Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10 – INCOME TAXES

Federal and State income tax expense is as follows:

	For the Years Ended December 31,
	2020			2019
Current
Federal	$	-		$	-
State		-			-
Total current		-			-
Deferred
Federal		(6,211	)		(1,614	)
State		(2,439	)		(930	)
Total deferred		(8,650	)		(2,544	)
Change in valuation allowance		8,650			2,544
Total income tax expense (benefit)	$	-		$	-

Deferred income taxes, if applicable, are provided for the differences between the basis of assets and liabilities for financial reporting and income tax purposes.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are as follows:

	As of December 31,
	2020			2019
Deferred tax assets:
Net operating loss carry forwards	$	19,371		$	3,806
Organization costs/legal fees		8			9
Stock option expense		443			111
Research and development credits		70			-
Operating lease liability		330			-
Restricted stock expense		-			238
RSU expense		1,796			12
Charitable contributions		2			2
Total deferred tax assets		22,020			4,178
Valuation allowance		(21,698	)		(4,176	)
Deferred tax assets, net of valuation allowance		322			2
Deferred tax liabilities:
Operating right-of-use asset		(322	)		-
Depreciation		-			(2	)
Total deferred tax liabilities		(322	)		(2	)
Deferred tax assets, net of valuation allowance and deferred tax liabilities	$	-		$	-

A reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax to income before provision for income taxes is as follows:

	For the Years Ended December 31,
	2020			2019
U.S. federal statutory rate		(21.0	)%		(21.0	)%
State taxes, net of federal benefit		(9.4	)%		(12.1	)%
Option expense		1.2	%		0.5	%
Other		1.9	%		0.1	%
True-up to prior years return		1.8	%		-	%
Change in valuation allowance		25.5	%		32.5	%
Effective tax rate		-	%		-	%

As of December 31, 2020 for U.S. federal and state income tax reporting purposes, the Company has approximately $63.7 million of unused net operating losses ("NOLs") available for carry forward to future years. The 2018 - 2020 federal NOLs may be carried forward indefinitely. The Company does not have the ability to carry any of these losses back. The New York state and city NOLs may be carried forward through the year 2040 and may be applied against future taxable income. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal and state income tax purposes when the Company does generate taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that could occur as the Company continues to issue additional shares of common stock pursuant to its capital raising plans. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.

On January 9, 2020, the Company completed the Merger. In connection with the Merger, the Company acquired NOL's from Proteon of $41.6 million. These NOLs were determined to be impaired by $12.4 million, with an annual limitation of $0.5 million on the remaining $29.2 million of NOLs. The general business credits of $3.6 million acquired in the merger were determined to be fully impaired.

As a result of the Merger, the company performed a study to review the application of IRC §382 to the Company. It was determined there was an ownership change as of January 9, 2020 and the Company's NOLs generated prior to January 9, 2020 would be limited. The annual limitation of the Company's NOL's after application of the IRC §382 are $1.4 million.

The Company remains subject to examination by tax authorities for tax years 2018 through 2020. The Company has identified its federal tax return and its state tax return in New York state and New York City as its "major" tax jurisdictions.

Based on a history of cumulative losses at the Company and the results of operations for the years ended December 31, 2020 and 2019, the Company determined that it is more likely than not that it will not realize benefits from the net deferred tax assets. The Company will not record income tax benefits in the financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets. As a result of the analysis, the Company determined that a full valuation allowance against the deferred tax assets was required. As of December 31, 2020 and 2019, the Company has recorded a valuation allowance of $21.7 million and $4.2 million, respectively.

As of December 31, 2020 and 2019, management does not believe that the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its consolidated financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.