Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes

6 Months Ended

May 31, 2014

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 May 31, 2014 and May 31, 2013. 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 $54 for the six months ended May 31, 2014, and $586 for the six months ended May 31, 2013. Penalties are recorded in selling, general and administrative expenses.

As of May 31, 2014, the Company had unrealized gain on its investments of $185,107. This amount was reduced by a deferred tax expense of $68,311. The deferred tax expense for the six months ended May 31, 2014 has been recorded as part of the deferred tax asset, and offset against the unrealized gains on marketable securities reported on the consolidated balance sheet. The charitable contributions portion of the deferred tax asset has $357,650 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 May 31, 2014.

At May 31, 2014 and November 30, 2013, respectively, the Company had temporary differences arising from the following:



	May 31, 2014
							Classified As
Type	Amount			Deferred Tax			Short-Term Asset			Long-Term Asset
Depreciation	$	(989,117	)	$	(365,020	)	$	—		$	(365,020	)
Unrealized (gain) on investments	(185,107		)	(68,311		)	(68,311		)	—
Reserve for bad debts	31,788			11,731			11,731			—
Reserve for returns	5,560,399			2,051,991			2,051,991			—
Reserve for obsolete inventory	2,836,831			1,046,895			1,046,895			—
Vacation accrual	194,409			71,744			71,744			—
Charitable contributions	996,145			367,613			9,963			357,650
Section 263A costs	181,046			66,813			66,813			—
Loss carry forward	12,376,706			4,567,458			1,641,077			2,926,381
Net deferred tax asset (liability)				$	7,750,914		$	4,831,903		$	2,919,011

	November 30, 2013
							Classified As
Type	Amount			Deferred Tax			Short-Term Asset			Long-Term (Liability)
Depreciation	$	(980,638	)	$	(361,891	)	$	—		$	(361,891	)
Unrealized (gain) on investments	(289,021		)	(106,669		)	(106,669		)	—
Reserve for bad debts	56,513			20,855			20,855			—
Reserve for returns	2,070,223			763,988			763,988			—
Reserve for obsolete inventory	3,030,306			1,118,294			1,118,294			—
Vacation accrual	252,117			93,040			93,040			—
Charitable contributions	988,611			364,833			9,964			354,869
Section 263A costs	212,794			78,529			78,529			—
Loss carry forward	7,096,270			2,618,784			690,746			$	1,928,038
Net deferred tax asset (liability)				$	4,589,763		$	2,668,747		$	1,921,016

Income tax (benefit) expense is made up of the following components:



	Three Months Ended						Six Months Ended
	May 31, 2014			May 31, 2013			May 31, 2014			May 31, 2013
Continuing Operations
Current tax - Federal	$	—		$	—		$	—		$	—
Current tax - State & Local	2,800			53,970			4,000			23,111
Deferred tax	(975,733		)	280,338			(1,524,663		)	(559,555		)
Tax - Continuing Operations	$	(972,933	)	$	334,308		$	(1,520,663	)	$	(536,444	)
Discontinued Operations
Current tax - Federal	$	—		$	—		$	—		$	—
Current tax - State & Local	—			—			—			—
Deferred tax	(1,424,866		)	(376,250		)	(1,598,929		)	(163,228		)
Tax - Discontinued Operations	$	(1,424,866	)	$	(376,250	)	$	(1,598,929	)	$	(163,228	)

Prepaid and refundable income taxes are made up of the following components:



Prepaid and refundable income taxes	Federal		State & Local		Total
May 31, 2014	$	337,532	$	337,921	$	675,453
November 30, 2013	$	337,532	$	341,357	$	678,889

A reconciliation of the (benefit from) provision for income taxes computed at the statutory rate to the effective rate for the three months ended May 31, 2014, and May 31, 2013 is as follows:



	Three Months Ended					Three Months Ended
	May 31, 2014					May 31, 2013
	Amount			Percent of Pretax Income		Amount			Percent of Pretax Income
Continuing Operations
(Benefit from) provision for income taxes at federal statutory rate	$	(901,492	)	34.00	%	$	279,096		34.00	%
Changes in (benefit) provision for income taxes resulting from:
State income taxes, net of federal income tax benefit	(76,892		)	2.90	%	23,805			2.90	%
Non-deductible expenses and other adjustments	5,451			(0.21	)%	31,407			3.83	%
(Benefit from) provision for income taxes at effective rate	$	(972,933	)	36.69	%	$	334,308		40.73	%
Discontinued Operations
(Benefit from) income taxes at federal statutory rate	$	(1,320,240	)	34.00	%	$	(346,681	)	34.00	%
Changes in (benefit from) income taxes resulting from:



State income taxes, net of federal income tax benefit	(112,609		)	2.90	%	(29,569		)	2.90	%
Non-deductible expenses and other adjustments	7,983			(0.21	)%	—			—	%
(Benefit from) for income taxes at effective rate for Discontinued Operations	$	(1,424,866	)	36.69	%	$	(376,250	)	36.90	%

Total (benefit from) income taxes at effective rate	$	(2,397,799	)	36.69	%	$	(41,942	)	21.10	%
	Six Months Ended					Six Months Ended
	May 31, 2014					May 31, 2013
	Amount			Percent of Pretax Income		Amount			Percent of Pretax Income
Continuing Operations
Provision for income taxes at statutory rate	$	(1,408,061	)	34.00	%	$	(487,968	)	34.00	%
Changes in (benefit) provision for income taxes resulting from:
State income taxes, net of federal income tax benefit	(120,099		)	2.90	%	(41,621		)	2.90	%
Non-deductible expenses and other adjustments	7,497			(0.18	)%	(6,855		)	0.48	%
(Benefit from) income taxes at effective rate	$	(1,520,663	)	36.72	%	$	(536,444	)	37.38	%
	Six Months Ended					Six Months Ended
	May 31, 2014					May 31, 2013
	Amount			Percent of Pretax Income		Amount			Percent of Pretax Income
Discontinued Operations
(Benefit from) provision for income taxes at federal statutory rate	$	(1,480,532	)	34.00	%	$	(148,477	)	34.00	%
Changes in (benefit) provision for income taxes resulting from:
State income taxes, net of federal income tax benefit	(126,281		)	2.90	%	(12,664		)	2.90	%
Non-deductible expenses and other adjustments	7,884			(0.18	)%	(2,087		)	0.48	%
(Benefit from) income taxes at effective rate	$	(1,598,929	)	36.72	%	$	(163,228	)	37.38	%

Total (benefit from) income taxes at effective rate	$	(3,119,592	)	36.72	%	$	(699,672	)	37.38	%

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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