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Income Taxes | 12 Months Ended
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Jan. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes
| Years Ended January 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Loss before income taxes is attributable to the following jurisdictions: |  |  |  |  |
Domestic | $ | (12,246 | ) |  | $ | (17,685 | ) |  | $ | (11,900 | )
Foreign | (7,913 | ) |  | (13,654 | ) |  | (15,859 | )
Total | $ | (20,159 | ) |  | $ | (31,339 | ) |  | $ | (27,759 | )
The components of income tax expense (benefit) were as follows: |  |  |  |  |
Current: |  |  |  |  |
Domestic | $ | (225 | ) |  | $ | 34 |  |  | $ | (16 | )
Foreign | 1,156 |  |  | 846 |  |  | 684 |
| 931 |  |  | 880 |  |  | 668 |
Deferred: |  |  |  |  |
Domestic | (36 | ) |  | 40 |  |  | 10,762 |
Foreign | 15 |  |  | 894 |  |  | (453 | )
| (21 | ) |  | 934 |  |  | 10,309 |
Income tax expense | $ | 910 |  |  | $ | 1,814 |  |  | $ | 10,977 |
The following is a reconciliation of expected to actual income tax expense:
| Years Ended January 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Federal income tax at 32.9%, 34%, 34%, respectively | $ | (6,632 | ) |  | $ | (10,655 | ) |  | $ | (9,436 | )
Changes in tax rates | 7,257 |  |  | — |  |  | (82 | )
Permanent differences | 3,356 |  |  | 38 |  |  | 509 |
Foreign effective tax rate differential | 1,163 |  |  | 1,979 |  |  | 1,609 |
Potential tax, penalties and interest resulting from uncertain tax positions | — |  |  | — |  |  | (236 | )
Foreign withholding taxes, foreign branch taxes, including penalties and interest | 716 |  |  | 671 |  |  | 717 |
Election to deduct foreign taxes in prior years U.S. income tax returns | — |  |  | — |  |  | 2,610 |
Valuation allowance on deferred tax assets | (5,765 | ) |  | 10,056 |  |  | 15,477 |
Excess tax deficiency for share-based payments under ASU 2016-09 | 309 |  |  | — |  |  | — |
Other | 506 |  |  | (275 | ) |  | (191 | )
| $ | 910 |  |  | $ | 1,814 |  |  | $ | 10,977 |
The components of the Company’s deferred taxes consisted of the following:
| As of January 31,
| 2018 |  | 2017
| (in thousands)
Deferred tax assets: |  |  |
Net operating losses | $ | 14,292 |  |  | $ | 17,666 |
Tax credit carry forwards | 693 |  |  | 894 |
Stock option book expense | 1,381 |  |  | 2,259 |
Allowance for doubtful accounts | 1,521 |  |  | 2,098 |
Allowance for inventory obsolescence | 430 |  |  | 437 |
Accruals not yet deductible for tax purposes | 611 |  |  | 691 |
Fixed assets | 1,325 |  |  | 1,266 |
Other | 901 |  |  | 1,046 |
Gross deferred tax assets | 21,154 |  |  | 26,357 |
Valuation allowance | (21,154 | ) |  | (26,357 | )
Deferred tax assets | — |  |  | — |
Deferred tax liabilities: |  |  |
Intangible assets | — |  |  | (150 | )
Other | (307 | ) |  | (167 | )
Deferred tax liabilities | (307 | ) |  | (317 | )
Unrecognized tax benefits | — |  |  | — |
Total deferred tax (liabilities) assets, net | (307 | ) |  | $ | (317 | )
On December 22, 2017, the United States enacted legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act contains (i) significant changes to corporate taxation, including reduction of the highest corporate tax rate from 35% to 21%, (ii) limitations on the deductibility of interest expense, business entertainment expenses, and executive compensation, and (iii) significant changes to U.S. international taxation, including a one time repatriation tax on undistributed earnings of foreign subsidiaries, the exemption from U.S. tax of certain foreign earnings upon their distribution to U.S. corporate shareholders, and the addition of a base erosion and anti-abuse tax. The Company's assessment of the effects of the Tax Act is not complete; therefore, provisional amounts under the Tax Act have been reported for fiscal year ended January 31, 2018. As a result of the Tax Act reducing the corporate rate to 21%, effective January 1, 2018, the Company's effective federal income tax rate was reduced from 34% to 32.9% for the fiscal year ended January 31, 2018. As a result of the reduction of the corporate tax rate to 21%, U.S. generally accepted accounting principles require the Company to re-value its deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period of enactment. The impact of revaluation was a decrease of approximately $7.0 million in value of the Company's U.S. deferred tax assets. The decrease in value of the U.S. deferred tax assets was directly offset by a corresponding reduction in the valuation allowance related to deferred tax assets. Therefore, no tax expense was recorded for the fiscal year ended January 31, 2018 as a result of the change in the corporate tax rate. The Company also recognized approximately $11.2 million of estimated U.S. taxable income due to the one-time repatriation of previously untaxed foreign earnings and profits imposed by the Tax Act. The repatriated foreign earnings were reported as a permanent difference and were entirely offset by current year U.S. net operating losses. As a result, the one-time repatriation of foreign earnings did not result in a tax liability for the Company. The Company has determined that, due to fundamental shifts in its business strategy to emphasize its Marine Technology Products business and the potential requirement for additional investment and working capital to achieve its objectives, the undistributed earnings of foreign subsidiaries as of January 31, 2018, should no longer be 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, particularly in light of the one-time repatriation of foreign earnings imposed by the Tax Act. Therefore, the Company has not recorded a deferred tax liability associated with the undistributed foreign earnings as of January 31, 2018. Included in deferred tax assets is approximately $1.4 million related to stock based compensation, including non-qualified stock options. Recent prices for the Company’s common stock are below the exercise price for a significant number of these stock options. Should the 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, 2018, the Company has recorded valuation allowances of approximately $21.2 million related to deferred tax assets. 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 these deferred tax assets would be realized. The judgment was based on an evaluation of available evidence, both positive and negative. At January 31, 2018, the Company had tax credit carry forwards of approximately $693,000, which amounts can be carried forward through at least 2021. As of January 31, 2018, 2017 and 2016 the company had no unrecognized tax benefits attributable to uncertain tax positions. Income tax expense for the fiscal year ended January 31, 2016 included approximately $92,000 of benefit related to reductions in uncertain tax positions. A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding potential penalties and interest, is as follows:
| Years Ended January 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Unrecognized tax benefits as of beginning of year | $ | — |  |  | $ | — |  |  | $ | 92 |
Increases as a result of tax positions taken in prior years | — |  |  | — |  |  | — |
Increases as a result of tax positions taken in current year | — |  |  | — |  |  | — |
Settlements | — |  |  | — |  |  | (44 | )
Lapse of statute of limitations | — |  |  | — |  |  | (48 | )
Unrecognized tax benefits as of end of year | $ | — |  |  | $ | — |  |  | $ | — |
The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. Income tax expense for the fiscal year ended January 31, 2016 included approximately $145,000 of benefit related to a reduction in estimated penalties and interest for uncertain tax positions. Effective January 31, 2016 the Company has adopted the provisions of ASU 2015-17 on a prospective basis. Accordingly, all net deferred tax assets and liabilities are classified as long-term as of January 31, 2017 and January 31, 2018 in the accompanying Consolidated Balance Sheets. The company prospectively adopted the provisions of ASU 2016-09 beginning February 1, 2017. Accordingly, all excess tax benefits and deficiencies related to employee share-based payments are recognized as income tax benefits or expense in the accompanying Consolidated Statement of Operations and in the accompanying Consolidated Statement of Cash Flows as operating activities. For the fiscal year ended January 31, 2018 the excess tax deficiency for share-based payments recognized as tax expense was approximately $309,000. 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, 2013 through 2018. The Company’s tax returns may also be subject to examination by state and local revenue authorities for fiscal years ended January 31, 2013 through 2018. The Company’s Canadian income tax returns are subject to examination by the Canadian tax authorities for fiscal years ended January 31, 2014 through 2018. The Company’s tax returns in other foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2013 through January 31, 2018.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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