Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
12 Months Ended
Oct. 31, 2019
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

6.         INCOME TAXES  


Income tax provision (benefit) consists of the following:


 

Year Ended October 31,

 

2019

 

 2018

Federal:

 

 

 

 

 

Current

$

-

 

$

-

Deferred

 

(948,000)

 

 

(1,784,000)

State:

 

 

 

 

 

Current

 

-

 

 

-

Deferred

 

(995,000)

 

 

(1,206,000)

Adjustment to valuation allowance related

    to net deferred tax assets

 

1,943,000

 

 

2,990,000

 

$

-

 

$

-


The tax effects of temporary differences that give rise to significant portions of the deferred tax asset, net, at October 31, 2019 and 2018, are as follows:


 

2019

 

 2018

Long-term deferred tax assets:

 

 

 

 

 

Federal and state NOL and tax credit carryforwards

$

19,593,000

 

$

19,282,000

Deferred compensation

 

7,619,000

 

 

6,176,000

Intangibles

 

943,000

 

 

754,000

Other

 

205,000

 

 

205,000

Subtotal

 

28,360,000

 

 

26,417,000

Less: valuation allowance

 

(28,360,000)

 

 

(26,417,000)

Deferred tax asset, net

$

-

 

$

-


As of October 31, 2019, we had tax net operating loss and tax credit carryforwards of approximately $81,242,000 and $1,519,000, respectively, available within statutory limits (expiring at various dates between 2020 and 2039), to offset any future regular Federal corporate taxable income and taxes payable.  If the tax benefits relating to deductions of option holders’ income are ultimately realized, those benefits will be credited directly to additional paid-in capital.  Certain changes in stock ownership can result in a limitation on the amount of net operating loss and tax credit carryovers that can be utilized each year. As of October 31, 2019, management has not determined the extent of any such limitations, if any.


We had New York and California tax net operating loss carryforwards of approximately $63,485,000 and $20,441,000, respectively, as of October 31, 2019, available within statutory limits (expiring at various dates between 2020 and 2039), to offset future corporate taxable income and taxes payable, if any, under certain computations of such taxes.


We have provided a valuation allowance against our deferred tax asset due to our current and historical pre-tax losses and the uncertainty regarding their realizability.  The primary differences from the Federal statutory rate of 21% and the effective rate of 0% is attributable to certain permanent differences and a change in the valuation allowance.  The following is a reconciliation of income taxes at the Federal statutory tax rate to income tax expense (benefit):


 

Year Ended October 31,

 

2019

 

 2018

Income tax benefit at U.S.

   Federal statutory income tax rate

$

(2,482,000)

 

(21.00)%

 

$

(3,276,000)

 

(23.00)%

State income taxes

 

(1,045,000)

 

(8.84)%

 

 

(1,259,000)

 

(8.84)%

Permanent differences

 

30,000

 

0.25%

 

 

14,000

 

0.10%

Expiring net operating 

   losses, credits and other

 

1,554,000

 

13.15%

 

 

1,246,000

 

9.12%

Rate changes

 

-

 

-

 

 

285,000

 

2.00%

Change in valuation

   allowance

 

1,943,000

 

16.44%

 

 

2,990,000

 

20.62%

Income tax provision

$

-

 

0.00%

 

$

-

 

0.00%


During the two fiscal years ended October 31, 2019, we incurred no Federal and no State income taxes.  We have no unrecognized tax benefits as of October 31, 2019 and 2018 and we account for interest and penalties related to income tax matters in general and administrative expenses.  Tax years to which our net operating losses relate remain open to examination by Federal authorities and other jurisdictions to the extent which the net operating losses have yet to be utilized.