v3.23.1

Note 17 - Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 17. INCOME TAXES The geographical breakdown of loss before provision for income taxes is as follows:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
United States |  | $ | (32,045 | ) |  | $ | (12,260 | )
Other jurisdictions |  |  | (12,261 | ) |  |  | (10,588 | )
Loss before income taxes |  | $ | (44,306 | ) |  | $ | (22,848 | )
The components of the provision for income taxes are as follows:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Current tax provision (benefit): |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |
Foreign |  |  | (13 | ) |  |  | (542 | )
Total current tax provision (benefit) |  |  | (13 | ) |  |  | (542 | )
Deferred tax provision (benefit): |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |
Foreign |  |  | (709 | ) |  |  | (165 | )
Total deferred tax provision (benefit) |  | $ | (709 | ) |  | $ | (165 | )
Total provision (benefit) for income taxes |  | $ | (722 | ) |  | $ | (707 | )
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. A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. On the basis of this evaluation, as of December 31, 2022, a valuation allowance of $64,341 ($51,437 as of December 31, 2021) has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. The valuation allowance increased by $12,904 and decreased by $31,150 for the years ended December 31, 2022 and 2021, respectively. The Company’s effective tax rate substantially differed from the federal statutory tax rate primarily due to the change in the valuation allowance. The reconciliation between income taxes computed at the federal statutory income tax rate and the provision for income taxes is as follows:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Loss before income taxes |  | $ | (44,306 | ) |  | $ | (22,848 | )
Theoretical tax benefit at the statutory rate (21.0% in 2022 and 2021) |  |  | (9,304 | ) |  |  | (4,798 | )
Differences in jurisdictional tax rates |  |  | (1,671 | ) |  |  | (350 | )
Valuation allowance |  |  | 10,015 |  |  |  | 5,755 |
Non-deductible expenses |  |  | 803 |  |  |  | (266 | )
Other |  |  | (565 | ) |  |  | (1,048 | )
Total income tax (benefit) provision |  |  | (722 | ) |  |  | (707 | )
Net loss |  | $ | (43,584 | ) |  | $ | (22,141 | )
The components of the deferred tax assets and deferred tax liabilities are as follows:
|  | December 31, |
|  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Property and equipment |  | $ | 690 |  |  | $ | 668 |
Deferred revenue |  |  | 1,560 |  |  |  | 647 |
Allowance for doubtful accounts |  |  | 3,917 |  |  |  | 3,133 |
Intangible assets |  |  | (785 | ) |  |  | (1,543 | )
Non-deductible expenses |  |  | 10,371 |  |  |  | 8,694 |
Warranty and other reserves |  |  | 1,806 |  |  |  | 1,159 |
Other |  |  | 1,020 |  |  |  | 610 |
Loss carryforwards |  |  | 46,709 |  |  |  | 38,353 |
Valuation allowance |  |  | (64,341 | ) |  |  | (51,437 | )
Total deferred tax assets |  | $ | 947 |  |  | $ | 284 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Deferred revenue |  | $ | — |  |  | $ | 46 |
Total deferred tax liabilities |  | $ | — |  |  | $ | 46 |
As of December 31, 2022, the Company had federal, state and foreign non-operating loss (“NOL”) carryforwards of approximately $191,313 ($163,395 in 2021). The use of these NOL carryforwards might be subject to limitation under the rules regarding a change in stock ownership as determined by the IRC and similar state provisions; however, a complete analysis of the limitation of the NOL carryforwards will not be complete until the time the Company projects it will be able to utilize such NOLs. The NOL carryforwards expire between 2022 and indefinitely, and valuation allowances have been reserved, where necessary. The Company also had federal and state research and development credit carryforwards of approximately $276 and nil as of December 31, 2022. The federal credits will expire starting in 2025 if not utilized. The state credits have no expiration date. The Company may recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. During the year the Company determined that $947 of future tax benefits met this criterion. Utilization of the research and development credits carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the IRC. However, the Company has not conducted a formal study to determine the extent of the limitations, which could impact the realizability of these credit carryforwards in future periods. The annual limitations may result in the expiration of the net operating losses and research and development credits before utilization. The Company files income tax returns in the United States and in various state jurisdictions with varying statutes of limitations. Tax years 2016 through 2022 remain open to examination by the Internal Revenue Service for U.S. federal tax purposes. Uncertain Tax Positions The activity related to gross amount of unrecognized tax benefits is as follows:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Balance as of the beginning of the year |  | $ | 36 |  |  | $ | 1,584 |
Increases (reductions) related to tax positions in prior period |  |  | 47 |  |  |  | (1,548 | )
Increases related to tax positions taken during the current period |  |  | — |  |  |  | — |
Balance as of the end of the year |  | $ | 83 |  |  | $ | 36 |
These amounts are related to certain deferred tax assets with a corresponding valuation allowance. If recognized, the impact on the Company’s effective tax rate would not be material due to the full valuation allowance. Management believes that there will not be any significant changes in the Company’s unrecognized tax benefits in the next twelve-months. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes in the accompanying consolidated statements of operations. Accrued interest and penalties, if applicable, are included in accrued expenses and other current liabilities in the consolidated balance sheets. For the years ended December 31, 2022 and 2021, the Company did not recognize any accrued interest and penalties. The activity related to the tax effected amount of the recognized tax position as follows:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Balance as of the beginning of the year |  | $ | (563 | ) |  | $ | (478 | )
Increases related to tax positions in prior period |  |  | — |  |  |  | — |
Reduction (increase) related to tax position taken during the current period |  |  | 210 |  |  |  | (49 | )
Increase related to interest expense |  |  | (23 | ) |  |  | (36 | )
Balance as of the end of the year |  | $ | (376 | ) |  | $ | (563 | )
Additional current tax expense has been booked including interest and penalties relating to Venus Concept Australia Pty Ltd. for its historical tax return filing positions, which may be successfully challenged by the Australian Tax Office. The Company has recognized the full amount of the potential tax liability plus interest. Management believes that there will not be any significant changes in the Company’s recognized tax position in the next twelve-months. As such, the amount has been classified as a long-term tax payable in the consolidated balance sheets.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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