v3.26.3
Income Taxes
 12 Months Ended
Jul. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss from continuing operations before income taxes consists of the following:
Fiscal Years Ended July 31,
20262025
U.S.$(14,470,000)(19,347,000)
Foreign(2,964,000)71,000 
$(17,434,000)(19,276,000)

The provision for (benefit from) income taxes included in the accompanying Consolidated Statements of Operations consists of the following:
Fiscal Years Ended July 31,
20262025
Federal – current$44,000 673,000 
Federal – deferred— — 
State and local – current(88,000)371,000 
State and local – deferred— — 
Foreign – current(141,000)(136,000)
Foreign – deferred1,032,000 (1,187,000)
Provision for (benefit from) income taxes$847,000 (279,000)
In fiscal 2026, we adopted the enhanced disclosure requirements of FASB ASU No. 2023-09 and presented the fiscal 2026 effective income tax rate reconciliation below pursuant to the requirements of the revised standard. As permitted by FASB ASU No. 2023-09, we presented the fiscal 2025 effective income tax rate reconciliation consistent with our historical format.

Income taxes differed from the amounts computed by applying the U.S. Federal income tax rate as a result of the following:
Fiscal Year Ended July 31, 2026
AmountRate
Loss from continuing operations before income taxes
$(17,434,000)
U.S. Federal statutory income tax rate (computed "expected" tax benefit)(3,661,000)21.0 %
Nontaxable or nondeductible items:
Revaluation of warrants and embedded derivatives(4,639,000)26.6 
Compensation686,000 (3.9)
Other(93,000)0.5 
Effect of cross border tax laws:
Global Intangible Low Taxed Income ("GILTI")1,148,000 (6.6)
Change in valuation allowance5,936,000 (34.0)
State and local income taxes (net of Federal benefit) (1)
(84,000)0.5 
Other(28,000)0.2 
Foreign tax effects:
Canada
Change in valuation allowance1,718,000 (9.9)
Other(4,000)— 
Other foreign jurisdictions35,000 (0.2)
Changes in unrecognized tax benefits(167,000)0.9 
Provision for income taxes$847,000 (4.9)%

(1) The jurisdictions that comprise the majority of the domestic state and local income taxes is Texas and Pennsylvania.


Fiscal Year Ended July 31, 2025
AmountRate
Loss from continuing operations before income taxes
$(19,276,000)
U.S. Federal statutory income tax rate (computed "expected" tax benefit)$(4,048,000)21.0 %
Increase (reduction) in income taxes due to:
State and local income taxes, net of valuation allowance and Federal benefit371,000 (1.9)
Stock-based compensation931,000 (4.8)
Research and experimentation credits(374,000)1.9 
Revaluation of warrants and embedded derivatives(8,085,000)41.9 
Nondeductible executive compensation102,000 (0.5)
Change in U.S. Federal and foreign valuation allowances9,936,000 (51.5)
Foreign income tax rate differential7,000 — 
Goodwill impairment1,114,000 (5.8)
Other, net(233,000)1.2 
Benefit from income taxes$(279,000)1.5 %
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at July 31, 2026 and 2025 are presented below:
20262025
Deferred tax assets:
Inventory and contract reserves$339,000 347,000 
Compensation and commissions3,420,000 3,408,000 
Federal, state and foreign research and experimentation credits8,770,000 7,598,000 
Capitalized U.S. research and experimental expenditures2,240,000 7,029,000 
Stock-based compensation1,735,000 1,656,000 
Foreign scientific research and experimental development expenditures2,014,000 2,006,000 
Federal, state and foreign net operating losses6,364,000 5,367,000 
Federal and state capital losses— 14,473,000 
Lease liabilities3,318,000 3,286,000 
Deferred revenue, non-current2,834,000 3,371,000 
Interest expense limitation23,768,000 13,411,000 
Other2,240,000 2,098,000 
Less: valuation allowance(24,134,000)(29,102,000)
Total deferred tax assets, net32,908,000 34,948,000 
 Deferred tax liabilities:
Plant and equipment(2,350,000)(2,009,000)
Lease right-of-use assets(2,707,000)(2,584,000)
Intangibles(27,633,000)(29,106,000)
Total deferred tax liabilities(32,690,000)(33,699,000)
Net deferred tax assets$218,000 1,249,000 

At July 31, 2026 and 2025, our net deferred tax assets of $218,000 and $1,249,000, respectively, were recorded as "Other assets, net" in our Consolidated Balance Sheets.

In assessing the need for a valuation allowance for deferred tax assets, we consider all positive and negative evidence, including past financial performance, timing and judgments about future taxable income and tax planning strategies. Valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount "more-likely-than-not" expected to be realized. Based on our evaluation as of July 31, 2026, we determined, for most of our net deferred tax assets, that it was not more-likely-than-not that such net deferred tax assets will be realized. Accordingly, we recorded a full valuation allowance against such net deferred tax assets.

At July 31, 2026, we had: (i) $8,909,000 of Federal net operating loss carryforwards, which do not expire; (ii) state net operating loss carryforwards of $59,925,000, which begin to expire in fiscal 2027; and (iii) Canadian net operating loss carryforwards of $2,172,000, which expire in fiscal 2045.

At July 31, 2026, we had: (i) Federal research and experimentation credit carryforwards of $5,134,000, which begin to expire in 2032; (ii) state research and experimentation credit carryforwards of $2,826,000, which expire in fiscal 2027; and (iii) foreign research and experimentation credit carryforwards of $809,000, which begin to expire in fiscal 2043.

Our foreign earnings and profits are not material; therefore, we have not recorded any deferred tax liability related to unremitted foreign earnings.
Unrecognized Tax Positions
At July 31, 2026 and 2025, total unrecognized tax benefits were $3,991,000 and $4,078,000, respectively, including interest of $224,000 and $203,000, respectively. At July 31, 2026 and 2025, $1,444,000 and $1,611,000, respectively, of our unrecognized tax benefits were recorded as non-current income taxes payable on our Consolidated Balance Sheets. The remaining unrecognized tax benefits of $2,547,000 and $2,467,000 at July 31, 2026 and 2025, respectively, were presented as an offset to the associated deferred tax assets on our Consolidated Balance Sheets. Of the total unrecognized tax benefits, $1,444,000 and $1,611,000 at July 31, 2026 and 2025, respectively, would favorably impact our effective tax rate, if recognized.

The following table summarizes the activity related to our unrecognized tax benefits for fiscal years 2026 and 2025 (excluding interest):
20262025
Balance at beginning of period$3,875,000 4,267,000 
Increase related to current period34,000 66,000 
Increase related to prior periods63,000 8,000 
Expiration of statute of limitations(128,000)(458,000)
Decrease related to prior periods(77,000)(8,000)
Balance at end of period$3,767,000 3,875,000 

Our U.S. Federal income tax returns for fiscal 2023 through 2026 are subject to Internal Revenue Service ("IRS") audit. Our fiscal 2023 income tax return is currently under examination by the IRS. None of our state and foreign income tax returns prior to fiscal 2022 are subject to audit.

In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted, resulting in significant changes to U.S. tax law. U.S. GAAP, specifically ASC 740, requires that the effects of an applicable change in tax law be recognized in the period of enactment. Accordingly, our financial statements and footnote disclosures reflect the impact of those provisions of the OBBBA that were applicable to us, such as bonus depreciation, changes in the tax treatment of U.S. research and experimental expenditures (and related deductions) and limitations imposed on business interest expense deductions. We continue to assess the potential impact of the OBBBA on U.S. research and experimental expenditures incurred in prior years, as the OBBBA provides optionality as to when these costs may be deducted.

During fiscal 2026, net cash paid (received) related to income taxes, by taxing jurisdiction, for continuing operations was as follows:

Federal:
State:
California$(54,000)
Connecticut(129,000)
Pennsylvania124,000 
Texas85,000 
Virginia(78,000)
Other(121,000)
Foreign:
Australia60,000 
Russia(149,000)
Total $(262,000)