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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 10 —Income Taxes The following table presents the income (loss) before income taxes for domestic and foreign operations, and the components of the provision (benefit) for income taxes for the years ended December 31:
| 2021 |  |  | 2020 |
Domestic loss | $ | (39,065 | ) |  | $ | (31,390 | )
Foreign subsidiaries income |  | 605 |  |  |  | 937 |
Income (loss) before income taxes | $ | (38,460 | ) |  | $ | (30,453 | )
| 2021 |  |  | 2020 |
Current income tax expense: |  |  |  |  |  |  |
Federal | $ | — |  |  | $ | (53 | )
State |  | 17 |  |  |  | 5 |
Foreign |  | 169 |  |  |  | (494 | )
Total Current |  | 186 |  |  |  | (542 | )
Deferred income tax expense: |  |  |  |  |  |  |
Federal |  | — |  |  |  | 54 |
State |  | — |  |  |  | — |
Foreign |  | (19 | ) |  |  | (33 | )
Total Deferred |  | (19 | ) |  |  | 21 |
Total provision (benefit) for income taxes | $ | 167 |  |  | $ | (521 | )
The Company’s effective tax rate differs from the federal statutory rate due to the following for the years ended December 31:
| 2021 |  |  | 2020 |
Statutory federal income tax rate |  | 21.00 | % |  |  | 21.00 | %
State income taxes, net of federal tax benefits |  | 1.65 | % |  |  | -0.54 | %
Stock compensation |  | -0.54 | % |  |  | -0.74 | %
Foreign rate differential |  | -0.06 | % |  |  | 2.38 | %
Tax credits |  | 0.26 | % |  |  | 0.00 | %
GILTI Inclusion |  | -0.41 | % |  |  | -0.81 | %
Section 382 limits |  | 0.00 | % |  |  | -27.71 | %
Non-deductible expenses |  | -0.01 | % |  |  | -0.17 | %
Valuation allowance |  | -22.34 | % |  |  | 8.30 | %
Effective tax rate |  | -0.44 | % |  |  | 1.71 | %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company’s deferred tax assets and liabilities at December 31:
| 2021 |  |  | 2020 |
Gross deferred tax assets: |  |  |  |  |  |  |
Net operating loss carryforward | $ | 20,702 |  |  | $ | 12,684 |
Tax credits |  | 199 |  |  |  | 92 |
Accruals and reserves |  | 2,333 |  |  |  | 2,113 |
Property and equipment |  | 102 |  |  |  | 83 |
Alternative minimum tax credits |  | 21 |  |  |  | 21 |
Total gross deferred tax assets |  | 23,357 |  |  |  | 14,993 |
Less: valuation allowance |  | (22,738 | ) |  |  | (14,281 | )
Total deferred tax assets net of valuation allowance |  | 619 |  |  |  | 712 |
Deferred tax liabilities: |  |  |  |  |  |  |
Property and equipment |  | — |  |  |  | — |
Accrual and reserves |  | (550 | ) |  |  | (678 | )
Net deferred tax assets (liabilities) | $ | 69 |  |  | $ | 34 |
A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes the Company’s historical operating losses, lack of taxable income, and the accumulated deficit, the Company provided a full valuation allowance against the U.S. deferred tax assets resulting from the accruals and reserves along with the net operating loss and credits carried forward. The valuation allowance increased by $8,477 from $14,281 as of December 31, 2020 to $22,738 as of December 31, 2021, and by $2,467 from $11,814 to $14,281 as of December 31, 2020. At December 31, 2021 and 2020, the Company had net deferred income tax assets related primarily to net operating loss carry forwards, accruals and reserves and tax credit carryforward that are not currently being recognized of $22,738 and $14,281, respectively, which have been offset by a valuation allowance. We have not provided U.S. Federal and State income taxes, nor foreign withholding taxes on approximately $9,802 of undistributed earnings for certain non-US subsidiaries, because such earnings are intended to be indefinitely reinvested. If these earnings were distributed to the U.S. in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we would not be subject to U.S. income tax due to the transition tax of IRC Section 965 or via newly enacted Global Intangible Low-Taxed Income (“GILTI”) provision, enacted as part of the 2017 U.S. Tax Act. The Company would be subject to U.S. state tax and potential foreign withholding taxes on a repatriation of the foreign earnings. The amount of unrecognized deferred income tax liability related to these earnings is not material. Estimate of cumulative foreign earnings is as follows as of December 31:
| 2021 |  |  | 2020 |
China | $ | 4,741 |  |  | $ | 4,195 |
India |  | 5,061 |  |  |  | 4,961 |
Total | $ | 9,802 |  |  | $ | 9,156 |
The Company had net operating loss carryovers (NOL) for federal and state income tax purposes of approximately $92,262 and $27,577, respectively, as of December 31, 2021. Approximately $9,939 of federal NOLs will expire beginning in 2037, while approximately $82,323 generated beginning in 2018 have an indefinite life. The state NOLs will expire if unused in years 2027 through 2041:
| 2021 |  |  | 2020 |
Federal NOL | $ | 92,262 |  |  | $ | 56,805 |
State NOL | $ | 27,577 |  |  | $ | 12,418 |
The Company had research and development (“R&D”) credit carryforwards as follows as of December 31:
| 2021 |  |  | 2020 |
Federal R&D credits | $ | 99 |  |  | $ | — |
California R&D credits | $ | 126 |  |  | $ | 117 |
At December 31, 2021, the Company had approximately $99 of federal and $126 of California research and development tax credit and other tax credit carryforwards available to offset future taxable income. The California research credits have no expiration dates. The federal research credits expire on December 31, 2040. Federal and state laws impose restrictions on the utilization of net operating loss carryforwards and R&D credit carryforwards in the event of a change in ownership of the Company, which constitutes an 'ownership change' as defined by Internal Revenue Code Section 382 and 383. The Company experienced an ownership change in the past that materially impacts the availability of its net operating losses and tax credits. The amounts indicated in the above tables reflect the reduction of net operating losses and credit carryforwards as a result of previous ownership changes that the Company experienced. Should there be additional ownership changes in the future, the Company's ability to utilize existing carryforwards could be substantially restricted. The Company had excess interest expense carryforwards of $1,499 as of December 31, 2021. Federal laws impose restrictions on the utilization of sec 163 (j) excess interest expense carryforwards in the event of a change in ownership of the Company, which constitutes an 'ownership change' as defined by Internal Revenue Code Section 382 and 383. The Company experienced an ownership change in June 2020 that materially impacts the availability of its excess interest expense. However, since the Section 163(j) excess interest expense carryover does not expire, there will be no limitation under Section 382 against the excess interest expense carryover in 2021. Should the Company utilize the excess interest expense in the future, the availability of its carryforwards would be substantially restricted. Uncertain Tax Positions The Company accounts for uncertainty in income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, uncertain tax positions, are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination by the tax authority, including resolutions of any related appeals or litigation processes, based on technical merit. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize, in the consolidated financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The following table summarizes the activity related to unrecognized tax benefits as follows as of December 31:
In thousands | 2021 |  |  | 2020 |
Unrecognized benefit-beginning of period | $ | 1,190 |  |  | $ | 6,900 |
Gross increases-prior period tax positions |  | 34 |  |  |  | 96 |
Gross (decreases)-prior period tax positions |  | — |  |  |  | (5,818 | )
Decrease prior period tax positions - settlements |  | — |  |  |  | (95 | )
Gross increases -current period tax positions |  | 82 |  |  |  | 107 |
Unrecognized benefit-end of period | $ | 1,306 |  |  | $ | 1,190 |
$66 of the unrecognized tax benefits as of December 31, 2021, are accounted for as a reduction in the Company’s deferred tax assets. Due to the Company’s valuation allowance, only $1,240 of the $1,306 of unrecognized tax benefits would affect the Company’s effective tax rate, if recognized. The Company does not believe it is reasonably possible that its unrecognized tax benefits will significantly change in the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. The Company reported a tax expense of $52 of interest and penalties in 2021 and the Company has accrued a $136 liability for accrued interest and penalties related to unrecognized tax benefit as of December 31, 2021. The Company's material income tax jurisdictions are the United States (federal and California), China and India. As a result of net operating loss and credit carryforwards, the Company is subject to audit for tax years 2014 and forward for California purposes and for 2017 and forward for federal tax purposes. The statute of limitations remains open for China tax years 2015 and later, and for India tax years 2016 and later. Accounting for GILTI requires companies to adopt tax accounting policies related to: Treating the book-tax differences as either period costs or to recognize GILTI related deferred tax assets/liabilities in accounting for the GILTI book-tax differences. The Company has elected to treat this difference as a period cost. In the Company’s valuation allowance analysis, the Company will elect the Increment Cash Tax Savings Approach in determining its U.S. valuation allowance.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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