11. INCOME TAXES:

The income tax provision (benefit) consists of the following:

The Company has U.S. federal net operating loss carryovers (“NOLs”) of approximately $187,254,000, $137,082,000 and $100,662,000 at October 31, 2017, 2016 and 2015, respectively, available to offset taxable income which expire beginning in 2023. If not used, these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. In fiscal years 2017 and 2016, the Company performed a detailed analysis of any historical and/or current Section 382 ownership changes that may limit the utilization of the net operating loss carryovers. From the entire federal NOL of $187,254,000 as of October 31, 2017, approximately $155,930,000 is available for immediate use based on Internal Revenue Code Section 382 analysis. The NOL and the deferred tax asset table below does not include approximately $24,824,000 of NOL’s that may expire unused. The Company also has New Jersey State Net Operating Loss carryovers of approximately $50,745,000, $66,029,000 and $26,245,000 as of October 31, 2017, 2016 and 2015, respectively, available to offset future taxable income through 2037.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.

The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.

If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other Income (Expense)” in the statement of operations. Penalties would be recognized as a component of “General and Administrative Expenses” in the statement of operations.

No interest or penalties on unpaid tax were recorded during the years ended October 31, 2017, 2016 and 2015, respectively. As of October 31, 2017 and 2016, no liability for unrecognized tax benefits was required to be reported. The Company does not expect any significant changes in its unrecognized tax benefits in the next year.

The Company files tax returns in the U.S. federal and state jurisdictions and is subject to examination by tax authorities beginning with the year ended October 31, 2013.

The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:

The expected tax (expense) benefit based on the statutory rate is reconciled with actual tax expense benefit as follows:

Sale of Net Operating Losses (NOLs)

The Company may be eligible, from time to time, to receive cash from the sale of its Net Operating Losses under the State of New Jersey NOL Transfer Program. In fiscal 1Q 2018, the Company plans to receive a net cash amount of $4,452,682 from the sale of its state NOLs and research and development tax credits for the period ended October 31, 2016. In November 2016, the Company received a net cash amount of $2,549,862 from the sale of its state NOLs and research and development tax credits for the period ended October 31, 2015. In December 2015, the Company received a net cash amount of $1,609,349 from the sale of its state NOLs and research and development tax credits for the period ended October 31, 2014. Following the receipt of the NOL and research and development tax credit for the period ending October 31, 2016, the Company will have reached the limit under the NJ NOL program and will no longer be able to participate in future sales.