Income Taxes

12 Months Ended

Oct. 31, 2011

Income Taxes

Income Tax Disclosure [Text Block]

9. Income Taxes

The Company’s provision for income taxes in each fiscal year consists of current state, and local minimum taxes.

A reconciliation of the U.S statutory tax rate to the Company’s effective tax rate for fiscal years 2011 and 2010 is as follows:

	2011					2010
		Amount		Percent			Amount		Percent
U.S. statutory tax	$	361,000		34.0	%	$	23,000		34.0	%
Decrease in valuation allowance		(2,018,000	)	(190.1	)		(83,000	)	(122.3	)
Permanent differences		73,000		6.9			(38,000	)	(56.8	)
NOL stock-compensation adjustment		-		-			116,000		171.4
State tax, net of federal benefit		12,000		1.1			30,000		45.1
Other, net		-		-			(2,000	)	(3.0	)
Effective tax rate	$	(1,572,000	)	(148.1	)%	$	46,000		68.4	%

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of October 31, 2011 and 2010 is as follows:

	2011			2010
Deferred tax assets and liabilities:
Net operating loss carry-forward	$	4,696,000		$	4,924,000
Accrued interest		-			178,000
Accrued vacation		103,000			78,000
Allowance for doubtful accounts receivable		40,000			10,000
Stock compensation-nonqualified		41,000			7,000
Contributions		-			4,000
Depreciation		(984,000	)		(802,000	)
Deferred tax assets and liabilities		3,896,000			4,399,000
Less: valuation allowance		(2,306,000	)		(4,399,000	)
Net deferred tax assets and liabilities	$	1,590,000		$	-

The income tax (benefit) provision for fiscal years ended October 31, 2011 and 2010, consisted of the following:

	2011			2010
Current:
Federal	$	-		$	-
State		18,000			46,000
Income tax provision-current		18,000			46,000
Deferred:
Federal		(1,232,000	)		-
State		(358,000	)		-
Total income tax (benefit) provision	$	(1,572,000	)	$	46,000

At October 31, 2011, the Company had available a federal net operating loss carry-forward of $12,014,000 for income tax purposes, which will expire in various tax years from 2012 through 2029. The Company evaluates whether a valuation allowance related to deferred tax assets is required each reporting period. A valuation allowance is established if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. During 2011 the Company reversed $1,590,000 of a total valuation allowance of $3,896,000 related to deferred tax assets, since it was determined that it is more likely than not these assets will be realized. This determination was primarily based on cumulative positive earnings in recent years and projected taxable income in the future. In evaluating whether or not to realize a deferred tax asset, the Company considered all available positive and negative evidence, including past operating results and a forecast of future taxable income.