XML 43 R16.htm IDEA: XBRL DOCUMENT
v3.20.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 8. Income Taxes The components of (loss) income before the income tax provision consist of the following:
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
United States |  | $ | (6,556,280 | ) |  | $ | 1,120,521 |
Foreign |  |  | (2,819 | ) |  |  | (67,096 | )
Pre-tax (loss) income from operations |  | $ | (6,559,099 | ) |  | $ | 1,053,425 |
The Company is subject to taxation in the United States, California and Australia. The Company’s tax years for 2017 (federal), 2016 (California) and 2019 (Australia) and forward are subject to examination by the United States, California and Australia tax authorities. However, to the extent allowed by law, the taxing authorities may have the right to examine periods where NOLs and credits were generated and carried forward and make adjustments up to the amount of the NOL and credit carryforwards. The Company is not currently under examination by any jurisdiction. At December 31, 2020, the Company had federal and California NOLs aggregating $30,475,657 and $30,310,672, respectively. If not used, $13,213,037 of Federal NOLs and $30,310,672 of state NOLs will begin to expire in 2033. $17,262,620 of federal NOLs will carry forward indefinitely subject to an 80% limitation against taxable income. At December 31, 2020, the Company had Australia NOLs aggregating $43,349 which do not expire. At December 31, 2020, the Company had federal and California research credit carryforwards of approximately $76,632 and $40,528, respectively. The federal research credit carry forwards will begin to expire in 2040, unless previously utilized and the California research credits will carry forward indefinitely. The Company’s NOLs and research credit carryforwards are subject to a FIN 48 reserve. Utilization of the domestic NOL will be subject to a substantial annual limitation due to ownership change limitations that may have occurred, or that could occur in the future, as required by Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state provisions. These ownership changes may limit the amount of NOLs that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. Upon the occurrence of an ownership change under Section 382 as outlined above, utilization of the NOLs are subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOL before utilization. While the Company has not performed a Section 382 study, multiple ownership changes may have already occurred as the Company raised capital through the issuance of stock. However, due to the existence of the valuation allowance for deferred tax assets, any potential change in ownership will not impact the Company’s effective tax rate. The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred income tax assets are as follows:
|  | As of December 31, |
Current deferred tax assets/(liabilities): |  | 2020 |  |  | 2019 |
State taxes |  | $ | 336 |  |  | $ | 336 |
Amortization |  |  | 180 |  |  |  | — |
Research and development credits |  |  | 54,324 |  |  |  | — |
Other |  |  | 83,056 |  |  |  | 112,222 |
Net operating loss |  |  | 7,679,216 |  |  |  | 6,434,544 |
Gross deferred tax assets |  |  | 7,817,112 |  |  |  | 6,547,102 |
Valuation allowance |  |  | (7,590,215 | ) |  |  | (6,206,450 | )
Net deferred tax assets |  | $ | 226,897 |  |  | $ | 340,652 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Note discount |  | $ | (226,897 | ) |  | $ | (340,652 |
Total deferred tax liabilities |  |  | (226,897 | ) |  |  | (340,652 |
Net deferred tax assets |  | $ | — |  |  | $ | — |
The provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate at December 31, 2020 and 2019, due to the following:
|  | As of December 31, |
|  | 2020 |  |  | 2019 |
Expected income tax benefit at federal statutory tax rate |  | $ | (1,377,411 | ) |  | $ | 221,219 |
State income taxes, net of federal benefit |  |  | (415,249 | ) |  |  | (434,881 | )
Change in fair value of warrants |  |  | (72,549 | ) |  |  | (1,874,873 | )
Change in valuation allowance |  |  | 1,383,765 |  |  |  | 1,469,187 |
Uncertain tax positions |  |  | 470,838 |  |  |  | 436,145 |
Change in compound derivative |  |  | — |  |  |  | (101,671 | )
Loss on extinguishment of debt |  |  | 33,925 |  |  |  | 117,198 |
Stock compensation |  |  | 64,273 |  |  |  | 121,289 |
Rate adjustment |  |  | (108,649 | ) |  |  | 49,338 |
Other permanent difference |  |  | 22,657 |  |  |  | (1,351 | )
Provision for income taxes |  | $ | 1,600 |  |  | $ | 1,600 |
The Company records a valuation allowance against deferred tax assets to the extent that it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Due to the substantial doubt related to the Company’s ability to utilize its deferred tax assets, a valuation allowance for the full amount of the deferred tax assets has been established at December 31, 2020. As a result of this valuation allowance, there are no income tax benefits reflected in the accompanying statement of operations to offset pre-tax losses. During the year ended December 31, 2020, the valuation allowance increased by $1,383,765. The Tax Cuts and Jobs Act of 2017 subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company elects to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Due to the Company's history of net operating losses, the CARES Act is not expected to have a material impact on the Company's financial statements. On April 22, 2020, when the Company entered into the PPP Loan with the PPP Loan Lender (Note 4). In accordance with the Consolidated Appropriations Act, 2021 enacted on December 27, 2020, certain qualified expenses used with the funds of the PPP Loan are fully deductible for Federal income tax purposes. Additionally, should the Company receive forgiveness of the PPP loan in the future, the amount will not be considered taxable for Federal income tax purposes. Under the FASB’s accounting guidance related to income tax positions, among other things, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, the guidance provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. A reconciliation of the beginning and ending amounts of unrecognized tax positions are as follows:
|  | As of December 31, |
|  | 2020 |  |  | 2019 |
Unrecognized tax positions, beginning of the year |  | $ | 552,082 |  |  | $ | — |
Gross increase - current period tax positions |  |  | 585,812 |  |  |  | 552,082 |
Gross decrease – prior period tax positions |  |  | (3,721 | ) |  |  |  |
Unrecognized tax positions, end of year |  | $ | 1,134,173 |  |  | $ | 552,082 |
If recognized, none of the unrecognized tax positions would impact the Company’s income tax benefit or effective tax rate as long as the Company’s net deferred tax assets remain subject to a full valuation allowance. The Company does not expect any significant increases or decreases to the Company’s unrecognized tax positions within the next twelve months. The Company had no accrual for interest or penalties on the Company’s Balance Sheets at December 31, 2020 and 2019 and has not recognized interest and/or penalties in the Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2020 and 2019.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration