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INCOME TAXES
 12 Months Ended
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)202520242023
Current
Federal$747 $3,291 $2,990 
State(59)742 696 
Foreign108 3 144 
Total current tax expense796 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:
202520242023
Income tax computed at federal statutory tax rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit1.1 %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 credit0.4 %(1.3)%(2.2)%
Foreign-tax-related differences1.4 %(7.0)%(8.2)%
Goodwill Impairment(15.7)%— %— %
Change in prior year estimated taxes0.4 %(0.2)%(6.0)%
Non-deductible expenses (0.3)%— %— %
Total6.7 %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) 20252024
Deferred tax assets: 
Accrued compensation $31 $681 
Deferred revenue 30 186 
Capitalized merger costs — 707 
Operating lease liability41 255 
Research and development credits 60 157 
Allowance for credit losses 24 67 
Capitalized research & development5,157 3,933 
Share-based compensation2,297 1,676 
Capital loss carryforward25 — 
Accrued sales tax 67 — 
Net operating loss carryforward1,923 3,336 
Charitable contributions1 — 
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 indefinitely3,335 
Amount to expire before Section 382 limitation lifts9,697 
Pennsylvania NOL as of August 31, 202514,771 
Subject to expiration 14,771 
Carried forward indefinitely— 
Amount to expire before Section 382 limitation lifts10,639 
North Carolina NOL as of August 31, 20252,215 
Subject to expiration 2,215 
Carried forward indefinitely— 
Amount to expire before Section 382 limitation lifts— 
Oregon NOL as of August 31, 2025166 
Subject to expiration 166 
Carried forward indefinitely— 
Amount to expire before Section 382 limitation lifts— 
California R&D Credit as of August 31, 202544 
Subject to expiration — 
Carried forward indefinitely44 
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.