INCOME TAXES

12 Months Ended

Feb. 28, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 14 – INCOME TAXES

Our loss from continuing operations before income taxes and equity in net loss of affiliate consists of the following (in thousands):

	Year Ended February 28/29,
	2022			2021			2020
Domestic	$	(22,943	)	$	(16,964	)	$	(31,381	)
Foreign		(7,118	)		(3,632	)		813
Total loss before income taxes and equity in net loss of affiliate	$	(30,061	)	$	(20,596	)	$	(30,568	)

The components of income tax provision consists of the following (in thousands):

	Year Ended February 28/29,
	2022			2021			2020
Current:
State	$	(33	)	$	40		$	(273	)
Foreign		(589	)		(602	)		(1,629	)
Total current		(622	)		(562	)		(1,902	)
Deferred:
Federal		(31	)		(59	)		(12,852	)
State		(6	)		(18	)		(10,645	)
Foreign		(428	)		78			4,945
Total deferred		(465	)		1			(18,552	)
Income tax provision	$	(1,087	)	$	(561	)	$	(20,454	)

The income tax benefit (provision) differs from the amount obtained by applying the statutory rate as follows (in thousands):

	Year Ended February 28/29,
	2022			2021			2020
Income tax benefit (provision) at U.S. statutory federal rate	$	6,313		$	4,325		$	6,420
State income tax benefit, net of federal income tax effect		730			602			117
Foreign taxes benefit (provision) exclusive of valuation allowance change		(1,385	)		900			(50	)
U.S. taxes on foreign income		-			(306	)		(571	)
Valuation allowance increases		(7,672	)		(5,825	)		(27,726	)
Research and other tax credits		1,544			1,322			2,594
Tax benefits on vested and exercised equity awards		(112	)		(851	)		(606	)
Non-deductible expenses		(791	)		(655	)		(697	)
Other, net		286			(73	)		65
Total income tax provision	$	(1,087	)	$	(561	)	$	(20,454	)

The components of net deferred income tax assets for income tax purposes are as follows (in thousands):

	February 28,
	2022			2021
Net operating loss carryforwards	$	33,379		$	27,194
Depreciation, amortization and impairments		(5,001	)		(2,117	)
Research and development credits		23,484			21,917
Stock-based compensation		1,795			2,944
Other tax credits		2,211			2,197
Capitalized research costs		2,657			2,638
ROU asset		(3,122	)		(3,528	)
Lease liabilities		4,667			5,472
Payroll and employee benefit accruals		1,906			1,984
Allowance for doubtful accounts		677			1,163
Other accrued liabilities		3,365			4,743
Convertible debt		(6,573	)		(8,185	)
Other, net		8,236			5,137
Total deferred tax assets (liabilities)		67,681			61,559
Valuation allowance		(63,732	)		(56,848	)
Net deferred tax assets (liabilities)	$	3,949		$	4,711
Reported as:
Deferred tax assets	$	4,165		$	4,889
Deferred tax liabilities		(216	)		(178	)
Net deferred tax assets	$	3,949		$	4,711

As of February 28, 2022, we maintained a valuation allowance with respect to certain of our deferred tax assets relating primarily to net operating losses and tax credits in domestic and certain foreign jurisdictions for which we cannot assert that they are more likely than not going to be realized. For fiscal year 2022, we increased the valuation allowance against our domestic and foreign net deferred tax assets by approximately $5.6 million and $1.3 million, respectively. For fiscal year 2021, we considered positive and negative evidence, in assessing our ability to realize our domestic and foreign net deferred tax assets and concluded that it is more likely than not that our domestic and many of our foreign net deferred tax assets will not be realized. As such, we increased the valuation allowance against our domestic and foreign net deferred tax asset by approximately $9.2 million and $2.1 million, respectively, for fiscal year 2021. The amount of the net deferred tax assets considered realizable, however, could be adjusted in future periods in the event sufficient evidence is present to support a conclusion that it is more likely than not that all or a portion of our domestic deferred tax assets will be realized.

At February 28, 2022, we had net operating loss carryforwards of approximately $32.3 million, $68.3 million and $42.8 million for federal, state and foreign purposes, respectively, expiring at various dates through fiscal year 2039. Approximately $43.1 and $17.9 million of federal and foreign net operating loss carryforwards do not expire, respectively. The federal net operating loss carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code. If substantial changes in our ownership were to occur, there may be certain annual limitations on the amount of the NOL carryforwards that can be utilized.

As of February 28, 2022, we had R&D tax credit carryforwards of $11.2 million and $11.7 million for federal and state income tax purposes, respectively. The federal R&D tax credits expire at various dates through fiscal year 2040. A substantial portion of the state R&D tax credits have no expiration date. As of February 28, 2022, we had foreign tax credit carryforwards of $1.9 million for federal income tax purposes which expire beginning in fiscal year 2023 through fiscal year 2032.

We accounted for stock-based compensation pursuant to ASU 2016-09 and we have tax deductions on exercised stock options and vested restricted stock awards that did not exceed stock compensation expense amounts recognized for financial reporting purposes in fiscal 2022 and 2021. The gross shortfall was $0.7 million and $4.1 million in fiscal 2022 and 2021, respectively. We follow ASC Topic 740, Income Taxes, which clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Management determined based on our evaluation of our income tax positions that we have uncertain tax benefit of $1.6 million, $1.8 million, and $2.2 million at February 28/29, 2022, 2021 and 2020, respectively, for which we have not yet recognized an income tax benefit for financial reporting purposes.

At February 28, 2022, we decreased the uncertain tax benefits related to certain foreign net operating loss carryforwards and domestic tax credits by $0.1 million. At February 28, 2021, we decreased the uncertain tax benefits related to certain foreign net operating loss carry forwards and domestic tax credits by $0.4 million. If total uncertain tax benefits were realized in a future period, it would result in a tax benefit of $0.8 million. As of February 28, 2022 and 2021, our liabilities for uncertain tax benefits were netted against our deferred tax assets on our consolidated balance sheet. It is reasonably possible the amount of unrecognized tax benefits could be reduced within the next 12 months by at least $0.5 million.

We recognize interest and/or penalties related to uncertain tax positions in income tax expense. No amounts of interest and/or penalties have been accrued as of February 28, 2022.

	Year Ended February 28/29,
	2022			2021			2020
Gross amounts of unrecognized tax benefits as of the beginning of the period	$	1,750		$	2,172		$	3,201
Decreases related to prior period tax positions		(45	)		(2	)		(34	)
Decreases from lapse in statue of limitations		-			(550	)		(908	)
Foreign curreny translation adjustment		(58	)		130			(87	)
Gross amounts of unrecognized tax benefits as of the end of the period	$	1,647		$	1,750		$	2,172

We file income tax returns in the U.S. federal jurisdiction, various U.S. states, Canada, Ireland, Italy, United Kingdom, the Netherlands, Brazil, Mexico, Japan, Hong Kong and New Zealand. Certain income tax returns for the years 2017 through 2020 remain open to examination by U.S. federal and state tax authorities. To the extent allowed by law, the tax authorities may have the right to examine prior periods in which net operating losses or tax credits were generated and carried forward, and to make adjustments up to the net operating loss or tax credit carryforward amount. Our tax returns in the foreign jurisdictions remain open for examination for varying years by jurisdiction with certain jurisdictions being open for examination from 2016 to the present.

 For the fiscal years ended February 28, 2022 and 2021, we assert our intention to indefinitely reinvest foreign earnings in all our non-U.S. subsidiaries and accordingly, recorded no deferred income taxes on outside basis differences.