INCOME TAXES

3 Months Ended

Oct. 31, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 8 – INCOME TAXES

Deferred tax assets on our balance sheet primarily include Federal and State net operating loss carry forwards (collectively “NOLs”) which are expected to result in future tax benefits. Realization of these NOLs assumes that we will be able to generate sufficient future taxable income to realize these assets. Deferred tax assets also include temporary differences between the financial reporting basis and the income tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled.

In assessing the recoverability of deferred tax assets, we consider 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 the generation of future taxable income during the periods in which those temporary differences are expected to be deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and projections for future taxable income over the periods in which the deferred tax assets are expected to be deductible.

On July 31, 2011, we had NOLs of approximately $12,913 available to offset future taxable income. These are composed of approximately $11,008 from ITEX operating losses and approximately $1,905 from BXI operating losses. The future utilization is recorded as a deferred tax asset given that management believes it is more likely than not that we will generate future taxable income. We periodically assess the realizability of our available NOLs to determine whether we believe we will generate enough future taxable income to utilize some portion or all of the available NOLs. During the fourth quarter of 2011, we performed an assessment of our available NOLs. As part of that assessment for the year ended July 31, 2011, we concluded that the portion of our income that will be apportioned to the state of California in future years will not be as large as previously expected. As a result, we believe that we will not be able to utilize a portion of the California NOL. Accordingly, we have taken a $152 valuation allowance during the year ended July 31, 2011 against this NOL. We determined that there is no allowance required on our Federal NOL. As of October 31, 2011 and July 31, 2011, we have a $152 and $152 valuation allowance on state of California NOLs.

The deferred tax assets recorded represent our estimate of all deferred tax benefits to be utilized in the current year and future periods beyond 2011. The following table reflects the reconciliation of the Company’s income tax expense:

The reconciliation of the income tax provision (benefit) calculated using the federal statutory rates to the recorded income tax provision is as follows (dollars in thousands):

	Three-months ended October 31
	2011					2010
	Amount		Rate			Amount		Rate
Expected tax provison at federal statutory rate	$	91		35	%	$	120		35	%
State income taxes		10		4	%		13		4	%
Provision for income taxes	$	101		39	%	$	133		39	%

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. A reconciliation of the Company’s unrecognized tax benefits as of October 31, 2011 is as follows (in thousands):

Balance at July 31, 2011	$	204
Increases/(Decreases) as a result of tax positions taken in the current year	$	5
Increases/(Decreases) as a result of tax positions taken in prior years		-
Balance at October 31, 2011	$	209

The Company is subject to income taxes in the U.S. as well as various U.S. state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is subject to U.S. and state income tax examinations by tax authorities for tax years 2005 through the present. The Company does not anticipate any material changes to its recognized tax benefits over the next 12 months.