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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | 10. INCOME TAXES The Company recorded a deferred tax liability of $0.1 million as of December 31, 2018, related to the acquisition of IPR&D through the Merger. This deferred tax liability was recorded to account for the book versus tax basis difference related to the IPR&D intangible asset. This deferred tax liability was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the indefinite life of this IPR&D. As such, this deferred tax liability cannot be used to offset the valuation allowance. As a result of the write-off of the IPR&D in 2019, the related deferred tax liability of $0.1 million was eliminated and is included in income tax benefit in the consolidated statements of operations for the year ended December 31, 2019. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s net deferred tax assets relate primarily to its net operating loss carryforwards and stock based compensation, offset by property and equipment and intangible assets. With the exception of the IPR&D, the Company has recorded a full valuation allowance to offset the net deferred tax assets, because it is not more likely than not that the Company will realize future benefits associated with these net deferred tax assets at December 31, 2019 and 2018. At December 31, 2019 and 2018, the Company had net deferred tax assets of $10.7 million and $8.7 million, respectively, against which a valuation allowance of $10.7 million and $8.8 million, respectively, had been recorded. The valuation allowance excluded the deferred tax liability for IPR&D assigned as an indefinite life intangible asset for book purposes, also known as a “naked credit” in the amount of $0.1 million at December 31, 2018. The increase in the valuation allowance for the year ended December 31, 2019 is $1.9 million, resulting from additional net operating losses generated in the year. The deferred tax liabilities associated with the book versus tax basis difference of intangible assets are the result of an asset step-up pursuant to the Merger. Significant components of the Company’s deferred tax assets at December 31, 2019 and 2018 are as follows:
|  | Dollars in Thousands
|  | 2019 |  | 2018
Deferred tax assets: |  |  |  |  |  |
Net operating loss and credit carryforwards |  | $ | 13,989 |  | $ | 10,202
Stock-based compensation |  |  | 292 |  |  | 192
Other |  |  | 666 |  |  | 426
Gross deferred tax assets |  |  | 14,947 |  |  | 10,820
Deferred tax liabilities: |  |  |  |  |  |
Property and equipment |  |  | (95) |  |  | 42
Intangible assets |  |  | (4,148) |  |  | (2,084)
IPR&D intangible assets |  |  | — |  |  | (70)
Gross deferred tax liabilities |  |  | (4,243) |  |  | (2,112)
Net deferred tax assets |  |  | 10,704 |  |  | 8,708
Less valuation allowance |  |  | (10,704) |  |  | (8,778)
Net deferred liability |  | $ | — |  | $ | (70)
The Company’s provision for income taxes for the year ended December 31, 2019 and December 31, 2018 relates to income taxes in states and other jurisdictions and differs from the amounts determined by applying the statutory federal income tax rate to the loss before income taxes for the following reasons:
|  | Dollars in Thousands
|  | 2019 |  | 2018
Benefit at federal rate |  | $ | (2,796) |  | $ | (3,354)
Increase (decrease) resulting from: |  |  |  |  |  |
State income taxes—net of federal benefit |  |  | (517) |  |  | (633)
Miscellaneous permanent differences |  |  | 78 |  |  | —
Warrant liability revaluation |  |  | (104) |  |  | (479)
Impairment of goodwill |  |  | — |  |  | 1,170
Impairment of in-process research and development |  |  | (70) |  |  | —
Other |  |  | — |  |  | 14
Change in valuation allowance |  |  | 3,339 |  |  | 3,003
Total income tax benefit |  | $ | (70) |  | $ | (279)
The income tax expense consists of the following at December 31, 2019 and 2018.
|  | Dollars in Thousands
|  | 2019 |  | 2018
Federal: |  |  |  |  |  |
Current |  | $ | — |  | $ | —
Deferred |  |  | (70) |  |  | (279)
Total Federal |  | $ | (70) |  | $ | (279)
State: |  |  |  |  |  |
Current |  | $ | — |  | $ | —
Deferred |  |  | — |  |  | —
Total State |  | $ | — |  | $ | —
Foreign: |  |  |  |  |  |
Current |  | $ | — |  | $ | —
Deferred |  |  | — |  |  | —
Total Foreign |  | $ | — |  | $ | —
Total Tax Provision |  | $ | (70) |  | $ | (279)
The Company had approximately $61 million and $39 million of available gross federal and state net operating loss (“NOL”) carryforwards as of December 31, 2019 and 2018, respectively. B eginning in 2018, under the Act, federal loss carryforwards have an unlimited carryforward period, however such losses can only offset 80% of taxable income in any one year. Included in the total NOLs for 2019 are $31 million of federal losses that fall under these new rules. Section 382 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the NOL carryforwards that the Company may utilize in any one year may be limited. The Company reduced its tax attributes (NOLs and tax credits) and generated a limitation on utilization of such attributes resulting from the Merger. At December 31, 2019 and 2018, and as a result of the limitations under Section 382 of the Internal Revenue Code, the Company had a total of unused federal tax net operating loss carryforwards with expiration dates as follows:
|  | Dollars in Thousands
|  | 2019 |  | 2018
2036 |  | $ | 13,470 |  | $ | 13,470
2037 |  |  | 3,441 |  |  | 3,441
Unlimited life |  |  | 42,100 |  |  | 21,138
Total Federal |  | $ | 59,011 |  | $ | 38,049
The Company has adopted guidance on accounting for uncertainty in income taxes which clarified the accounting for income taxes by prescribing the minimum threshold a tax position is required to meet before being recognized in the financial statements as well as guidance on de-recognition, measurement, classification and disclosure of tax positions. There are no material uncertain tax positions that would require recognition in the financial statements. The Company is obligated to file income tax returns in the U.S. federal jurisdiction and various U.S. states. Since the Company had losses in the past, all prior years that generated NOLs are open and subject to audit examination in relation to the NOL generated from those years. Our evaluation of uncertain tax positions was performed for the tax years ended December 31, 2014 and forward.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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