v3.26.3
Income Taxes
 12 Months Ended
Jul. 31, 2026
Income Taxes [Abstract]  
Income Taxes

Note 11—Income Taxes

 

The components of loss before income taxes are as follows (in thousands):

 

Fiscal year ended July 31,   2026     2025  
Domestic   $ (794 )   $ (3,240 )
Foreign     528       524  
Loss before income taxes   $ (266 )   $ (2,717 )

 

Income tax expense (benefit) consisted of the following (in thousands):

 

Fiscal year ended July 31,   2026     2025  
Current:            
Foreign   $ 100     $ 179  
Federal     66       (33 )
State     2       9  
Total current expense     168       155  
Deferred:                
Federal     (310 )     (406 )
State     7       (73 )
Total deferred expense     (303 )     (479 )
Income tax benefit   $ (135 )   $ (325 )

 

The income taxes paid by the Company are as follows:

 

Fiscal year ended July 31,   2026     2025  
Federal   $ -     $ 15  
State     5       27  
Foreign     193       178  
Total income taxes paid   $ 198     $ 220  

 

Income taxes paid (net of refunds) exceeds 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (in thousands):

 

Fiscal year ended July 31,   2026     2025  
State            
Minnesota     *     $ 27  
Wisconsin     *       *  
New Jersey     *       *  
                 
Foreign                
Norway   $ 98     $ 99  
Lithuania   $ 95     $ 79  

 

* Jurisdiction below the threshold for the period presented.

 

The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes reported were as follows (in thousands):

 

Fiscal Year ended July 31,   2026     2025  
    $     %     $     %  
Loss before income taxes   $ (266 )           $ (2,717 )        
U.S. Federal Statutory Tax Rate     (56 )     21.1 %     (571 )     21.0 %
Current State and Local Income Taxes, Net of Federal Income Tax Effect     8       -3.0 %     (56 )     2.1 %
                                 
Foreign Tax Effects                                
Norway                                
Statutory tax rate difference between Norway and United States     -       0.0 %     1       0.0 %
Other     1       -0.4 %     2       -0.1 %
Lithuania                                
Statutory tax rate difference between Lithuania and United States     (26 )     9.8 %     (22 )     0.8 %
Other     -       0.0 %     -       0.0 %
                                 
Effect of Changes in Tax Laws or Rates Enacted in the Current Period     -       0.0 %     -       0.0 %
                                 
Effect of Cross-Border Tax Laws                                
Global intangible low-taxed income     129       -48.5 %     90       -3.3 %
Foreign-derived intangible income     (86 )     32.3 %     -       0.0 %
Foreign Tax Credit     -       0.0 %     -       0.0 %
                                 
Nontaxable or Nondeductible Items                                
Share-based payment awards     (30 )     11.3 %     401       -14.8 %
Other     -       0.0 %     2       -0.1 %
                                 
Changes in Valuation Allowances     -       0.0 %     (185 )     6.8 %
                                 
Other Adjustments     (75 )     28.2 %     12       -0.4 %
                                 
Effective Tax Rate   $ (135 )     50.8 %   $ (325 )     11.9 %

 

The Company is subject to taxation in the United States and certain foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax.

 

The material jurisdictions where the Company is subject to potential examination by tax authorities include the United States, Norway and Lithuania.

 

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) contains a provision which subjects a U.S parent of a foreign subsidiary to current U.S. tax on its global intangible low-taxed income (“GILTI”). The GILTI income is eligible for a deduction, which lowers the effective tax. The Company will report the tax impact of GILTI as a period cost when incurred. Accordingly, the Company is not providing deferred taxes for basis differences expected to reverse as GILTI.

 

U.S companies are eligible for a deduction that lowers the effective tax rate on certain foreign income. This regime is referred to as the Foreign-Derived Intangible Income deduction (“FDII”).

 

Significant components of the Company’s deferred tax assets and are as follows (in thousands):

 

Fiscal year ended July 31,   2026     2025  
Deferred tax assets:            
Depreciation and amortization   $ 3,984     $ 3,260  
Net operating loss carryforwards (Foreign)     1,840       1,840  
Net operating loss carryforwards (Federal)     294       476  
Net operating loss carryforwards (State)     77       90  
Reserves and accruals     175       181  
Stock-based compensation     155       213  
Deferred revenue     244       209  
Others     197       395  
Net deferred tax assets     6,966       6,663  
Less valuation allowance     (1,840 )     (1,840 )
Total deferred tax assets   $ 5,126     $ 4,823  

 

At July 31, 2026, the Company had available gross U.S. federal and state net operating loss (“NOL”) carryforwards from domestic operations of approximately $1.4 million and $1.1 million, respectively, to offset future taxable income. The state NOL carryforwards will begin to expire in 2040. In addition, the Company has approximately $8.0 million of Foreign NOLs (Israel) which are available to offset future taxable income in Israel without time limit.

 

The change in the valuation allowance is as follows (in thousands):

 

Fiscal year ended July 31,   Balance at
beginning of
year		     Additions
related to
stock-based
compensation		     Deductions     Balance at
end of year		  
2026                        
Reserves deducted from deferred income taxes, net:                        
Valuation allowance   $ 1,840     $              -     $          -     $ 1,840  
2025                                
Reserves deducted from deferred income taxes, net:                                
Valuation allowance   $ 2,025     $ -     $ (185 )   $ 1,840  

 

At July 31, 2026 and 2025, the Company did not have any unrecognized tax benefits and does not anticipate any significant changes to the unrecognized tax benefits within the twelve months of the date of filing of this annual report. In the fiscal years ended July 31, 2026 and 2025, the Company recorded $0 and $4,500, respectively, in interest and penalties on income taxes. At July 31, 2026 and 2025, there was no accrued interest included in income taxes payable.

 

The Company currently remains subject to examinations of its U.S. federal, state, and foreign tax returns generally for fiscal years 2021 through 2025.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which enacts significant changes to the U.S. tax and related laws. Some of the provisions of the new tax law that affect corporations include but are not limited to expensing of domestic specified research or experimental expenditures, increasing the limitation on the deductibility of business interest expense under IRC §163(j) to thirty percent of EBITDA, and one hundred percent bonus depreciation on eligible property acquired after January 19, 2025. The Company does not expect that the new tax law will have a material impact on its financial condition and results of operations.