INCOME TAXES

12 Months Ended

Aug. 31, 2023

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 components of the income tax provision for the years ended August 31, 2023, 2022, and 2021 were as follows:

(in thousands)	2023		2022		2021
Current
Federal	$	2,990	$	2,518	$	1,315
State	696		611		450
Foreign	144		(228)		166
Total current tax expense	3,830		2,901		1,931
Deferred
Federal	(1,818)		(4)		(379)
State	(278)		(265)		(249)
Total deferred federal and state	(2,096)		(269)		(628)
Total	$	1,734	$	2,632	$	1,303

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 years ended August 31, 2023, 2022, and 2021:

	2023		2022		2021
Income tax computed at federal statutory tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	4.7		3.2		2.0
Meals & entertainment	0.1		—		—
Stock-based compensation	2.1		0.6		(6.8)
Other permanent differences	3.3		0.4		(0.3)
Research and development credit	(2.2)		(2.2)		(1.6)
Foreign-tax-related differences	(8.2)		(3.2)		(2.6)
Research & credit adjustments to expense	—		—		0.2
Change in prior year estimated taxes	(6.0)		(2.4)		(0.1)
Total	14.8	%	17.4	%	11.8	%

Significant components of the Company's deferred tax assets and liabilities for income taxes for the years ended August 31, 2023, and 2022 are as follows:

(in thousands)	2023		2022
Deferred tax assets:
Accrued compensation	$	865	$	563
Deferred revenue	103		241
Capitalized merger costs	696		703
Operating lease liability	285		—
Intellectual property	—		7
Research and development credits	274		347
Foreign tax credits	—		101
State taxes	(19)		128
Allowance for doubtful accounts	11		3
State tax deferred	—		28
Capitalized Research & Development	1,079		—
Share-Based Compensation	1,104		—
Net Operating Loss Carryforward	2,142		—
Total deferred tax assets	6,540		2,121
Less: Valuation allowance	—		—
Deferred tax asset	6,540		2,121
Deferred tax liabilities:
Property and equipment	(90)		(109)
Operating lease right-of-use assets	(295)		—
Unrealized Gain/(Loss)	(122)		—
State tax deferred	—		(30)
Intellectual property	(2,353)		(1,139)
Capitalized computer software development costs	(2,242)		(2,299)
Total deferred tax liabilities	(5,102)		(3,577)
Net deferred tax assets (liabilities)	$	1,438	$	(1,456)

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 immaterial for the years ended August 31, 2023, 2022, and 2021, respectively. We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India, Belgium and France. Our federal income tax returns for fiscal year 2019 through 2022 are open for audit, and our state tax returns for fiscal year 2018 through 2022 remain open for audit.

Net Operating Loss is summarized as follows:

(in thousands)	Amount
Federal NOL as of August 31, 2023	$	17,775
Subject to expiration	14,440
Carried forward indefinitely	3,335
Amount to expire before Section 382 limitation lifts	9,333
Pennsylvania NOL as of August 31, 2023	16,054
Subject to expiration	16,054
Carried forward indefinitely	—
Amount to expire before Section 382 limitation lifts	10,935

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.