9. Income Taxes

12 Months Ended

Oct. 31, 2017

Notes

9. Income Taxes

9. Income Taxes

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

The income tax expense for fiscal years ended October 31, 2017 and 2016 consisted of the following:

	2017	2016
		(As Restated)
Current:
Federal	$                   -	$                   -
State	$         20,000	$           50,000
Income tax provision-current	$         20,000	$           50,000
Deferred:
Federal	$    1,826,000	$         514,000
State	$       116,000	$           79,000
Total income tax expense, net	$    1,962,000	$         643,000

The difference between income taxes expected at the U.S federal statutory income tax rate of 34% and the reported income tax expense are summarized as follows:

	2017		2016
	Amount	Percent	Amount	Percent
			(As Restated)
U.S. statutory tax	$      (530,000)	34.0%	$395,000	34.0%
Stock compensation	174,000	--11.2%	125,000	10.8%
Meals and entertainment	14,000	-0.9%	14,000	1.2%
State tax, net of federal benefit	(37,000)	2.4%	109,000	9.4%
Other	63,000	-4.0%	-	0.0%
Change in Valuation Allowance	2,278,000	-146.1%	-	0.0%
Income tax expense, net	$    1,962,000	-125.8%	$643,000	55.4%

The tax effect of temporary differences that give rise to deferred tax assets and liabilities as of October 31, 2017 and 2016 is as follows:

	2017	2016
		(As Restated)
Deferred tax assets and liabilities:
Net operating loss carry-forward	$    2,157,000	$       1,696,000
Deferred Revenue	178,000	-
Allowance for doubtful accounts receivable	70,000	19,000
Stock compensation-nonqualified	217,000	198,000
Accruals	58,000	-
Depreciation	(402,000)	29,000
Sub-total	$    2,278,000	$       1,942,000
Valuation allowance	(2,278,000)	-
Deferred tax assets and liabilities	$                          -	$         1,942,000

At October 31, 2017, the Company had available federal net operating loss carryforwards of $7,474,000, which will expire in various tax years from fiscal year 2023 through fiscal year 2037.  As a result of certain realization requirements of ASC 718, the table of deferred tax assets and liabilities does not include certain deferred tax assets that arose directly from tax deductions related to equity compensation greater than compensation recognized for financial reporting. 

At October 31, 2017 and 2016, the Company did not have any uncertain tax positions. As permitted by ASC 740-10, the Company’s accounting policy is to prospectively classify accrued interest and penalties related to any unrecognized tax benefits in its income tax provision. The Company’s tax return years that are subject to examination by taxing authorities are fiscal years 2014 through 2017.