Income Taxes

12 Months Ended

Jul. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The Company files federal and state consolidated tax returns with our subsidiaries. There was no income tax provision for the years ended July 31, 2024 and 2023 due to the net losses.

At July 31, 2024, the Company had federal and state tax net operating loss carry-forwards of approximately $107.2 million and $65.9 million, respectively. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code as well as similar state provisions. These ownership changes may limit the amount of net operating loss carry-forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 of the Internal Revenue Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since its formation, the Company has raised capital through the issuance of capital stock on several occasions (both before and after its initial public offering in 1996) which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition. While the Company does not believe that it has experienced an ownership change, the pertinent tax rules related thereto are complex and subject to varying interpretations, and thus complete assurance cannot be provided that the taxing authorities would not take an alternative position.

The Company’s current federal tax loss carry-forwards began expiring in the year ended July 31, 2020 and, unless previously utilized, all but $11.9 million will completely expire in the year ending July 31, 2038. The $9.1 million can be carried forward indefinitely. The Company’s state tax loss carry-forwards began to expire in the year ending July 31, 2029, and will completely expire in the year ending July 31, 2040.

Significant components of the Company’s deferred tax assets are as follows:

	July 31,
	2024			2023
Net operating loss carry-forward	$	26,840,000		$	28,200,000
Stock options and warrants		2,270,000			2,060,000
Other temporary differences		210,000			70,000
Total deferred tax assets		29,320,000			30,330,000
Valuation allowance for deferred tax assets		(29,320,000	)		(30,330,000	)
Net deferred tax assets	$	—		$	—

A reconciliation of income taxes computed using the statutory income tax rate, compared to the effective tax rate, is as follows:

	2024			2023
Federal tax benefit at the expected statutory rate		(21	)%		(21	)%
State income tax, net of federal tax benefit		(7	)		(7	)
Other		—			—
Valuation allowance		28			28
Income tax benefit - effective rate		—	%		—	%

Following authoritative guidance, the Company recognizes the tax benefit from a tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense; however it has had no accrued interest or penalties at either July 31, 2024 or July 31, 2023. The Company is subject to income taxes in the United States and in various states, and its historical tax years remain subject to future examination by the U.S. and state tax authorities. During the years ended July 31, 2024 and 2023, it did not record any activity related to our unrecognized tax benefits.

The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for tax years prior to 2012. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.