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Note 15 - Income Tax
 12 Months Ended
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.