Note 14 - Income Taxes

12 Months Ended

Jan. 31, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14. Income Taxes

	Year Ended January 31,
	2024			2023
	(in thousands)
Income (loss) from continuing operations before income taxes is attributable to the following jurisdictions:
Domestic	$	(8,075	)	$	(9,108	)
Foreign		8,313			3,714
Total	$	238		$	(5,394	)
The components of income tax expense (benefit) for continuing operations were as follows:
Current:
Domestic	$	—		$	19
Foreign		1,489			743
		1,489			762
Deferred:
Domestic		—			—
Foreign		(151	)		(63	)
		(151	)		(63	)
Income tax (benefit) expense	$	1,338		$	699

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

	Year Ended January 31,
	2024			2023
	(in thousands)
Federal income tax at 21%	$	50		$	(1,133	)
Taxes created by return to provision adjustments to prior year temporary differences		146			—
Global intangible low tax income ("GILTI") inclusion		1,653			—
Permanent differences		90			329
Foreign effective tax rate differential		(218	)		(43	)
Valuation allowance on deferred tax assets		(528	)		1,400
Excess tax deficiency for share-based payments under ASU 2016-09		150			121
Other		(5	)		25
	$	1,338		$	699

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

	As of January 31,
	2024			2023
	(in thousands)
Deferred tax assets:
Net operating losses	$	26,895		$	22,425
Tax credit carry forwards		944			165
Stock option book expense		766			825
Allowance for credit losses		107			141
Inventory		594			1,262
Accruals not yet deductible for tax purposes		130			250
Fixed assets		80			236
Intangible assets		523			416
Disallowed interest expense		227			—
Other		1,033			527
Gross deferred tax assets		31,299			26,247
Valuation allowance		(31,177	)		(26,247	)
Deferred tax assets		122			—
Deferred tax liabilities:
Other		—			(29	)
Deferred tax liabilities		—			(29	)
Unrecognized tax benefits		—			—
Total deferred tax liabilities, net		—		$	(29	)

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, 2024, 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, 2024.

Included in deferred tax assets is approximately $766,000 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, 2024. 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, 2024, the Company has recorded valuation allowances of approximately $31.2 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. These net operating loss carry forwards are subject to limitation and future expiration. 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, 2024, the Company had tax credit carry forwards for continuing operations of approximately $944,000, which amounts can be carried forward through at least 2027.

As of January 31, 2024, and 2023 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 2024. 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 2024. The Company’s Singapore income tax returns are subject to examination by the Singapore tax authorities for fiscal years ended January 31, 2017, through 2024. 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, 2024.