Income Taxes

12 Months Ended

Apr. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before provision for income taxes consists of the following (in thousands):

	Year Ended April 30,
	2022		2021		2020
United States	$	2,512	$	2,011	$	1,751
International	(24,725)		(27,307)		344
	$	(22,213)	$	(25,296)	$	2,095

The components of income tax expenses are summarized as follows (in thousands):

	Year Ended April 30,
	2022		2021		2020
Current
Federal	$	224	$	274	$	102
State	(25)		28		1
International	1,292		544		947
Total current tax expense	1,491		846		1,050
Deferred
Federal	(1,163)		1,219		(535)
State	(142)		6		159
International	(223)		144		92
Total deferred tax benefit	(1,528)		1,369		(284)
Total tax expense	$	(37)	$	2,215	$	766

The tax effects of significant items comprising the Company’s deferred taxes are as follows (in thousands):

	April 30, 2022		April 30, 2021
Deferred tax assets:
Accrued expense	$	1,114	$	144
Deferred rent	—		58
Foreign tax credit	—		—
Net operating losses	125		19
Research and development credits	5,299		4,011
Stock compensation	868		—
Lease liability	3,900		—
Others	3		—
Total deferred tax assets	11,309		4,232
Deferred tax liabilities
Property and equipment basis	(1,162)		(900)
Right of use assets	(3,842)		—
Others	—		(16)
Total deferred tax liabilities	(5,004)		(916)
Valuation allowance	(5,170)		(3,706)
Net deferred taxes	$	1,135	$	(390)

A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. The valuation allowance increased by $1.5 million in fiscal 2022. As of April 30, 2022, the Company had federal and state research credits of $3.8 million and $4.0 million, respectively. The federal research credits will begin to expire in 2039. The state research credits have no expiration date. As it is not more likely than not that the Company will be able to utilize the federal and state research credits, the Company recorded $5.2 million of valuation allowance. As of April 30, 2022, the Company had no foreign tax credit carryover.

Foreign earnings may be subject to withholding taxes in local jurisdictions if they are distributed. The amount of cumulative undistributed earnings that are permanently reinvested that could be subject to withholding taxes are $20.6 million as of April 30, 2022. We intend to reinvest these earnings indefinitely.

The Company consists of a Cayman parent holding company with various international and U.S. subsidiaries. The applicable statutory rate in Cayman is zero for the Company for the years ended April 30, 2022, 2021 and 2020. For purposes of the reconciliation between the provision for income taxes at the statutory rate and the effective tax rate, a U.S. statutory tax rate of 21% for the years ended April 30, 2022, 2021 and 2020 is applied as follows:

	Year Ended April 30,
	2022		2021		2020
Statutory federal tax expense rate	21	%	21	%	21	%
State tax, net of federal benefit	1	%	—	%	8	%
Research tax credits	4	%	3	%	(34)	%
Stock compensation	7	%	—	%	—	%
Other permanent adjustment	—	%	1	%	1	%
Other	1	%	—	%	(2)	%
Foreign rate differential	(26)	%	(25)	%	25	%
Change in valuation allowance	(4)	%	(8)	%	—	%
Withholding Taxes	(4)	%	(2)	%	21	%
Foreign tax credit	—	%	—	%	(4)	%
Effective tax rate	—	%	(10)	%	36	%

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

	April 30, 2022		April 30, 2021
Beginning gross unrecognized tax benefits	$	1,234	$	953
Additions for tax positions taken in the current year	616		364
Subtractions for tax positions taken in the prior year	(6)		(83)
Ending gross unrecognized tax benefits	$	1,844	$	1,234

The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on such position’s technical merits as of the reporting date and only in an amount more likely than not to be sustained upon review by the tax authorities.

Included in the balance of unrecognized tax benefits as of April 30, 2022 and 2021 were potential benefits of $1.8 million and $1.2 million, respectively, which if recognized, would affect the effective tax rate. Unrecognized tax benefits are not expected to significantly increase or decrease within the next 12 months.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. For the years ended April 30, 2022, 2021 and 2020, the Company’s current tax provision was not impacted by interest and penalties.

The Company files U.S. state and foreign jurisdictions income tax returns with varying statutes of limitations. The Company does not have any tax years under income tax examination by taxing authorities. The Company’s tax returns continue to remain subject to examination by U.S. federal authorities for the years ended April 30, 2018 through 2021 and by state authorities for the years ended April 30, 2017 through 2021. For the Company’s international subsidiaries, the tax years that remain open to examination vary based on the year that each entity began operating.