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Note 11 - Income Taxes | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
(11) | INCOME TAXES
We are subject to Federal and certain state income taxes. In addition, we are taxed in certain foreign countries. Earnings (loss) before income taxes were as follows:
|  | Years Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Domestic |  | $ | 4,889 |  |  | $ | 9,600 |
Foreign |  |  | (1,435 | ) |  |  | 1,448 |
Total |  | $ | 3,454 |  |  | $ | 11,048 |
Income tax expense (benefit) was as follows:
|  | Years Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Current |  |  |  |  |  |  |  |
Domestic – Federal |  | $ | 1,221 |  |  | $ | 2,139 |
Domestic – state |  |  | 230 |  |  |  | 202 |
Foreign |  |  | (71 | ) |  |  | 522 |
Total |  | $ | 1,380 |  |  | $ | 2,863 |
Deferred |  |  |  |  |  |  |  |
Domestic – Federal |  | $ | (1,186 | ) |  | $ | (1,052 | )
Domestic – state |  |  | (262 | ) |  |  | 31 |
Foreign |  |  | 631 |  |  |  | (136 | )
Total |  |  | (817 | ) |  |  | (1,157 | )
Income tax expense |  | $ | 563 |  |  | $ | 1,706 |
Deferred income taxes reflect the net tax effect of net operating loss and tax credit carryforwards as well as temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of our deferred tax assets and liabilities at December 31, 2024 and 2023:
|  | December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |  |  |
Capitalized research and development costs |  | $ | 3,272 |  |  | $ | 2,320 |
Operating lease liabilities |  |  | 1,870 |  |  |  | 859 |
Accrued vacation pay and stock-based compensation |  |  | 532 |  |  |  | 433 |
Inventories |  |  | 434 |  |  |  | 395 |
Foreign intangible assets |  |  | 403 |  |  |  | 369 |
Net operating loss (state and foreign) |  |  | 381 |  |  |  | 245 |
Acquisition costs |  |  | 43 |  |  |  | 44 |
Allowance for credit losses |  |  | 45 |  |  |  | 44 |
Accrued warranty |  |  | 25 |  |  |  | 26 |
Other |  |  | 151 |  |  |  | 62 |
Total |  |  | 7,156 |  |  |  | 4,797 |
Valuation allowance |  |  | (261 | ) |  |  | (245 | )
Deferred tax assets |  |  | 6,895 |  |  |  | 4,552 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Intangible assets |  |  | (4,673 | ) |  |  | (1,949 | )
Right-of-use assets |  |  | (1,821 | ) |  |  | (762 | )
Depreciation of property and equipment |  |  | (334 | ) |  |  | (404 | )
Deferred tax liabilities |  |  | (6,828 | ) |  |  | (3,115 | )
Net deferred tax assets |  | $ | 67 |  |  | $ | 1,437 |
The net change in the valuation allowance for the years ended December 31, 2024 and 2023 was an increase of $16 thousand and $18 thousand, respectively. In assessing the ability to realize the deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the total deferred tax assets, we will need to generate future taxable income prior to the expiration of net operating loss and tax credit carryforwards which expire in various years through 2044. An analysis of the effective tax rate for the years ended December 31, 2024 and 2023 and a reconciliation from the expected statutory rate of 21% is as follows:
|  | Years Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Expected income tax expense at U.S. statutory rate |  | $ | 726 |  |  | $ | 2,320 |
Increase (decrease) in tax from: |  |  |  |  |  |  |  |
Subpart F income from foreign subsidiaries |  |  | 145 |  |  |  | 184 |
NOL carryforwards utilized |  |  | (136 | ) |  |  | 39 |
Stock compensation |  |  | 201 |  |  |  | (329 | )
Global intangible low taxed income |  |  | - |  |  |  | 87 |
Nondeductible expenses |  |  | 17 |  |  |  | 21 |
Current year tax credits (foreign and research) |  |  | (364 | ) |  |  | (367 | )
Domestic tax benefit, net of Federal benefit |  |  | 321 |  |  |  | (167 | )
Changes in valuation allowance |  |  | 16 |  |  |  | 18 |
Foreign income tax rate differences |  |  | 96 |  |  |  | 109 |
Section 250 foreign derived intangible income deduction |  |  | (537 | ) |  |  | (272 | )
Acquisition costs |  |  | 71 |  |  |  | - |
Other |  |  | 7 |  |  |  | 63 |
Income tax expense |  | $ | 563 |  |  | $ | 1,706 |
At December 31, 2024 and 2023, we did not have an accrual for uncertain tax positions. We file U.S. income tax returns and multiple state and foreign income tax returns. With few exceptions, the U.S. and state income tax returns filed for the tax years ended December 31, 2021 and thereafter are subject to examination by the relevant taxing authorities. As of December 31, 2024, we have federal net operating losses of $430 thousand of which $287 thousand can be carried forward indefinitely. The remaining federal net operating losses will begin to expire in 2032, if not utilized.

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