Note 8 - Income Taxes

6 Months Ended

Jul. 31, 2025

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8. Income Taxes

For the three- and six-month periods ended July 31, 2025, the income tax expense was approximately $670,000 and $964,000, respectively on pre-tax income of approximately $2.6 million and $1.9 million, respectively. For the three and six-month periods ended July 31, 2024, the income tax expense was approximately $672,000 and $917,000, respectively, on pre-tax income of approximately $1.5 million and $2.7 million, respectively. The variance between our actual provision and the expected provision when applying the U.S. statutory rate of 21% is due primarily to the impact of income taxes accrued in certain foreign jurisdictions, mainly Singapore, which do not have net operating losses available to offset taxable income, and because valuation allowances have been recorded against increases in our deferred tax assets. Valuation allowances have been provided against all deferred tax assets in the United States and certain foreign jurisdictions, including Malaysia and the United Kingdom.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. This legislation introduces several measures, including the permanent extension of select provisions from the Tax Cuts and Jobs Act, revisions to the international tax framework, and the reinstatement of favorable tax treatment for certain business-related items. The OBBBA contains multiple effective dates, with key provisions beginning in fiscal 2026. While we are still assessing the overall impact of the OBBBA, we do not anticipate a material impact on our tax expense.

The Company files U.S. federal and state 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 Internal Revenue Service for fiscal years ended January 31, 2019 through 2024. The Company’s tax returns may also be subject to examination by state and local tax authorities for fiscal years ending  January 31, 2017 through 2024. The Company's Singapore income tax returns are subject to examination by the Singapore tax authorities for the fiscal years ended January 31, 2017, through 2024. The Company’s tax returns in other foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2018 through 2024.

The Company has determined that the undistributed earnings of foreign subsidiaries are not deemed to be indefinitely reinvested outside of the United States as of July 31, 2025. Furthermore, the Company has concluded that any deferred taxes with respect to the undistributed foreign earnings would be immaterial. Therefore, the Company has not recorded a deferred tax liability associated with the undistributed foreign earnings as of July 31, 2025.

For the three- and six-month periods ended July 31, 2025 and 2024, the Company did not recognize any tax expense or benefit related to uncertain tax positions.