7. INCOME TAXES

12 Months Ended

Oct. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

The Company’s provision (benefit) for income taxes in 2015 and 2014 consisted of the following:

	2015			2014
Current
Federal	$	(73,407	)	$	1,607,952
State and local		36,610			332,199
		(36,797	)		1,940,151
Deferred
Federal		(657,500	)		886,060
State and local		(69,350	)		120,891
		(726,850	)		1,006,951
Income tax (benefit) expense	$	(763,647	)	$	2,947,102

A reconciliation of the difference between the expected income tax rate using the statutory U.S. federal tax rate and the Company’s effective tax rate is as follows:

	2015			2014
Tax at the federal statutory rate of 34%	$	(711,680	)	$	2,708,175
Other permanent differences		(30,359	)		(62,348	)
State and local tax, net of federal		(21,608	)		301,278
Provision for income taxes	$	(763,647	)	$	2,947,102
Effective income tax rate		(37)	%		37	%

The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities as of October 31, 2015 and 2014 are as follows:

	2015		2014
Current deferred tax assets:
Accounts receivable	$	53,605	$	54,407
Net operating loss		714,150		27,807
Unrealized loss		180,112		183,216
Inventory		49,853		78,227
Total current deferred tax asset	$	997,720	$	343,657
Non-current deferred tax assets:
Deferred rent		82,666		79,575
Deferred compensation		179,614		194,768
Total non-current deferred tax asset	$	262,280	$	274,343
Total deferred tax asset	$	1,260,000	$	618,000
Non-current deferred tax liability:
Fixed assets		354,650		439,500
Total deferred tax liabilities	$	354,650	$	439,500

A valuation allowance was not provided at October 31, 2015 or 2014.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are expected to be deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences.  The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

The gross net operating loss (“NOL”) incurred for the year ended October 31, 2015 aggregated to $1,918,380.  As of October 31, 2015, The Company has NOL carryforwards of approximately $1,918,380, which will be available to offset future federal and state taxable income. If not used, these carryforwards will expire in 2035.

As of October 31, 2015 and 2014, the Company did not have any unrecognized tax benefits or open tax positions.  The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.  As of October 31, 2015 and 2014, the Company had no accrued interest or penalties related to income taxes.  The Company currently has no federal or state tax examinations in progress.

The Company files a U.S. federal income tax return and California, Colorado, Connecticut, Idaho, Kansas, Michigan, New Jersey, New York, Texas, Rhode Island, South Carolina, Rhode Island and Oregon state tax returns.  The Company’s federal income tax return is no longer subject to examination by the federal taxing authority for years before fiscal 2012.  The Company’s California, Colorado and New Jersey income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2009.  The Company’s Oregon, New York, Kansas, South Carolina, Rhode Island, Connecticut and Michigan and Texas income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2010.