NOTE

INCOME TAXES

December 2020,

the Consolidated Appropriations Act,

2021

(“CAA”) was signed into law. The CAA included additional funding through tax credits as part of its economic package for

2021.

The Company evaluated these items in its tax computation as of

December 31, 2020

and determined that the items do

not

have a material impact on the Company's financial statements as of

December

31,

2020.

Additionally, as part of the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on

March 27, 2020,

the Company received a PPP loan that is anticipated to be forgiven. The PPP loan does

not

have an impact on the Company's financial statements as of

December 31, 2020

since forgiveness has

not

occurred. The PPP loan forgiveness will be treated as tax-exempt income when forgiven due to the provisions in the CAA.

The income tax expense for the years ended

December

31,

2020

and

2019

consists of the following:

	2020		2019

Current taxes - Federal	$	121	$	248
Current taxes - State		24		11
Current taxes - Foreign		165		150
Deferred taxes - Foreign		-		-
Income tax expense	$	310	$	409

The statutory rate reconciliation for the years ended

December

31,

2020

and

2019

is as follows:

	2020			2019
Statutory Rate	$	(259	)	$	(172	)
State Income Tax		60			(29	)
Effect of foreign operations		(18	)		(23	)
Uncertain tax benefits, including federal benefit for state reserves		-			44
Change in State Deferred Rate		(115	)		-
Valuation allowance		101			790
US Permanent differences		5			36
Federal Tax Credits		(108	)		(70	)
Global Intangible Low-Taxed Income Effect		125			80
Return to provision - credits, perm diffs		4			(240	)
Deferred Adjustment		-			(16	)
Goodwill Impairment		499			-
Other		16			9
	$	310		$	409

Loss from operations before income taxes was derived from the following sources:

	2020			2019
Domestic	$	(2,109	)	$	(1,512	)
Foreign		873			693
	$	(1,236	)	$	(819	)

Deferred tax (liabilities) assets at

December 31, 2020

and

2019,

consist of the following:

	2020			2019
Deferred Tax
Allowance for uncollectable accounts	$	85		$	79
Inventories reserve		531			348
Accrued vacation		115			112
Accrued bonus		57			171
Stock-based compensation and equity appreciation rights		78			62
Lease Accounting ASC 842 Lease Liability		1,405			1,230
Section 481(a) adjustment		798			716
Net operating loss carryforwards		82			97
Tax credit carryforwards		165			171
Unrealized Foreign Currency Gain		42			-
Other		5			7
Total		3,363			2,993
Valuation allowance		(1,504	)		(1,403	)
Deferred tax assets		1,859			1,590

Accumulated Other Comprehensive Income		(61	)		-
Lease Accounting ASC 842 Lease Asset		(1,386	)		(1,158	)
Property and equipment		(412	)		(432	)
Deferred tax liabilities		(1,859	)		(1,590	)
Net deferred tax assets	$	-		$	-

We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and state net operating loss carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our financial statements become deductible for income tax purposes, or when net operating loss carry forwards are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards.

Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards

not

expiring unused and tax planning alternatives.

We have concluded that a valuation allowance is needed for all our United States based deferred tax assets due to the cumulative net losses we have sustained in the past

three

years. In analyzing the need for a valuation allowance, we considered our history of operating results for income tax purposes over the past

three

years in each of the tax jurisdictions where we operate, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability. After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all our U.S. based deferred tax assets,

valuation allowance was placed on the foreign assets.

December 31, 2020,

for U.S. state tax purposes, we have Minnesota R&D credit carryforwards of

$190

and various state net operating loss carryforwards of

$212

for Iowa,

$326

for Minnesota,

$586

for Wisconsin. The state credits and NOLs expire at various years starting in

2024;

we have a valuation allowance related to these state credits and NOLs of

$302.

The tax effects from an uncertain tax positions can be recognized in our consolidated financial statements, only if the position is more likely than

not

to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than

not

sustain the position following an audit. For tax positions meeting the more likely than

not

threshold, the amount recognized in the financial statements is the largest benefit that has a greater than

percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended

December

31,

2020

and

2019

(in thousands):

Balance at December 31, 2019	$	44
Tax Positions - Additions		6
Tax Positions - Reductions		-
Balance at December 31, 2020	$	50

Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of

December

31,

2020

and

2019

was

not

significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns.

We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of

December

31,

2020,

with few exceptions, the Company or its subsidiaries are

longer subject to examination prior to tax year

2017.

Our tax year

2018

income tax return is currently under IRS audit.