INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of the Company’s (loss) before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands):

	2023		2022
United States	$	(5,378)	$	(7,822)
Foreign	4,248		7,343
(Loss) income before income taxes	$	(1,130)	$	(479)

The components of the Company’s income tax provision (benefit) for the years ended December 31 (in thousands):

Current provision (benefit):	2023		2022
Federal	$	180	$	241
State	15		(37)
Foreign	793		2,581
	988		2,785
Deferred provision (benefit):
Federal	(2)		1,200
State	10		81
Foreign	113		(55)
	121		1,226
	$	1,109	$	4,011

For the years ended December 31, 2023 and 2022, the Company’s effective tax rate was (98.1)% and (837.4)%, respectively. The Company's effective tax rate for the year ended December 31, 2023 differed from the statutory rate due to a mix of earnings across jurisdictions and the associated valuation allowance recorded on losses in certain jurisdictions. The Company's effective tax rate for the year ended December 31, 2022 differed from the statutory rate due to additional taxes assessed as a result of the settlement of the income tax audit in Korea, the Company recording a valuation allowance on U.S. deferred tax assets largely driven by changes in expected earnings mix between jurisdictions, and the relative impact of these items on decreased earnings.

A reconciliation of the Company’s effective income tax rate and the United States federal statutory income tax rate is summarized as follows, for the years ended December 31:

	2023		2022
Federal statutory income taxes	21.0	%	21.0	%
State income taxes, net of federal benefit	6.3		20.7
Difference in foreign and United States tax on foreign operations	(0.7)		(24.8)
Assessments from taxing authorities	—		(278.5)
Effect of changes in valuation allowance	(46.4)		(383.7)
Global Intangible Low Taxed Income (GILTI)(1)	(16.1)		—
Credits generated	7.9		15.2
Effect of changes in tax rates	—		19.4
Foreign charitable contributions	(4.6)		(12.5)
Return to provision adjustments	1.4		(43.4)
Meals and entertainment	(12.8)		—
Withholding taxes	(16.0)		(50.3)
Expiration of tax attribute	(38.5)		(135.5)
Other	0.4		15.0
	(98.1)	%	(837.4)	%

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. Significant components of the Company’s deferred tax assets and liabilities consisted of the following at December 31 (in thousands):

Deferred tax assets:	2023		2022
Deferred revenue	$	277	$	629
Inventory	266		260
Accrued expenses	1,379		1,240
Net operating loss (1)	4,634		4,956
Equity compensation	249		240
Foreign tax credit carryover	3,301		3,333
Lease liability	1,033		673
Capitalized research & development	1,058		218
Unrealized foreign exchange gains and losses	410		225
Other	1,090		743
Total deferred tax assets	$	13,697	$	12,517
Valuation allowance	(10,296)		(9,772)
Total deferred tax assets, net of valuation allowance	$	3,401	$	2,745
Deferred tax liabilities:
Prepaid expenses	202		41
Deferred commissions	446		418
Lease assets	978		624
Fixed assets	164		161
Total deferred tax liabilities	$	1,790	$	1,244
Total net deferred tax asset	$	1,611	$	1,501

(1)The Company’s net operating loss will expire as follows (dollar amounts in thousands):

Jurisdiction	Gross NOL	Tax Effected NOL	Expiration Years
Cyprus	1,453	182	2024-2027
Mexico	6,066	1,816	2024-2028
Switzerland	4,566	420	2024-2029
Taiwan	2,274	455	2024-2032
United States - Federal	1,828	384	Indefinite
United States - State	14,941	849	2024-Indefinite
Other - Foreign	2,408	528	Indefinite

We have U.S. foreign tax credit carryforwards of $3.3 million as of December 31, 2023, which will begin to expire in 2024. The Company maintains a valuation allowance of $3.3 million against its foreign tax credit carryforwards.

At December 31, 2023 and 2022, the Company’s valuation allowance was $10.3 million and $9.8 million, respectively. The net change in the valuation allowance for the years ended December 31, 2023 and 2022 was an increase of $0.5 million and $1.9 million, respectively. The provisions of ASC Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing a deferred tax asset cannot be met. A company is to use judgment in reviewing both positive and negative evidence of realizing a deferred tax asset. Furthermore, the weight given to the potential effect of such evidence is commensurate with the extent the evidence can be objectively verified. The valuation allowance against the Company's deferred tax assets consisted of the following at December 31 (in millions):

Country	2023		2022
China	$	—	$	0.4
Cyprus	0.2		0.2
Mexico	1.8		1.8
Norway	0.1		0.1
South Africa	0.2		0.2
Switzerland	0.3		0.3
Taiwan	0.4		0.6
United States	7.3		6.2
Total	$	10.3	$	9.8

As of December 31, 2023 and 2022, the Company had no unrecognized tax benefits.

The Company recognizes interest and/or penalties related to uncertain tax positions in current income tax expense. As of December 31, 2023 and 2022, the Company had no accrued interest and penalties in the consolidated balance sheet or the consolidated statement of operations.

The Company is subject to examination by taxing authorities in the United States and various state and foreign jurisdictions. As of December 31, 2023, the tax years that remained subject to examination by a major tax jurisdiction for the Company’s most significant subsidiaries were as follows:

Jurisdiction	Open Years
China	2019-2022
Japan	2018-2022
Republic of Korea	2018-2022
Switzerland	2019-2022
United States	2020-2022