Income Tax Provision

12 Months Ended

Jan. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Provision

Note 13 - Income Tax Provision

The income tax provision consists of the following:

Income tax provision / (benefit) consists of the following:

	January 31, 2022		January 31, 2021
Federal
Current	$	-	$	-
Deferred		32,224		(184,085	)
State and Local
Current
Deferred		264,248		(560,888	)
Income tax provision / (benefit)	$	296,472	$	(744,973	)

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Reform Bill”) was signed into law. Prior to the enactment of the Tax Reform Bill, the Company measured its deferred tax assets at the federal rate of 34%. The Tax Reform Bill reduced the federal tax rate to 21% resulting in the re-measurement of the deferred tax asset as of January 31, 2018. Beginning January 1, 2018, the lower tax rate of 21% will be used to calculate the amount of any federal income tax due on taxable income earned during 2019.

The Company had U.S. federal net operating loss carryovers (NOLs) of approximately $5.4 million and $3.8 million at January 31, 2022 and 2021, respectively, available to offset taxable income through 2034. If not used, these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. The Company plans on undertaking a detailed analysis of any historical and/or current Section 382 ownership changes that may limit the utilization of the net operating loss carryovers. The Company also has State NOLs of approximately $10.0 million and $5.2 million at January 31, 2022 and 2021, respectively, available to offset future taxable income through 2035.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. During the year ended January 31, 2021, the valuation allowance was reduced to zero and decreased by $2,177,802. There was no valuation allowance as of January 31, 2022.

The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the Company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.

If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other expenses – Interest” in the consolidated statements of operations. Penalties would be recognized as a component of “General and administrative.”

No interest or penalties on unpaid tax were recorded during the years ended January 31, 2022 and 2021, respectively. As of January 31, 2022 and 2021, no liability for unrecognized tax benefits was required to be reported. The Company does not expect any significant changes in its unrecognized tax benefits in the next year.

The Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following:

Deferred Tax Assets	Year Ended January 31, 2022		Year Ended January 31, 2021
Net operating loss carryovers	$	1,152,434	$	1,212,466
Share-based compensation		6,854		-
Acquisition costs		88,109		-
Capitalized start-up and organization costs		27,843		44,133
Right of use liability		798,015		571,046
Inventory		21,945		-
Interest limitation		16,224		-
Other		18,354		6,309
Total deferred tax assets		2,129,778		1,833,954
Deferred Tax Liabilities
Fixed assets		812,528		708,798
Right of use asset		868,749		380,183
Total deferred tax liabilities		1,681,277		1,088,981
Net deferred tax asset	$	448,501	$	744,973

The expected tax provision (benefit) based on the statutory rate is reconciled with actual tax provision (benefit) as follows:

	Year Ended January 31, 2022			Year Ended January 31, 2021
US Federal statutory rate		21.00	%		21.00	%
State income tax, net of federal benefit		1.08			7.11
Adjustments to deferred tax assets		627.47			5.78
Change in valuation allowance		-			(65.55	)
Non-deductible expenses		16.00			9.24
Income tax provision (benefit)		665.55	%		(22.42	)%