Income Taxes

The Company provides for income taxes using an asset and liability approach, where deferred income taxes are provided based upon enacted tax laws and rates applicable to periods in which the taxes become payable. The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of December 31, 2014, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2010.

(Loss) income from continuing operations before income taxes consists of the following components (in thousands):



	Year Ended December 31,
	2014			2013			2012
United States	$	(8,260	)	$	(167	)	$	1,811

During the years ended December 31, 2014 and 2013, the Company did not pay income taxes. During the year ended December 31, 2012, the Company paid income taxes of $0.1 million.

The components of the income tax provision from continuing operations, by classification, included in the accompanying Consolidated Statements of Operations is as follows (in thousands):



	Year Ended December 31,
	2014		2013		2012
Current:
Federal	$	—	$	—	$	6
State	2		—		—
	$	2	$	—	$	6



	Year Ended December 31,
	2014		2013		2012
Deferred:
Federal	$	9	$	—	$	—
State	1		—		—
	$	10	$	—	$	—

As part of the acquisition of Treehouse, the Company acquired indefinite lived intangible assets which will be amortized for income tax purposes and result in a net operating loss that has a finite carryforward period. The amortization also results in a deferred tax liability that will not reverse until some indefinite future period when the asset is either sold or written down due to impairment. As such, this deferred tax liability is not netted against the Company's deferred tax assets when determining the amount of valuation allowance that should be recorded.

Deferred tax assets and liabilities consist of the following (in thousands):



	Year Ended December 31,
	2014			2013
Deferred tax assets:
Net operating loss carryforwards	$	10,333		$	7,067
Accruals and reserves	1,755			1,632
Research and development credit carryforward	1,756			1,260
Other	73			73
Gross deferred tax assets	$	13,917		$	10,032

Deferred tax liabilities:
Goodwill	$	(10	)	$	—
Gross deferred tax liabilities	$	(10	)	$	—

Deferred tax assets	$	13,907		$	10,032
Valuation allowance	(13,917		)	(10,032		)
Net deferred tax liability	$	(10	)	$	—

Consistent with historical practice, the Company continues to fully reduce the federal and state net operating loss carryforwards and all other deferred tax assets by a valuation allowance. This is due to the conclusion that it is more likely than not that the Company would not recover the deferred tax assets because of uncertainties about the Company's ability to generate taxable income in the future.

The amount of federal net operating losses available to offset taxable income in 2015 and beyond as of December 31, 2014 is $29.2 million. Of this amount, utilization of approximately $16.4 million of the net operating losses are subject to an annual limitation due to a change in control as defined by Section 382 of the Internal Revenue Code that occurred in 2008. Additionally, approximately $1.2 million of the net operating loss carryforwards have not been recognized as they related to benefits associated with stock option exercises that have not reduced current taxes payable.

The federal net operating losses expire between 2023 and 2034. The Company's state net operating losses begin to expire in 2017. The net operating loss carryforwards stated above are reflective of various federal and state tax limitations. As of December 31, 2014 and December 31, 2013, the Company has federal research and development credit carryforwards of $1.5 million and $1.1 million, respectively, which expire between 2028 and 2034. These credits are presented net of the related unrecognized tax benefit.

Reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate on (loss) income from continuing operations is as follows:



	Year Ended December 31,
	2014		2013		2012
Federal statutory income tax rate	34.0	%	34.0	%	34.0	%
State, net of federal benefit	3.3	%	(61.8	)%	0.9	%
Stock compensation	—	%	1.7	%	—	%
Research and development credit	6.0	%	287.8	%	—	%
Return to provision and true-ups	0.5	%	(3.9	)%	—	%
Change in valuation allowance	(43.8	)%	(249.3	)%	(35.9	)%
Other	(0.1	)%	(8.5	)%	1.3	%
Effective income tax rate	(0.1	)%	—	%	0.3	%

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



	Year Ended December 31,
	2014		2013			2012
Unrecognized tax benefits at beginning of period	$	415	$	344		$	1,192
Gross increases to current period tax positions	128		161			—
Gross increases (decreases) to prior period tax positions	37		(90		)	(848		)
Unrecognized tax benefits at end of period	$	580	$	415		$	344

The Company classifies interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of its income tax expense. No interest or penalties were recognized during the years ended December 31, 2014, 2013 and 2012, respectively. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. There are no unrecognized tax benefits that would affect the actual tax rate at December 31, 2014, as a full valuation is recorded on the deferred tax assets.