Note 16 - Income Taxes

12 Months Ended

Jan. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

16. Income Taxes

	Year Ended January 31,
	2023			2022
	(in thousands)
Loss from continuing operations before income taxes is attributable to the following jurisdictions:
Domestic	$	(10,446	)	$	(11,618	)
Foreign		3,714			(2,000	)
Total	$	(6,732	)	$	(13,618	)
The components of income tax expense (benefit) for continuing operations were as follows:
Current:
Domestic	$	19		$	27
Foreign		743			40
		762			67
Deferred:
Domestic		—			—
Foreign		(63	)		(106	)
		(63	)		(106	)
Income tax (benefit) expense	$	699		$	(39	)

The following is a reconciliation of expected to actual income tax expense (benefit) for continuing operations:

	Year Ended January 31,
	2023			2022
	(in thousands)
Federal income tax at 21%	$	(1,414	)	$	(2,860	)
Changes in tax rates		—			—
Permanent differences		363			(144	)
Foreign effective tax rate differential		(53	)		(8	)
Valuation allowance on deferred tax assets		1,690			2,931
Excess tax deficiency for share-based payments under ASU 2016-09		133			13
Other		(20	)		29
	$	699		$	(39	)

The components of the Company’s deferred taxes for continuing operations consisted of the following:

	As of January 31,
	2023			2022
	(in thousands)
Deferred tax assets:
Net operating losses	$	23,019		$	20,282
Tax credit carry forwards		184			165
Stock option book expense		857			833
Allowance for doubtful accounts		145			102
Inventory		1,383			835
Accruals not yet deductible for tax purposes		83			130
Fixed assets		265			289
Intangible assets		411			391
Other		585			623
Gross deferred tax assets		26,932			23,650
Valuation allowance		(26,932	)		(23,650	)
Deferred tax assets		—			—
Deferred tax liabilities:
Other		(29	)		(92	)
Deferred tax liabilities		(29	)		(92	)
Unrecognized tax benefits		—			—
Total deferred tax liabilities, net		(29	)	$	(92	)

On August 16, 2022, the Inflation Reduction Act (IRA) was enacted.  The IRA, among other things, establishes certain “green energy” tax credits, establishes a corporate alternative minimum tax, and requires a 2% excise tax on stock buybacks. The Company does not believe the IRA will have a material impact on the Company’s future income tax expense or the related tax assets and liabilities. 

The Company has determined that, due to the potential requirement for additional investment and working capital to achieve its objectives, the undistributed earnings of foreign subsidiaries as of January 31, 2023, are not deemed indefinitely reinvested outside of the United States. Furthermore, the Company has concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial. Therefore, the Company has not recorded a deferred tax liability associated with the undistributed foreign earnings as of January 31, 2023.

Included in deferred tax assets is approximately $857,000 related to stock-based compensation, including non-qualified stock options. Recent market prices for the Company’s Common Stock remain below the exercise price of a number of options outstanding as of January 31, 2023. Should the market price of the Company’s Common Stock remain below the exercise price of the options, these stock options will expire without exercise. In accordance with the provisions of ASC 718-740-10, a valuation allowance has not been computed based on the decline in stock price.

As of January 31, 2023, the Company has recorded valuation allowances of approximately $26.9 million related to deferred tax assets for continuing operations. These deferred tax assets relate primarily to net operating loss carryforwards in the United States and other jurisdictions. The valuation allowances were determined based on management’s judgment as to the likelihood that the deferred tax assets would not be realized. The judgment was based on an evaluation of available evidence, both positive and negative.

On  January 31, 2023, the Company had tax credit carry forwards for continuing operations of approximately $184,000, which amounts can be carried forward through at least 2026.

As of January 31, 2023, and 2022 the company had no unrecognized tax benefits attributable to uncertain tax positions.

The Company recognizes interest and penalties related to income tax matters as a component of income tax expense.

The Company files U.S. federal income tax returns as well as separate returns for its foreign subsidiaries within their local jurisdictions. The Company’s U.S. federal tax returns are subject to examination by the IRS for fiscal years ended January 31, 2019, through 2023. The Company’s tax returns may also be subject to examination by state and local revenue authorities for fiscal years ended January 31, 2017, through 2023. The Company’s Singapore income tax returns are subject to examination by the Singapore tax authorities for fiscal years ended January 31, 2017, through 2023. The Company’s tax returns in other foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2018 through January 31, 2023.