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INCOME TAXES | 12 Months Ended
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Jan. 31, 2025
INCOME TAXES |
INCOME TAXES | 10. INCOME TAXES Income tax expense (benefit) is based on the following pretax income (loss):
|  | Years Ended |
|  | January 31, |
|  | 2025 |  |  | 2024 |
Domestic |  | $ | (14,701 | ) |  | $ | 8,648 |
Foreign |  |  | (3,655 | ) |  |  | 708 |
Total |  | $ | (18,356 | ) |  | $ | 9,356 |
The domestic and foreign pretax income (loss) in the schedule above reflects intercompany dividends paid to the U.S. from international subsidiaries of $4.8 million and $11.4 million for fiscal years ended January 31, 2025 and 2024, respectively.
|  | Years Ended |
|  | January 31, |
|  | 2025 |  |  | 2024 |
Income Tax Expense (Benefit) |  |  |  |  |  |
Current: |  |  |  |  |  |
Federal |  | $ | 8 |  |  | $ | 17 |
State and other taxes |  |  | 29 |  |  |  | 58 |
Foreign |  |  | 3,832 |  |  |  | 4,674 |
Total Current Tax Expense |  | $ | 3,869 |  |  | $ | 4,749 |
Deferred: |  |  |  |  |  |  |  |
Domestic |  | $ | (3,312 | ) |  | $ | (186 | )
Foreign |  |  | (838 | ) |  |  | (633 | )
Total Deferred Tax Expense |  |  | (4,150 | ) |  |  | (819 | )
Total Income Taxes |  | $ | (281 | ) |  | $ | 3,930 |
The following is a reconciliation of the Federal statutory rate to the Company’s effective income tax rate::
|  | Years Ended January 31, |
|  | 2025 |  |  | 2024 |
Statutory rate |  |  | 21.00 | % |  |  | 21.00 | %
State Income Taxes, Net of Federal Tax Benefit |  |  | 1.66 | % |  |  | 0.49 | %
Adjustment to Deferred |  |  | (5.38 | )% |  |  | (23.26 | )%
GILTI |  |  | 0.00 | % |  |  | 9.07 | %
Foreign Tax Credit – GILTI |  |  | 0.00 | % |  |  | (2.42 | )%
Goodwill Impairment |  |  | (12.06 | )% |  |  | 0.00 | %
Section 250 Deduction |  |  | 0.00 | % |  |  | (4.92 | )%
Permanent Differences |  |  | (1.48 | )% |  |  | 0.20 | %
Valuation Allowance-Deferred Tax Asset |  |  | 0.17 | % |  |  | 33.29 | %
Foreign Tax Credit |  |  | 8.19 | % |  |  | (15.24 | )%
Section 78 Gross-up |  |  | 0.00 | % |  |  | 0.77 | %
Argentina Flow Through Loss |  |  | (6.14 | )% |  |  | 7.20 | %
Withholding Taxes |  |  | (1.40 | )% |  |  | 5.72 | %
Foreign Rate Differential |  |  | (2.11 | )% |  |  | 18.25 | %
Change in State Apportionment Rate |  |  | (0.01 | )% |  |  | (1.48 | )%
Foreign employee benefits |  |  | 0.00 | % |  |  | (1.58 | )%
Foreign Dividends Paid to U.S. |  |  | (5.48 | )% |  |  | 25.69 | %
Foreign Dividends Received Deduction |  |  | 5.48 | % |  |  | (25.69 | )%
Earnout Adjustment |  |  | 0.81 | % |  |  | (5.70 | )%
Other |  |  | (1.72 | )% |  |  | 0.62 | %
Effective Rate |  |  | 1.53 | % |  |  | 42.01 | %
The tax effects of temporary cumulative differences which give rise to deferred tax assets and liabilities are summarized as follows:
|  | January 31, |
|  | 2025 |  |  | 2024 |
Deferred tax assets: |  |  |  |  |  |
Inventories |  | $ | 661 |  |  | $ | 1,545 |
US tax loss carryforwards, including work opportunity credit |  |  | 2,364 |  |  |  | 167 |
Accounts receivable and accrued rebates |  |  | 313 |  |  |  | 295 |
Accrued compensation and other |  |  | 326 |  |  |  | 441 |
India reserves - US deduction |  |  | 0 |  |  |  | 24 |
Equity based compensation |  |  | 508 |  |  |  | 346 |
Foreign tax credit carry-forward |  |  | 5,184 |  |  |  | 4,548 |
State and local carry-forwards |  |  | 1,528 |  |  |  | 1,256 |
Depreciation and amortization |  |  | (4,230 | ) |  |  | (1,846 | )
Prepaid expenses |  |  | (301 | ) |  |  | (253 | )
Right-of-use asset |  |  | (1,577 | ) |  |  | (1,590 | )
Operating lease liability |  |  | 1,660 |  |  |  | 1,672 |
Foreign carry-forwards |  |  | 1,029 |  |  |  | 1,102 |
Investments |  |  | 1,404 |  |  |  | 268 |
Section 163(j) Interest Expense |  |  | 293 |  |  |  | 0 |
Withholding taxes |  |  | (139 | ) |  |  | (383 | )
Other |  |  | - |  |  |  | 83 |
Deferred tax assets |  |  | 9,023 |  |  |  | 7,675 |
Less valuation allowance |  |  | (6,644 | ) |  |  | (6,675 | )
Net deferred tax assets |  | $ | 2,379 |  |  | $ | 1,000 |
|  | January 31, |
Balance sheet classification |  | 2024 |  |  | 2025 |
Long-term deferred tax assets |  | $ | 6,270 |  |  | $ | 3,097 |
Long-term deferred tax liability |  | $ | 3,891 |  |  | $ | 2,097 |
The benefit relating to operating loss, and credit carryforwards included in the above table at January 31, 2025, consisted of:
|  | Gross Carryforward |  |  | Benefit Amount |  |  | Valuation Allowance |  |  | Expiration Beginning In |
State operating loss carryforwards |  | $ | 35,834 |  |  | $ | 1,528 |  |  | $ | (925 | ) |  | 2028 |
Foreign tax credit carryforwards |  |  |  |  |  |  | 5,184 |  |  |  | (3,509 | ) |  | 2026 |
Federal credit carryforwards |  |  |  |  |  |  | 167 |  |  |  | - |  |  | 2035 |
Mexico operating loss carryforwards |  | $ | 1,022 |  |  |  | 307 |  |  |  | (307 | ) |  | 2033 |
Chile operating loss carryforwards |  | $ | 1,625 |  |  |  | 439 |  |  |  | (439 | ) |  | Indefinite |
Germany operating loss carryforwards |  | $ | 2 |  |  |  | 1 |  |  |  | (1 | ) |  | Indefinite |
UK operating loss carryforwards |  | $ | 241 |  |  |  | 60 |  |  |  | (60 | ) |  | Indefinite |
Total |  |  |  |  |  | $ | 7,686 |  |  | $ | (5,241 | ) |  |  |
A significant portion of our net operating loss carryforwards were generated in the state of Alabama prior to the change in apportionment factor rules for that state in 2021 which moved the state to a single sales factor apportionment method. The impact of the state law change significantly reduced our apportionment factor in that state, making it unlikely that we will generate sufficient income allocated to that state in order to utilize the full amount of our net loss carryforwards prior to their expiration. Indefinite Reinvestment Assertion The Company generally considers all earnings generated outside of the U.S. to be permanently reinvested offshore, with the exception of countries where cash can be repatriated without withholding taxes, and in China in which the Company previously determined excess cash over what was required to fund operations and growth existed. During FY25, the Company repatriated $4.8 million from two of its subsidiaries in China. The Company also identified an additional $0.4 million in excess cash in its Chinese operations, which it plans to repatriate in the future. A withholding tax liability of $0.1 million has been established for the expected withholding taxes as of the year ended January 31, 2025. Income Tax Audits The Company is subject to US federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions. Returns for the years since FY21 are still open based on statutes of limitation only. Chinese tax authorities have performed limited reviews on all Chinese subsidiaries as of tax years 2008 through 2024 with no significant issues noted, and we believe our tax positions are reasonably stated as of January 31, 2025. The 2024 tax review will be performed before May 31, 2025 in China. Change in Valuation Allowance We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. The valuation allowance as of January 31, 2025 and January 31, 2024 was $6.6 million and $6.7 million, respectively.

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