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. There are no material tax positions included in the accompanying unaudited consolidated financial statements at April 30, 2019 and the audited consolidated financial statements at October 31, 2018 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

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 federal tax NOL carryforwards of $8,353,186 as of October 31, 2018 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 $1,253,799 and was $1,754,169 as April 30, 2019 and October 31, 2018, respectively. For the six months ended April 30, 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.

Components of deferred tax assets as of April 30, 2019 and October 31, 2018 are as follows:

The Company did not incur any regular income tax but did incur an Alternative Minimum Tax expense in the US for the year ended October 31, 2018. For financial purposes in its U.S. entities and other foreign entities not included above, as we have been able to use net operating loss carry-forwards and other timing differences during the current and prior year to offset any tax liabilities in the various tax jurisdictions. The use of these income tax benefits in the prior year have been adjusted for and offset by a valuation allowance as noted above.

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