Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 11. Income Taxes

The income tax provision consists of the following ($ in thousands):

	For the years ended December 31,
	2019			2018
Federal
Current				$	-
Deferred		3,862			(517	)
Decrease in valuation allowance		(3,862	)		517
State and local
Current					-
Deferred		(12,115	)		(92	)
Decrease in valuation allowance		12,115			92
Change in valuation Allowance		8,253			610
Income Tax Provision (Benefit)	$	-		$	-

The following is a reconciliation of the U.S. federal statutory rate to the effective income tax rates for the years ended December 31, 2019 and 2018:

	For the years ended December 31,
	2019			2018
U.S. Statutory Federal Rate		21	%		21	%
Federal tax rate change		-%			-%
State Taxes, Net of Federal Tax Benefit		13.62	%		3.91	%
Other Permanent Differences		.01	%		1.76	%
State rate change in effect		216.40	%		-%
Fair Value of Warrants		-%			8.99	%
Decrease due to true up of State NOL		(19.10	)%		-%
Decrease due to change in Federal NOL and other true ups		(34.64	)%		(0.36	)%
Change in Valuation Allowance		(197.29	)%		(35.30	)%
Income Tax Provision (Benefit)

At December 31, 2019 and 2018, the Company's deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following ($ in thousands):

	As of December 31,
	2019			2018
Deferred tax assets:
Net-operating loss carryforward	$	15,443		$	12,163
Stock based compensation		8,104			5,444
Patent portfolio and other		15,004			11,201
Total Deferred Tax assets		38,551			28,808
Valuation allowance		(35,084	)		(26,831	)
Deferred Tax Asset, Net of Allowance	$	3,467		$	1,977
Deferred tax liability:
Fair value adjustment of investment		(3,467	)		(1,977	)
		-			-

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The Company has determined that, based on objective evidence currently available, it is more likely than not, the deferred tax assets will not be realized in future periods. Accordingly, the Company has provided a full allowance for the deferred tax assets at December 31, 2019 and 2018. As of December 31, 2019, the change in valuation allowance is approximately $8.253 million.

Under the Act, corporations are no longer subject to the Alternative Minimum Tax (AMT), effective for taxable years beginning after Dec. 31, 2017. However, where a corporation has an AMT credit from a prior taxable year, the corporation will continue to carry the credit forward and may use a portion of it as a refundable credit in any taxable year beginning after 2017 but before 2022. Generally, 50 percent of the corporation's AMT Credit carried forward to one of these years will be claimable and refundable for that year. In tax years beginning in 2021, however, the entire remaining carryforward generally will be refundable. The Company has an AMT credit carryforward of $40,842 as of December, 31, 2019. The Company will request the following refunds for the tax years ended December 31, 2020 through December 31, 2021:

Tax Year Ended:	AMT Credit Refund Request
December 31, 2020		20,421
December 31, 2021		20,421
	$	40,842

As of December 31, 2019, the Company has approximately $41 million federal and $20 million of city net operating loss carryovers ("NOLs"), which expire from 2022 through 2037, and $14 million of federal and city NOLs with indefinite utilization. The Company has approximately $35 million of state NOLs, which expire from 2022 through 2039.

The NOL carryover may be subject to limitation under Internal Revenue Code section 382, should there be a greater than 50% ownership change as determined under the regulations. No study has been performed since the last known ownership change of September 10, 2013.

As required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits." A liability is recognized (or amount of NOL or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise's potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.

If applicable, interest costs and penalties related to unrecognized tax benefits are required to be calculated and would be classified as interest and penalties in general and administrative expense in the statement of operations. As of December 31, 2019 and 2018, no liability for unrecognized tax benefit was required to be reported. No interest or penalties were recorded during the years ended December 31, 2019 and 2018. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. The Company files U.S. federal and state income tax returns. As of December 31, 2019, the Company's U.S. and state tax returns (Delaware, New York, New York City, Pennsylvania, Virginia, and Texas) remain subject to examination by tax authorities beginning with the tax return filed for the year ended December 31, 2016, however, there were no audits pending in any of the above-mentioned jurisdictions during 2019. The Company believes that its income tax positions would be sustained upon an audit and does not anticipate any adjustments that would result in material changes to its consolidated financial position.