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8. Income Taxes

12 Months Ended

Dec. 31, 2020

8. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets (liabilities) as of December 31, 2020 and 2019 are as follows (in thousands):

	December 31
	2020			2019

Net operating loss carryforwards	$	19,965		$	18,771
Net operating loss carryforwards of foreign subsidiaries		374			374
Depreciation expense		(99	)		(77	)
Stock-based compensation expense		53			36
Other		304			68
Net deferred tax assets		20,597			19,172
Valuation allowance for net deferred tax assets		(20,597	)		(19,172	)
Net deferred tax assets, net of allowance	$	–		$	–

Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the future benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the near to medium term. Management has considered these factors in determining the valuation allowance for 2020 and 2019.

The differences between the provision for income taxes and income taxes computed using the federal statutory rate for the years ended December 31, 2020 and 2019 are as follows (in thousands):

	2020			2019

Reconciliation of income tax benefit to statutory rate:
Income benefit at statutory rate	$	(1,369	)	$	938
State income taxes (benefit), net of federal income tax benefit		(121	)		1,066
Permanent differences		60			10
Change in valuation allowance		1,425			(2,030	)
Other		5			16
	$	–		$	–

At December 31, 2020, we had federal net operating loss carryforwards of approximately $86.9 million for income tax purposes that begin to expire in 2022 and are subject to the ownership change limitations under Internal Revenue Code Section 382.

- 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.

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