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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES

14. INCOME TAXES

 

The components of loss before income taxes are summarized below:

 

               
   Year Ended Decmber 31, 
   2021   2020 
Loss before income taxes          
U.S. operations  $(2,183)  $(2,981)
Loss before income taxes  $(2,183)  $(2,981)

 

The components of the income tax provision were as follows:

 

               
   Year Ended Decmber 31, 
   2021   2020 
Current        
State  $(16)  $5 
Total income tax provision  $(16)  $5 

 

A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate, as computed on loss before taxes, is as follows:

 

               
   Year Ended December 31, 
   2021   2020 
Federal income tax at statutory rate  $(459)  $(626)
State and local income tax, net   (108)   (120)
Other permanent items   (379)   5 
Expired foreign tax credits   178    — 
Valuation allowance   611    748 
True-up   143    — 
Other   (2)    (2)
Total  $(16)  $5 

 

The Company’s provision for income taxes reflects an effective tax rate on loss before income taxes of 0.7% in 2021, as compared to (0.2)% in 2020.

 

The net deferred income tax asset (liability) was comprised of the following:

 

               
   December 31, 
   2021   2020 
Noncurrent deferred income taxes          
Total assets  $82   $68 
Total liabilities   (82)   (68)
Net noncurrent deferred income tax asset   —    — 
Net deferred income tax asset  $—   $— 

 

The tax effect of temporary differences between GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:

 

               
   December 31, 
   2021   2020 
Deferred tax assets          
U.S. net operating loss carry forward  $2,600   $1,367 
Non-deductible reserves   1,390    1,609 
Tax credits   4,454    4,631 
Fixed assets   24    15 
Intangibles   1,738    1,959 
Valuation allowance   (10,124)   (9,513)
Net deferred tax assets   82    68 
Deferred tax liabilities          
Fixed assets   (45)   (28)
Other   (37)   (40)
Net deferred tax liabilities   (82)   (68)
Deferred asset, net  $—   $— 

 

 

 

The assessment of the amount of value assigned to our deferred tax assets under the applicable accounting rules is judgmental.  We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods. We do not believe that it is more likely than not that future taxable income will be sufficient to allow us to recover any of the value assigned to our deferred tax assets. Accordingly, we have provided for a valuation allowance of the Company’s foreign tax credits as we do not anticipate generating sufficient foreign source income. In addition, we have provided for a full valuation allowance on the domestic deferred tax assets as the combined effect of future domestic source income and the future reversals of future tax assets and liabilities will likely be insufficient to realize the full benefits of the assets.

 

As of December 31, 2021, the Company has a net operating loss carryforward of $10.3 million. The Company has $10.1 million of deferred tax assets on which it is taking a full valuation allowance. The total valuation allowance recorded is $10.1 million, representing an increase of $611 from December 31, 2020. The Company has approximately $4.4 million of foreign tax credits for which it has provided a full valuation allowance and $39 of research and development credits which expire in 2032.

 

Section 382 of the Internal Revenue Code of 1986, as amended imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset federal taxable income and federal tax liabilities when a corporation has undergone significant changes in its ownership. If the Company experiences an ownership change as a result of future events, the use of tax attributes may be limited.

 

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

 

The tax years subject to examination by major tax jurisdiction include the years 2015 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2016 and forward for the Canadian jurisdiction.