Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.1
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Taxes  
Income Taxes

10. Income Taxes

As of December 31, 2019, we had federal net operating loss carryforwards of approximately $244.8 million that expire at various dates through 2037 and approximately $23.5 million which do not expire but are subject to 80% taxable income limitations. As of December 31, 2019, we had federal research and development tax credits of approximately $8.5 million that expire at various dates through 2039. We also had net operating loss carryforwards for California income tax purposes of approximately $108.2 million that expire at various dates through 2039 and state research and development tax credits of approximately $9.1 million which do not expire.

Current federal and California tax laws include substantial restrictions on the utilization of net operating losses and tax credits in the event of an ownership change of a corporation under Internal Revenue Code Section 382 and 383.

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 and operating loss and credit carryforwards. Significant components of our deferred tax assets are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

    

2019

    

2018

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

63,910

 

$

62,863

Research credit carryforwards

 

 

15,683

 

 

15,886

Other, net

 

 

1,303

 

 

1,321

Total deferred tax assets

 

 

80,896

 

 

80,070

Deferred tax liabilities:

 

 

 

 

 

 

Other, net

 

 

(84)

 

 

 —

Total deferred tax liabilities

 

 

(84)

 

 

 —

Valuation allowance

 

 

(80,812)

 

 

(80,070)

Net deferred tax assets

 

$

 —

 

$

 —

 

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 our ability to generate sufficient taxable income within the carryforward period. Because of our recent history of operating losses, our 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.

 

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $0.7 million during 2019 and increased by approximately $0.2 million during 2018.

The provision for income taxes consists of state minimum taxes due. The effective tax rate of our provision (benefit) for income taxes differs from the federal statutory rate as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Years Ended December 31, 

 

    

2019

    

2018

Computed at 21%

 

$

(3,451)

 

$

(1,879)

State taxes

 

 

(146)

 

 

(167)

Change in valuation allowance

 

 

768

 

 

197

Other

 

 

56

 

 

121

Revaluation of warrant liability

 

 

(238)

 

 

(30)

Research and development credits

 

 

(54)

 

 

144

Tax attributes expirations

 

 

2,698

 

 

975

Impact of IRC 162m

 

 

367

 

 

639

Total

 

$

 —

 

$

 —

 

We had no unrecognized tax benefits or any amounts accrued for interest and penalties for the three years ended December 31, 2019. Our policy is to recognize interest and penalties related to income taxes as a component of income tax expense. We do not expect the amount of unrecognized tax benefits will materially change in the next twelve months.

We file tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are subject to the U.S. federal and state income tax examination by tax authorities for such years 2000 through 2019, due to net operating losses that are being carried forward for tax purposes.