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

6 Months Ended

Apr. 30, 2020

Policies

Income Taxes

Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic.  Under FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, the effects of changes in tax rates and tax laws are recognized in the period in which the new legislation is enacted.  The CARES Act made various tax law changes, including among others: (i) modified the limitation on business interest expenses under IRC Section 163(j) for the 2019 and 2020 tax years to permit additional expensing of interest, (ii) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k); and (iii) made modifications to the federal net operating loss rules, including to permit federal net operating losses incurred in 2018, 2019, or 2020 to be carried back to the five preceding taxable years in order to generate a refund for previously paid income taxes; and (iv)  enhanced the recoverability of corporate alternative minimum tax (AMT) credits.  Given the Company’s full valuation allowance position, the CARES Act did not have a material impact on the financial statements.

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.  

For the six months ended April 30, 2020, the Company recorded an income tax provision of $31,560, which was attributable to foreign withholding tax.  The effective tax rate for the six months ended April 30, 2020 was (0.3)% as compared to the U.S. federal corporate tax rate of 21% due to foreign withholding taxes.  The Company did not record an income tax benefit on its pre-tax losses as the Company maintains a full valuation allowance against its net deferred tax assets and the net deferred tax assets were not realizable on a more-likely-than-not basis.

For the six months ended April 30, 2019, the Company recorded an income tax provision (benefit) of $0.  The Company projected that its annual effective tax rate for the six months ended April 30, 2019 was 0% as the Company’s net deferred tax assets were not realizable on a more-likely-than-not basis.