
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$ |
(704,673 |
) |
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32.27 |
% |
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$ |
(2,725,256 |
) |
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36.76 |
% |
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