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Income taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income taxes [Abstract]

Components of Income Tax Benefit

The components of the income tax benefit are as follows:

		December 31,
(In thousands)		2022				2021
Current:
Federal		$	149			$	26
State			110				51
Foreign			(83	)			2
			176				79
Deferred:
Federal			(1,924	)			(2,057	)
State			(217	)			(62	)
Foreign			–				(2	)
			(2,141	)			(2,121	)
Income tax benefit		$	(1,965	)		$	(2,042	)

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)		2022				2021
Deferred tax assets:
Federal net operating losses		$	2,297			$	1,978
Foreign net operating losses			676				624
State net operating losses			149				–
Depreciation			–				306
Capitalized R&D expenses			1,708				–
Inventory reserves			648				710
Deferred revenue			41				24
Warranty reserve			17				22
Stock compensation expense			769				796
Other accrued compensation			222				308
R&D credit carryforward			1,238				901
Other liabilities and reserves			463				250
Gross deferred tax assets			8,228				5,919
Valuation allowance			(656	)			(733	)
Net deferred tax assets			7,572				5,186
Deferred tax liabilities:
Depreciation			196				–
Other			49				43
Net deferred tax liabilities			245				43
Total net deferred tax assets		$	7,327			$	5,143

Valuation Allowance on Deferred Tax Assets

As of December 31, 2022 and 2021, we had a $656 thousand and $733 thousand, respectively, of valuation allowances on our net operating loss carryforwards. The following table summarizes the activity recorded in the valuation allowance on the deferred tax assets:

		Year Ended December 31,
(In thousands)		2022				2021
Balance, beginning of period		$	733			$	659
Subtractions released to income tax provisions			(77	)			–
Additions charged to income tax provision			–				74
Balance, end of period		$	656			$	733

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,
		2022				2021
Federal statutory rate			21.0	%			21.0	%
PPP loan forgiveness			–				7.4
R&D credit			4.3				7.1
Stock award excess tax benefit			–				0.3
State income taxes, net of federal income taxes			1.1				0.1
Business meals and entertainment			–				(0.2	)
Miscellaneous permanent items			–				(0.3	)
Uncertain tax positions			(0.5	)			(0.4	)
Stock option cancellations			(1.9	)			(0.6	)
Valuation allowance and tax accruals			1.0				(1.2	)
Other			(0.1	)			0.4
Effective tax rate			24.9	%			33.6	%

Unrecognized Tax Benefits

We had $142 thousand and $144 thousand of total gross unrecognized tax benefits at December 31, 2022 and 2021, 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)		2022				2021
Balance, beginning of period		$	144			$	121
Tax positions taken during the current period			26				47
Lapse of statute of limitations			(28	)			(24	)
Balance, end of period		$	142			$	144

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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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