Income Taxes

9 Months Ended

Aug. 06, 2011

Income Taxes [Abstract]

Income Taxes

12. Income Taxes

In assessing the ability to realize a portion of the 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 Company has determined that due to significant negative evidence that is difficult to overcome in the form of three years of cumulative losses, the only positive evidence that could be relied upon in assessing the realization of net deferred tax assets were tax planning strategies that would enable the Company to generate future taxable income.

The primary strategy is the potential sale of real estate, primarily land not currently used in the operations of the Company, to generated taxable gains. The Company has assessed that these strategies would result in the realization of approximately $1,917,000 of deferred tax assets as of August 6, 2011. The amount of deferred tax assets above $1,917,000 are reserved with a valuation allowance which totals $333,560 at August 6, 2011.

The Company’s effective tax rate was 0% for the three and nine months ended August 6, 2011 and approximately 43% for the three and nine months ended July 31 2010 which differs from the federal statutory rate of 34%. The 2010 rate differential between the effective rate and statutory rate is due to the effect of state income taxes and certain expenses that are not deductible for tax purpose and the establishment of a $23,253 valuation allowance on deferred tax assets in the fourth quarter of 2010. The 2011 rate differential between the effective rate and statutory rate is attributable to subsequent increases to the valuation allowance. The valuation allowance increased by $195,555 and $310,307 for the three and nine months ended August 6, 2011, respectively.