12. Income Taxes


	Years Ended January 31,
	2017			2016			2015
	(in thousands)
Loss before income taxes is attributable to the following jurisdictions:
Domestic	$	(17,685	)	$	(11,900	)	$	(6,766	)
Foreign		(13,654	)		(15,859	)		(3,420	)

Total	$	(31,339	)	$	(27,759	)	$	(10,186	)

The components of income tax expense (benefit) were as follows:
Current:
Domestic	$	34		$	(16	)	$	387
Foreign		846			684			1,687

		880			668			2,074
Deferred:
Domestic		40			10,762			(4,230	)
Foreign		894			(453	)		1,162

		934			10,309			(3,068	)

Income tax expense (benefit)	$	1,814		$	10,977		$	(994	)

The following is a reconciliation of expected to actual income tax expense:


	Years Ended January 31,
	2017			2016			2015
	(in thousands)
Federal income tax (benefit) expense at 34%	$	(10,655	)	$	(9,436	)	$	(3,463	)
Changes in tax rates		—			(82	)		—
Permanent differences		38			509			(224	)
Foreign effective tax rate differential		1,979			1,609			540
Potential tax, penalties and interest resulting from uncertain tax positions		—			(236	)		(172	)
Foreign withholding taxes		671			717			920
Election to deduct foreign taxes in prior years U.S. income tax returns		—			2,610			—
Valuation allowance on deferred tax assets		10,056			15,477			1,379
Other		(275	)		(191	)		26

	$	1,814		$	10,977		$	(994	)

The components of the Company’s deferred taxes consisted of the following:


	As of January 31,
	2017			2016
	(in thousands)
Deferred tax assets:
Net operating losses	$	17,666		$	10,127
Tax credit carry forwards		894			823
Stock option book expense		2,259			2,716
Allowance for doubtful accounts		2,098			2,121
Allowance for inventory obsolescence		437			116
Accruals not yet deductible for tax purposes		691			636
Fixed assets		1,266			299
Other		1,046			627

Gross deferred tax assets		26,357			17,465
Valuation allowance		(26,357	)		(16,647	)

Deferred tax assets		—			818
Deferred tax liabilities:
Intangible assets		(150	)		(215	)
Other		(167	)		(17	)

Deferred tax liabilities		(317	)		(232	)
Unrecognized tax benefits		—			—

Total deferred tax (liabilities) assets, net		(317	)	$	586

The Company has determined that the undistributed earnings of foreign subsidiaries, other than branch operations in Colombia, as of January 31, 2017, have been indefinitely reinvested outside of the United States. Accordingly, no deferred tax liability has been recognized related to these undistributed earnings. As of January 31, 2017, the unrecognized deferred tax liability related to these items is immaterial.

Effective January 31, 2016 the Company has adopted the provisions of ASU 2015-17 on a prospective basis. Accordingly, all net deferred tax assets are classified as long-term (liabilities) assets as of January 31, 2016 in the accompanying Consolidated Balance Sheets.

Included in deferred tax assets is approximately $2.3 million related to stock based compensation, including non-qualified stock options. Recent prices for the Company’s common stock are below the exercise price for a significant number of these stock options. Should the price of the Company’s common stock remain below the exercise price of the options, these stock options will expire without exercise. In accordance with the provisions of ASC 718-740-10, a valuation allowance has not been computed based on the decline in stock price.

As of January 31, 2017, the Company has recorded valuation allowances of approximately $26.4 million related to deferred tax assets. These deferred tax assets relate primarily to net operating loss carryforwards in the United States and other jurisdictions. The valuation allowances were determined based on management’s judgment as to the likelihood that these deferred tax assets would be realized. The judgment was based on an evaluation of available evidence, both positive and negative.

In the fiscal year ended January 31, 2016, the cumulative book expense related to stock-based compensation awards exceeded the tax deduction related to these awards. Accordingly, the deferred tax asset related to these awards was reduced by the tax effect of approximately $416,000, which amount reduced paid-in capital.

At January 31, 2017, the Company had tax credit carry forwards of approximately $894,000, which amounts can be carried forward through at least 2021.

As of January 31, 2015, the Company had unrecognized tax benefits amounting to approximately $237,000 attributable to uncertain tax positions. There were no such amounts as of January 31, 2017 or January 31, 2016. The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. The unrecognized tax benefits attributable to uncertain tax positions include accrued interest and penalties of approximately $145,000 as of January 31, 2015. Included in income tax expense for the fiscal years ended January 31, 2016 and 2015 are benefits related to a reduction in estimated potential penalties and interest of approximately $145,000 and $10,000, respectively. A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding potential penalties and interest, is as follows:


	Years Ended January 31,
	2017		2016			2015
	(in thousands)
Unrecognized tax benefits as of beginning of year	$	—	$	92		$	254
Increases as a result of tax positions taken in prior years		—		—			—
Increases as a result of tax positions taken in current year		—		—			—
Settlements		—		(44	)		(162	)
Lapse of statute of limitations		—		(48	)		—

Unrecognized tax benefits as of end of year	$	—	$	—		$	92

The Company files U.S. federal income tax returns as well as separate returns for its foreign subsidiaries within their local jurisdictions. The Company’s U.S. federal tax returns are subject to examination by the IRS for fiscal years ended January 31, 2013 through 2017. The Company’s tax returns may also be subject to examination by state and local revenue authorities for fiscal years ended January 31, 2012 through 2017. The Company’s Canadian income tax returns are subject to examination by the Canadian tax authorities for fiscal years ended January 31, 2013 through 2017. The Company’s tax returns in other foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2012 through January 31, 2017.