Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.23.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 9—INCOME TAXES

The provision for income taxes consists of the following for the years ended December 31, 2022 and 2021 (in thousands):

 

 

 

2022

 

 

2021

 

Current U.S.

 

$

30

 

 

$

25

 

International

 

 

30

 

 

 

—

 

Deferred U.S.

 

 

—

 

 

 

—

 

International

 

 

—

 

 

 

—

 

 

 

$

60

 

 

$

25

 

 

Deferred tax assets consisted of the following as of December 31, 2022 and 2021 (in thousands):

 

 

2022

 

 

2021

 

Net operating loss carryforward

 

$

17,978

 

 

$

17,019

 

General business tax credit

 

 

11,837

 

 

 

11,393

 

Stock options

 

 

6,149

 

 

 

5,955

 

Charitable contribution

 

 

37

 

 

 

36

 

Accrued expenses

 

 

380

 

 

 

292

 

Unearned revenue

 

 

2,472

 

 

 

2,393

 

Allowance for bad debt

 

 

442

 

 

 

167

 

Unrealized gain on foreign exchange translation and others

 

 

789

 

 

 

133

 

Section 174 Expenditures

 

 

292

 

 

 

—

 

Unrealized gain/ (loss) on LT investment

 

 

33

 

 

 

 

Other

 

 

4,130

 

 

 

3,188

 

Total gross deferred tax assets

 

 

44,539

 

 

 

40,576

 

Less valuation allowance

 

 

(44,112

)

 

 

(40,147

)

Net deferred tax assets

 

$

427

 

 

$

429

 

 

Deferred tax liabilities consisted of the following as of December 31, 2022 and 2021 (in thousands):

 

 

 

2022

 

 

2021

 

Unrealized gain on available-for-sale securities

 

$

(426

)

 

$

(427

)

Other

 

 

(1

)

 

 

(2

)

Total deferred tax liabilities

 

$

(427

)

 

$

(429

)

 

A valuation allowance for the net deferred tax assets is recorded when it is more likely than not that the Company will not realize these assets through future operations. The valuation allowance increased by approximately $4.0 million and $2.7 million for the years ended December 31, 2022 and December 31, 2021, respectively.

As of December 31, 2022 and December 31, 2021, the Company had net operating loss carryforwards for federal income tax purposes of approximately $66.4 million and $62.6 million, respectively, available to offset future federal taxable income, if any. Net operating loss generated in 2017 and prior years expire in various years through 2037. Net operating losses for federal income tax purpose generated in 2018 and after will be available indefinitely. In addition, the Company had net operating loss carryforwards for state income tax purposes of approximately $61.2 million and $57.8 million respectively, which expire in various years through 2042. As of December 31, 2022 and December 31, 2021, the Company has general business tax credits of $11.8 million and $11.4 million, respectively, for federal income tax purposes. The tax credits are available to offset future tax liabilities, if any, through 2042. The Company’s utilization of net operating loss carryforwards could be subject to an annual limitation as a result of certain past or future events, such as stock sales or other equity events constituting a “change in ownership” under the provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations could result in the expiration of net operating loss carryforwards and tax credits before they can be utilized.

The income tax provision differs from that computed using the statutory federal tax rate of 21% due to the following factors (in thousands):

 

 

 

2022

 

 

2021

 

Tax benefit at statutory federal rate

 

$

(2,242

)

 

$

(3,359

)

State taxes, net of federal tax benefit

 

 

(453

)

 

 

(275

)

Increase (decreases) in valuation allowance

 

 

3,964

 

 

 

2,722

 

Permanent items

 

 

(384

)

 

 

1,337

 

General business tax credit

 

 

(450

)

 

 

(902

)

Other

 

 

(375

)

 

 

502

 

 

 

$

60

 

 

$

25

 

 

As of December 31, 2022 and December 31, 2021, the Company had no unrecognized tax benefits or position which, in the opinion of management, would be reversed if challenged by a taxing authority. In the event the Company is assessed interest or penalties, such amounts would be classified as income tax expense. As of December 31, 2022, all federal tax returns since 2019 are subject to audit. The expiration of the state returns varies by state, but the 2018 and subsequent years’ returns generally are subject to audit. No tax returns are currently being examined by taxing authorities.