13. INCOME TAXES

The provision (benefit) for income taxes for the years ended October 31, 2015 and 2014 consisted of:

	2015		2014
Current:
Federal	$	-	$	-
State		3		10
Deferred:
Federal		182		(4,126)
State		181		(259)
Impact of change in effective tax rates on deferred taxes		-		-
Change in: valuation allowance		(363)		4,385
	$	3	$	10

The difference between income taxes computed at the statutory federal rate and the provision for income taxes for 2015 and 2014 related to the following:

	2015					2014
			Percent of					Percent of
	Amount		Pretax income			Amount		Pretax income
Tax (benefit) at federal statutory rate	$	(1,297)		34	%	$	(5,503)		34	%
State income taxes, net of federal income taxes		184		(5)	%		(249)		1	%
Effect of warrant liability		526		(14)	%		-		-	%
Effect of other permanent items		574		(15)	%		1,361		(8)	%
Change in valuation allowance		(363)		10	%		4,385		(27)	%
Reduction of deferred benefits		379		(10)	%		16		-	%
	$	3		-	%	$	10		-	%

The components of deferred income tax assets (liabilities) were as follows:

	October 31,
	2015		2014
Impairment of development costs	$	597	$	562
Depreciation and amortization		144		215
Impairment of inventory		14		277
Compensation expense not deductible until options are exercised		174		759
All other temporary differences		370		1,373
Net operating loss carry forward		1,368		30,190
Less valuation allowance		(2,667)		(33,376)
Deferred tax asset	$	-	$	-

Realization of deferred tax assets, including those related to net operating loss carryforwards, are dependent upon future earnings, if any, of which the timing and amount are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance, as management cannot conclude that it is more likely than not that such assets will be realized. The valuation allowance decreased by approximately $30,709 primarily due to the write down of the federal net operating losses to its realizable value after the effects of the Internal Revenue Code §382 limitation.

As a result of the Company’s private placements during the current fiscal year, a change of ownership under Internal Revenue Code Section 382 has occurred and, accordingly, the annual utilization of the Company’s federal net operating loss carryforwards will be severely limited. The annual limitations are expected to result in the expiration of federal net operating loss carryforwards of approximately $88,500 before full utilization. The federal net operating loss carryforwards expected to be available for income tax purposes at October 31, 2015 after the application of these limitations are estimated to be approximately $3,770,which expire between 2026 and 2035 for federal income taxes, and approximately $33,600 for state income taxes, which primarily expire between 2016 and 2022.

The Company files income tax returns in the U.S., various states and the United Kingdom. As of October 31, 2015 and 2014, the Company had no unrecognized tax benefits, which would impact its tax rate if recognized. As of October 31, 2015, the Company had no accrual for the potential payment of penalties. As of October 31, 2015, the Company was not subject to any U.S. federal, state or foreign income tax examinations. The Company’s U.S. federal tax returns have been examined for tax years through 2011, and income taxes for Majesco Europe Limited have been examined for tax years through 2006 in the United Kingdom with the results of such examinations being reflected in the Company’s results of operations. Subsequent years’ returns in the U.S. and United Kingdom remain subject to examination. The Company does not anticipate any significant changes in its unrecognized tax benefits over the next 12 months.