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Income Taxes | 12 Months Ended
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Oct. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Note 19. Income Taxes The components of loss before income taxes for the years ended October 31, 2020, 2019, and 2018 were as follows (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. |  | $ | (85,865 | ) |  | $ | (74,133 | ) |  | $ | (47,314 | )
Foreign |  |  | (3,196 | ) |  |  | (3,326 | ) |  |  | (3,035 | )
Loss before income taxes |  | $ | (89,061 | ) |  | $ | (77,459 | ) |  | $ | (50,349 | )
The Company recorded an income tax provision totaling $0.0 million and $0.1 million for the years ended October 31, 2020 and 2019, respectively, compared to income tax benefit of $3.0 million for the year ended October 31, 2018. The income tax expense for the years ended October 31, 2020 and 2019 primarily related to foreign taxes in South Korea and Canada. The income tax benefit for the year ended October 31, 2018 primarily related to the Tax Cuts and Jobs Act (the “TCJA”) that was enacted on December 22, 2017. The TCJA reduced the U.S. federal corporate tax rate from 34% to 21% effective January 1, 2018 which resulted in a deferred tax benefit of $1.0 million primarily related to a reduction of the Company’s deferred tax liability for IPR&D. The TCJA also established an unlimited carryforward period for the net operating loss (“NOL”) the Company generated after 2017. This provision of the TCJA resulted in a reduction of the valuation allowance attributable to deferred tax assets at the enactment date by $2.0 million based on the indefinite life of the resulting NOL as well as the deferred tax liability for IPR&D. Franchise tax expense, which is included in administrative and selling expenses, was $0.3 million, $0.2 million and $0.5 million for the years ended October 31, 2020, 2019 and 2018, respectively. The reconciliation of the federal statutory income tax rate to our effective income tax rate for the years ended October 31, 2020, 2019 and 2018 was as follows:
|  | 2020 |  |  | 2019 |  |  | 2018 |
Statutory federal income tax rate |  |  | (21.0 | )% |  |  | (21.0 | )% |  |  | (23.2 | )%
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net of Federal benefits |  |  | (1.1 | )% |  |  | (2.9 | )% |  |  | 0.7 | %
Foreign withholding tax |  |  | 0.0 | % |  |  | 0.1 | % |  |  | 0.0 | %
Net operating loss expiration, impairment and true-ups |  |  | 129.2 | % |  |  | (1.3 | )% |  |  | 4.6 | %
Nondeductible expenditures |  |  | 1.4 | % |  |  | 0.2 | % |  |  | 1.5 | %
Change in tax rates |  |  | (0.6 | )% |  |  | (0.1 | )% |  |  | 201.6 | %
Fair value adjustment on warrants |  |  | 8.7 | % |  |  | — |  |  |  | — |
Other, net |  |  | 1.1 | % |  |  | (0.3 | )% |  |  | 0.0 | %
Deferred only adjustment |  |  | 4.4 | % |  |  | — |  |  |  | 0.0 | %
Valuation allowance |  |  | (122.1 | )% |  |  | 25.4 | % |  |  | (191.2 | )%
Effective income tax rate |  |  | — |  |  |  | 0.1 | % |  |  | (6.0 | )%
Our deferred tax assets and liabilities consisted of the following as of October 31, 2020 and 2019 (in thousands):
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Compensation and benefit accruals |  | $ | 8,157 |  |  | $ | 7,446 |
Bad debt and other allowances |  |  | 1,458 |  |  |  | 905 |
Capital loss and tax credit carry-forwards |  |  | 15,456 |  |  |  | 12,645 |
Net operating losses (domestic and foreign) |  |  | 100,791 |  |  |  | 217,430 |
Deferred license revenue |  |  | 2,093 |  |  |  | 4,264 |
Inventory valuation allowances |  |  | 116 |  |  |  | 312 |
Accumulated depreciation |  |  | 9,759 |  |  |  | 9,200 |
Grant revenue |  |  | 700 |  |  |  | 798 |
Excess business interest |  |  | 5,544 |  |  |  | - |
Operating lease liabilities |  |  | 2,387 |  |  |  | - |
Gross deferred tax assets: |  |  | 146,461 |  |  |  | 253,000 |
Valuation allowance |  |  | (142,217 | ) |  |  | (250,985 | )
Deferred tax assets after valuation allowance |  |  | 4,244 |  |  |  | 2,015 |
Deferred tax liability: |  |  |  |  |  |  |  |
In process research and development |  |  | (2,391 | ) |  |  | (2,321 | )
Right of use assets |  |  | (2,229 | ) |  |  |  |
Net deferred tax liability |  | $ | (376 | ) |  | $ | (306 | )
We continually evaluate our deferred tax assets as to whether it is “more likely than not” that the deferred tax assets will be realized. In assessing the realizability of our deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Based on the projections for future taxable income over the periods in which the deferred tax assets are realizable, management believes that significant uncertainty exists surrounding the recoverability of the deferred tax assets. As a result, we recorded a valuation allowance against our net deferred tax assets. As of October 31, 2020, we had $905.4 million of federal NOL carryforwards that expire in the years 2021 to 2038 and $457.1 million of state NOL carryforwards that expire in the years 2021 through 2038. Additionally, we had $12.5 million of state tax credits available that will expire from tax years 2021 to 2040. During the year, the Company experienced an “ownership change” as defined by Internal Revenue Code Section 382. As a result, the utilization of federal NOLs generated prior to October of 2020 is subject to limitation. The Company has recorded an adjustment to its deferred tax asset to account for NOLs it will not be able to utilize due to the Section 382 limitation, reducing the amount of federal NOLs for which deferred taxes have been recognized to $325.6 million, or a deferred tax asset of $68.4 million as of October 31, 2020 before being offset by a valuation allowance. The Company recorded a similar adjustment to its state NOL carryforward, reducing the amount of losses for which deferred taxes have been recognized in the financial statements to $431.8 million, or a deferred tax asset of $26.4 million before being offset by a valuation allowance. In addition, the acquisition of Versa in fiscal year 2013 triggered a Section 382 ownership change at the level of Versa Power System which will limit the future usage of some of the federal and state NOLs that we acquired in that transaction. Accordingly, a valuation allowance has been recorded against the deferred tax asset associated with these attributes. The Company’s financial statements reflect expected future tax consequences of uncertain tax positions that the Company has taken or expects to take on a tax return (including a decision whether to file or not file a return in a particular jurisdiction) presuming the taxing authorities’ full knowledge of the position and all relevant facts. The liability for unrecognized tax benefits as of October 31, 2020 and 2019 was $0.0 and $15.7 million, respectively. This amount was directly associated with a tax position taken in a year in which federal and state NOL carryforwards were generated. Historically, the amount of unrecognized tax benefit has been presented as a reduction in the reported amounts of our federal and state NOL carryforwards. Due to the Section 382 ownership change discussed above, the underlying NOLs are no longer available for utilization, a deferred tax asset is not recorded on the Consolidated Balance Sheets and the uncertain tax position has been released. It is our policy to record interest and penalties on unrecognized tax benefits as income taxes; however, because of our significant NOLs, no provision for interest or penalties has been recorded. We file income tax returns in the U.S. and certain states, primarily Connecticut and California, as well as income tax returns required internationally for South Korea and Germany. We are open to examination by the IRS and various states in which we file for fiscal year 2003 to the present. During the fiscal year ended October 31, 2018, the Company underwent an IRS examination for its fiscal year 2016 tax year which was closed without material adjustment.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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