Annual report pursuant to Section 13 and 15(d)

Note 7 - Income Taxes

Note 7 - Income Taxes
12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]



The components of income before income taxes consist of the following (in thousands):



Year Ended December 31,







  $ (1,182 )   $ (982 )


    1,927       1,584  

Income before income taxes

  $ 745     $ 602  


The components of the income tax provision consist of the following (in thousands):



Year Ended December 31,






Current taxes:



  $ 73     $ (16 )


    13       9  


    269       195  

Total current taxes

    355       188  

Deferred taxes:



    (4 )     58  


    (5 )     4  


    (169 )     39  

Total deferred taxes

    (178 )     101  

Income tax provision

  $ 177     $ 289  


A reconciliation of the reported income tax provision to the provision that would result from applying the domestic federal statutory tax rate to pretax income is as follows (in thousands):



Year Ended December 31,






Income tax at federal statutory rate

  $ 156     $ 126  

Effect of permanent differences

    195       154  

U.S. foreign income inclusions

    90       89  

Change in valuation allowance

    67       (68 )

Foreign rate differential

    (334 )     (41 )

Restricted stock shortfall


Other reconciling items

    3       7  

Income tax provision

  $ 177     $ 289  


Income before income taxes and the statutory tax rate for each country that materially contributed to the foreign rate differential presented above is as follows (in thousands):



Year Ended December 31,


Statutory Tax Rate






Cayman Islands

    %   $ 2,005     $ 1,104  

Hong Kong

    16.5 %     665       1,105  


    25.0 %     48       143  


Deferred income taxes consist of the following (in thousands):



December 31,






Deferred tax assets:


Net operating losses

  $ 600     $ 411  

Operating lease liabilities

    384       451  


    83       70  

Total deferred tax assets

    1,067       932  

Valuation allowance

    (302 )     (235 )

Net deferred tax assets

    765       697  

Deferred tax liabilities:


Operating lease assets

    (356 )     (419 )

Foreign deferreds

    (135 )     (141 )


    (35 )     (83 )


    (5 )      

Total deferred tax liabilities

    (531 )     (643 )

Net deferred tax assets

  $ 234     $ 54  


The effective income tax rate for the year ended December 31, 2023 includes estimates for foreign income inclusions such as global intangible low-taxed income (“GILTI”) and Subpart F income. The effect of permanent differences in 2023 and 2022 is mainly due to compensation-related limitations under Internal Revenue Code Section 162(m). As of December 31, 2023, the Company does not have a valuation allowance against its U.S. deferred tax assets. The Company analyzed all sources of available income and determined that they are more likely than not to realize the tax benefits of their deferred assets. As of December 31, 2023, the Company has a valuation allowance against deferred taxes in certain foreign jurisdictions with an overall net operating loss. The valuation allowance will be reduced at such time as management believes it is more likely than not that the deferred tax assets will be realized. Any reductions in the valuation allowance will reduce future income tax provision.


As of December 31, 2023, the Company has zero U.S. federal net operating loss carryforwards. The Company has post-apportioned U.S. state net operating loss carryforwards of $446,000 that begin expiring in 2038. At December 31, 2023, the Company has foreign net operating loss carryforwards of approximately $2.3 million in various jurisdictions with various expirations.


As of December 31, 2023, income taxes payable for the repatriation tax on the deemed repatriation of deferred foreign income required the U.S. Tax Cuts and Jobs Act (the “Tax Act”), enacted in 2017 by the U.S. government, totaled $9.0 million, of which $5.1 million is reflected as a noncurrent liability.


As a result of capital return activities, the Company determined that a portion of its current undistributed foreign earnings is no longer deemed reinvested indefinitely by its non-U.S. subsidiaries. For state income tax purposes, the Company will continue to periodically reassess the needs of its foreign subsidiaries and update its indefinite reinvestment assertion as necessary. To the extent that additional foreign earnings are not deemed permanently reinvested, the Company expects to recognize additional income tax provision at the applicable state corporate income tax rate(s). As of December 31, 2023, the Company has not recorded a state deferred tax liability for earnings that the Company plans to repatriate out of accumulated earnings in future periods because all earnings as of December 31, 2023 have already been repatriated. Due to the Tax Act, repatriation from foreign subsidiaries will be offset with a dividends received deduction, resulting in little to no impact on federal tax expense. All undistributed earnings in excess of 50% of current earnings on an annual basis are intended to be reinvested indefinitely as of December 31, 2023.


The Company and its subsidiaries file tax returns in the United States, California, New Jersey, Texas and various foreign jurisdictions. The Company is no longer subject to state income tax examinations for years prior to 2018. The Company is not aware of any jurisdictions that are currently examining any income tax returns of the Company.