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Income Taxes | 12 Months Ended
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Jan. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes
| Years Ended January 31,
| 2020 |  | 2019 |  | 2018
| (in thousands)
(Loss) income before income taxes is attributable to the following jurisdictions: |  |  |  |  |
Domestic | $ | (12,808 | ) |  | $ | (6,025 | ) |  | $ | (12,246 | )
Foreign | 2,399 |  |  | (13,563 | ) |  | (7,913 | )
Total | $ | (10,409 | ) |  | $ | (19,588 | ) |  | $ | (20,159 | )
The components of income tax expense (benefit) were as follows: |  |  |  |  |
Current: |  |  |  |  |
Domestic | $ | 27 |  |  | $ | 9 |  |  | $ | (225 | )
Foreign | 582 |  |  | 619 |  |  | 1,156 |
| 609 |  |  | 628 |  |  | 931 |
Deferred: |  |  |  |  |
Domestic | — |  |  | — |  |  | (36 | )
Foreign | 269 |  |  | (376 | ) |  | 15 |
| 269 |  |  | (376 | ) |  | (21 | )
Income tax expense | $ | 878 |  |  | $ | 252 |  |  | $ | 910 |
The following is a reconciliation of expected to actual income tax expense:
| Years Ended January 31,
| 2020 |  | 2019 |  | 2018
| (in thousands)
Federal income tax at 21%, 21%, 32.9%, respectively | $ | (2,186 | ) |  | $ | (4,113 | ) |  | $ | (6,632 | )
Changes in tax rates | 631 |  |  | — |  |  | 7,257 |
Permanent differences | 101 |  |  | (148 | ) |  | 3,356 |
Foreign effective tax rate differential | (197 | ) |  | 60 |  |  | 1,163 |
Foreign withholding taxes, foreign branch taxes, including penalties and interest | 403 |  |  | 431 |  |  | 716 |
Tax effect of book loss on disposition of subsidiaries | 69 |  |  | 1,271 |  |  | — |
Valuation allowance on deferred tax assets | 1,719 |  |  | 2,249 |  |  | (5,765 | )
Excess tax deficiency for share-based payments under ASU 2016-09 | 284 |  |  | 663 |  |  | 309 |
Other | 54 |  |  | (161 | ) |  | 506 |
| $ | 878 |  |  | $ | 252 |  |  | $ | 910 |
The components of the Company’s deferred taxes consisted of the following:
| As of January 31,
| 2020 |  | 2019
| (in thousands)
Deferred tax assets: |  |  |
Net operating losses | $ | 17,978 |  |  | $ | 16,696 |
Tax credit carry forwards | 724 |  |  | 675 |
Stock option book expense | 650 |  |  | 781 |
Allowance for doubtful accounts | 776 |  |  | 329 |
Allowance for inventory obsolescence | 570 |  |  | 480 |
Accruals not yet deductible for tax purposes | 357 |  |  | 418 |
Fixed assets | 851 |  |  | 1,255 |
Intangible assets | 337 |  |  | — |
Other | 954 |  |  | 876 |
Gross deferred tax assets | 23,197 |  |  | 21,510 |
Valuation allowance | (23,197 | ) |  | (21,407 | )
Deferred tax assets | — |  |  | 103 |
Deferred tax liabilities: |  |  |
Intangible assets | — |  |  | (35 | )
Other | (200 | ) |  | — |
Deferred tax liabilities | (200 | ) |  | (35 | )
Unrecognized tax benefits | — |  |  | — |
Total deferred tax (liabilities) assets, net | (200 | ) |  | $ | 68 |
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES Act and believes, based on preliminary analysis, that the legislation will not have a material impact on the Company’s future income tax expense or the related tax assets and liabilities. On December 22, 2017, the United States enacted legislation commonly known as the TCJA. The TCJA 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 effective federal income tax rate was 21%, 21% and 32.9% for the fiscal year ended January 31, 2020, 2019 and 2018, respectively. The reduction in the effective federal income tax rate is due to the TCJA reducing the corporate rate to 21%, effective January 1, 2018. For fiscal 2018, the Company was required by U.S. generally accepted accounting principles to re-value its deferred tax assets and liabilities as a result of the reduction of the corporate tax rate to 21%. The change is required to be reported 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 fiscal year 2018 as a result of the change in the corporate tax rate. In fiscal 2018 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 TCJA. 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. As of January 31, 2019, the Company classified SAP, its Australian subsidiary, as held for sale. Included in the assets held for sale were deferred tax assets totaling $1.5 million. These deferred tax assets were offset by a full valuation allowance resulting in a net zero balance in deferred tax assets classified as held for sale. 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, 2020, 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 TCJA and recorded in fiscal 2018. Therefore, the Company has not recorded a deferred tax liability associated with the undistributed foreign earnings as of January 31, 2020. Included in deferred tax assets is approximately $700,000 related to stock-based compensation, including non-qualified stock options. A significant number of stock options expired during fiscal 2020 because the market price of the Company’s common stock remained below the exercise price of these 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, 2020. 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, 2020, the Company has recorded valuation allowances of approximately $23.2 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 the deferred tax assets would not be realized. The judgment was based on an evaluation of available evidence, both positive and negative. At January 31, 2020, the Company had tax credit carry forwards of approximately $724,000, which amounts can be carried forward through at least 2021. As of January 31, 2020, 2019 and 2018 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 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 fiscal 2020, the excess tax deficiency for share-based payments recognized as tax expense was approximately $284,000. 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, 2017 through 2020. The Company’s tax returns may also be subject to examination by state and local revenue authorities for fiscal years ended January 31, 2015 through 2020. The Company’s Canadian income tax returns are subject to examination by the Canadian tax authorities for fiscal years ended January 31, 2016 through 2020. The Company’s tax returns in other foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2015 through January 31, 2020.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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