Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Oct. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

7. INCOME TAXES

 

Income tax provision (benefit) consists of the following:

 

    Year Ended October 31,  
    2020     2019  
Federal:                
Current   $ -     $ -  
Deferred     404,000       (948,000 )
State:                
Current     -       -  
Deferred     (800,000 )     (995,000 )
Adjustment to valuation allowance related to net deferred tax assets     396,000       1,943,000  
    $ -     $ -  

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset, net, at October 31, 2020 and 2019, are as follows:

 

    October 31,  
    2020     2019  
Long-term deferred tax assets:                
Federal and state NOL and tax credit carryforwards   $ 19,727,000     $ 19,593,000  
Deferred compensation     8,009,000       7,619,000  
Intangibles     828,000       943,000  
Other     192,000       205,000  
Subtotal     28,756,000       28,360,000  
Less: valuation allowance     (28,756,000 )     (28,360,000 )
Deferred tax asset, net   $ -     $ -  

 

As of October 31, 2020, we had tax net operating loss and tax credit carryforwards of approximately $81,316,000 and $1,545,000, respectively, available within statutory limits (expiring at various dates between 2021 and 2040), 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, 2020, management has not determined the extent of any such limitations, if any.

 

We had California tax net operating loss carryforwards of approximately $26,671,000 as of October 31, 2020, available within statutory limits (expiring at various dates between 2021 and 2040), 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 expiring net operating losses 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,  
    2020     2019  
Income tax benefit at U.S. Federal statutory income tax rate   $ (2,119,000 )     (21.00 )%   $ (2,482,000 )     (21.00 )%
State income taxes     (705,000 )     (6.98 )%     (1,045,000 )     (8.84 )%
Permanent differences     32,000       0.32 %     30,000       0.25 %
Expiring net operating losses, credits and other     2,396,000       23.74 %     1,554,000       13.15 %
Change in valuation allowance     396,000       3.92 %     1,943,000       16.44 %
Income tax provision   $ -       0.00 %   $ -       0.00 %

 

During the two fiscal years ended October 31, 2020, we incurred no Federal and no State income taxes. We have no unrecognized tax benefits as of October 31, 2020 and 2019 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 and California authorities to the extent which the net operating losses have yet to be utilized.