Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.3
Income Taxes
 12 Months Ended
Jul. 31, 2024
Income Taxes [Abstract]  
Income taxes

Note 8 - Income taxes

 

The Company recorded no benefit or provision for income taxes with respect to continuing operations for fiscal years ended July 31, 2024 and 2023. Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. The components of deferred tax assets (liabilities) as of July 31 are as follows:

 

    2024     2023  
Deferred tax assets:            
Federal tax carryforward losses   $ 16,405       11,345  
Provision for uncollectible accounts receivable     13       878  
State and local tax carry forward losses     1,706       97  
Stock compensation     250       2,349  
Depreciation     438       563  
Research and development and other tax credit carryforwards     1,596       1,652  
Lease liabilities     2,086       3,232  
Foreign tax carryforward losses     4,096       3,708  
Intangibles and goodwill    
—
       83  
Inventory     1,707       1,623  
Accrued expenses     2,848       4,463  
Other, net    
—
       13  
Deferred tax assets     31,145       30,006  
                 
Right-of-use assets     (1,063 )     (2,757 )
Prepaid expenses     (420 )     (507 )
Other, net    
—
       (57 )
Deferred tax liabilities     (1,483 )     (3,321 )
                 
Net deferred tax assets before valuation allowance     29,662       26,685  
Less: valuation allowance     (29,662 )     (26,685 )
Net deferred tax assets   $
—
     $
—
  

 

The Company recorded a valuation allowance during the years ended July 31, 2024 and 2023 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 not 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 2024 and 2023, the change in the valuation allowance was $2,977 and ($7,925), respectively.

 

As of July 31, 2024, the Company had U.S. federal net operating loss carryforwards of approximately $78,118 of which $17,422, if not fully utilized, expire between 2033 and 2038 and which $60,696 do not expire. The Company has State and local net operating loss carryforwards of $16,324 and $7,289, respectively, which expire through 2044. 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 $1,596 as of July 31, 2024, which expire between 2025 and 2043. As of July 31, 2024, the Company had foreign loss carryforwards of approximately $20,189, 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:

 

    2024     2023  
United States operations   $ (7,664 )   $ (23,714 )
International operations     (2,153 )     (1,308 )
Loss before taxes   $ (9,817 )   $ (25,022 )

 

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: 

 

    2024     2023  
Federal statutory rate     21.0 %     21.0 %
Compensation and other expenses not deductible for income tax return purposes     (7.6 )     (1.4 )
Change in valuation allowance, net     (13.4 )     (19.6 )
     
—
 %    
—
 %

 

Because there are no undistributed earnings at the Company’s foreign subsidiaries at July 31, 2024, no U.S. federal income taxes have been provided. As of July 31, 2024, the Company has no liabilities for uncertain tax positions. It is the Company’s policy to record tax-related 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, 2021 through July 31, 2024.