Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 13. INCOME TAXES

Total provision (benefit) for income taxes for the years ended December 31, 2021, 2020, and 2019:

	December 31,
	2021			2020			2019
(Loss) income before taxes
Domestic	$	(17,030	)	$	5,320		$	370
Foreign		4,050			(295	)		1,600
Total (loss) income before taxes		(12,980	)		5,025			1,970
Current tax expense (benefit):
Federal		(165	)		(94	)		(604	)
State		(36	)		205			289
Foreign		744			109			283
Total current tax expense (benefit)		543			220			(32	)
Deferred tax expense (benefit):
Federal		(3,506	)		(4,559	)		(1,010	)
State		(464	)		(343	)		(105	)
Foreign		170			(91	)		—
Change in valuation allowance		3,970			6,300			—
Total deferred tax expense ( benefit)		170			1,307			(1,115	)
Total tax expense (benefit):
Federal		(3,671	)		(4,653	)		(1,614	)
State		(500	)		(138	)		184
Foreign		914			18			283
Change in valuation allowance		3,970			6,300			—
Total income tax expense (benefit)	$	713		$	1,527		$	(1,147	)

We account for income taxes under the asset and liability method, which required the recognition of deferred tax assets and liabilities for the expected future consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of differences between the financial statement and tax bases of the assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and applicable foreign jurisdictions. We are no longer subject to U.S. federal or state tax examinations for the years prior to 2011.

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 our deferred taxes as of December 31, 2021 and 2020 were:

	December 31,
	2021			2020
Deferred tax assets:
Receivable allowances	$	213		$	264
Accrued expenses		339			358
S263A capitalizable costs		218			127
Inventory reserves		3,957			3,329
Research and development credits		3,249			2,315
Net operating losses		5,740			3,412
Transaction costs		—			163
Interest expense		387			—
Stock-based Compensation		2,208			1,157
Other		530			414
Total deferred tax assets		16,841			11,539
Valuation allowance		(10,270	)		(6,300	)
Net deferred tax assets		6,571			5,239
Deferred tax liabilities:
Property and Equipment		(5,975	)		(4,320	)
Section 481 adjustment		(178	)		(361	)
Patents and trademarks		(496	)		(458	)
Total deferred tax liabilities		(6,649	)		(5,139	)
Total net deferred tax (liability) asset	$	(78	)	$	100

A valuation allowance is established when it is “more likely than not” that all, or a portion, of net deferred tax assets will not be realized. As a result, the Company has concluded based on all available evidence and determined that valuation allowances of $10,270 and $6,300 should be provided for certain deferred tax assets at December 31, 2021, and 2020, respectively. As of December 31, 2021 and 2020 we had federal net operating loss carryforwards of $25,119 and $14,813 respectively which have an indefinite carryforward period and $27,820 of combined state net operating loss carryforwards in various states that will begin to expire in 2037.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2021			2020
Gross unrecognized tax benefits - beginning of period	$	627		$	731
Increases related to current year tax positions		102			—
Increases related to prior year tax positions		712			10
Decreases related to prior year tax positions		(104	)		(114	)
Decreases related to settlements of prior year tax positions		—			—
Gross unrecognized tax benefits - end of period	$	1,337		$	627

The unrecognized tax benefits of $1,227, if recognized, will impact the Company’s effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties relate to unrecognized tax benefits as a component of tax expense. As of December 31, 2020, we have not recorded any interest or penalties associated with unrecognized tax benefits. We expect the total amount of tax contingencies will not decrease in 2021 based on statute of limitation expiration.

A reconciliation of the provision for income taxes at the federal statutory rate compared to the effective tax rate for the years ended December 31, 2021, 2020 and 2019 is:

	2021			2020			2019
Statutory U.S. federal tax rate	$	(2,726	)	$	1,055		$	414
State taxes net of federal benefit		(492	)		99			32
Non-U.S. earnings taxed at rates different than the U.S. statutory rate		(150	)		80			(53	)
Foreign source earnings, net of associated foreign tax credits		601			306			328
Benefit of tax credits		(1,569	)		(670	)		(715	)
Stock based compensation		(212	)		(4,913	)		(1,074	)
PPP loan forgiveness		—			(861	)		—
Change in valuation allowance		3,970			6,300			—
Impact of NOL carryback		—			—			(174	)
Change in unrecognized tax benefits		710			10			731
State tax true-ups		—			—			(618	)
Other		581			121			(18	)
Total provision (benefit) for income taxes	$	713		$	1,527		$	(1,147	)

As of December 31, 2021, our foreign operations held cash totaling $2,593. We have not provided for a U.S. deferred tax liability or foreign withholding tax on the undistributed earnings from our non-U.S. subsidiaries that are considered to be indefinitely reinvested. If such earnings were to be distributed, any U.S. deferred tax liability or foreign withholding tax would not be significant.