Note 6 - Domestic and Foreign Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6. DOMESTIC AND FOREIGN INCOME TAXES

Domestic and foreign income taxes (benefits) were comprised as follows:

Year Ended December 31,	2021			2020
Current
Federal	$	-		$	(74	)
State		13			10
Foreign		267			157
Total Current	$	280		$	93
Deferred
Federal		-			74
State		-			-
Foreign		(145	)		(106	)
Total Deferred	$	(145	)	$	(32	)
Income Tax Expense	$	135		$	61
Income (loss) before income taxes
Foreign		1,217			(255	)
Domestic		(1,146	)		(2,173	)
Total	$	71		$	(2,428	)

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate based on income (loss):

	Year Ended December 31,
	2021			2020
Tax provision at statutory rate		21.0	%		21.0	%
Change in valuation allowance		1,019.8			(27.6	)
Impact of permanent items, including stock based compensation expense and impairment loss		(898.8	)		11.0
Effect of foreign tax rates		(52.0	)		(0.8	)
State taxes net of federal benefit		(260.2	)		(3.9	)
Prior year provision to return true-up		363.4			(3.2	)
Non-controlling interest		-			1.0
Domestic and foreign income tax rate		193.2	%		(2.5	)%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2021, and 2020 are presented below:

	Year Ended December 31,
	2021			2020
Deferred tax assets:
Net operating loss carry forwards	$	8,605		$	8,486
Inventory		570			548
Compensation accruals		1,310			1,161
Accruals and reserves		95			92
Credits		235			235
Contract assets		1,989			1,573
Other		118			134
Total Deferred tax assets		12,922			12,229
Less: valuation allowance		(12,013	)		(11,395	)
Deferred tax assets net of valuation allowance	$	909		$	834
Deferred tax liabilities
Depreciation and amortization		(909	)		(844	)
Identified intangibles		(873	)		(1,008	)
Total deferred tax liabilities		(1,782	)		(1,852	)
Net deferred tax	$	(873	)	$	(1,018	)

The valuation allowance is maintained against deferred tax assets which the Company has determined are more likely than not to be unrealized. The change in valuation allowance was ($618) and ($790) for the years ended December 31, 2021 and 2020, respectively. For tax reporting purposes, the Company has actual federal and state net operating loss carryforwards of $35,933 and $14,381, respectively, as of December 31, 2021. These net operating loss carryforwards begin to expire in 2023 for federal tax purposes and began to expire in 2020 for state tax purposes. Subsequently recognized tax benefits, if any, related to the valuation allowance for deferred tax assets or realization of net operating loss carryforwards will be reported in the Consolidated Statements of Operations. If substantial changes in the Company’s ownership occur, there could be an annual limitation on the amount of the carryforwards that are available to be utilized.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred taxes to an amount that is more likely than not able to be realized. Based upon the Company’s assessment of all available evidence, including the previous three years of United States based taxable income and loss after permanent items, estimates of future profitability, and the Company’s overall prospects of future business, the Company determined that it is more likely than not that the Company will not be able to realize a portion of the deferred tax assets in the future. The Company will continue to assess the potential realization of deferred tax assets on an annual basis, or an interim basis if circumstances warrant. If the Company’s actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to change the valuation allowance against the gross deferred tax assets.

The Company recognizes 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 50 percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company has analyzed all tax positions for which the statute of limitations remains open. As a result of the assessment, the Company has not recorded any liabilities for unrecognized income tax benefits or retained earnings. The Company does not have any unrecognized tax benefits as of December 31, 2021 and 2020.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company is still subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years 2003 to 2005, 2009 to 2013, 2016 and 2018. There are no on-going or pending IRS, state, or foreign examinations.

The Company recognizes penalties and interest accrued related to liability on unrecognized tax benefits in income tax expense for all periods presented. As of December 31, 2021, and 2020, the Company has no amounts accrued for the payment of interest and penalties.

The Tax Cuts and Jobs Act enacted in December of 2017 introduced a new Global Intangible Low-Taxed Income (“GILTI”) provision that requires certain income earned by foreign subsidiaries to be included currently in the gross income of the U.S. shareholder. The Company has chosen to treat GILTI as a current-period cost when incurred.