NOTE 15 – INCOME TAXES

The Company files federal income tax returns in the U.S. and state income tax returns in the applicable states on a consolidated basis. The Company’s subsidiaries also file in the appropriate foreign jurisdictions as applicable, most notably the United Kingdom.

The Company is required to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The Company has no significant unrecognized tax benefit during the three months ended January 31, 2019 and 2018.

There are no material tax positions included in the accompanying unaudited consolidated financial statements at January 31, 2019 and October 31, 2018 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company uses an asset and liability approach to financial accounting and reporting for income taxes. The difference between the financial statement and tax bases of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce the deferred tax asset to the amount that will more likely than not be realized. Income tax expense is the current income tax payable or refundable for the period plus or minus the net change in the deferred tax assets and liabilities.

We have US federal tax NOL carryforwards of $7,452,210 remaining, which will expire at various dates in the next 20 years. Such NOL carryforwards expire as follows:

We believe that it is more likely than not that the benefit from certain federal NOL carryforwards will be realized. The federal NOL carryforwards in the income tax returns filed included unrecognized tax benefits taken in prior years. The NOLs for which a deferred tax asset is recognized for financial statement purposes in accordance with ASC 740 are presented net of these unrecognized tax benefits. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.

The deferred tax asset related to the U.S. tax carry-forward is $1,564,964 and $1,754,169 as January 31, 2019 and October 31, 2018 respectively. The 2018 Tax Act eliminated the Alternative Minimum Tax (AMT) and provided for a refund of the AMT previously paid over two years. For the three months ended January 31, 2019 the Company had an Alternative Minimum Tax refund of $77,967 and for the year ended October 31, 2018 had an Alternative Minimum Tax of $7,840.

The Company’s income tax returns are subject to audit by taxing authorities for the years beginning November 1, 2015.