Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14. Income Taxes

No

provision for income taxes has been recorded due to the net operating losses incurred from inception to date, for which

no

benefit has been recorded.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on

March 27, 2020

in the United States. The CARES Act includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits. The Company is evaluating the impact, if any, the CARES Act and other economic stimulus measures will have on the Company's financials and disclosures.  

The Company's effective tax rate is

0%

for the years ended

December 31, 2020

and

2019.

A reconciliation of the U.S. statutory income tax rate to the Company's effective tax rate is as follows:

	Year Ended
	December 31,
	2020			2019
Income tax benefit at statutory rate		(21	)%		(21	)%
State income taxes, net of federal benefit		(3	)%		(4	)%
Change in valuation allowance		20	%		(39	)%
Debt restructuring		0	%		6	%
Limitation on net operating loss and credit carryovers		0	%		56	%
Other		4	%		2	%
Effective tax rate		0	%		0	%

The components of the Company's net deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2020			2019
Deferred tax assets:
Net operating loss carryforwards	$	20,891		$	16,688
Capitalized start up costs		2,866			3,225
Research and development credits		631			527
Accruals and reserves		773			532
Fixed assets and depreciation		291			128
Total deferred tax assets		25,452			21,100
Deferred tax liabilities:
Valuation allowance		(25,452	)		(21,100	)
Net deferred tax assets	$	-		$	-

The Company has recorded a full valuation allowance for its deferred tax assets based on its past losses and the uncertainty regarding the ability to project future taxable income. The valuation allowance increased by approximately

$4,352,000

during the year ended

December 31, 2020

and decreased by approximately

$16,506,000

during the year ended

December 31, 2019.

As of

December 31, 2020,

the Company has net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately

$95,395,000

and

$20,239,000,

respectively. The federal NOLs do

not

expire and the state NOLs will begin to expire in the year

2028.

The Company also has California research and development tax credits of approximately

$817,000.

The credits have

no

expiration date.

Utilization of the NOL and research and development credit carryforwards

may

be subject to a substantial annual limitation due to ownership changes that have occurred previously or that could occur in the future, as provided by Section

382

of the Internal Revenue Code of

1986,

as well as similar state provisions. Ownership changes

may

limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section

382,

results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than

50

percentage points over a

three

-year period. The Company experienced a change of control in

November 2019,

resulting in the expiration of a portion of the NOL and research and development credit carryforwards before utilization. Subsequent ownership changes could further impact the limitation in future years. A full valuation allowance has been provided against the Company's NOL carryforwards and research and development credit carryforwards and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be

no

net impact to the consolidated balance sheets or the consolidated statements of operations if an adjustment were required.

As of

December 31, 2020,

the Company had

not

accrued any interest or penalties related to uncertain tax positions. 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Year Ended
	December 31,
	2020		2019
Balance at the beginning of the year	$	223	$	450
Additions (deletions) based upon tax positions related to the current year		22		(227	)
Balance at the end of the year	$	245	$	223

If the ending balance of

$245,000

of unrecognized tax benefits as of

December 31, 2020

were recognized,

none

of the recognition would affect the income tax rate. The Company does

not

anticipate any material change in its unrecognized tax benefits over the next

twelve

months. The unrecognized tax benefits

may

change during the next year for items that arise in the ordinary course of business.

The Company files U.S. federal and state income tax returns with varying statutes of limitations. All tax years since inception remain open to examination due to the carryover of unused net operating losses and tax credits.