Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
12 Months Ended
Jan. 31, 2023
Income Tax Disclosure [Line Items]  
Income Taxes
8.
Income Taxes

The components of the provision for income taxes are comprised of the following for the fiscal years ended January 31:

 

 

 

2023

 

 

2022

 

Current income taxes

 

 

 

 

 

 

Federal

 

$

-

 

 

$

-

 

State

 

 

10

 

 

 

1

 

Foreign

 

 

48

 

 

 

464

 

Deferred income taxes

 

 

 

 

 

 

Total income tax expense

 

$

58

 

 

$

465

 

For the years ended January 31, 2023 and 2022, the foreign income (loss) before provision for income tax was $51 and $1,774, respectively. For the years ended January 31, 2023 and 2022, the domestic loss before provision for income tax was ($110,609) and ($243,956), respectively.

Indefinite reinvestment is determined by management’s judgment about and intentions concerning the future operations of the Company. As part of its business strategies, the Company has determined that all earnings from foreign continuing operations will be deemed indefinitely reinvested outside of the United States. The Company's plans to indefinitely reinvest certain earnings are supported by projected working capital and long-term capital requirements in each foreign subsidiary location in which the earnings are generated.

A reconciliation of income tax expense at the U.S. federal statutory income tax rate to annual income tax expense at the Company’s effective tax rate is as follows:

 

 

 

2023

 

 

 

 

 

2022

 

 

 

 

Income tax expense computed at U.S. federal statutory income tax rate

 

$

(23,217

)

 

 

21.0

%

 

$

(50,575

)

 

 

21.0

%

State income taxes

 

 

(8,434

)

 

 

7.63

%

 

 

(10,190

)

 

 

4.2

%

Permanent items

 

 

7,623

 

 

 

(6.90

)%

 

 

8,197

 

 

 

(3.4

)%

Valuation allowance

 

 

36,661

 

 

 

(33.16

)%

 

 

53,577

 

 

 

(22.2

)%

Change in State Tax Rate

 

 

(12,761

)

 

 

11.54

%

 

 

(362

)

 

 

0.2

%

Other

 

 

186

 

 

 

(0.17

)%

 

 

(182

)

 

 

0.1

%

Income tax expense computed at U.S. federal statutory income tax rate

 

$

58

 

 

 

(0.06

)%

 

$

465

 

 

 

(0.1

)%

Income tax expense was $58 and $465 for the fiscal years ended January 31, 2023 and 2022, respectively. The effective tax rate for the fiscal years ended January 31, 2023 and 2022 was (0.06)% and (0.1)%, respectively.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and carryforwards.

Significant components of the Company’s deferred tax assets and (liabilities) are as follows:

 

 

 

2023

 

 

2022

 

Deferred tax assets

 

 

 

 

 

 

Net operating loss carryforward

 

$

118,465

 

 

$

81,955

 

Accruals and other

 

 

601

 

 

 

610

 

Intangibles

 

 

124

 

 

 

123

 

Depreciation and amortization

 

 

281

 

 

 

118

 

RSU

 

 

9,766

 

 

 

8,499

 

Others

 

 

657

 

 

 

285

 

Deferred revenue

 

 

4,241

 

 

 

5,786

 

Lease Liabilities

 

 

760

 

 

 

 

Gross deferred tax assets

 

 

134,895

 

 

 

97,376

 

Valuation allowance

 

 

(132,520

)

 

 

(95,533

)

Net deferred tax asset

 

 

2,375

 

 

 

1,843

 

Deferred tax liabilities

 

 

 

 

 

 

Deferred costs

 

 

(1,835

)

 

 

(1,843

)

ROU Assets

 

 

(540

)

 

 

 

Net deferred tax assets (liabilities)

 

$

-

 

 

$

-

 

 

Income Tax Valuation Allowance

 

The following summarizes changes to valuation and qualifying accounts for fiscal year 2023 and fiscal year 2022:

 

Income Tax Valuation Allowance

 

Balance at Beginning of Period

 

 

Charged to Costs & Expenses

 

 

Federal/State NOL

 

 

Balance at End of Period

 

Fiscal Year Ended

 

 

 

 

 

 

 

 

 

 

 

 

January 31, 2023

 

 

95,533

 

 

 

476

 

 

 

36,510

 

 

 

132,520

 

January 31, 2022

 

 

41,849

 

 

 

10,662

 

 

 

43,022

 

 

 

95,533

 

 

As of January 31, 2023 and January 31, 2022, the Company had net operating loss carryforwards (NOLs) available to offset federal taxable income of approximately $413,570 and $324,787, respectively. $25,270 of the federal NOLs expire on various dates through 2037 and $388,300 are able to be carried forward indefinitely to offset 80% of future taxable income. The company has tax effected state NOL carryforwards of approximately $31,616 as of January 31, 2023 and $13,749 as of January 31, 2022 that expire on various dates through 2037.

In accordance with IRC Section 382, the extent to which net operating loss carryforwards can be used to offset future taxable income may be limited, depending on the extent of any ownership changes as defined by federal and various state and local jurisdictions. These limitations may result in the expiration of net operating loss carry forwards before utilization.

In assessing the realizability of the Company's net deferred tax assets, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will be recognized. The ultimate realization of the net deferred tax assets is dependent upon the generation of taxable income during the periods in which temporary differences become deductible. Management considers taxes paid, if any, scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies that can be implemented by the Company in making this assessment. Based upon the level of historical taxable income, scheduled reversal of deferred tax liabilities, and projections for taxable income over the periods in which the temporary differences become deductible based on available tax planning strategies, management presently believes it is more likely than not that the Company may not realize all of the benefits of these deductible differences and, accordingly, has established a valuation allowance against the net deferred tax assets at January 31, 2023 and 2022.

The Company recognizes a tax position taken or expected to be taken (and any associated interest and penalties) if it is more likely than not that it will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company measures the tax position at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

Management evaluated all income tax positions and determined that there were no uncertain tax positions that required reserves as of January 31, 2023 and 2022. The Company files tax returns in the United States federal jurisdiction and in many state jurisdictions. The tax years 2018 through 2023 remain open to examination by the major taxing jurisdictions to which the company is subject. No examinations are currently open.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. Changes in tax laws or rates are accounted for in the period of enactment. The income tax provisions of the CARES Act did not have a significant impact on the Company's current taxes, deferred taxes, or uncertain tax positions.