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Note 18 - Income Taxes
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 18. INCOME TAXES

 

For the years ended December 31, 2021, 2020 and 2019, loss before provision for income taxes consisted of the following (in thousands):

 

  

Year Ended December 31,

 
  

2021

  

2020

  

2019

 

United States

 $(5,824

)

 $(11,034

)

 $(9,652

)

International

  —   —   — 
  $(5,824

)

 $(11,034

)

 $(9,652

)

 

For the years ended December 31, 2021, 2020 and 2019, the federal and state income tax provision is summarized as follows (in thousands):

 

  

Year Ended December 31,

 
  

2021

  

2020

  

2019

 

Current

            

Federal

 $—  $—  $— 

State

  —   5   6 

Other

  —   —   — 

Total current tax expense

  —   5   6 
             
             

Deferred

            

Federal

  —   —   — 

State

  —   —   — 

Other

  —   —   — 

Total deferred tax expense

  —   —   — 
             

Income tax provision

 $—  $5  $6 

 

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

 

The tax effects of significant items comprising the Company's deferred taxes as of December 31, 2021 and 2020 are as follows (in thousands):

 

  

Year Ended December 31,

 
  

2021

  

2020

 

Deferred tax assets:

        

Net operating losses

 $33,455  $31,115 

Stock options

  884   790 

Research and development credits

  641   641 

Accruals

  306   267 

Operating lease liabilities

  19   109 

Property and equipment

  10   2 

Other deferred tax assets

  376   81 

Total deferred tax assets

  35,691   33,005 
         
         

Deferred tax liabilities:

        

Operating lease right-of-use assets

  (19)  (108

)

Total deferred tax liabilities

  (19)  (108

)

         

Valuation allowance

  (35,672)  (32,897

)

Net deferred taxes

 $—  $— 

 

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act was enacted. The CARES Act changed net loss carryforward and back provisions and the business interest expenses limitation. The Company has evaluated the impact of the CARES Act and determined that none of the changes would result in a material cash benefit to the Company.

 

The valuation allowance increased by $2.8 million, $1.3 million and $2.2 million during the years ended December 31, 2021, 2020 and 2019, respectively.

 

Net operating loss and tax credit carryforwards as of December 31, 2021, are as follows (in thousands):

 

      

Expiration

 
  

Amount

  

Years

 

Net operating losses, federal (Post December 31, 2017)

 $30,989  

Does Not Expire

 

Net operating losses, federal (Pre January 1, 2018)

 $94,886  

Beginning in 2024

 

Net operating losses, state

 $106,784  

Beginning in 2028

 

Tax credits, federal

 $1,321  

Beginning in 2026

 

Tax credits, state

 $325  

Indefinite

 

 

A reconciliation of the beginning and ending balance of unrecognized income tax benefits follows (in thousands): 

 

  

Year Ended December 31,

 
  

2021

  

2020

 

Unrecognized benefit - beginning of period

 $974  $974 

Change during the period

  —   — 

Unrecognized benefit - end of period

 $974  $974 

 

The entire amount of the unrecognized tax benefits would not impact our effective tax rate if recognized. The balance of unrecognized tax benefits increased as a result of a comprehensive analysis to substantiate the company's research credits. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense and were immaterial. We do not anticipate that total unrecognized tax benefits will significantly change in the next 12 months. The Company files income tax returns in the United States and in California. Other jurisdictions are not significant. The tax years 2004 - 2021 remain open in the federal jurisdiction and 2006 - 2021 for California. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

 

The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows:

 

  

Year Ended December 31,

 
  

2021

  

2020

  

2019

 

Statutory rate

  21.0

%

  21.0

%

  21.0

%

State tax

  11.2

%

  3.2

%

  3.1

%

Change in valuation allowance

  (47.7

%)

  (11.7

%)

  (23.0

%)

Warrant/equity expenses

  16.7

%

  (10.3

%)

  1.7

%

Stock-based compensation expense

  (1.1

%)

  (4.0

%)

  (3.7

%)

Other

  (0.1

%)

  1.7

%

  (0.3

%)

Impact of 162m

  —%  —

%

  1.1

%

Total

  0.0

%

  (0.1

%)

  (0.1

%)