MIND TECHNOLOGY, INC Income Taxes Disclosure

14. Income Taxes

 

		Year Ended January 31,
		2025				2024
		(in thousands)
Income (loss) from continuing operations before income taxes is attributable to the following jurisdictions:
Domestic		$	(6,049	)		$	(8,075	)
Foreign			13,107				8,313
Total		$	7,058			$	238
The components of income tax expense (benefit) for continuing operations were as follows:
Current:
Domestic		$	2			$	—
Foreign			1,947				1,489
			1,949				1,489
Deferred:
Domestic			—				—
Foreign			35				(151	)
			35				(151	)
Income tax expense		$	1,984			$	1,338

 

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

 

		Year Ended January 31,
		2025				2024
		(in thousands)
Federal income tax at 21%		$	1,482			$	50
Taxes created by return to provision adjustments to prior year temporary differences			110				146
Global intangible low tax income ("GILTI") inclusion			2,449				1,653
Permanent differences			61				90
Foreign effective tax rate differential			(429	)			(218	)
Valuation allowance on deferred tax assets			(1,903	)			(528	)
Excess tax deficiency for share-based payments under ASU 2016-09			149				150
Other			65				(5	)
		$	1,984			$	1,338

 

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

 

		As of January 31,
		2025				2024
		(in thousands)
Deferred tax assets:
Net operating losses		$	24,613			$	26,895
Tax credit carry forwards			334				944
Stock option book expense			581				766
Allowance for credit losses			98				107
Inventory			475				594
Accruals not yet deductible for tax purposes			113				130
Fixed assets			63				80
Intangible assets			948				523
Disallowed interest expense			98				227
Other			945				1,033
Gross deferred tax assets			28,268				31,299
Valuation allowance			(28,181	)			(31,177	)
Deferred tax assets			87				122
Deferred tax liabilities:
Other			—				—
Deferred tax liabilities			—				—
Unrecognized tax benefits			—				—
Total deferred tax liabilities, net			—			$	—

 

 

The Company has determined that, due to the potential requirement for additional investment and working capital to achieve its objectives, the undistributed earnings of foreign subsidiaries as of January 31, 2025, are not deemed indefinitely reinvested outside of the United States. 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 January 31, 2025.

 

Included in deferred tax assets is approximately $581,000 related to stock-based compensation, including non-qualified stock options. Recent market prices for the Company’s Common Stock remain below the exercise price of a number of options outstanding as of January 31, 2025. Should the market 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, 2025, the Company has recorded valuation allowances of approximately $28.2 million related to deferred tax assets . These deferred tax assets relate primarily to net operating loss carryforwards in the United States and other jurisdictions. These net operating loss carry forwards are subject to limitation and future expiration. The valuation allowances were determined based on management’s judgment as to the likelihood that the deferred tax assets would not be realized. The judgment was based on an evaluation of available evidence, both positive and negative.

 

On  January 31, 2025, the Company had tax credit carry forwards of approximately $334,000, which amounts can be carried forward through at least 2027.

 

As of January 31, 2025, and 2024 the company had no unrecognized tax benefits attributable to uncertain tax positions.

 

The Company recognizes interest and penalties related to income tax matters as a component of income tax expense.

 

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, 2019, through 2025. The Company’s tax returns may also be subject to examination by state and local revenue authorities for fiscal years ended January 31, 2017, through 2025. The Company’s Singapore income tax returns are subject to examination by the Singapore tax authorities for fiscal years ended January 31, 2017, through 2025. The Company’s tax returns in other foreign jurisdictions are generally subject to examination for the fiscal years ended January 31, 2018 through January 31, 2025.