Income taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes |
Note 7 - Income taxes The benefit for income taxes for fiscal years ended July 31 is as follows:
In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 34% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects on the Tax Act. As a result of the Tax Act, the Company remeasured its U.S. Federal deferred tax assets and liabilities at the rate they are expected to reverse in the future and recorded a cumulative charge of $11.5 million for the fiscal year ended July 31, 2018, which was fully offset by an equivalent adjustment to the deferred tax valuation allowance. The Company recorded a cumulative benefit of $1.1 million for the fiscal year ended July 31, 2018 related to a credit for alternative minimum taxes (AMT) paid in prior years. During the fiscal year ended July 31, 2019, the Company finalized its computation of the impact of the Tax Act with no change to the benefit amount. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance allows companies to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which they are subject to the rules (the period cost method), or (ii) account for GILTI in the Company’s measurement of deferred taxes (the deferred method). After completing the analysis of the GILTI provisions, the Company elected to account for GILTI using the period cost method. Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The components of deferred tax assets (liabilities) as of July 31 are as follows:
The Company recorded a valuation allowance during the years ended July 31, 2020 and 2019 equal to domestic and foreign net deferred tax assets. The Company believes that the valuation allowance is necessary as it is not more likely than not that the deferred tax assets will be realized in the foreseeable future based on positive and negative evidence available at this time. This conclusion was reached because of uncertainties relating to future taxable income, in terms of both its timing and its sufficiency, which would enable the Company to realize the deferred tax assets. For fiscal year 2020 and 2019, the change in the valuation allowance was $6.6 million and $(0.9) million, respectively. As of July 31, 2020, the Company had U.S. federal net operating loss carryforwards of approximately $85.8 million of which $59.0 million, if not fully utilized, expire between 2030 and 2038 and which $26.8 million do not expire. Utilization is dependent on generating sufficient taxable income prior to expiration of the tax loss carryforwards. In addition, the Company has research and development tax credit carryforwards of approximately $1.5 million which expire between 2025 and 2040. As of July 31, 2020, the Company has state net operating loss carryforwards of approximately $22.5 million, which if not fully utilized, expire between 2038 and 2040. As of July 31, 2020, the Company had foreign loss carryforwards of approximately $15.5 million. The geographic components of (loss) income before income taxes consisted of the following for the years ended July 31:
The benefit (provision) for income taxes was at rates different from U.S. federal statutory rates for the following reasons for the years ended July 31:
Because there are no undistributed earnings at the Company’s foreign subsidiaries at July 31, 2020, no U.S. federal income taxes have been provided. As of July 31, 2020, the Company has no liabilities for uncertain tax positions. It is the Company’s policy to record interest and penalties as a component of tax expense. The Company files income tax returns in the U.S. Federal jurisdiction, various U.S. state jurisdictions and several foreign jurisdictions. With few exceptions, the fiscal years that remain subject to examination are July 31, 2017 through July 31, 2020. During fiscal 2020, the Company received notification from the Swiss Federal Tax Administration of an examination for the fiscal years 2015 through 2018. As of July 31, 2020, we had received no preliminary audit findings and no reserves have been recorded with respect to this audit. |