NOTE

. INCOME TAXES

Loss before provision for income taxes consisted of the following:

	Year Ending December 31,
(in thousands)	2019			2018			2017
United States	$	(9,652	)	$	(6,541	)	$	(7,400	)
International		—			—			—
	$	(9,652	)	$	(6,541	)	$	(7,400	)

The federal and state income tax provision is summarized as follows (in thousands):

	Year Ending December
(in thousands)	2019		2018		2017
Current
Federal	$	—	$	—	$	—
State		6		4		3
Other		—		—		—
Total current tax expense		6		4		3


Deferred
Federal		—		—		—
State		—		—		—
Other		—		—		—
Total deferred tax expense		—		—		—

Income tax provision	$	6	$	4	$	3

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, 2019

and

2018

are as follows:

	December 31
(in thousands)	2019			2018
Deferred tax assets:
Net operating losses	$	29,427		$	26,790
Accruals		222			446
Deferred revenue		—			10
Stock options		1,191			1,425
Other deferred tax assets		765			716
Property and equipment		6			9
Lease liability		301			—
Total deferred tax assets		31,912			29,396


Deferred tax liabilities:
Lease asset		(301	)		—
Total deferred tax liabilities		(301	)		—

Valuation allowance		(31,611	)		(29,396	)
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. The valuation allowance increased by

$2.2

million during

2019,

$0.9

million during

2018,

and decreased by

$10.1

million during

2017.

Net operating loss and tax credit carryforwards as of

December 31, 2019,

are as follows (in thousands):

			Expiration
	Amount		Years
Net operating losses, federal (Post December 31, 2017)	$	16,151	Do Not Expire
Net operating losses, federal (Pre January 1, 2018)	$	94,886	Beginning in 2024
Net operating losses, state	$	90,455	Beginning in 2028
Tax credits, federal	$	1,316	Beginning in 2026
Tax credits, state	$	325	Indefinite

Under Section

382

of the Internal Revenue Code of

1986,

as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than

50%

change (by value) in its equity ownership over a

three

year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research credits

may

be limited.

A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the below years are as follows (in thousands):

	Year ended December 31,
(in thousands)	2019		2018
Unrecognized benefit - beginning of period	$	974	$	931
Gross decreases - prior period tax positions		—		43
Unrecognized benefit - end of period	$	974	$	974

The entire amount of the unrecognized tax benefits would

not

impact our effective tax rate if recognized. 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

months. The Company files income tax returns in the United States and in California. Other jurisdictions are

not

significant. The tax years

2004

2019

remain open in the federal jurisdiction and

2006

2019

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 Ending December 31,
	2019			2018			2017
Statutory Rate		21.0	%		21.0	%		34.0	%
State Tax		3.1	%		(0.3	%)		0.2	%
Stock Based Compensation Expense		(3.7	%)		(4.3	%)		(2.1	%)
Change in Valuation Allowance		(23.0	%)		(13.0	%)		141.7	%
Other		(0.3	%)		(0.5	%)		0.7	%
Warrant/equity expenses		1.7	%		4.2	%		(0.5	%)
Impact of 162m		1.1	%		1.3	%		(4.6	%)
Tax Reform - Tax Rate Change		0.0	%		0.0	%		(169.5	%)
Impact of ASC 606		0.0	%		(8.5	%)		0.0	%
Total		(0.1	%)		(0.1	%)		(0.1	%)