v3.26.1
Income Taxes
 12 Months Ended
May 31, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of loss before income tax expense (benefit) are as follows:
Year ended May 31,
(in thousands)202620252024
Income (loss) before tax expense:
U.S.$(37,787)$(30,172)$(177,314)
Non U.S.1,487 (3,860)(14,324)
$(36,300)$(34,032)$(191,638)
Income tax expense (benefit) is comprised of the following:
Year ended May 31,
(in thousands)202620252024
Current
Federal$— $13 $147 
State113 608 171 
Non U.S.186 328 361 
299 949 679 
Deferred
Federal— — (6,427)
State— — (612)
Non U.S.143 (988)(929)
143 (988)(7,968)
Income tax expense (benefit)$442 $(39)$(7,289)
Temporary differences that give rise to deferred tax assets and liabilities are summarized as follows:
(in thousands)May 31, 2026May 31, 2025
Deferred tax assets
Net operating loss carryforward$46,341 $34,388 
Stock-based compensation4,901 3,396 
Federal and state R&D tax credit carryforward7,852 8,275 
Inventories1,302 1,016 
Expenses incurred not currently deductible11,903 18,188 
Accrued liabilities36 34 
Gross deferred tax asset72,335 65,297 
Deferred tax liabilities
Depreciation and amortization12,072 10,915 
12,072 10,915 
Valuation allowance(65,493)(58,440)
Net deferred tax liability$(5,230)$(4,058)
The net deferred tax liability of $5.2 million and $4.0 million as of May 31, 2026 and 2025, respectively, principally relates to the stock acquisition of Eximo Medical Ltd., related to book intangibles partially offset by tax net operating losses and capitalized R&D expenditures.
The Company's U.S. Federal net operating loss carryforwards as of May 31, 2026 after considering IRC Section 382 limitations are $188.9 million. The expiration of the Federal net operating loss carryforwards are as follows: $37.1 million between 2030 and 2032, and $151.8 million indefinitely.
The Company's state net operating loss carryforwards as of May 31, 2026 after considering remaining IRC Section 382 limitations are $42.2 million which expire in various years from 2030 to 2044. The Company has Israel tax net operating losses of $18.1 million that can be carried forward indefinitely.
Beginning in 2018, except for the Global Intangible Low-Taxed Income, the Company will no longer record United States federal income tax on its share of the income of its foreign subsidiaries, nor will it record a benefit for foreign tax credits related to that income. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject to withholding taxes payable, where applicable, to foreign countries, but would have no further federal income tax liability. The Company intends to indefinitely reinvest the unremitted foreign earnings of all other subsidiaries as of May 31, 2026, as well as all subsequent earnings generated by all of our foreign subsidiaries. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practical.
The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive and negative evidence, and weighted the evidence based on its objectivity.
Based on the review of all available evidence, the Company determined that it has not yet attained a sustained level of profitability and the objectively verifiable negative evidence outweighed the positive evidence. As a result of the full impairment of Goodwill and the reversal of the naked credit deferred tax liability sourced income, the Company has recorded a full valuation allowance on its US net deferred tax assets as of May 31, 2026. The Company will continue to assess the level of the valuation allowance required. If sufficient positive evidence exists in future periods to support a release of some or all of the valuation allowance, such a release would likely have a material impact on the Company’s results of operations.
We adopted ASC Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09) on a prospective basis beginning with the year ended May 31, 2026.
The reconciliation of income taxes at the federal statutory rate to the reported rate for income taxes pursuant to the disclosure requirements of ASU 2023-09 for the year ended May 31, 2026 is as follows:
Year ended May 31, 2026
(in thousands)AmountRate
Statutory Rate$(7,623)21.00 %
State & local income tax, net of federal (national) income tax effect (1)
90 (0.25)%
Foreign tax effects16 (0.05)%
Effect of cross-border tax laws104 (0.29)%
Research & development tax credit422 (1.16)%
Changes in valuation allowance6,475 (17.84)%
Nontaxable or nondeductible items756 (2.08)%
Other adjustments202 (0.56)%
Total income tax expense$442 (1.23)%
(1) State taxes in Texas make up the majority (greater than 50%) of the tax effect in this category
The reconciliation of income taxes at the federal statutory rate to the reported rate for income taxes for years prior to our adoption of ASU 2023-09 is as follows:
Year ended May 31,
(in thousands)20252024
Income tax benefit at federal statutory tax rate of 21.0% and 21.0%, respectively$(7,147)$(40,244)
State income taxes, net of Federal tax benefit10 (3,016)
Impact of Non-U.S. operations150 2,440 
Research and development tax credit(497)(907)
Meals and entertainment250 244 
Goodwill impairment— 4,867 
Non-deductible executive compensation 294 201 
Change in valuation allowance5,760 26,921 
Stock based compensation1,325 1,357 
Other(184)848 
Income tax benefit$(39)$(7,289)
The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits:
Year ended May 31,
(in thousands)202620252024
Unrecognized tax benefits balance at June 1 $— $— $464 
Decrease in gross amounts of tax positions related to prior years due to U.S. tax reform— — — 
Decrease due to lapse in statute of limitations— — (464)
Unrecognized tax benefits balance at May 31$— $— $— 
The table above includes unrecognized tax benefits associated with the calculation of limitations placed on the utilization of tax attributes related to an acquired company.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. There are no accrued interest and penalties recognized in the Consolidated Balance Sheets as of May 31, 2026 and 2025.
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world. Fiscal years 2023 through 2025 remain open to examination by the various tax authorities.
A reconciliation of income taxes paid, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended May 31, 2026 is as follows:
(in thousands)Year ended May 31, 2026
Federal$— 
State and local
Texas104 
Other states37 
Foreign
Canada50 
France33 
Netherlands59 
United Kingdom84 
Other foreign38 
Total income taxes paid, net of refunds$405