For the years ended December 31, 2020 and 2019, the Company did not record a provision for income taxes, as the Company recorded a full valuation allowance against its deferred tax assets.

	December 31,
	2020			2019
Deferred tax assets:
Net operating loss carryforwards	$	84,827		$	81,406
Research and development credits		24,179			24,011
Deferred royalty obligation		36,265			30,460
Share-based compensation expense		2,497			9,581
Depreciation and amortization expense		1,044			-
Lease liability		136			7,127
Other		436			1,263
Total gross deferred tax assets		149,384			153,848
Deferred tax liabilities:
Depreciation and amortization		-			(1,612	)
Right-of-use lease asset		(136	)		(3,775	)
Valuation allowance		(149,248	)		(148,461	)
Net deferred tax assets	$	-		$	-

The difference between income taxes computed using the U.S. federal income effective tax rate and the provision for income taxes is as follows (in thousands):

	Year Ended December 31,
	2020			2019
Federal statutory rate	$	(8,278	)	$	(24,467	)
State tax benefit		(1,740	)		(3,825	)
Change in valuation allowance		787			102,583
Share-based compensation expense		9,072			7,532
State rate true-up		291			2,513
Establishment of NOLs and credits, post-Section 382 ownership change		-			(81,368	)
Research and development credits		(173	)		(2,599	)
Foreign rate differential		-			(62	)
Other permanent differences		41			(307	)
Provision for income taxes	$	-		$	-

As of December 31, 2020 and 2019, the Company established a full valuation allowance against its federal and state deferred tax assets due to the uncertainty surrounding the realization of such assets.

Pursuant to Section 382 and 383 of the IRC, utilization of the Company’s federal net operating loss (“NOL”) carryforwards and research and development credit carryforwards may be subject to annual limitations in the event of any significant changes in its ownership structure. These annual limitations may result in the expiration of net operating loss carryforwards and research and development credit carryforwards, unless utilized. The federal and state net operating loss carryforwards and federal and state research and development carryforwards acquired in the Tetraphase transaction will likely be subject to annual limitations under IRC Section 382 and 383, and more likely than not, will expire unused.

As of December 31, 2020, the Company had federal and state net operating loss carryforwards of $815.4 million and $670.8 million, respectively. In addition, the Company had estimated federal and California research and development credit carryforwards of $20.6 million and $20.4 million, respectively. Federal net operating loss carryforwards of $567.0 million, state net operating loss carryforwards of $622.6 million, federal research and development credit carryforwards of $20.6 million and Massachusetts research and development credit carryforwards of $3.5 million will begin to expire in 2026, unless utilized. Federal net operating loss carryforwards of $248.4 million, state net operating loss carryforwards of $48.2 million and California research and development credit carryforwards of $16.9 million will carry forward indefinitely, unless utilized.

There were no unrecognized tax benefits as of December 31, 2020 and 2019. The Company does not anticipate there will be a significant change in unrecognized tax benefits within the next 12 months.

The Company had no accrual for interest or penalties on the Company’s consolidated balance sheets as of December 31, 2020 or December 31, 2019, and has not recognized interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2020 and 2019.

The Company is subject to taxation in the U.S. and various state jurisdictions. The Company’s tax returns since inception are subject to examination by the U.S. and various state tax authorities. The Company is not currently undergoing a tax audit in any federal or state jurisdiction.