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INCOME TAXES | 12 Months Ended
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Aug. 31, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES We utilize ASC 740 to account for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. The Company is subject to the Global Intangible Low-Taxed Income (“GILTI”) rules, and has an annual GILTI inclusion income and deduction. Based on our assessment, we have not recorded a liability for uncertain tax positions. Management has considered that the accounting guidance under ASC 740-10-55-7 requires entities to assess deferred tax assets (DTAs) for realization and to record a valuation allowance if the DTA is not fully realizable. The objective of the valuation allowance is to reduce the deferred tax asset to the amount that is more likely than not to be realized. After completing the analysis, management determined the deferred tax asset is realizable and no valuation allowance is required. The components of the income tax (benefit) expense for the fiscal years ended August 31, 2025, 2024, and 2023 were as follows:
(in thousands) |  | 2025 |  | 2024 |  | 2023
Current |  |  |  |  |  |
Federal |  | $ | 747 |  |  | $ | 3,291 |  |  | $ | 2,990 |
State |  | (59) |  |  | 742 |  |  | 696 |
Foreign |  | 108 |  |  | 3 |  |  | 144 |
Total current tax expense |  | 796 |  |  | 4,036 |  |  | 3,830 |
Deferred |  |  |  |  |  |
Federal |  | (4,432) |  |  | (1,466) |  |  | (1,818) |
State |  | (1,023) |  |  | (113) |  |  | (278) |
Total deferred federal and state |  | (5,455) |  |  | (1,579) |  |  | (2,096) |
Total |  | $ | (4,659) |  |  | $ | 2,457 |  |  | $ | 1,734 |
A reconciliation of the expected income tax computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the fiscal years ended August 31, 2025, 2024, and 2023:
|  | 2025 |  | 2024 |  | 2023
Income tax computed at federal statutory tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit |  | 1.1 | % |  | 3.5 | % |  | 4.7 | %
Meals & entertainment |  | — | % |  | 0.1 | % |  | 0.1 | %
Stock-based compensation |  | (0.6) | % |  | 3.9 | % |  | 2.1 | %
Other permanent differences |  | (1.0) | % |  | (0.2) | % |  | 3.3 | %
Research and development credit |  | 0.4 | % |  | (1.3) | % |  | (2.2) | %
Foreign-tax-related differences |  | 1.4 | % |  | (7.0) | % |  | (8.2) | %
Goodwill Impairment |  | (15.7) | % |  | — | % |  | — | %
Change in prior year estimated taxes |  | 0.4 | % |  | (0.2) | % |  | (6.0) | %
Non-deductible expenses |  | (0.3) | % |  | — | % |  | — | %
Total |  | 6.7 | % |  | 19.8 | % |  | 14.8 | %
The book impairment of $77.2 million had zero tax basis. The goodwill component of the impairment resulted in a permanent item in the amount of $51.9 million ($10.9 million tax effected). The other intangibles component of impairment in the amount of $25.3 million ($6.4 million tax effected) release of an existing deferred tax liability. Significant components of the Company's deferred tax assets and liabilities for income taxes for the fiscal years ended August 31, 2025, and 2024 are as follows:
(in thousands) |  | 2025 |  | 2024
Deferred tax assets: |  |  |  |
Accrued compensation |  | $ | 31 |  |  | $ | 681 |
Deferred revenue |  | 30 |  |  | 186 |
Capitalized merger costs |  | — |  |  | 707 |
Operating lease liability |  | 41 |  |  | 255 |
Research and development credits |  | 60 |  |  | 157 |
Allowance for credit losses |  | 24 |  |  | 67 |
Capitalized research & development |  | 5,157 |  |  | 3,933 |
Share-based compensation |  | 2,297 |  |  | 1,676 |
Capital loss carryforward |  | 25 |  |  | — |
Accrued sales tax |  | 67 |  |  | — |
Net operating loss carryforward |  | 1,923 |  |  | 3,336 |
Charitable contributions |  | 1 |  |  | — |
Total deferred tax assets |  | 9,656 |  |  | 10,998 |
Less: Valuation allowance |  | — |  |  | — |
Deferred tax asset |  | 9,656 |  |  | 10,998 |
Deferred tax liabilities: |  |  |  |
Property and equipment |  | (131) |  |  | (111) |
Operating lease right-of-use assets |  | — |  |  | (259) |
Unrealized loss |  | (34) |  |  | (40) |
State tax deferred |  | (10) |  |  | (25) |
Intellectual property |  | (2,230) |  |  | (9,012) |
Capitalized computer software development costs |  | (2,477) |  |  | (3,086) |
Prepaid expenses |  | — |  |  | (73) |
Total deferred tax liabilities |  | (4,882) |  |  | (12,606) |
Net deferred tax assets (liabilities) |  | $ | 4,774 |  |  | $ | (1,608) |
We follow ASC 740 with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, we determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and assume that the tax position will be examined by taxing authorities. Interest and penalties were insignificant for the fiscal years ended August 31, 2025, 2024, and 2023, respectively. We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India and France. Our federal income tax returns for fiscal year 2021 through 2024 are open for audit, and our state tax returns for fiscal year 2019 through 2024 remain open for audit. Based on our assessment, we have not recorded any liability for uncertain tax positions in the consolidated financial for the fiscal years ended August 31, 2025, 2024, and 2023, respectively. The Company had no uncertain tax position for all open tax years. Net Operating Loss is summarized as follows:
(in thousands) |  | Amount
Federal NOL as of August 31, 2025 |  | $ | 17,045 |
Subject to expiration |  | 13,710 |
Carried forward indefinitely |  | 3,335 |
Amount to expire before Section 382 limitation lifts |  | 9,697 |
Pennsylvania NOL as of August 31, 2025 |  | 14,771 |
Subject to expiration |  | 14,771 |
Carried forward indefinitely |  | — |
Amount to expire before Section 382 limitation lifts |  | 10,639 |
North Carolina NOL as of August 31, 2025 |  | 2,215 |
Subject to expiration |  | 2,215 |
Carried forward indefinitely |  | — |
Amount to expire before Section 382 limitation lifts |  | — |
Oregon NOL as of August 31, 2025 |  | 166 |
Subject to expiration |  | 166 |
Carried forward indefinitely |  | — |
Amount to expire before Section 382 limitation lifts |  | — |
California R&D Credit as of August 31, 2025 |  | 44 |
Subject to expiration |  | — |
Carried forward indefinitely |  | 44 |
Our review of prior-year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations.

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