2. Basis of Presentation and Significant Accounting Policies: Income Taxes (Policies)

9 Months Ended

Jul. 31, 2021

Policies

Income Taxes

Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act made various tax law changes, including, among other things: (i) modified the federal net operating loss rules, including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes; (ii) enhanced recoverability of AMT tax credit carryforwards; (iii) delayed payment of employer payroll taxes; (iv) increased the limitation on business interest expenses under IRC Section 163(j) for the 2019 and 2020 tax years to permit additional expensing of interest; and (v) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k).  As of October 31, 2020, the Company had approximately $25,377,000 of net operating losses, which cannot be carried back to prior years to generate tax refunds since no tax had been paid in those years by the Company.

The Company’s provision for income taxes consists of federal, state and foreign taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.

The estimated annual effective tax rate for the fiscal year ending October 31, 2021 is 0%. This calculation reflects estimated income tax expense based on our current year annual pretax income forecast which is offset by a reduction in the valuation allowance. The Company maintains a full valuation allowance against its deferred tax assets.

For the three and nine months ended July 31, 2021, the Company recorded an income tax provision of $0.  The effective tax rate for the three and nine months ended July 31, 2021 was 0% on a pretax (loss)/income of ($64,000) and $21,000, respectively.  The effective rate differs from the U.S. federal corporate tax rate of 21% due to the valuation allowance.

For the three and nine months ended July 31, 2020, the Company recorded an income tax provision of $0 and $31,560, respectively. The income tax provision for the nine months ended July 31, 2020 is attributable to foreign withholding tax. The effective tax rate for the three and nine months ended July 31, 2020 was 0% and (0.3)%, respectively. The effective rate differed from the U.S. federal statutory rate of 21% due to foreign withholding taxes and the valuation allowance.  The Company did not record an income tax benefit on its pre-tax losses as there is a full valuation allowance recorded against its net deferred tax assets which are not realizable on a more-likely-than-not basis.