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Note 9 - Income Taxes
 9 Months Ended
Jul. 31, 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 taxable income (loss), 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 provisions benefits of $52,000 and $482,000 for the three months ended July 31, 2024 and 2023, respectively. The effective tax rate was 6.9% for the three months ended July 31, 2024, compared to 22.7% for the three months ended July 31, 2023. For the nine months ended July 31, 2024 and 2023, we recorded income tax provisions (benefits) of $2,766,000 and ($806,000), respectively. The effective tax rate was (76.9%) for the nine months ended July 31, 2024, compared to 26.6% for the nine months ended July 31, 2023. The change in effective tax rate for the nine months ended July 31, 2024 compared to the nine months ended July 31, 2023 was primarily driven by the recording of a valuation allowance of $3.6 million on deferred tax assets during the quarter ended April 30, 2024.

 

 

We had $226,000 and $178,000 of unrecognized tax benefits, as of July 31, 2024 and October 31, 2023, respectively. The unrecognized tax benefits, if recognized, would result in a net tax benefit of $203,000 as of July 31, 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 July 31, 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 continued 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 partial valuation allowance against its deferred tax assets. The Company's valuation allowance was $3,573,000 and $124,000 as of July 31, 2024 and October 31, 2023, respectively.