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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 7. Income Taxes Loss before income taxes are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Losses before income taxes: |  |  |  |  |  |  |  |
U.S. |  | $ | (16,174 | ) |  | $ | (14,177 | )
Non-U.S. |  |  | 163 |  |  |  | 112 |
Total |  | $ | (16,011 | ) |  | $ | (14,065 | )
The provision (benefit) for income taxes are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Current: |  | $ | — |  |  | $ | — |
Federal |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |
|  |  | — |  |  |  | — |
Deferred |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |
|  |  | — |  |  |  | — |
Provision (benefit) for income taxes |  | $ | — |  |  | $ | — |
The Company is subject to income taxes under U.S. tax laws. The Company was subject to an Israeli corporate tax rate of 23% in 2018. The Company is subject to an Israeli corporate tax rate of 23% in 2019 and thereafter. The Company was subject to a blended U.S. tax rate (federal as well as state corporate tax) of 21% in 2018 and 2019. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of H.R. 1/Public Law No. 115-97, known as the Tax Cuts and Jobs Act (the “Tax Act”). SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. As of December 22, 2018, the Company’s accounting for the remeasurement of its deferred tax assets was complete and there were no changes to the amount previously recorded. Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against net deferred tax assets. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets are expected to be realized. A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis, and includes a review of all available positive and negative evidence. Factors reviewed include projections of pre-tax book income for the foreseeable future, determination of cumulative pre-tax book income after permanent differences, earnings history, and reliability of forecasting. Based on its review, the Company concluded that it was more likely than not that they would not realize the benefit of its deferred tax assets in the future. This conclusion was based on historical and projected operating performance, as well as the Company’s expectation that its operations will not generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets within the statutory carryover periods. Therefore, the Company maintained a full valuation allowance on its deferred tax assets as of December 31, 2019 and 2018. The Company will continue to assess the need for a valuation allowance on its deferred tax assets by evaluating both positive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the statement of operations for the period that the adjustment is determined to be required. A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Statutory Federal income tax rate |  | $ | (3,362 | ) |  | $ | (2,953 | )
State income taxes, net of Federal tax benefits |  |  | — |  |  |  | — |
Foreign losses |  |  | — |  |  |  | — |
Tax credits |  |  | (207 | ) |  |  | (204 | )
Change in statutory rates |  |  | — |  |  |  | — |
Stock-based compensation |  |  | 141 |  |  |  | 72 |
Goodwill impairment |  |  | 392 |  |  |  |  |
Permanent items |  |  | 4 |  |  |  | 3 |
Other |  |  | 38 |  |  |  | 90 |
Change in valuation allowance |  |  | 2,994 |  |  |  | 2,992 |
Total provision for income taxes |  | $ | — |  |  | $ | — |
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 consisted of the following (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Net operating loss carryforwards |  | $ | 9,947 |  |  | $ | 7,126 |
Research and development tax credits |  |  | 506 |  |  |  | 299 |
Accruals and reserves |  |  | 43 |  |  |  | 159 |
Stock compensation |  |  | 391 |  |  |  | 301 |
Depreciation and amortization |  |  | 116 |  |  |  | 126 |
Lease liability |  |  | 68 |  |  |  | — |
Total deferred tax assets |  |  | 11,071 |  |  |  | 8,011 |
Right-of-use asset |  |  | (66 | ) |  |  | — |
Total deferred tax liabilities |  |  | (66 | ) |  |  | — |
Less: valuation allowance |  |  | (11,005 | ) |  |  | (8,011 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
The following table reconciles the beginning and ending amounts of unrecognized tax benefits for the years presented (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Gross unrecognized tax benefits at the beginning of the year |  | $ | 328 |  |  | $ | 181 |
Additions from tax positions taken in the current year |  |  | 214 |  |  |  | 158 |
Additions from tax positions taken in prior years |  |  | 6 |  |  |  | — |
Reductions from tax positions taken in prior years |  |  | — |  |  |  | (11 | )
Tax settlements |  |  | — |  |  |  | — |
Gross unrecognized tax benefits at the end of the year |  | $ | 548 |  |  | $ | 328 |
The deferred income tax assets have been fully offset by a valuation allowance, as realization is dependent on future earnings, if any, the timing and amount of which are uncertain. The net valuation allowance increased by $3.0 million. The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood, and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying balance sheets. As of December 31, 2019 and 2018, the Company had federal net operating loss carryforwards of approximately $38.6 million and $25.0 million, respectively, available to reduce future taxable income. As of December 31, 2019 and December 31, 2018, the Company also has state net operating loss carryforwards of $0.9 million. Both the federal and California net operating loss carryforwards incurred before 2018 begin expiring in 2034 if not utilized. The December 31, 2019 and 2018 federal net operating losses of $13.6 million and $12.5 million, respectively, do not expire. As of December 31, 2019 and 2018, the Company had Israeli net operating losses of $8.0 million and $8.2 million, respectively, which carryforward indefinitely. As of December 31, 2019 and 2018, the Company had federal research and development tax credit carryforwards of approximately $764,000 and $420,000, respectively. If not utilized, the carryforwards will begin expiring in 2025. As of December 31, 2019 and 2018, the Company has state research and development credit carryforwards or approximately $264,000 and $161,000, respectively, which do not expire. Pursuant to Internal Revenue Code (“IRC) Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact the Company’s effective tax rate. The Company’s ability to use its remaining net operating loss and tax credit carryforwards may be further limited if the Company experiences a Section 382 ownership change in connection with future changes in the Company’s stock ownership. In the United States, the Company files income tax returns in the U.S. Federal jurisdiction and California. The Company’s tax years for 2016 and forward are subject to examination by the Federal and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There was no accrued interest and penalties associated with uncertain tax positions as of December 31, 2019 and 2018. The Company has not recorded any interest or penalties in 2019 or 2018.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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