Note 9 - Income Taxes

6 Months Ended

Apr. 30, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 9 – Income taxes

We use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate, to determine its quarterly provision (benefit) for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

We recorded income tax provision (benefit) of $3,649,000 and ($164,000) for the three months ended April 30, 2024 and 2023, respectively. The effective tax rate was (564.7%) for the three months ended April 30, 2024, compared to (39.3%) for the three months ended April 30, 2023. For the six months ended April 30, 2024 and 2023, we recorded income tax provision (benefit) of $2,818,000 and ($324,000), respectively. The effective tax rate was (99.3%) for the six months ended April 30, 2024, compared to 35.8% for the six months ended April 30, 2023. The change in effective tax rate for the six months ended April 30, 2024 compared to the six months ended April 30, 2023 was primarily driven by the recording of a valuation allowance.

We had $211,000 and $178,000 of unrecognized tax benefits, as of April 30, 2024 and October 31, 2023, respectively. The unrecognized tax benefits, if recognized, would result in a net tax benefit of $186,000 as of April 30, 2024.

The Company assesses all positive and negative evidence in determining if, based on the weight of such evidence, a valuation allowance is required to be recorded against the deferred tax assets as of April 30, 2024. The Company has evaluated future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. In making such judgements, significant weight is given to evidence that can be objectively verified. After analyzing all available evidence, including the recent trend of losses, the Company has determined that it is not more likely than not that all of its deferred tax assets will be realized, and therefore, has recorded a valuation allowance of $3,526,000 against its deferred tax assets as of April 30, 2024.