Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

The components of the pretax loss from operations for the years ended December 31, 2019 and 2018 are as follows (in thousands)

	Years Ended December 31,
	2019			2018
U.S. Domestic		(10,029	)		(11,908	)
Foreign		—			—
Pretax loss from operations		(10,029	)		(11,908	)

The provision for income taxes from continuing operations for the years ended December 31, 2019 and 2018 are as follows:

	Years Ended December 31,
	2019		2018
Current
Federal		—		—
State		—		—
Foreign		—		—
Total current		—		—
Deferred
Federal		—		—
State		—		—
Foreign		—		—
Total deferred		—		—
Total income tax expense (benefit)		—		—

Tax Rate Reconciliation

A reconciliation on income taxes to the amount computed by applying the statutory federal income tax rate to the net loss is summarized as follows (in thousands):

	Years Ended December 31,
	2019			2018
Income tax benefit at statutory rates		(2,106	)		(2,501	)
State income tax, net of federal benefit		(337	)		(331	)
Permanent items		5			8
Stock-based compensation		27			697
Tax Rate Adjustment – TCJA		—			7,758
Change in rate		—			941
Stock Compensation DTA Adjustment		—			5,794
Change in Valuation Allowance		2,408			(12,673	)
RTP and Other		3			307
Income tax expense (benefit)		—			—

Significant components of the Company's deferred tax assets as of December 31, 2019 and 2018 are shown below. A valuation allowance has been recognized to offset the net deferred tax assets as realization of such deferred tax assets have not met the more likely than not threshold.

	December 31,
	2019			2018
Deferred tax assets:
Deferred Rent		—			4
ASC 842 Leases		173			—
Federal and State Net Operating Loss Carryovers		15,492			12,964
Stock Based Compensation		230			448
Compensation Accruals and Other		245			187
Total deferred tax assets		16,140			13,603
Valuation Allowance for deferred tax assets		(15,958	)		(13,550	)
Deferred tax assets, net of valuation allowance		182			53
Deferred tax liabilities:
Depreciation		(8	)		(53	)
ASC 842 Assets		(174	)		—
Total deferred tax liabilities		(182	)		(53	)
		—			—

At December 31, 2019, the Company has federal and state net operating loss carryforwards of approximately $61.3 million and $47.8 million, respectively, not considering the IRC Section 382 annual limitation discussed below. The federal loss carryforwards begin to expire in 2023, unless previously utilized. In addition, the Company has approximately $16.8 million of the total $61.3 million of net operating losses that do not expire, as these losses were generated after the law change introduced as part of the Tax Cuts and Jobs Act. 023.

Additionally, the utilization of the net operating loss carryforwards could be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state tax provisions due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has not conducted an analysis of an ownership change under section 382. To the extent that a study is completed and an ownership change is deemed to occur, the Company's net operating losses could be limited.

The following table summarizes the activity related to the Company's gross unrecognized tax benefits at the beginning and end of the years ended December 31, 2019 and 2018 (in thousands):

	Years Ended December 31,
	2019		2018
Gross unrecognized tax benefits at the beginning of the year		—		—
Increases related to current year positions		—		—
Increases related to prior year positions		—		—
Decreases related to prior year positions		—		—
Expiration of unrecognized tax benefits		—		—
Gross unrecognized tax benefits at the end of the year		—		—

None of the unrecognized tax benefits would affect the Company's annual effective tax rate.

The Company does not expect a significant change in unrecognized tax benefits over the next 12 months.

The Company files income tax returns in the United States and Arizona with general statutes of limitations of 3 and 4 years, respectively. Due to net operating losses incurred, the Company's tax returns from inception to date are subject to examination by taxing authorities. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. As of December 31, 2019, the Company had no interest or penalties accrued for uncertain tax positions.