Income Taxes |
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | 9. Income Taxes Loss before income taxes consisted of the following components:
The company has not recognized any current or deferred tax expense on its US and Foreign pre-tax losses for the years ended December 31, 2020 and 2019. The differences between the Company’s effective tax rate and the U.S. federal statutory tax rate were as follows:
Significant components of the Company’s deferred tax assets and liabilities were as follows:
The Company’s net operating loss carryforwards at December 31, 2020 are $110.5 million and $78.7 million for federal and state income tax purposes, respectively. Federal and state net operating loss carryforwards are available to offset future taxable income, if any, and will begin to expire in 2026 to 2028, respectively. The federal NOL’s generated in tax years 2018 and forward will carryforward indefinitely. The ability of the Company to utilize net operating losses carryforwards to reduce future domestic taxable income and domestic income tax is subject to various limitations under the Internal Revenue Code (Code). The utilization of such carryforwards may be limited upon the occurrence of certain ownership changes during any three-year period resulting in an aggregate change of more than 50% in beneficial ownership. The Company previously determined an ownership change occurred on May 9, 2019 as a result of the merger discussed in Note 5. The resulting limitation significantly reduced the Company’s ability to utilize its net operating loss and credit carryovers before the expire. Accordingly, in 2019 the Company reduced its deferred tax assets for the net operating loss and credit carryforwards that were expected to expire unused with a corresponding offset to the valuation allowance recorded against such assets. Future ownership changes under Section 382 may also limit the Company’s ability to fully utilize any remaining tax benefits. The Company does not believe that it has experienced another more-than 50% ownership change since the date of the merger. Future equity transactions by the Company, or by 5% of stockholders, could cause a more-than‑50% ownership change and, therefore, trigger a limitation on the annual utilization of net operating losses. The Company has generated federal and state income tax losses in all years since its inception. Accordingly, management has determined that significant negative evidence precludes the Company from recording a net deferred tax asset for financial statement purposes as it is more likely than not that its deferred tax assets will not be realized. The Company files income tax returns in the U.S. federal jurisdiction, state of California and certain foreign jurisdictions. As of December 31, 2020, the Company is no longer subject to U.S. federal income tax examinations for tax years ended on or before December 31, 2014 or to California state income tax examinations for tax years ended on or before December 31, 2013. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward. The Company did not have a liability for unrecognized tax benefits at December 31, 2020 and 2019. The Company’s policy is to classify interest and penalties on uncertain tax positions as a component of tax expense. As of December 31, 2020, the Company has no accrued interest or penalties related to uncertain tax positions. |