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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
9. | Income Taxes
The Company has recorded a full valuation allowance against deferred tax assets and due to our net losses for the years ended December 31, 2019 and 2018, there was no provision or benefit for income taxes recorded. The components of income/(loss) from continuing operations before income tax provision (benefit) as of December 31, 2019 and 2018 are as follows (in thousands):
|  | 2019 |  |  | 2018 |
U.S. |  | $ | (3,439 | ) |  | $ | (8,346 | )
Foreign |  |  | 403 |  |  |  | (507 | )
|  | $ | (3,036 | ) |  | $ | (8,853 | )
A reconciliation of the total income tax provision tax rate to the statutory federal income tax rates of 21% for the years ended December 31, 2019 and 2018, respectively, is as follows:
|  | 2019 |  |  | 2018 |
Income tax expense (benefit) at federal statutory rate |  |  | (21.0 | )% |  |  | (21.0 | )%
Income tax expense (benefit) at state statutory rate |  |  | (12.2 | )% |  |  | (6.1 | )%
Change in valuation allowance |  |  | 23.0 | % |  |  | 34.8 | %
Change in state rate |  |  | (1.3 | )% |  |  | (0.1 | )%
Permanent interest adjustments |  |  | 1.1 | % |  |  | 0.7 | %
Stock compensation |  |  | 13.7 | % |  |  | 1.8 | %
Research credit |  |  | (1.8 | )% |  |  | (1.4 | )%
Return to provision |  |  | 3.1 | % |  |  | (3.4 | )%
NOLs expiring and adjustments to NOL |  |  | 19.2 | % |  |  | — |
Mark to market adjustment |  |  | (24.0 | )% |  |  | (5.3 | )%
Other, net |  |  | 0.2 | % |  |  | — |
|  |  | 0.0 | % |  |  | (0.0 | )%
The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities as of December 31, 2019 and 2018 are as follows (in thousands):
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowances and reserves |  | $ | 6 |  |  | $ | 270 |
Accrued expenses |  |  | 283 |  |  |  | 122 |
Stock based compensation |  |  | 657 |  |  |  | 996 |
Net operating loss carryforwards |  |  | 92,659 |  |  |  | 91,197 |
Income tax credit carryforwards |  |  | 8,749 |  |  |  | 8,671 |
Property and equipment, principally due to differences in depreciation |  |  | 95 |  |  |  | 548 |
Intangible assets |  |  | 370 |  |  |  |  |
Other, net |  |  | 217 |  |  |  | 38 |
|  |  | 103,036 |  |  |  | 101,842 |
Valuation allowance |  |  | (102,822 | ) |  |  | (101,091 | )
Total deferred tax assets, net of allowance |  |  | 214 |  |  |  | 751 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Other |  |  | (214 | ) |  |  | (751 | )
Total deferred tax liability |  |  | (214 | ) |  |  | (751 | )
Net deferred tax assets (liability) |  | $ | — |  |  | $ | — |
The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a full valuation allowance of $102.8 million as of December 31, 2019 as it does not believe it is more likely than not our net deferred tax assets will be realized. The Company increased its valuation allowance by approximately $1.7 million during the year ended December 31, 2019. At December 31, 2019, we had federal, and state tax loss carry forwards of approximately $386.8 million, and $161.9 million, respectively. The federal and state net operating loss carry forwards begin to expire in 2020 and 2028, respectively, if unused. The federal net operating loss carryover includes $21.9 million of net operating losses generated in 2018. Federal net operating losses generated from 2018 onwards carryover indefinitely and may generally be used to offset up to 80% of future taxable income. At December 31, 2019, we had federal and state tax credit carry forwards of approximately $6.4 million and $5.5 million, respectively, after reduction for uncertain tax positions. The Company has not performed a formal research and development credit study with respect to these credits. The federal credits will begin to expire in 2020, if unused, and the state credits carry forward indefinitely. Pursuant to the Internal Revenue Code (“IRC”) of 1986, as amended, specifically IRC §382 and IRC §383, The Company’s ability to use net operating loss and R&D tax credit carry forwards (“tax attribute carry forwards”) to offset future taxable income is limited if we experience a cumulative change in ownership of more than 50% within a three-year testing period. The Company has not completed an ownership change analysis pursuant to IRC Section 382 for taxable years ended after December 31, 2007. If ownership changes within the meaning of IRC Section 382 are identified as having occurred subsequent to 2007, the amount of remaining tax attribute carry forwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company’s deferred tax assets associated with such tax attributes could be significantly reduced upon realization of an ownership change within the meaning of IRC §382. The Company follows the provisions of income tax guidance which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. The guidance requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company has not recognized any liability for uncertain tax positions as of December 31, 2019 and 2018. Following is a tabular reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2019 and 2018 (in thousands):
|  | 2019 |  |  | 2018 |
Unrecognized Tax Benefits – Beginning |  | $ | 2,216 |  |  | $ | 2,157 |
Gross increases – tax positions in prior period |  |  | — |  |  |  | 1 |
Gross decreases – tax positions in prior period |  |  | (18 | ) |  |  | (3 | )
Gross increase – current-period tax positions |  |  | 36 |  |  |  | 61 |
Unrecognized Tax Benefits – Ending |  | $ | 2,234 |  |  | $ | 2,216 |
The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal reduction in the deferred tax asset valuation allowance. The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months. The Company did not recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses as of December 31, 2019. The Company’s material tax jurisdictions are the United States and California. To its knowledge, the Company is currently not under examination by the Internal Revenue Service or any other taxing authority. The Company’s tax years for 2016 (federal) and 2015 (CA) remain open to examination by the taxing authority. While not open to examination, the tax attributes generated in tax years 1998 (federal) and 1997 (CA) and forward are subject to adjustment by the taxing authorities if utilized in tax years which are still open to examination.

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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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