v3.25.1
Note 7 - Income Taxes
 12 Months Ended
Jan. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 7 — INCOME TAXES

 

For fiscal 2024 and 2023, income taxes consist of the following:

 

  

Fiscal Year

 
  

2024

  

2023

 

Current tax expense:

        

Federal

 $—  $— 

State

  —   (58,000)

Total current tax benefit (expense)

 $—  $(58,000)

Deferred tax expense:

        

Federal

 $—  $86,000 

State

  —   18,000 

Total deferred tax benefit (expense)

 $—  $104,000 

Income tax benefit (expense)

 $—  $46,000 

 

The income tax expense differs from the amount computed using the federal statutory income tax rate of 21% for fiscal 2024 and 2023 as follows:

 

  

Fiscal Year

 
  

2024

  

2023

 

Federal tax benefit at statutory rate

 $2,134,000  $3,887,000 

State and local tax expense, net of federal

  —   (28,000)

Increase in valuation allowance

  (1,907,000)  (3,994,000)

Permanent items:

        

Other

  1,000   (36,000)

Reserve for uncertain tax position

  9,000   (7,000)

Federal research and development (R&D) tax credit

  (45,000)  33,000 

Stock-based compensation

  (249,000)  135,000 

Other

  57,000   56,000 

Income tax benefit (expense)

 $—  $46,000 

 

The Company provides deferred income taxes for temporary differences between assets and liabilities recognized for financial reporting and income tax purposes. The income tax effects of these temporary differences and credits are as follows:

 

  

January 31,

 
  

2025

  

2024

 

Deferred tax assets:

        

Allowance for credit losses

 $60,000  $26,000 

Deferred revenue

  484,000   209,000 

Accruals

  96,000   67,000 

Net operating loss carryforwards

  15,312,000   15,748,000 

Stock-based compensation

  489,000   427,000 

Finite-lived intangible assets

  3,830,000   1,739,000 

R&D tax credit

  1,398,000   1,434,000 

Other

  1,000   1,000 

Total deferred tax assets

  21,670,000   19,651,000 

Valuation allowance

  (21,670,000)  (19,646,000)

Net deferred tax assets

  —   5,000 

Deferred tax liabilities:

        

Property and equipment

  —   (5,000)

Finite-lived intangible liabilities

  —   — 

Total deferred tax liabilities

  —   (5,000)

Net deferred tax liabilities

 $—  $— 

 

At January 31, 2025, the Company had U.S. federal net operating loss carry forwards of $64,036,000 and $29,083,000 of these net operating losses expire at various dates through fiscal 2038. The remaining $34,953,000 of these net operating losses can be carried forward indefinitely under the provisions of the Tax Cuts and Jobs Act (TCJA). The TCJA also eliminated the ability to carry back net operating losses. The Company also had stated net operating loss carry forwards of $38,568,000 and Federal R&D credit carry forwards of $1,324,000 and Georgia R&D credit carry forwards of $94,000, all of which expire at various dates through fiscal 2042.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company established a valuation allowance of $21,670,000 and $19,646,000 at January 31, 2025 and 2024, respectively. The increase in the valuation allowance of $1,907,000 was driven primarily by the Company’s federal net operating losses.

 

The Company and its subsidiaries are subject to U.S. federal income tax as well as income taxes in multiple state and local jurisdictions. The Company has concluded all U.S. federal tax matters for years through January 31, 2020. All material state and local income tax matters have been concluded for years through January 31, 2019. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2020; however, carry forward losses that were generated prior to the tax year ended January 31, 2020 may still be adjusted by the IRS if they are used in a future period.

 

The Company has recorded a reserve, including interest and penalties, for uncertain tax positions of $331,000 and $340,000 as of January 31, 2025 and 2024, respectively. As of January 31, 2025 and 2024, the Company had no accrued interest and penalties associated with unrecognized tax benefits. 

 

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:

 

  

2024

  

2023

 

Beginning of fiscal year

 $340,000  $333,000 

Additions for tax positions for the current year

  —   9,000 

Additions for tax positions of prior years

  —   — 

Subtractions for tax positions of prior years

  (9,000)  (2,000)

End of fiscal year

 $331,000  $340,000