TAX REFORM AND DEFERRED TAX LIABILITIES

6 Months Ended

Jan. 31, 2018

NOTE 9:

TAX REFORM AND DEFERRED TAX LIABILITIES

The Tax Cuts and Jobs Act enacted on December 22, 2017 reduces the US federal corporate tax rate from 35% to 21%, requiring the Company to remeasure existing deferred tax balances and re-evaluate realizability of deferred tax assets. The rate change is administratively effective at the beginning of our Fiscal 2018, using a blended rate for the annual period. As a result, the blended statutory tax rate for Fiscal 2018 is 26.87%.

The Company is not expected to generate taxable income in Fiscal 2018 and has not recorded any current income taxes. Consequently, the tax rate change would have no impact on our current tax expenses but will impact the taxable losses to be recognized for Fiscal 2018. For the three months ended January 31, 2018, we remeasured our existing deferred tax liabilities at the newly enacted tax rates and recognized a deferred tax benefit of $232,843.

The Company has incurred taxable losses for all years since inception, which has resulted in net operating loss carry-forwards in the U.S. that may be available to reduce future years’ taxable income. In the past, we have recorded a full valuation allowance for the deferred tax asset relating to these tax loss carry-forwards as their realization has been determined not likely to occur.

At December 22, 2017, we re-evaluated realizability of the Company’s tax loss carry-forwards and our conclusion that the realization of these tax loss carry-forwards is not likely to occur remains unchanged. As a result, we will continue to record a full valuation allowance for the deferred tax assets relating to these tax loss carry-forwards.

The accounting for the effects of the rate changes on deferred tax balances is complete and no provisional amounts were recorded for this item.