Income taxes

12 Months Ended

Jul. 31, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 6 - Income taxes

The benefit (provision) for income taxes for fiscal years ended July 31 is as follows:

	2016			2015			2014
Current (provision) benefit:
Federal	$	(968	)	$	—		$	—
State and local		(276	)		(72	)		(68	)
Foreign		(45	)		(25	)		(22	)
Deferred benefit		60			104			18
Benefit (provision) for income taxes	$	(1,229	)	$	7		$	(72	)

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:

	2016			2015
Deferred tax assets:
Federal tax carryforward losses	$	18,964		$	35,411
Provision for uncollectible accounts receivable		1,406			685
State and local tax carry forward losses		2,757			2,661
Accrued royalties		146			144
Stock compensation		616			99
Depreciation		769			618
Research and development and other tax credit carryforwards		2,152			1,134
Foreign tax carryforward losses		2,046			1,476
Intangibles		2,915			2,951
Inventory		2,477			2,558
Accrued expenses		1,321			2,627
Unrealized foreign exchange		100			98
Other, net		63			18
Deferred tax assets		35,732			50,480
Deferred tax liabilities:
Deferred patent costs		—			(152	)
Prepaid expenses		(820	)		(676	)
Other, net		—			(31	)
Deferred tax liabilities		(820	)		(859	)
Net deferred tax assets before valuation allowance		34,912			49,621
Less: valuation allowance		(34,912	)		(49,658	)
Net deferred tax liabilities	$	—		$	(37	)

Net deferred tax liabilities are included in the consolidated balance sheets as of July 31 as follows:

	2016		2015
Deferred taxes:
Current	$	—	$	—
Non-current		—		37
	$	—	$	37

The Company recorded a valuation allowance during the years ended July 31, 2016 and 2015 equal to domestic and certain 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 2016 and 2015 the change in the valuation allowance was $14.7 million and $0.2 million, respectively.

As of July 31, 2016, the Company had U.S. federal net operating loss carryforwards of approximately $55.0 million. The U.S. federal tax loss carryforwards, if not fully utilized, expire between 2030 and 2035. 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 $1.0 million which expire between 2025 and 2036. As of July 31, 2016, the Company had foreign loss carryforwards of approximately $7.9 million.

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

	2016			2015			2014
United States operations	$	48,847		$	(615	)	$	(8,702	)
International operations		(2,332	)		(1,677	)		(1,203	)
Income (loss) before taxes	$	46,515		$	(2,292	)	$	(9,905	)

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

	2016			2015			2014
Federal statutory rate		(34.0	)%		34.0	%		34.0	%
Penalties and other expenses not deductible for income tax return purposes		(1.1	)		(18.6	)		(6.6	)
State income taxes, net of benefit of federal tax deduction		(0.4	)		(0.5	)		0.2
Change in valuation allowance		32.9			(15.2	)		(16.5	)
State tax law change		—			—			(12.3	)
Other		—			0.6			0.5
		(2.6	)%		0.3	%		(0.7	)%

U.S. federal income taxes have not been provided on approximately $101 of undistributed earnings at the Company’s foreign subsidiaries at July 31, 2016, because it is the Company’s intent to keep the earnings reinvested. As of July 31, 2016, 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.