Income Taxes

Our net loss before income tax was subject to tax in the following jurisdictions for the following periods (in thousands):



	Year Ended December 31,
	2015			2014			2013
United States	$	(51,779	)	$	(47,482	)	$	(32,524	)
Foreign	(244		)	(185		)	(194		)
	$	(52,023	)	$	(47,667	)	$	(32,718	)

Our rate reconciliation consists of the following:



	Year Ended December 31,
	2015		2014		2013
Federal statutory rate	35.0	%	35.0	%	35.0	%
State tax (net of federal benefit)	5.8	%	5.4	%	5.3	%
Research and development credits	3.0	%	3.8	%	3.9	%
Warrants/purchase rights liabilities	0.0	%	2.2	%	(1.6	)%
Foreign net operating losses	(0.2	)%	(0.4	)%	(1.2	)%
382 limited net operating losses and credits	0.0	%	0.0	%	(0.6	)%
Change in valuation allowance	(43.3	)%	(45.1	)%	(40.0	)%
Other	(0.3	)%	(0.9	)%	(0.8	)%
Effective tax rate	0.0	%	0.0	%	0.0	%

Significant components of our deferred tax assets are shown below. A valuation allowance has been established as realization of such deferred tax assets has not met the more likely-than-not threshold requirement. If our judgment changes and it is determined that we will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense.



	December 31,
	2015			2014
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	53,218		$	33,517
Research and development tax credits	4,903			3,269
Stock compensation	2,000			879
Foreign net operating loss carryforwards	333			377
Other, net	1,823			1,715
Total deferred tax assets	62,277			39,757
Less valuation allowance	(62,277		)	(39,757		)
	$	—		$	—

We have a history of incurring net operating losses each year since inception that is due to our history as a development stage company with no realized revenues from our planned principal operations. These cumulative operating losses provide significant negative evidence in the determination of whether or not we will be able to realize our deferred tax assets such as our net operating losses and other favorable temporary differences. As a result, we have maintained a full valuation allowance against the entire balance of deferred tax assets since the date of inception. The valuation allowance increased by $22.5 million and $21.5 million for the years ended December 31, 2015 and 2014, respectively.

As of December 31, 2015, we had available net operating loss, or NOL, carryforwards of approximately $133.0 million and $132.6 million for federal and state income tax purposes, respectively. The federal and state NOLs begin to expire in 2023 and 2016, respectively. As of December 31, 2015, we have federal and state research and development tax credits available for income tax purposes of approximately $3.3 million and $2.3 million, respectively. The federal research and development credits begin to expire in 2023 and the state research and development tax credits do not expire. These carryforwards are net of the Section 382 and 383 limitations discussed below.

As of December 31, 2015, we also have available NOLs from our Chinese subsidiary of approximately $1.3 million. The Chinese NOLs begin to expire in 2016.

Sections 382 and 383 of the Internal Revenue Code (the IRC) limit a company’s ability to utilize certain net operating losses and tax credit carryforwards in the event of a cumulative change in ownership in excess of 50%, as defined. We experienced changes in ownership, as defined in Section 382, in February 2012 and in December 2013. As a result, the deferred tax asset associated with our federal and state net operating loss carryforwards and federal and state research credits have been reduced based on the Section 382 limitations. The amount of the reduction in our deferred tax assets is based on the estimated amount of the NOL carryforwards and federal and state research credits we believe cannot be used based on the estimated amount of our Section 382 annual limitation. We have reduced our deferred tax assets by $23.5 million and have estimated that approximately $58.7 million and $51.1 million of our federal and state NOLs, respectively, cannot be used in future years as a result of this change in ownership. Additionally, we have estimated that approximately $2.2 million and $1.6 million of our federal and state research credits, respectively, cannot be used in future years. We have not experienced any additional changes as defined in Section 382 through December 31, 2015. If additional Section 382 changes occur, limitations against the utilization of net operating losses and credits could further impact our future cash flows, but would not impact our 2015 consolidated financial statements, due to the existence of a full valuation allowance against our deferred tax assets.

Approximately $2.3 million of both the federal and state NOL carryforwards reflected above relate to excess tax deductions for stock compensation, the income tax benefit of which will be recorded as additional paid-in capital if and when realized.

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):



	Year Ended December 31,
	2015		2014
Balance at beginning of year	$	938	$	407
Additions based on tax positions related to the current year	484		533
Changes for prior period tax positions	—		(2		)
Balance at end of year	$	1,422	$	938

We do not anticipate any significant changes in the amount of unrecognized tax benefits over the next twelve months. Due to the full valuation allowance we have on our net deferred tax asset balance, there are no unrecognized tax benefits that would impact the effective tax rate if recognized.

We are subject to U.S. federal, California and various other states and Chinese income taxes. We are no longer subject to U.S. federal or state income tax examination by tax authorities for tax returns filed for the years ended on or before December 31, 2010. However, to the extent allowed by law, the taxing authorities may have the right to examine the period from 2003 through 2015 where NOLs were generated and carried forward, and make adjustments to the amount of the NOL carryforward. We are not currently under examination by any federal or state jurisdictions.