Income Taxes

The components of the Company’s overall deferred tax assets and liabilities are as follows (in thousands):



	June 30,
	2014			2013
Deferred tax assets
Stock-based compensation	$	4,135		$	5,202
Accrued expenses	1,779			1,403
Inventories	639			825
Depreciation and amortization	266			221
Other	238			301
Research and development credit carryforwards	3,825			3,299
Net operating loss carryforwards	57,817			53,560
Total deferred tax assets	68,699			64,811
Valuation allowance	(68,699		)	(64,811		)
Net deferred tax assets	$	—		$	—

The Company has established valuation allowances to fully offset its deferred tax assets due to the uncertainty about the Company’s ability to generate the future taxable income necessary to realize these deferred assets, particularly in light of the Company’s historical losses. The future use of net operating loss carryforwards is dependent on the Company attaining profitable operations, and may be limited in any one year under Internal Revenue Code Section 382 due to significant ownership changes, as defined under such Section, as a result of the Company’s equity financings. A summary of the valuation allowances are as follows (in thousands):



Balance at June 30, 2012	$	56,465
Additions	8,346
Balance at June 30, 2013	64,811
Additions	3,888
Balance at June 30, 2014	$	68,699

As of June 30, 2014 and 2013, the Company had federal tax NOL carryforwards of approximately $159,237 and $150,381, respectively. These NOL carryforwards are available to offset taxable income through 2034 and begin to expire in 2018. The Company also had various state NOL carryforwards available to offset future state taxable income. These state NOL carryforwards typically have the same expirations as the Company’s federal tax NOL carryforwards.

Our federal net operating losses at June 30, 2014 do not include $26,983 of income tax deductions in excess of previously recorded tax benefits related to stock compensation. These additional tax deductions are not included in the net operating losses referenced above since the related tax benefit will not be recognized until the deductions reduce our income tax payable. The tax benefit of these excess deductions will be reflected as a credit to additional paid in capital when recognized. Accordingly, our deferred tax assets are reported net of the excess tax deductions for stock compensation.

As of June 30, 2014 and 2013, the Company had approximately $3,624 and $3,171 of federal research and development credit carryforwards, respectively. As of June 30, 2014 and 2013, the Company had approximately $949 and $749 of state research and development credit carryforwards. The federal and state research and development credit carryforwards will begin to expire in 2026.

As required by FASB ASC Topic 740, “Income Taxes,” 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 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. The Company recorded a liability relating to unrecognized tax benefits of $458 and $392 at June 30, 2014 and 2013, respectively. Due to the Company having a full valuation allowance, this liability has been netted against the deferred tax asset. The Company recognizes interest and penalties related to uncertain tax provisions as part of the provision for income taxes. The Company has not currently reserved for any interest or penalties for such reserves due to the Company being in an NOL position. The Company does not expect to recognize any benefits from the unrecognized tax benefits within the next twelve months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



Balance at July 1, 2012	$	381
Increases related to prior year tax positions	3
Increases related to current year tax positions	8
Balance at June 30, 2013	392
Increases related to prior year tax positions	28
Increases related to current year tax positions	38
Balance at June 30, 2014	$	458

The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company is potentially subject to income tax examinations by tax authorities for the tax years ended June 30, 2014, 2013, 2012, 2011, and 2010. The Company is not currently under examination by any taxing jurisdiction.