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Note 15 - Income Tax | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
15. | Income Tax
Income tax expense for the years ended December 31, 2024 and 2023, consisted of:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Current income tax expense: |  |  |  |  |  |  |  |
Federal and state |  | $ | 140 |  |  | $ | 570 |
Foreign |  |  | 290 |  |  |  | 61 |
|  |  | 430 |  |  |  | 631 |
Deferred income tax (benefit) expense: |  |  |  |  |  |  |  |
Federal and state |  |  | (70 | ) |  |  | 132 |
Foreign |  |  | 380 |  |  |  | 96 |
|  |  | 310 |  |  |  | 228 |
Total income tax expense |  | $ | 740 |  |  | $ | 859 |
The effective tax rate for the year ended December 31, 2024 was (6.3)% as compared with (33.5)% for the same period in 2023. The difference between the Company’s effective tax rate year over year was primarily attributable to changes to tax attribute carryforwards, a decrease in the Company’s GILTI inclusion, and a difference in the Company’s excess tax benefits related to stock compensation. Income tax expense for the years ended December 31, 2024 and 2023, differed from the amount computed by applying the U.S. federal income tax rate of 21% to pre-tax loss as a result of the following:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Income tax benefit computed at federal statutory tax rate |  | $ | (2,450 | ) |  | $ | (537 | )
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |
Permanent differences, net |  |  | 82 |  |  |  | (89 | )
Non-deductible executive compensation |  |  | 243 |  |  |  | 324 |
Global Intangible Low-Taxed Income (GILTI) |  |  | - |  |  |  | 537 |
State income taxes, net of federal income tax benefit |  |  | (245 | ) |  |  | (19 | )
Stock-based compensation |  |  | 210 |  |  |  | (329 | )
Tax credits |  |  | 52 |  |  |  | (51 | )
Net operating loss true-ups and expirations |  |  | (125 | ) |  |  | 1,140 |
Change in reserve for uncertain tax position |  |  | (233 | ) |  |  | 239 |
Impact of change to prior year tax accruals |  |  | 398 |  |  |  | (171 | )
Change in valuation allowance allocated to income tax |  |  | 2,666 |  |  |  | 631 |
Other |  |  | 142 |  |  |  | (816 | )
Total income tax expense |  | $ | 740 |  |  | $ | 859 |
Income tax expense was based on the following pre-tax (loss) income:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Domestic |  | $ | (10,966 | ) |  | $ | (2,951 | )
Foreign |  |  | (699 | ) |  |  | 395 |
Total |  | $ | (11,665 | ) |  | $ | (2,556 | )
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023, were as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Deferred income tax assets: |  |  |  |  |  |  |  |
Inventory |  | $ | 1,036 |  |  | $ | 1,489 |
Operating loss and credit carryforwards |  |  | 12,371 |  |  |  | 11,550 |
Research and development |  |  | 4,776 |  |  |  | 3,908 |
Employee retention credit |  |  | 1,409 |  |  |  | 1,435 |
Lease liabilities |  |  | 1,675 |  |  |  | 1,317 |
Accrued expenses |  |  | 472 |  |  |  | 818 |
Stock compensation |  |  | 699 |  |  |  | 670 |
Deferred interest expense |  |  | 1,023 |  |  |  | 386 |
Other assets |  |  | 204 |  |  |  | 934 |
Total gross deferred assets |  |  | 23,665 |  |  |  | 22,507 |
Less: valuation allowance |  |  | (17,769 | ) |  |  | (15,222 | )
Deferred tax assets |  | $ | 5,896 |  |  | $ | 7,285 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Indefinite-lived intangible assets |  | $ | 1,990 |  |  | $ | 1,964 |
Definite-lived intangible assets |  |  | 2,468 |  |  |  | 3,733 |
Lease right-of-use assets |  |  | 1,339 |  |  |  | 959 |
Employee benefit plans |  |  | 597 |  |  |  | 569 |
Other liabilities |  |  | 120 |  |  |  | 400 |
Total deferred tax liabilities |  |  | 6,514 |  |  |  | 7,625 |
Deferred income tax liabilities, net |  | $ | (618 | ) |  | $ | (340 | )
Deferred income tax assets and liabilities by classification on the consolidated balance sheets were as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Deferred tax assets (included in other long-term assets) |  | $ | 92 |  |  | $ | 436 |
Deferred income tax liabilities |  |  | (710 | ) |  |  | (776 | )
Deferred income tax liability, net |  | $ | (618 | ) |  | $ | (340 | )
As of December 31, 2024, the Company had federal net operating loss carryforwards of $1.3 million, state net operating loss carryforwards of $8.4 million, and foreign net operating loss carryforwards of $7.8 million The federal and foreign net operating losses can be carried forward indefinitely while the state net operating losses expire between 2025 and 2044, all of which are partially offset by valuation allowances. The Company had $7.6 million of federal research and development tax credit carryforwards which begin to expire in 2025 and are partially offset by a reserve of $0.8 million for uncertain tax positions. The Company had a total of $2.7 million of state investment tax credit carryforwards, research and development tax credit carryforwards, and enterprise zone credit carryforwards, which begin to expire in 2025 and are partially offset by a reserve of $0.3 million for uncertain tax positions. In addition, the Company had a total of $0.4 million of international R&D credits which begin to expire in 2037. The Internal Revenue Code (“IRC”) limits the amounts of net operating loss carryforwards or credits that a company may use in any one year in the event of a change in ownership under IRC Sections 382 or 383. The Company completed a study through December 31, 2023 and determined that no Section 382 ownership changes occurred. As of December 31, 2024 and 2023, the Company maintained a total valuation allowance of $17.8 million and $15.2 million, respectively, which related to foreign, federal, and state deferred tax assets in both years. The valuation allowance was based on estimates of taxable income in each of the jurisdictions in which the Company operates and the period over which deferred tax assets will be recoverable. The net change in the total valuation allowance for the years ended December 31, 2024 and 2023, was an increase of $2.5 million and $0.7 million, respectively. During the year ended December 31, 2024, the Company increased the valuation allowance related to the estimate of realizability of Spanish deferred tax assets and deferred tax assets related to the net operating losses and credit carryforwards generated in the current year. As of December 31, 2024 and 2023, cash and cash equivalents held by the Company’s foreign subsidiaries were $2.7 million and $2.1 million, respectively. As of December 31, 2024, the Company has determined the potential income tax and withholding liability related to available cash balances at foreign subsidiaries to be immaterial. A summary of activity of unrecognized tax benefits is as follows:
(in thousands) |  |  |  |
Balance at December 31, 2022 |  | $ | 1,983 |
Additions based on tax positions of prior years |  |  | 13 |
Decreases based on tax positions of prior years |  |  | 57 |
Additions based on tax positions of current year |  |  | 245 |
Other decreases, net |  |  | (76 | )
Balance at December 31, 2023 |  |  | 2,222 |
Additions based on tax positions of prior years |  |  | 172 |
Decreases based on tax positions of prior years |  |  | (382 | )
Additions based on tax positions of current year |  |  | 111 |
Other decreases, net |  |  | (134 | )
Balance at December 31, 2024 |  | $ | 1,989 |
The Company expects the amount of unrecognized tax benefits to change within the next twelve months, including the release of reserves of approximately $0.2 million. Substantially all of the liability for uncertain tax benefits related to various federal, state and foreign income tax matters would benefit the Company's effective tax rate, if recognized. The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense, which has not been significant during the years ended December 31, 2024 and 2023, respectively. With a few exceptions, the Company is no longer subject to income tax examinations by tax authorities in foreign jurisdictions for the years before 2020. In the U.S., the Company’s net operating loss and tax credit carryforward amounts remain subject to federal and state examination for tax years starting in 2005 as a result of tax credits generated in the prior years. There are currently no pending federal or state tax examinations.

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