Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 8 — INCOME TAXES 

The Company (a “C” Corporation) provides for income taxes based on the Federal and state statutory rates on taxable income. U.S. and foreign components of income before incomes taxes are presented below:

	For the years ended December 31,
(In thousands)	2023			2022			2021
Domestic	$	(11,630	)	$	(21,403	)	$	(24,875	)
Foreign		(26,100	)		(80,681	)		(96,312	)
Total	$	(37,730	)	$	(102,084	)	$	(121,187	)

The income tax provisions are comprised of the following:

	For the years ended December 31,
(In thousands)	2023		2022			2021
Current
Federal	$	-	$	-		$	-
State		218		244			(7	)
Foreign - Other		209		392			45
Total current		427		636			38
Deferred
Federal		1,492		5,709			(1,894	)
State		625		218			928
Foreign - Other		602		(487	)		(1,091	)
Total deferred		2,719		5,440			(2,057	)
Income tax expense (benefit)	$	3,146	$	6,076		$	(2,019	)

A reconciliation of the U.S. federal statutory income tax (benefit) expense to the Company’s effective income tax provision is as follows:

	For the years ended December 31,
	2023			2022			2021
Tax provision at statutory rate – federal		21.0	%		21.0	%		21.0	%
Tax provision at effective state and local rates		(2.1	%)		(0.3	%)		(0.8	%)
Foreign tax rate differential		(17.1	%)		(16.6	%)		(15.2	%)
Executive compensation		(5.0	%)		0.0	%		0.0	%
Valuation allowance		(5.9	%)		(9.4	%)		(4.1	%)
Other		0.8	%		(0.7	%)		0.8	%
Total effective income tax rate		(8.3	%)		(6.0	%)		1.7	%

The Company, through its subsidiaries and affiliated entities in the U.S., the Cayman Islands and Ecuador are subject to US Federal, US state and Ecuadorian Federal income taxes. The Cayman Islands do not impose federal or local income taxes.

Deferred tax (liabilities) assets, net, are comprised of the following:

	As of December 31,
(In thousands)	2023			2022
Deferred tax assets:
Net operating loss carryforward	$	26,086		$	27,896
Disallowed interest carryforward		15,286			12,893
Stock-based compensation		383			351
Other		1,637			1,874
Valuation allowance		(24,726	)		(21,521	)
Total net deferred assets		18,666			21,493
Deferred tax liabilities:
Property and equipment		(18,542	)		(18,942	)
Other		(676	)		(384	)
Total net deferred liabilities		(19,218	)		(19,326	)
Deferred tax (liabilities) assets	$	(552	)	$	2,167

Deferred tax assets and liabilities are recorded on the consolidated balance sheet based on tax jurisdictions. For the years ended December 31, 2023 and 2022, the Company has recorded deferred tax assets of $1.6 million and $2.2 million, respectively, within other long-term assets, and for the year ended December 31, 2023, a deferred tax liability of $2.2 million.

The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, management considers: (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary differences and carryforwards; (iii) taxable income in prior carryback year(s) if carryback is permitted under applicable tax law; and (iv) tax planning strategies.

The Company has deferred tax assets related to U.S. federal loss carryforwards of $98.8 million as of December 31, 2023, which begin to expire in 2036. The timing and manner in which the Company will utilize the net operating loss carryforwards in any year, or in total, may be limited in the future as a result of changes in the Company’s ownership and any limitations imposed by the jurisdictions in which the Company operates. 

As a result of the transition to the territorial tax regime effectuated by the Tax Cuts and Jobs Act enacted in 2017, any potential dividends from the Company’s foreign subsidiaries would no longer be subject to Federal tax in the United States. The Company continue to assert its prior position regarding the repatriation of historical foreign earnings from its Ecuadorian subsidiaries. The Company currently has no intention to remit any additional undistributed earnings of its Ecuadorian subsidiaries in a taxable manner. The Company no longer remains permanently reinvested in the earnings of its Cayman subsidiary. No taxes have been accrued as a result of this change because no taxes are expected to be imposed by either the United States or the Cayman Islands upon such a remittance.

The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. The Company establishes liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes may be due. These liabilities are established when the Company believes that certain positions might be challenged despite its belief that its tax return positions are fully supportable. The Company adjusts these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of changes to these liabilities.

As of December 31, 2023 and 2021, the Company had no unrecognized tax positions. As of December 31, 2022, the Company had $1.4 million of unrecognized tax benefits. The Company has elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2023, 2022 and 2021, interest and penalties included in income tax expense related to unrecognized tax benefits and/or uncertain tax positions were insignificant.

The Company is subject to tax audits in all jurisdictions for which it files tax returns. Tax audits by their very nature are often complex and can require several years to complete. Currently, there are no U.S. federal, state or foreign jurisdiction tax audits pending. The Company’s corporate U.S. federal and state tax returns for the current year and the four prior years remain subject to examination by tax authorities and the Company’s foreign tax returns for the current year and the five prior years remain subject to examination by tax authorities.