8. Income Taxes

12 Months Ended

Oct. 31, 2020

Disclosure Text Block [Abstract]

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, 2020 and 2019 consisted of the following:

	2020	2019
Current:
Federal	$ -	$ -
State	5,000	(10,000)
Foreign	32,000	-
Income tax provision-current	$ 37,000	$ (10,000)
Deferred:
Federal	-	-
State	-	-
Total income tax expense/(benefit)	$ 37,000	$ (10,000)

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:

	2020		2019
	Amount	Percent	Amount	Percent
U.S. statutory tax	$ (2,576,000)	21.0%	$ (808,000)	21.0%
Stock compensation	84,000	-0.7%	102,000	-2.6%
Meals and entertainment	3,000	0.0%	9,000	-0.2%
State tax, net of federal benefit	(636,000)	5.2%	(164,000)	4.2%
Other	(14,000)	0.1%	44,000	-1.1%
Change in Valuation Allowance	3,176,000	-25.9%	807,000	-21.0%
Income tax (benefit)/expense, net	$ 37,000	-0.3%	$ (10,000)	0.3%

The tax effect of temporary differences that give rise to deferred tax assets and liabilities as of October 31, 2020 and 2019 is as follows:

	2020	2019
Deferred tax assets and liabilities:
Net operating loss carry-forward	$ 6,356,000	$ 3,758,000
Deferred Revenue	72,000	92,000
Allowance for doubtful accounts receivable	251,000	43,000
Stock compensation-nonqualified	228,000	205,000
Accruals	53,000	81,000
ROU lease assets	(61,000)	-
ROU lease liabilities	116,000	-
Foreign tax credit	32,000	-
Deferred rent	-	29,000
Deferred interest	-	97,000
Depreciation	7,000	(427,000)
Sub-total	$ 7,054,000	$ 3,878,000
Valuation allowance	(7,054,000)	(3,878,000)
Deferred tax assets and liabilities	$ -	$ -

The ultimate realization of deferred tax assets is dependent on the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. We assess all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. After weighting all available positive and negative evidence including cumulative losses in recent years, the Company continues to conclude that the more likely than not threshold for the realization of deferred tax assets has not been met.

At October 31, 2020, the Company had available a federal net operating loss carryforward of $25,377,000, of which $12,597,000 are indefinite lived and $12,780,000 will expire in various tax years from fiscal year 2022 through fiscal year 2038.

At October 31, 2020 and 2019, 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 2017 through 2020.