Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8. Income Taxes

Pre-tax loss consisted of the following (in thousands):  

	Year Ended December 31,
	2021			2020
U.S.	$	(820	)	$	(851	)
Foreign		(1,422	)		(1,038	)
Total	$	(2,242	)	$	(1,889	)

Income tax expense consisted of the following (in thousands):

	Year Ended December 31,
	2021		2020
Current taxes:
Federal	$	—	$	—
State and local		—		—
Foreign		—		—
Current taxes		—		—
Deferred taxes:
Federal		—		—
State and local		—		—
Foreign		—		—
Deferred taxes		—		—
Total	$	—	$	—

Net deferred tax assets and liabilities consisted of the following (in thousands):  

	December 31,
	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	19,230		$	18,141
Research and development credit carryforwards		2,747			3,058
Stock-based compensation		382			449
Accrued expenses and reserves		58			137
Depreciation and amortization		—			38
Deferred revenue		107			253
Right of use liability		318			357
Other		7			23
Gross deferred tax assets		22,849			22,456
Less: valuation allowance		(22,544	)		(22,121	)
Net deferred tax assets		305			335
Deferred tax liabilities:
Depreciation and amortization		(16	)		—
Right of use asset		(289	)		(328	)
Net deferred tax assets	$	—		$	7

Net deferred tax assets and liabilities were recorded as follows (in thousands):  

	December 31,
	2021		2020
Deferred tax assets, non-current	$	—	$	7
Deferred tax liability, non-current		—		—
Net deferred tax assets	$	—	$	7

As of December 31, 2021, our deferred tax assets were primarily the result of U.S. net operating loss, research and development credit carryforwards and stock-based compensation expense. We have applied a full valuation allowance against the U.S. deferred tax assets in the U.S. and foreign jurisdictions.

We use judgment as to the appropriate weighting of all available evidence when assessing the need for the establishment or the release of valuation allowances. As part of this analysis, we examine all available evidence on a jurisdiction-by-jurisdiction basis and weigh the positive and negative information when determining the need for full or partial valuation allowances. The evidence considered for each jurisdiction includes, among other items, (i) the historical levels of income or loss over a range of time periods that extends beyond the two years presented, (ii) the historical sources of income and losses, (iii) the expectations and risk associated with underlying estimates of future taxable income, (iv) the expectations and risk associated with new product offerings and uncertainties with the timing of future taxable income, and (v) prudent and feasible tax planning strategies. Based on the analysis conducted as of December 31, 2021, we determined that we would maintain a full valuation allowance against our U.S. gross deferred tax assets.

The provision for income taxes differed from the amount of expected income tax expense determined by applying the applicable U.S. statutory federal income tax rate to pre-tax loss as follows (in thousands, except percentages):  

	Year Ended December 31,
	2021					2020
U.S. Federal tax benefit at statutory rates	$	(471	)	21.0	%	$	(397	)	21.0	%
Impact of:
Tax credits		—		—			109		(5.8	)
State income tax		(83	)	3.7			(53	)	2.8
International operations		28		(1.3	)		(6	)	0.3
Stock-based compensation		93		(4.2	)		317		(16.8	)
Valuation allowance		429		(19.1	)		(1,224	)	64.8
Expiration of tax attributes		311		(13.9	)		1,330		(70.4	)
PPP loan forgiveness		(333	)	14.9			—		—
Other, net		26		(1.1	)		(76	)	4.0
Tax expense and effective tax rate	$	—		0.0	%	$	—		0.0	%

At December 31, 2021, we had approximately $83.7 million of federal and $12.8 million of state net operating loss carryforwards, which have begun to expire. Of the federal net operating loss carryforwards, approximately $62.7 million will expire by 2037 and $21.0 million are indefinite. We also have approximately $2.7 million of tax credit carryforwards, which have begun to expire. Use of these carryforwards may subject us to an annual limitation due to Section 382 of the U.S. Internal Revenue Code that restricts the ability of a corporation that undergoes an ownership change to use its carryforwards. Under the applicable tax rules, an ownership change occurs if holders of more than five percent of an issuer’s outstanding common stock, collectively, increase their ownership percentage by more than 50 percentage points over a rolling three-year period. We have performed analyses of possible ownership changes in the past, which included consideration of third-party studies, and do not believe that an ownership change of more than 50 percentage points has occurred.

We have evaluated all the material income tax positions taken on our income tax filings to various tax authorities, and we determined that we did not have unrealized tax benefits related to uncertain tax positions recorded at December 31, 2021 and 2020.

Because of net operating loss and tax credit carryforwards, substantially all of our tax years remain open and subject to examination.