Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.3.1.900
Income Taxes
12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 10—INCOME TAXES

For the years ended December 31, 2015, the Company did not record an income tax provision due to net operating losses and the inability to record an income tax benefit. For the year ended December 31, 2014, the Company recorded an income tax benefit of $0.2 million, which was related to state minimum taxes recorded in the prior year. For the year ended December 31, 2013, the Company recorded an income tax provision of $0.2 million, which was related to state minimum taxes.

A reconciliation of income taxes at the statutory federal income tax rate to net income taxes included in the accompanying statements of operations is as follows (in thousands):

 

 

 

2015

 

 

2014

 

 

2013

 

U.S. federal taxes (benefit) at statutory rate

 

$

14,900

 

 

$

(7,407

)

 

$

(9,592

)

State federal income tax benefit

 

 

(448

)

 

 

(571

)

 

 

(1,794

)

Unutilized (utilized) net operating losses

 

 

(11,287

)

 

 

9,809

 

 

 

9,747

 

Stock-based compensation

 

 

898

 

 

 

730

 

 

 

486

 

Research and development credits

 

 

(3,135

)

 

 

(952

)

 

 

(1,416

)

Tax assets not benefited

 

 

4,732

 

 

 

1,322

 

 

 

1,926

 

Nondeductible warrant expense

 

 

(5,703

)

 

 

(3,177

)

 

 

790

 

Other

 

 

43

 

 

 

44

 

 

 

55

 

Total

 

$

 

 

$

(202

)

 

$

202

 

 

The tax effects of temporary differences that give rise to significant components of the net deferred tax assets are as follows (in thousands):

 

 

 

December 31,

 

 

 

2015

 

 

2014

 

Capitalized start-up costs

 

$

103

 

 

$

128

 

Net operating loss carryforwards

 

 

47,725

 

 

 

33,049

 

Research and development credits

 

 

11,354

 

 

 

6,616

 

Deferred stock compensation

 

 

5,130

 

 

 

3,933

 

Deferred revenue

 

 

0

 

 

 

26,151

 

Other (accruals, reserves, depreciation)

 

 

359

 

 

 

1,019

 

Total deferred tax assets

 

 

64,671

 

 

 

70,896

 

Less: Valuation allowance

 

 

(64,671

)

 

 

(70,896

)

Net deferred tax assets

 

$

 

 

$

 

 

At December 31, 2015, the Company had federal and state net operating loss carryforwards of approximately $124 million and $95 million, respectively, available to offset future taxable income. The Company’s federal and state net operating loss carryforwards will begin to expire in 2021 and 2016, respectively, if not used before such time to offset future taxable income or tax liabilities. For federal and state income tax purposes, a portion of the Company’s net operating loss carryforward is subject to certain limitations on annual utilization in case of changes in ownership, as defined by federal and state tax laws. The annual limitation may result in the expiration of the net operating loss before utilization.

The net operating loss deferred tax asset balance as of December 31, 2015 includes $0.5 million of excess tax benefits from stock option exercises. Stockholders’ equity (deficit) will be credited if and when such excess tax benefits are ultimately realized.

At December 31, 2015, the Company had federal research and development tax credits of approximately $8.4 million, which expire in the year beginning 2022, and state research and development tax credits of approximately $5.5 million, which have no expiration date.

The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. The valuation allowance decreased by $6.2 million for the year ended December 31, 2015 and increased by $7.8 million and by $11.6 million for the years ended December 31, 2014 and 2013, respectively.

The Company adopted ASC Topic 740-10-50 “Accounting for Uncertainty of Income Taxes” (“ASC Topic 740-10-50”), on January 1, 2007. The Company does not believe that its unrecognized tax benefits will change over the next twelve months.

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits:

 

(in thousands)

 

2015

 

 

2014

 

Gross unrecognized tax benefits at January 1,

 

$

1,100

 

 

$

1,100

 

Gross increases (decreases) related to prior year tax positions

 

 

 

 

 

 

Gross increases (decreases) related to current year tax

   positions

 

 

 

 

 

 

Settlements

 

 

 

 

 

 

Expiration of the statute of limitations for the assessment of

   taxes

 

 

 

 

 

 

Gross unrecognized tax benefits at December 31,

 

$

1,100

 

 

$

1,100

 

 

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2015 and 2014, the Company had no accrued interest or penalties due to the Company’s net operating losses available to offset any tax adjustment. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state tax examinations since its inception. As a result of the Company’s net operating loss carryforwards, all of its tax years are subject to federal and state tax examination.