Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v2.4.1.9
INCOME TAXES
12 Months Ended
Oct. 31, 2014
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

9.         INCOME TAXES         


Income tax provision (benefit) consists of the following:


 

Year Ended October 31,

 

2014

 

2013

Federal:

 

 

 

 

 

Current

$

-

 

$

-

Deferred

 

(1,606,000)

 

 

(2,489,000)

State:

 

 

 

 

 

Current

 

-

 

 

-

Deferred

 

(1,000)

 

 

3,000

Adjustment to valuation allowance related to net deferred tax assets

 

1,607,000

 

 

2,486,000

Income tax provision (benefit) 

$

-

 

$

-


The tax effects of temporary differences that give rise to significant portions of the deferred tax asset, net, at October 31, 2014 and 2013, are as follows:


 

2014

 

2013

Long-term deferred tax assets:

 

 

 

 

 

Federal and state NOL and tax credit carryforwards

$

26,669,000

 

$

25,689,000

Deferred Compensation

 

4,517,000

 

 

3,484,000

Deferred Revenue

 

-

 

 

404,000

Other

 

298,000

 

 

300,000

Subtotal

 

31,484,000

 

 

29,877,000

 

 

 

 

 

 

Less: valuation allowance

 

(31,484,000)

 

 

(29,877,000)

Deferred tax asset, net

$

-

 

$

-


As of October 31, 2014, we had tax net operating loss and tax credit carryforwards of approximately $77,159,000 and $1,110,000, respectively, available, within statutory limits (expiring at various dates between 2015 and 2034), 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, 2014, management has not determined the extent of any such limitations, if any.


We had tax net operating loss and tax credit carryforwards of approximately $76,999,000 and $11,000, respectively, as of October 31, 2014, available, within statutory limits (expiring at various dates between 2015 and 2034), to offset future New York State 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 34% 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,

 

2014

 

2013

Income tax benefit at U.S.

 

 

 

 

 

 

 

 

 

Federal statutory income Tax rate

$

(3,266,00)

 

(34.00%)

 

$

(3,427,000)

 

(34.00%)

State income taxes

 

(6,000)

 

(.06%)

 

 

(6,000)

 

(.06%)

Permanent differences

 

1,529,000

 

15.92%

 

 

294,000

 

2.92%

Expiring net operating losses, credits and other

 

115,000

 

1.19%

 

 

250,000

 

2.48%

Foreign rate difference on impairment

 

21,000

 

.22%

 

 

403,000

 

4.00%

Change in valuation allowance

 

1,607,000

 

16.73%

 

 

2,486,000

 

24.66%

Income tax provision

$

-

 

0%

 

$

-

 

0%


During the two fiscal years ended October 31, 2014, we incurred no Federal and no State income taxes.  We have no unrecognized tax benefits as of October 31, 2014 and 2013 and we account for interest and penalties related to income tax matters in marketing, 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.