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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | Note 13—Income Taxes The Company does not file a consolidated return with its foreign subsidiaries. The Company files federal and state returns and its foreign subsidiaries file returns in their respective jurisdiction. For the years ended 2021, 2020 and 2019, the provision for income taxes, which included federal, state and foreign income taxes, was an expense of $0.2 million, $0.7 million and $1.9 million, respectively, reflecting effective tax provision rates of (4.0%), (5.5%) and (3.6%) respectively. The 2021 tax expense of $0.2 million included a discrete tax benefit of ($0.4) million primarily comprised of return to provision and uncertain tax position adjustments. Absent these discrete tax benefits, the Company’s effective tax rate for 2021 was (10.7%), primarily due to state taxes and taxes on foreign income. For the years ended 2020 and 2019, provision for income taxes includes federal, state and foreign income taxes at effective tax rates of (5.5%) and (3.6%). Exclusive of discrete items, the effective tax provision rate would be (7.7%) in 2020 and (3.1%) in 2019. As of December 31, 2021 and 2020, the Company had net deferred tax liabilities of approximately $51,000 and $0.1 million, primarily related to foreign jurisdictions. Provision for income taxes reflected in the accompanying consolidated statements of operations are comprised of the following (in thousands):
|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Federal |  | $ | 1 |  |  | $ | (212 | ) |  | $ | (212 | )
State and local |  |  | 43 |  |  |  | 134 |  |  |  | 66 |
Foreign |  |  | 254 |  |  |  | 704 |  |  |  | 3,037 |
Total Current |  |  | 298 |  |  |  | 626 |  |  |  | 2,891 |
Deferred |  |  | (72 | ) |  |  | 109 |  |  |  | (979 | )
Total |  | $ | 226 |  |  | $ | 735 |  |  | $ | 1,912 |
The components of deferred tax assets/(liabilities) are as follows (in thousands):
|  | December 31, |
|  | 2021 |  |  | 2020 |
Net deferred tax assets/(liabilities): |  |  |  |  |  |  |  |
Reserve for sales allowances and possible losses |  | $ | 356 |  |  | $ | 658 |
Accrued expenses |  |  | 2,998 |  |  |  | 3,227 |
Prepaid royalties |  |  | 1,298 |  |  |  | 4,282 |
Accrued royalties |  |  | 1,731 |  |  |  | 4,191 |
Inventory |  |  | 9,313 |  |  |  | 8,793 |
State income taxes |  |  | 17 |  |  |  | 23 |
Property and equipment |  |  | 1,832 |  |  |  | 1,618 |
Goodwill and intangibles |  |  | 4,266 |  |  |  | 6,015 |
Share-based compensation |  |  | 593 |  |  |  | 780 |
Interest limitation |  |  | 3,595 |  |  |  | 2,114 |
Undistributed foreign earnings |  |  | (2,919 | ) |  |  | (2,419 | )
Operating lease right-of-use assets |  |  | (4,117 | ) |  |  | (5,798 | )
Operating lease liabilities |  |  | 4,518 |  |  |  | 6,427 |
Federal and state net operating loss carryforwards |  |  | 59,572 |  |  |  | 61,239 |
Credit carryforwards |  |  | 697 |  |  |  | 697 |
Other |  |  | 902 |  |  |  | 794 |
Gross |  |  | 84,652 |  |  |  | 92,641 |
Valuation allowance |  |  | (84,703 | ) |  |  | (92,764 | )
Total net deferred tax liabilities |  | $ | (51 | ) |  | $ | (123 | )
Provision for income taxes varies from the U.S. federal statutory rate. The following reconciliation shows the significant differences in the tax at statutory and effective rates:
|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Federal income tax expense |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State income tax expense, net of federal tax effect |  |  | 3.3 |  |  |  | 7.7 |  |  |  | 6.1 |
Effect of differences in U.S. and foreign statutory rates |  |  | (0.5 | ) |  |  | 1.2 |  |  |  | 0.6 |
Uncertain tax positions |  |  | 7.0 |  |  |  | 3.4 |  |  |  | (0.3 | )
Provision to return |  |  | 6.3 |  |  |  | (3.8 | ) |  |  | (0.1 | )
Change in tax rate |  |  | 6.5 |  |  |  | 4.4 |  |  |  | (1.5 | )
Non-deductible expenses |  |  | (68.7 | ) |  |  | (26.2 | ) |  |  | (13.0 | )
PPP Loan |  |  | 29.1 |  |  |  | 0.0 |  |  |  | 0.0 |
Unrealized Loss |  |  | (138.9 | ) |  |  | (10.0 | ) |  |  | 0.0 |
Other |  |  | 0.0 |  |  |  | 0.0 |  |  |  | (0.4 | )
Undistributed foreign earnings |  |  | (8.7 | ) |  |  | (3.3 | ) |  |  | 0.2 |
Valuation allowance |  |  | 139.6 |  |  |  | 0.1 |  |  |  | (16.2 | )
|  |  | (4.0 | )% |  |  | (5.5 | )% |  |  | (3.6 | )%
Deferred taxes result from temporary differences between tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. The temporary differences result from costs required to be capitalized for tax purposes by the U.S. Internal Revenue Code (“IRC”), and certain items accrued for financial reporting purposes in the year incurred but not deductible for tax purposes until paid. The Company has established a valuation allowance on net deferred tax assets in the United States since, in the opinion of management, it is not more likely than not that the U.S. net deferred tax assets will be realized. The components of income (loss) before provision for income taxes are as follows (in thousands):
|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Domestic |  | $ | (7,881 | ) |  | $ | (18,748 | ) |  | $ | (61,798 | )
Foreign |  |  | 2,219 |  |  |  | 5,339 |  |  |  | 8,331 |
|  | $ | (5,662 | ) |  | $ | (13,409 | ) |  | $ | (53,467 | )
The Company uses a recognition threshold and measurement process for recording in the consolidated financial statements uncertain tax positions (“UTP”) taken or expected to be taken in a tax return. Approximately $0.8 million of the current year reduction was related to a settlement of an audit examination in Hong Kong in 2021. During 2020, approximately $0.6 million of the liability for UTP related to foreign withholding taxes and audit examination in Hong Kong was derecognized. Current interest on uncertain income tax liabilities is recognized as a component of the income tax provision recognized in the consolidated statements of operations. During 2021 and 2020, the Company did not recognize any interest expense relating to UTPs. The following table provides further information of UTPs that would affect the effective tax rate, if recognized, as of December 31, 2021 (in millions):
Balance, December 31, 2018 |  | $ | 1.5 |
Current year additions |  |  | 0.1 |
Balance, December 31, 2019 |  |  | 1.6 |
Current year reduction |  |  | (0.6 | )
Balance, December 31, 2020 |  |  | 1.0 |
Current year reduction |  |  | (0.8 | )
Balance, December 31, 2021 |  | $ | 0.2 |
The Company does not expect its gross unrecognized tax benefits to significantly change within the next 12 months. Tax years 2018 through 2020 remain subject to examination in the United States. The tax years 2017 through 2020 are generally still subject to examination in the various states. Furthermore, all net operating losses and tax credit carryforwards are still subject to review given that the statute of limitation for these items would begin in the year of utilization. The tax years 2015 through 2020 are still subject to examination in Hong Kong. In the normal course of business, the Company is audited by federal, state and foreign tax authorities. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets by jurisdiction. The Company is required to establish a valuation allowance for the U.S. deferred tax assets and record a charge to income if Management determines, based upon available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets may not be realized. Based on our evaluation of all positive and negative evidence, as of December 31, 2021, a valuation allowance of $84.7 million has been recorded against the deferred tax assets that more likely than not will not be realized. For the year ended December 31, 2021, the valuation allowance decreased from $92.8 million at December 31, 2020. The net deferred tax liabilities of $51,000 in 2021 represent the net deferred tax liabilities in the foreign jurisdiction, where the Company is in a cumulative income position. The net deferred tax liabilities of $0.1 million in 2020 represent the net deferred tax liabilities in the foreign jurisdiction, where the Company is in a cumulative income position. At December 31, 2021, the Company has U.S. federal net operating loss carryforwards, or "NOLs", of approximately $181 million, which will begin to expire in 2033. At December 31, 2021, the Company has state NOLs of approximately $302 million. The majority of the Company's state NOLs were from California, which will begin to expire in 2031. At December 31, 2021, the Company had foreign tax credit carryforwards of approximately $0.1 million, which will begin to expire in 2027. At December 31, 2021, the Company had federal research and development tax credit carryforwards ("credit carryforwards") of approximately $0.5 million, which will begin to expire in 2029. At December 31, 2021, the Company had state research and development tax credits of approximately $0.1 million, which carry forward indefinitely. Utilization of certain NOLs and research credit carryforwards may be subject to an annual limitation due to ownership change limitations set forth in Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and comparable state income tax laws. Any future annual limitation may result in the expiration of NOLs and credit carryforwards before utilization.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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