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Income taxes (Tables)

12 Months Ended

Dec. 31, 2021

Income taxes [Abstract]

Components of Income Tax Benefit

The components of the income tax benefit are as follows:

		December 31,
(In thousands)		2021				2020
Current:
Federal		$	26			$	(2,141	)
State			51				17
Foreign			2				(48	)
			79				(2,172	)
Deferred:
Federal			(2,086	)			(483	)
State			(62	)			(36	)
Foreign			(2	)			152
			(2,150	)			(367	)
Income tax benefit		$	(2,071	)		$	(2,539	)

Deferred Tax Assets and Liabilities

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements.  Our deferred tax assets and liabilities were comprised of the following:

		December 31,
(In thousands)		2021				2020
Deferred tax assets:
Federal net operating losses		$	1,976			$	–
Foreign net operating losses			624				563
Depreciation			306				302
Inventory reserves			710				719
Deferred revenue			24				47
Warranty reserve			22				31
Stock compensation expense			796				731
Other accrued compensation			308				388
R&D credit carryforward			901				460
Other liabilities and reserves			250				394
Gross deferred tax assets			5,917				3,635
Valuation allowance			(733	)			(659	)
Net deferred tax assets			5,184				2,976
Deferred tax liabilities:
Other			43				37
Net deferred tax liabilities			43				37
Total net deferred tax assets		$	5,141			$	2,939

Valuation Allowance on Deferred Tax Assets

As of December 31, 2021, a valuation allowance of $733 thousand has been established for foreign net operating loss carryforwards that are not expected to be used. The following table summarizes the activity recorded in the valuation allowance on the deferred tax assets:

		Year Ended December 31,
(In thousands)		2021				2020
Balance, beginning of period		$	659			$	444
Additions charged to income tax provision			74				215
Balance, end of period		$	733			$	659

Statutory to Effective Tax Rate Reconciliation

Differences between the U.S. statutory federal income tax rate and our effective income tax rate are analyzed below:

		Year Ended December 31,
		2021				2020
Federal statutory rate			21.0	%			21.0	%
PPP loan forgiveness			7.4				–
R&D credit			7.1				4.2
Stock award excess tax benefit			0.3				(0.3	)
State income taxes, net of federal income taxes			0.1				0.2
U.S. corporate tax rate change			–				9.5
Business meals and entertainment			(0.2	)			0.1
Miscellaneous permanent items			(0.3	)			–
Uncertain tax positions			(0.4	)			(0.2	)
Stock option cancellations			(0.6	)			(0.5	)
Valuation allowance and tax accruals			(1.2	)			(2.6	)
Other			0.1				(0.3	)
Effective tax rate			33.3	%			31.1	%

Unrecognized Tax Benefits

We had $144 thousand and $121 thousand of total gross unrecognized tax benefits at December 31, 2021 and 2020, respectively that, if recognized, would favorably affect the effective income tax rate in any future periods.  We are not aware of any events that could occur within the next twelve months that could cause a significant change in the total amount of unrecognized tax benefits.  A tabular reconciliation of the gross amounts of unrecognized tax benefits at the beginning and end of the year is as follows:

		December 31,
(In thousands)		2021				2020
Balance, beginning of period		$	121			$	107
Tax positions taken during the current period			47				41
Lapse of statute of limitations			(24	)			(27	)
Balance, end of period		$	144			$	121

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Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.

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Tabular disclosure of the components of net deferred tax asset or liability recognized in an entity's statement of financial position, including the following: the total of all deferred tax liabilities, the total of all deferred tax assets, the total valuation allowance recognized for deferred tax assets.

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Tabular disclosure of the reconciliation using percentage or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.

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Tabular disclosure of unrecognized tax benefits for which a material change is reasonably possible in the next twelve months, typically including the nature of the uncertainty, the event(s) that could cause a material change, and an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made. An unrecognized tax benefit is the difference between a tax position taken in a tax return and the amounts recognized in the financial statements for which it is more likely than not, based on the technical merits of the position, that the tax position will not be sustained upon examination.

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