8. Income Taxes

12 Months Ended

Oct. 31, 2018

Notes

8. Income Taxes

8. 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, 2018 and 2017 consisted of the following:

	2018	2017
Current:
Federal	$                 -	$                       -
State	$         5,000	$              20,000
Income tax provision-current	$         5,000	$              20,000
Deferred:
Federal	$                 -	$         1,826,000
State	$                 -	$           116,000
Total income tax expense, net	$         5,000	$         1,962,000

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

	2018		2017
	Amount	Percent	Amount	Percent
U.S. statutory tax	$      (1,273,000)	23.2%	$   (530,000)	34.0%
Stock compensation	128,000	-2.3%	174,000	-11.2%
Meals and entertainment	9,000	-0.2%	14,000	-0.9%
State tax, net of federal benefit	(209,000)	3.8%	(37,000)	2.4%
Tax law changes (U.S. Tax Reform)	1,127,000	-20.5%	-	0.0%
Other	(44,000)	0.8%	63,000	-4.0%
Change in Valuation Allowance	267,000	-4.9%	2,278,000	-146.1%
Income tax expense, net	$                5,000	-0.1%	$1,962,000	-125.8%

The tax effect of temporary differences that give rise to deferred tax assets and liabilities as of October 31, 2018 and 2017 is as follows:

	2018	2017
Deferred tax assets and liabilities:
Net operating loss carry-forward	$    3,037,000	$    2,157,000
Deferred Revenue	84,000	178,000
Allowance for doubtful accounts receivable	41,000	70,000
Stock compensation-nonqualified	171,000	217,000
Accruals	104,000	58,000
Deferred rent	37,000	-
Depreciation	(402,000)	(402,000)
Sub-total	$    3,072,000	$    2,278,000
Valuation allowance	(3,072,000)	(2,278,000)
Deferred tax assets and liabilities	$                          -	$                          -

At October 31, 2018, the Company had available a federal net operating loss carryforward of $12,815,000, of which $4,750,000 are indefinite lived and $8,065,000 will expire in various tax years from fiscal year 2022 through fiscal year 2038.

At October 31, 2018 and 2017, 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 2015 through 2018.