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Note 8 - Income Tax Provision | 12 Months Ended
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Oct. 31, 2022
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 8 – Income tax provision The provision (benefit) for income taxes for the fiscal years ended October 31, 2022 and 2021 consists of the following (in thousands):
|  | 2022 |  |  | 2021 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | 1,252 |  |  | $ | 401 |
State |  |  | 225 |  |  |  | 189 |
|  |  | 1,477 |  |  |  | 590 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | (1,054 | ) |  |  | 323 |
State |  |  | (284 | ) |  |  | 123 |
|  |  | (1,338 | ) |  |  | 446 |
|  | $ | 139 |  |  | $ | 1,036 |
Income tax at the federal statutory rate is reconciled to our actual net provision (benefit) for income taxes as follows (in thousands, except percentages):
|  | 2022 |  |  | 2021 |
|  |  |  |  |  | % of Pretax |  |  |  |  |  |  | % of Pretax |
|  | Amount |  |  | Income |  |  | Amount |  |  | Income |
Income taxes at federal statutory rate |  | $ | 333 |  |  |  | 21.0 | % |  | $ | 1,516 |  |  |  | 21.0 | %
State tax provision, net of federal tax benefit |  |  | 60 |  |  |  | 3.8 | % |  |  | 246 |  |  |  | 3.4 | %
Nondeductible differences: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stock options |  |  | 19 |  |  |  | 1.2 | % |  |  | (86 | ) |  |  | -1.2 | %
PPP loan forgiveness |  |  | - |  |  |  | 0.0 | % |  |  | (588 | ) |  |  | -8.1 | %
Permanent differences |  |  | 5 |  |  |  | 0.3 | % |  |  | 5 |  |  |  | 0.1 | %
R&D credits |  |  | (219 | ) |  |  | -13.6 | % |  |  | (51 | ) |  |  | -0.7 | %
Foreign derived intangible income |  |  | (68 | ) |  |  | -4.3 | % |  |  | (15 | ) |  |  | -0.2 | %
ASC 740-10 Liability |  |  | (7 | ) |  |  | -0.4 | % |  |  | 29 |  |  |  | 0.4 | %
Section 481(a) adjustment |  |  | 142 |  |  |  | 8.9 | % |  |  | - |  |  |  | 0.0 | %
Return-to-provision adjustments |  |  | (126 | ) |  |  | -7.9 | % |  |  | - |  |  |  | 0.0 | %
Other |  |  | - |  |  |  | -0.0 | % |  |  | (20 | ) |  |  | -0.3 | %
|  | $ | 139 |  |  |  | 9.2 | % |  | $ | 1,036 |  |  |  | 14.4 | %
Our total deferred tax assets and deferred tax liabilities at October 31, 2022 and 2021 are as follows (in thousands):
|  | 2022 |  |  | 2021 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
Reserves |  | $ | 404 |  |  | $ | 383 |
Accrued vacation |  |  | 294 |  |  |  | 241 |
Stock-based compensation awards |  |  | 168 |  |  |  | 144 |
Uniform capitalization |  |  | 173 |  |  |  | 134 |
Lease liability |  |  | 4,169 |  |  |  | 366 |
State Taxes |  |  | 72 |  |  |  | 52 |
Other |  |  | 36 |  |  |  | 25 |
Total deferred tax assets |  |  | 5,316 |  |  |  | 1,345 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Amortization / intangible assets |  |  | (29 | ) |  |  | (487 | )
Change in ROU assets |  |  | (3,335 | ) |  |  | (357 | )
Depreciation / equipment and furnishings |  |  | (136 | ) |  |  | (112 | )
Total deferred tax liabilities |  |  | (3,500 | ) |  |  | (956 | )
Total net deferred tax assets (liabilities) |  | $ | 1,816 |  |  | $ | 389 |
Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We have evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined it is more likely than not that the assets will be realized in future tax years. The provision (benefit) for income taxes was $0.1 million or 9.2% and $1.0 million or 14.4% of income before income taxes for fiscal 2022 and 2021, respectively. The fiscal 2022 effective tax rate differed from the statutory federal rate of 21% primarily as a result of the tax benefit from research and development tax credits and foreign derived intangible income deduction and the tax expense associated with tax accounting method changes. The Company recognizes the benefit of tax positions taken or expected to be taken in its tax returns in the consolidated financial statements when it is more likely than not that the position will be sustained upon examination by authorities. Recognized tax positions are measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. A reconciliation of the beginning and ending balance to total uncertain tax positions in fiscal years ended October 31, 2022 and 2021 are as follows:
|  | 2022 |  |  | 2021 |
Balance, at beginning of year |  | $ | 141 |  |  | $ | 107 |
Increase for tax positions related to the current year |  |  | 50 |  |  |  | 44 |
Increase for tax positions related to prior years |  |  | (29 | ) |  |  | (1 | )
Increase for interest and penalties |  |  | - |  |  |  | 2 |
Statute of Limitations Expirations |  |  | (28 | ) |  |  | (11 | )
Balance, at end of year |  | $ | 134 |  |  | $ | 141 |
We had gross unrecognized tax benefits of $121,000 and $128,000 attributable to U.S. federal and California research tax credits as of October 31, 2022 and 2021, respectively. During fiscal 2022, the decrease in our gross unrecognized tax benefit was primarily related to statute expirations and adjustments for prior year federal and California research tax credits. The uncertain tax benefit is recorded as income taxes payable in our consolidated balance sheet and if recognized in the future would impact our effective tax rate. We recognize interest and penalties related to uncertain tax positions in income tax expense. We recognized expense of approximately $13,000 and $13,000 during the years ended October 31, 2022 and 2021, respectively. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, it is possible that certain changes may occur within the next twelve months, but we do not anticipate that our accrual for uncertain tax positions will change by a material amount over the next 12-month period. We are subject to taxation in the United States and state jurisdictions. Our tax years for October 31, 2019 and forward are subject to examination by the United States and October 31, 2018 and forward with state tax authorities.

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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