Income Taxes

Income (loss) before income taxes for U.S and non-U.S operations was as follows:



	Year Ended December 31,
	2016			2015			2014
U.S. loss	$	(19,302	)	$	(16,235	)	$	(18,078	)
Non U.S. loss	(264		)	(105		)	(1,842		)
	$	(19,566	)	$	(16,340	)	$	(19,920	)

A reconciliation of income taxes computed using the federal statutory rate to the taxes reported in the consolidated statements of operations is as follows:



	Year Ended December 31,
(In thousands)	2016			2015			2014
Loss before income taxes	$	(19,566	)	$	(16,340	)	$	(19,920	)
Federal statutory rate	34		%	34		%	34		%
Taxes computed at federal statutory rate	(6,652		)	(5,556		)	(6,773		)
State taxes (net of federal benefit)	(1,016		)	(392		)	(463		)
Warrants	—			(118		)	(10		)
Nondeductible stock compensation	549			543			48
State Rate Change	(614		)	—			—
Michigan NOL benefit	—			—			—
Net operating loss expirations	—			—			655
Write-off of Section 382 limited NOL’s	—			—			67,781
Write-off of Section 383 limited R&D credits	—			—			1,600
Other	56			57			352
Adjustment to prior year filed returns	—			(5,203		)	—
Change in valuation allowance	7,677			10,669			(63,190		)
Reported income taxes	$	—		$	—		$	—

Deferred tax assets consist of the following:



	Year Ended December 31,
(In thousands)	2016			2015
Net operating loss carryforwards	$	10,343		$	13,998
Employee benefits and stock compensation	2,896			2,485
Research and development costs	13,659			4,903
Fixed assets	700			453
Intangible assets	—			(477		)
Inventory reserve	1,898			510
Other, net	196			143
Total deferred tax assets	29,692			22,015
Valuation allowance	(29,692		)	(22,015		)
Net deferred tax assets	$	—		$	—

In 2014, the Company underwent a change in control as defined by Section 382 of the Internal Revenue Code. A change in control is generally defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three year period. This change in control resulted in substantial limitations being placed on certain tax attributes including net operating losses and tax credit carryforwards. The limitations are computed based upon several variable factors including the value of the Company on the date of the change in control. The projected annual limitation on the use of the net operating losses that existed prior to September 17, 2014 is $0.8 million. As a result, a significant portion of the net operating losses and tax credit carryforwards will expire prior to their utilization, regardless of the level of future profitability. Accordingly, the Company reduced its net operating losses and tax credit carryforwards in 2014 (with a corresponding adjustment to the valuation allowance) to reflect the amount available to offset future profits. There was not a change of control in 2015 or 2016.

As of December 31, 2016, the Company’s U.S. federal, and state tax net operating loss carryforwards available to offset future profits, after considering the aforementioned annual Section 382 limit, are $28.6 million and $11.5 million, respectively. These net operating loss carryforwards will expire between 2017 and 2036.

In accordance with the accounting guidance for income taxes, the Company estimated whether recoverability of its deferred tax assets is “more likely than not,” based on forecasts of taxable income in the related tax jurisdictions. In this estimate, the Company uses historical results, projected future operating results based upon approved business plans, eligible carry forward periods, tax planning opportunities and other relevant considerations. Based on these factors, including historical losses incurred by the Company, a full valuation allowance for the deferred tax assets, including the deferred tax assets for the aforementioned net operating losses and credits, has been provided since they are not more likely than not to be realized. If the Company achieves profitability, these deferred tax assets may be available to offset future income taxes. The change in the valuation allowance was an increase of $7.7 million and $10.7 million for the years ended December 31, 2016 and 2015, respectively.

The Company assesses uncertain tax positions in accordance with the guidance for accounting for uncertain tax positions. This pronouncement prescribes a recognition threshold and measurement methodology for recording within the financial statements uncertain tax positions taken, or expected to be taken, in the Company’s income tax returns. To the extent the uncertain tax positions do not meet the “more likely than not” threshold, the Company has derecognized such positions. To the extent the uncertain tax positions meet the “more likely than not” threshold, the Company has measured and recorded the highest probable benefit, and have established appropriate reserves for benefits that exceed the amount likely to be sustained upon examination. The Company currently has not recorded any uncertain tax positions and does not anticipate that the unrecognized tax benefits will significantly increase or decrease within the next twelve months.

The Company files U.S. federal, Alabama, California, Colorado, Illinois, Massachusetts, Michigan, New Jersey, Tennessee and Texas income tax returns. Due to the Company’s net operating loss carryforwards, Federal income tax returns from incorporation are still subject to examination. Michigan tax returns for the year ended December 31, 2012 and forward are subject to examination. Massachusetts tax returns for the year ended December 31, 2014 and forward are subject to examination.