INCOME TAXES

The Company has incurred losses since inception, which have generated United States net operating loss carryforwards and capital loss carryforwards of approximately $192.1 million for federal income tax purposes. These carryforwards are available to offset future taxable income and expire beginning in 2018 through 2035 for federal income tax purposes.

Utilization of the loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required under Internal Revenue Code Section 382 (“Section 382”), as well as similar state and foreign provisions. These ownership changes may limit the amount of loss carryforwards that can be utilized annually to offset future taxable income. In general, an “ownership change” as defined by Section 382 results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since the Company’s formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. If the Company has experienced an ownership change at any time since its formation, utilization of the loss carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the loss carryforwards before utilization. Further, until a study is completed and any limitation known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit under authoritative accounting guidance. Any loss carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance with no net effect on income tax expense or the effective tax rate.

The Company did not incur income tax expense in any of the years ended December 31, 2015, 2014, or 2013.

Deferred tax assets consist of the following:



	December 31,
	2015			2014
Net operating tax loss and capital loss carryforwards	$	65,783		$	60,380
Capitalized research and development costs	2,890			—
Research and development tax credits	950			534
Deferred compensation	106			168
Other accruals and reserves	1,092			670
Basis of intangible assets	4,197			4,610
Total deferred tax asset	75,018			66,362
Less valuation allowance	(75,018		)	(66,362		)
Net deferred tax asset	$	—		$	—

The net operating loss carryforwards and tax credit carryforwards resulted in a noncurrent deferred tax asset as of December 31, 2015 and 2014 of approximately $66.7 million and $60.9 million, respectively. In consideration of the Company’s accumulated losses and the uncertainty of its ability to utilize this deferred tax asset in the future, the Company has recorded a full valuation allowance as of such dates.

The Company follows the provisions of income tax guidance which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. The guidance requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company’s Federal income tax returns for 2012 to 2015 are still open and subject to audit. In addition, net operating losses and capital losses arising from prior years are also subject to examination at the time they are utilized in future years. Unrecognized tax benefits, if recognized, would have no effect on the Company’s effective tax rate. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2015, the Company has not recorded any interest and penalties related to uncertain tax positions. The Company does not foresee any material changes to unrecognized tax benefits within the next twelve months.

A reconciliation of the Company’s unrecognized tax benefits from January 1, 2015 through December 31, 2015 is provided in the following table (in thousands):



	Year Ended December 31,
	2015		2014
Beginning balance	$	2,822	$	2,795
Change in current period positions	56		34
Change in prior period positions	4		(7		)
Ending balance	$	2,882	$	2,822

The reconciliation of income taxes computed using the statutory United States income tax rate and the provision (benefit) for income taxes for continuing operations for the years ended December 31, 2015, 2014, and 2013, are as follows:



	Year Ended December 31,
	2015		2014		2013
Federal statutory tax rate	(34	)%	(34	)%	(34	)%
State taxes, net of federal benefit	—	%	(1	)%	(1	)%
Valuation allowance	45	%	22	%	37	%
Prior year true-ups	(1	)%	17	%	1	%
Revaluation of warrants	(6	)%	—	%	—	%
Permanent differences	(2	)%	(3	)%	(1	)%
Tax credits	(2	)%	(1	)%	(2	)%
Income tax expense	—	%	—	%	—	%

For the years ended December 31, 2015, 2014, and 2013, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses, capital losses, and other temporary differences for which no benefit was recorded.