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Note 17 - Income Taxes | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 17. Income Taxes Income Tax Expense The components of the Company’s income (loss) before income taxes and its provision for (benefit from) income taxes consist of the following:
|  | Years ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
(Loss) income before income taxes |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (4,078 | ) |  | $ | 2,421 |  |  | $ | 3,990 |
Foreign |  |  | 1,314 |  |  |  | 735 |  |  |  | 334 |
|  | $ | (2,764 | ) |  | $ | 3,156 |  |  | $ | 4,324 |
|  | Years ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Provision for (benefit from) income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 4,044 |  |  | $ | 4,910 |  |  | $ | 3,558 |
State |  |  | 1,370 |  |  |  | 457 |  |  |  | 551 |
Foreign |  |  | 421 |  |  |  | 312 |  |  |  | 96 |
Total current |  |  | 5,835 |  |  |  | 5,679 |  |  |  | 4,205 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | 1,579 |  |  |  | (904 | )
State |  |  | - |  |  |  | (692 | ) |  |  | (402 | )
Foreign |  |  | 229 |  |  |  | 29 |  |  |  | (775 | )
Total deferred |  |  | 229 |  |  |  | 916 |  |  |  | (2,081 | )
Total benefit from income taxes |  | $ | 6,064 |  |  | $ | 6,595 |  |  | $ | 2,124 |
Deferred Tax Assets and Liabilities Significant components of the Company’s deferred tax assets and liabilities consist of the following:
|  | December 31, |
|  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |  |  |
Capital loss carryforward |  | $ | 20,714 |  |  | $ | - |
Capitalized research expenditures |  |  | 12,241 |  |  |  | 8,417 |
Lease liability |  |  | 6,555 |  |  |  | 7,074 |
Acquisition-related intangible asset |  |  | 5,959 |  |  |  | 5,422 |
Impairment of assets |  |  | 4,215 |  |  |  | - |
Stock-based compensation expense |  |  | 3,908 |  |  |  | 3,818 |
Inventory reserves |  |  | 2,316 |  |  |  | 2,123 |
Accrued expenses and other |  |  | 1,403 |  |  |  | 550 |
Compensation accrual |  |  | 1,202 |  |  |  | 1,414 |
Net operating loss carry forwards |  |  | 650 |  |  |  | 1,124 |
Foreign currency exchange |  |  | 48 |  |  |  | 121 |
Gross deferred tax assets |  |  | 59,211 |  |  |  | 30,063 |
Less: Valuation allowance |  |  | (45,148 | ) |  |  | (13,754 | )
Deferred tax assets |  | $ | 14,063 |  |  | $ | 16,309 |
|  | December 31, |
|  | 2024 |  |  | 2023 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Acquisition-related intangible asset |  | $ | (42 | ) |  | $ | (288 | )
Depreciation |  |  | (6,552 | ) |  |  | (7,695 | )
Right of use asset |  |  | (6,292 | ) |  |  | (6,837 | )
Deferred tax liabilities |  | $ | (12,886 | ) |  | $ | (14,820 | )
Net deferred tax assets |  | $ | 1,177 |  |  | $ | 1,489 |
As of December 31, 2024, the Company had no Federal net operating loss (“NOL”) carryforwards, including with the Arthrosurface asset group and a negligible amount of state net NOL carryforwards that will begin to expire in 2039. The Company also had NOL carryforwards in Italy of $2.7 million that do not expire but are limited to 80% of taxable income. As of December 31, 2024, the Company had no federal or state research and development tax credit carryforwards. The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and experimental (“R&D”) starting in the year the year ended December 31, 2022. The Company will amortize these costs for tax purposes over 5 years if the R&D was performed in the United States and over 15 years if the R&D was performed outside the U.S. This change has resulted in the recognition of additional deferred tax assets and increased cash tax liabilities. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. Based upon future reversals of existing taxable temporary differences and projected future taxable income, the Company believes it is more likely than not it will realize its foreign deferred tax assets. The Company recorded a full valuation allowance on all deferred tax assets in the U.S. as it was determined they are more likely than not to be realizable as of both December 31, 2024 and December 31, 2023. The Company intends to maintain a full valuation allowance until there is sufficient evidence to support release of all or a portion of the allowance. As of December 31, 2024, the Company continues to believe its foreign deferred tax assets are realizable based upon future reversals of existing taxable temporary differences and projected future taxable income in the Company’s foreign jurisdictions. Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to approximately $0.6 million at December 31, 2024. The Company expects to be able to take a 100% dividend received deduction to offset any U.S. federal income tax liability on the undistributed earnings. Determination of the amount of unrecognized state and local deferred income tax liability is not practicable due to the complexities associated with its hypothetical calculation. Effective Tax Rate The reconciliation between the U.S. federal statutory rate and the Company’s effective rate is summarized as follows:
|  | Years ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Statutory federal income tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State tax expense, net of federal benefit |  |  | (52.2 | %) |  |  | 9.5 | % |  |  | 13.0 | %
Stock compensation |  |  | (17.2 | %) |  |  | 11.8 | % |  |  | 18.4 | %
Section 162(m) limitation |  |  | (30.1 | %) |  |  | 28.3 | % |  |  | 35.4 | %
Change in tax rates and state apportionment |  |  | 10.4 | % |  |  | - | % |  |  | (3.0 | %)
Federal, state and foreign tax credits |  |  | 22.5 | % |  |  | (23.1 | %) |  |  | (13.3 | %)
Valuation allowance |  |  | (157.3 | %) |  |  | 173.0 | % |  |  | - | %
Return to provision adjustments |  |  | 5.5 | % |  |  | (3.6 | %) |  |  | (18.9 | %)
Tax reserves |  |  | (20.9 | %) |  |  | - | % |  |  | - | %
Other permanent items |  |  | (1.1 | %) |  |  | (7.9 | %) |  |  | (3.5 | %)
Effective income tax rate |  |  | (219.4 | %) |  |  | 209.0 | % |  |  | 49.1 | %
Accounting for Uncertainty in Income Taxes The Company has $0.6 million and $0 of unrecognized tax benefits for the years ended December 31, 2024 and 2023, respectively. The Company does not anticipate experiencing any significant increase or decrease in its unrecognized tax benefits within the twelve months following December 31, 2024. The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. With a few exceptions, the Company is no longer subject to income tax examinations for years prior to 2020. In September 2024, the Company was notified by the Italian tax authorities that it had selected the Company’s tax returns for its Italian subsidiary for 2021 for examination and they remain under review.

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