Income Tax

12 Months Ended

Oct. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax

Note 7 – Income Tax

The Company is subject to federal income taxes and state income tax in the U.S. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and reduced the U.S. federal corporate tax rate from 35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limited the deduction of interest expense for certain companies. The Company fulfilled and shipped all the Products from Florida and, thus, it is subject to the state corporate income tax of Florida with a tax rate of 4.458%. There is no difference between the income tax computed at the combined federal and state statutory rate to the income tax effective rate.

Significant components of the tax expense (benefit) recognized in the accompanying statements of operations for the years ended October 31, 2022, and October 31, 2021, are as follows:

Schedule of Components of Income Tax Expense (Benefit)
	October 31,
	2022			2021
Current Tax Expense:
Federal	$	—		$	(1,301,008	)
State		(18,317	)		(134,190	)
Total Current Tax Expense		(18,317	)		(1,435,198	)
Deferred Tax Expense:
Federal		—			—
State		—			—
Total Deferred Tax Expense		—			—
Estimated Tax Payments:
Federal		—			—
State		—			—
Total Estimated Tax Payment		—			—
Net Income Tax Liability/(Benefit)	$	(18,317	)	$	(1,435,198	)

Total net deferred taxes are comprised of the following on October 31, 2021, and October 31, 2022:

Schedule of Deferred Tax Assets and Liabilities
	October 31,
	2022			2021
Deferred Tax Assets:
Stock Compensation Expense – NQSO	$	1,694,324		$	384,540
Other		362,170			30,099
Net Operating Loss Carryforwards		2,582,061			910,685
Total Deferred Tax Asset		4,638,555			1,325,324
Deferred Tax Liabilities:
Prepaid Expenses		(92,420	)		(69,265	)
Right of Use Asset		(259,866	)		—
Total Deferred Tax Liabilities		(352,286	)		(69,265	)
Less: Valuation Allowance		(4,286,269	)		(1,256,059	)
Net Deferred Tax Asset		—			—

The Company has Federal NOL carryforwards of approximately $12,295,530 and state NOL carryforwards of approximately $85,429. With the changes instituted by the CARES Act, the Federal NOLs have an indefinite life and will not expire. The Company’s federal and state tax returns for the 2019 and 2020 tax years generally remain subject to examination by U.S. and various state authorities. A valuation allowance is recorded to reduce the deferred tax asset if, based on the weight of the evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a valuation allowance of $4,286,269 for the year ended on October 31, 2022, it is necessary to reduce the deferred tax asset to the amount that will more likely than not be realized.

During the year ended October 31, 2021, the Company paid $1,637,102 in combined Federal/State income taxes for taxable income generated in fiscal year 2020. As of October 31, 2021, the Company had a total income tax receivable in the amount of $1,753,594, which was the result of the NOL generated in fiscal year 2021 to be applied against taxable income in fiscal year 2020. As of October 31, 2022, the Company had a total income tax receivable in the amount of $1,607,302 of which $ 1,127,683 was received on December 22, 2022. On January 17, 2023 the Company received a payment from the U.S. Treasury in the amount of approximately $491,000, which the eliminated the remaining receivable balance as of October 31, 2022.   

During the year ended October 31, 2022, the Company generated a pre-tax loss of $(14,388,652), creating a $0 federal tax current provision and a state tax benefit of $(18,317).