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Note 19 - Income Taxes | 12 Months Ended
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Nov. 30, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
19. | INCOME TAXES
Loss before income taxes consists of the following (in thousands):
|  | Year Ended November 30, |
|  | 2021 |  |  | 2020 |
United States |  | $ | (2,911 | ) |  | $ | (13,572 | )
Foreign |  |  | (532 | ) |  |  | 1,312 |
Total |  | $ | (3,443 | ) |  | $ | (12,260 | )
The components of the provision for income taxes is as follows (in thousands):
|  | Year Ended November 30, |
|  | 2021 |  |  | 2020 |
Current expense (benefit): |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |
State |  |  | 14 |  |  |  | — |
Foreign |  |  | (165 | ) |  |  | 293 |
Total current expense (benefit): |  |  | (151 | ) |  |  | 293 |
Deferred expense (benefit): |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |
Foreign |  |  | (9 | ) |  |  | — |
Total deferred expense (benefit) |  |  | (9 | ) |  |  | — |
Total income tax expense (benefit) |  | $ | (160 | ) |  | $ | 293 |
A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows:
|  | Year Ended November 30, |
|  | 2021 |  |  | 2020 |
Income at US statutory rate |  |  | 21.00 | % |  |  | 21.00 | %
State taxes, net of Federal benefit |  |  | (0.31 | )% |  |  | 6.58 | %
Permanent differences |  |  | (0.34 | )% |  |  | (13.60 | )%
Foreign Taxes |  |  | 6.34 | % |  |  | - |
Foreign rate differential |  |  | (4.52 | )% |  |  | (0.75 | )%
Valuation allowance |  |  | (9.05 | )% |  |  | (12.30 | )%
Other |  |  | (8.52 | )% |  |  | (3.32 | )%
Total |  |  | 4.60 | % |  |  | (2.39 | )%
The net deferred income tax asset balance related to the following (in thousands):
|  | November 30, |
|  | 2021 |  |  | 2020 |
Depreciation and amortization |  | $ | (412 | ) |  | $ | (270 | )
Stock compensation |  |  | 1,103 |  |  |  | 335 |
Inventory reserve |  |  | 95 |  |  |  | 29 |
Bad debt reserve |  |  | 3 |  |  |  | 3 |
Accrued payroll |  |  | 363 |  |  |  | 183 |
Warranty reserve |  |  | 160 |  |  |  | 90 |
Foreign tax credit carryforwards |  |  | 9 |  |  |  | — |
Unrealized gain/(loss) on investments |  |  | 4 |  |  |  | — |
Net operating loss (“NOL”) carryforwards |  |  | 5,226 |  |  |  | 5,950 |
Total deferred tax assets |  |  | 6,551 |  |  |  | 6,320 |
Valuation allowance |  |  | (6,551 | ) |  |  | (6,320 | )
Net deferred tax assets (liabilities) |  | $ | — |  |  | $ | — |
As of November 30, 2021, the Company had federal and state NOL carryforwards of approximately $24.9 million and $11.4 million, respectively, which begin to expire in 2025 for federal and state purposes. The federal NOL carryforwards include approximately $8.6 million, which do not expire. Future realization of the tax benefits of existing temporary differences and NOL carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of November 30, 2021 and 2020, respectively, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of November 30, 2021 and 2020. At November 30, 2021 and 2020, the Company recognized valuation allowances of $6.6 million and $6.3 million, respectively, related to its deferred tax assets created in those respective years. The net increase of $0.3 million in the valuation allowance reflects the net in increase in gross deferred tax asset between those periods. Pursuant to Internal Revenue Code Section 382, use of NOL carryforwards may be limited if the Company experiences a cumulative change in ownership of greater than 50% in a moving three-year period. Ownership changes could impact the Company’s ability to utilize the NOL carryforwards remaining at an ownership change date. The Company has completed a Section 382 study and determined that there were multiple ownership changes of 50% or more during the period from March 5, 2007 through November 30, 2020. These ownership changes occurred around March 10, 2007, August 27, 2013, and March 27, 2020. As of the last testing date covered in the testing period, the cumulative ownership change is 11.06%. The resulting limitation of NOL carryforwards has been considered in determining the full valuation allowance against the related deferred tax assets as noted above.

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