Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.3
Income Taxes
 12 Months Ended
Jul. 31, 2023
Income Tax Disclosure [Abstract]  
Income taxes

Note 8 - Income taxes

 

The Company recorded no benefit or provision for income taxes for fiscal years ended July 31, 2023 and 2022.

 

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:

 

    2023     2022  
Deferred tax assets:            
Federal tax carryforward losses   $ 11,345       20,303  
Provision for uncollectible accounts receivable     878       635  
State and local tax carry forward losses     97       2,758  
Stock compensation     2,349       1,766  
Depreciation     563       875  
Research and development and other tax credit carryforwards     1,652       1,551  
Lease liabilities     3,232       4,594  
Foreign tax carryforward losses     3,708       3,213  
Intangibles and goodwill     83       481  
Inventory     1,623       1,769  
Accrued expenses     4,463       2,199  
Other, net     13       12  
Deferred tax assets     30,006       40,156  
                 
Right of use assets     (2,757 )     (4,313 )
Prepaid expenses     (507 )     (1,175 )
Other, net     (57 )     (58 )
Deferred tax liabilities     (3,321 )     (5,546 )
                 
Net deferred tax assets before valuation allowance     26,685       34,610  
Less: valuation allowance     (26,685 )     (34,610 )
Net deferred tax assets   $
—
     $
—
  

 

The Company recorded a valuation allowance during the years ended July 31, 2023 and 2022 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 years 2023 and 2022, the change in the valuation allowance was ($7,925) and $4,736, respectively.

 

As of July 31, 2023, the Company had U.S. federal net operating loss carryforwards of approximately $54,025 of which $16,214, if not fully utilized, expire between 2030 and 2038 and which $37,811 do not expire. The Company has local net operating loss carryforwards of $1,101 which expire in 2042. 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 $1,646 which expire between 2025 and 2043. As of July 31, 2023, the Company had foreign loss carryforwards of approximately $16,574 which with few exceptions do not expire.

 

The geographic components of loss before income taxes consisted of the following for the years ended July 31:

 

    2023     2022  
United States operations   $ (23,714 )   $ (16,345 )
International operations     (1,308 )     (3,994 )
(Loss) income before taxes   $ (25,022 )   $ (20,339 )

 

The benefit for income taxes was at rates different from U.S. federal statutory rates for the following reasons for the years ended July 31: 

 

    2023     2022  
Federal statutory rate     21.0 %     21.0 %
Compensation and other expenses not deductible for income tax return purposes     (1.4 )     (2.9 )
Change in valuation allowance, net     (19.6 )     (18.1 )
     
—
 %    
—
 %

 

Because there are no undistributed earnings at the Company’s foreign subsidiaries at July 31, 2023, no U.S. federal income taxes have been provided. As of July 31, 2023, 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, 2020 through July 31, 2023.