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Income taxes (Tables) | 12 Months Ended
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Dec. 31, 2023
Income taxes [Abstract] |
Components of Income Tax Expense (Benefit) | The components of the income tax expense (benefit) are as follows:
|  | December 31, |
(In thousands) |  | 2023 |  |  | 2022 |
Current: |  |  |  |  |  |
Federal |  | $ | (1 | ) |  | $ | 149 |
State |  |  | 51 |  |  |  | 110 |
Foreign |  |  | 85 |  |  |  | (83 | )
|  |  | 135 |  |  |  | 176 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 825 |  |  |  | (1,924 | )
State |  |  | 132 |  |  |  | (217 | )
Foreign |  |  | 63 |  |  |  | – |
|  |  | 1,020 |  |  |  | (2,141 | )
Income tax expense (benefit) |  | $ | 1,155 |  |  | $ | (1,965 | )
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) |  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |
Federal net operating losses |  | $ | – |  |  | $ | 2,297 |
Foreign net operating losses |  |  | 733 |  |  |  | 676 |
State net operating losses |  |  | 84 |  |  |  | 149 |
Accrued severance |  |  | 165 |  |  |  | – |
Capitalized R&D expenses |  |  | 3,127 |  |  |  | 1,708 |
Inventory reserves |  |  | 896 |  |  |  | 648 |
Deferred revenue |  |  | 31 |  |  |  | 41 |
Warranty reserve |  |  | 24 |  |  |  | 17 |
Stock compensation expense |  |  | 790 |  |  |  | 769 |
Other accrued compensation |  |  | 404 |  |  |  | 222 |
R&D credit carryforward |  |  | 695 |  |  |  | 1,238 |
Other Assets |  |  | 360 |  |  |  | – |
Other liabilities and reserves |  |  | – |  |  |  | 463 |
Gross deferred tax assets |  |  | 7,309 |  |  |  | 8,228 |
Valuation allowance |  |  | (719 | ) |  |  | (656 | )
Net deferred tax assets |  |  | 6,590 |  |  |  | 7,572 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 237 |  |  |  | 196 |
Other |  |  | 49 |  |  |  | 49 |
Net deferred tax liabilities |  |  | 286 |  |  |  | 245 |
Total net deferred tax assets |  | $ | 6,304 |  |  | $ | 7,327 |
Valuation Allowance on Deferred Tax Assets | As of December 31, 2023 and 2022, we had a $719 thousand and $656 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) |  | 2023 |  |  | 2022 |
Balance, beginning of period |  | $ | 656 |  |  | $ | 733 |
Subtractions released to income tax provisions |  |  | – |  |  |  | (77 | )
Additions charged to income tax provision |  |  | 63 |  |  |  | – |
Balance, end of period |  | $ | 719 |  |  | $ | 656 |
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, |
|  | 2023 |  |  | 2022 |
Federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | %
R&D credit |  |  | (5.9 | ) |  |  | 4.3 |
Foreign-derived intangible income deduction |  |  | (1.7 | ) |  |  | – |
Stock award excess tax benefit |  |  | 0.4 |  |  |  | – |
State income taxes, net of federal income taxes |  |  | 2.5 |  |  |  | 1.1 |
Business meals and entertainment |  |  | 0.3 |  |  |  | – |
Executive compensation limitation |  |  | 0.6 |  |  |  | – |
Uncertain tax positions |  |  | 0.5 |  |  |  | (0.5 | )
Stock option cancellations |  |  | 0.6 |  |  |  | (1.9 | )
Valuation allowance and tax accruals |  |  | 1.0 |  |  |  | 1.0 |
Other |  |  | 0.3 |  |  |  | (0.1 | )
Effective tax rate |  |  | 19.6 | % |  |  | 24.9 | %
Unrecognized Tax Benefits | We had $197 thousand and $142 thousand of total gross unrecognized tax benefits at December 31, 2023 and 2022, 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) |  | 2023 |  |  | 2022 |
Balance, beginning of period |  | $ | 142 |  |  | $ | 144 |
Tax positions taken during the current period |  |  | 83 |  |  |  | 26 |
Lapse of statute of limitations |  |  | (28 | ) |  |  | (28 | )
Balance, end of period |  | $ | 197 |  |  | $ | 142 |

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