Note 8—Income Taxes

Domestic and foreign loss before income taxes, consists of the following for the years ended December 31:

(in thousands)	2020			2019
Domestic	$	(15,865	)	$	(18,114	)
Foreign		38			8
Loss before income taxes	$	(15,827	)	$	(18,106	)

The components of income tax expense consist of the following for the years ended December 31:

(in thousands)	2020			2019
Current:
United States and state	$	—		$	—
Foreign, net		(9	)		(8	)
Deferred:
United States and state		—			—
Foreign		—			—
Total income tax expense	$	(9	)	$	(8	)

Actual income tax expense differs from statutory federal income tax expense as follows for the years ended December 31:

(in thousands)	2020			2019
Statutory federal income tax benefit	$	3,324		$	3,802
State tax benefit, net of federal taxes		94			46
Foreign tax		(1	)		1
Foreign deferred exchange rate adjustments		1,027			(59	)
Dissolution of foreign subsidiary		(11,401	)		—
Nondeductible/nontaxable items		34			(272	)
Other		(255	)		(113	)
Valuation allowance (increase) decrease		7,169			(3,413	)
Total income tax expense	$	(9	)	$	(8	)

Deferred taxes consist of the following as of December 31:

(in thousands)	2020			2019
Deferred tax assets:
Noncurrent:
Accrued leave	$	61		$	51
Other accrued expenses		—			—
Stock based compensation		293			449
Net operating loss carryforward		37,665			44,572
Other		11			69
Intangibles		751			809
R&D credit carryforward		531			531
Total deferred tax assets		39,312			46,481
Less: valuation allowance		(39,312	)		(46,481	)
Total	$	—		$	—

As of December 31, 2020, the Company had federal net operating loss (“NOLs”) carryforwards of approximately $168.2 million and $30.9 million of state NOL carryforwards. Approximately $120.1 million of federal NOL carryforwards will expire between 2024 and 2037. Pursuant to the Tax Cuts and Jobs Act of 2017, NOLs generated after 2017 of approximately $48.1 million do not expire. The expiration of state NOL carryforwards will vary by jurisdiction. In addition, future utilization of NOL carryforwards in the U.S. may be subject to certain limitations under Section 382 of the Internal Revenue Code. As of December 31, 2020, the Company no longer has tax loss carryforwards in the Commonwealth of Australia due to the dissolution of the subsidiary in November 2020.

The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a valuation allowance for U.S. and foreign deferred tax assets due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred tax assets in the accompanying consolidated financial statements. For the years ended December 31, 2020, and 2019, the valuation allowance decreased by $7.2 million and increased by $3.4 million, respectively. The current year decrease was primarily due to the dissolution of the Australian subsidiary and corresponding elimination of their net operating loss carryforwards previously subject to a valuation allowance.

During 2018, 2019 and 2020, the Company believes it experienced an ownership change as defined in Section 382 of the Internal Revenue Code which will limit the ability to utilize the Company’s net operating losses (NOLs). The Company may have experienced additional ownership changes in earlier years further limiting the NOL carry-forwards that may be utilized. The Company has not yet completed a formal Section 382 analysis. The general limitation rules allow the Company to utilize its NOLs subject to an annual limitation that is determined by multiplying the federal long-term tax-exempt rate by the Company’s value immediately before the ownership change.

The accounting guidance related to uncertain tax positions prescribes a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company had no material uncertain tax positions as of December 31, 2020 or 2019.

The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense. At December 31, 2020 and 2019, the Company recorded no accrued interest or penalties related to uncertain tax positions.

The tax years ended December 31, 2017 through December 31, 2020 remain open to examination by the Internal Revenue Service and for the various states where the Company is subject to taxation. Additionally, the returns of the Company’s Australian (through November 2020) and Irish subsidiary are subject to examination by tax authorities of those jurisdictions for the tax years ended and subsequent to June 30, 2015 and December 31, 2015, respectively.