XML 35 R15.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes The Company is subject to an ownership change pursuant to IRC Section 382, which occurred in February 2017, which significantly limits its ability to use its net operating loss carryforwards and tax credits against its 2017 taxable income. Due to historical losses, there was no income tax expense for the years ended December 31, 2016, and 2015. The provision for income taxes (all current) consists of the following (in thousands):
|  | Year Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Federal |  | $ | 1,649 |  |  | $ | — |  |  | $ | — |
State |  |  | 13 |  |  |  | — |  |  |  | — |
Total |  | $ | 1,662 |  |  | $ | — |  |  | $ | — |
Reconciliation between the tax provision computed at the federal statutory income tax rate of 34% and the Company’s actual effective income tax rate is as follows:
|  | Year Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Federal tax at statutory rate |  |  | 34 | % |  |  | 34 | % |  |  | 34 | %
Warrant valuation |  |  | — |  |  |  | 7 | % |  |  | 29 | %
Stock compensation and other permanent differences |  |  | 6 | % |  |  | — |  |  | (1) | %
Tax credits |  | (4) | % |  |  | 2 | % |  | (14) | %
Impact of 2017 Tax Act on change in deferred |  |  | 128 | % |  |  | — |  |  |  | — |
Section 382 limitations |  |  | 868 | % |  |  | — |  |  |  | — |
Valuation allowance |  | (1,022) | % |  | (43) | % |  | (48) | %
Total |  |  | 10 | % |  |  | 0 | % |  |  | 0 | %
The significant components of net deferred tax assets at December 31, 2017 and 2016 were as follows (in thousands):
|  | December 31, |
|  | 2017 |  |  | 2016 |
Capitalized research and development expenses |  | $ | 26,367 |  |  | $ | 53,557 |
Net operating loss carryforwards |  |  | 4,701 |  |  |  | 123,672 |
Research and development and other credit carryforwards |  |  | 12,225 |  |  |  | 25,297 |
Stock compensation |  |  | 3,680 |  |  |  | 7,099 |
Deferred revenue |  |  | 3,928 |  |  |  | 6,577 |
Other |  |  | 883 |  |  |  | 1,724 |
Total deferred tax assets |  |  | 51,784 |  |  |  | 217,926 |
Valuation allowance |  |  | (51,784 | ) |  |  | (217,926 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
The net (decrease) increase in the valuation allowance was $(166.1) million, $8.2 million, and $19.6 million for the years ended December 31, 2017, 2016, and 2015, respectively. Accounting standards provide for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes the Company’s four sources of taxable income including historical operating performance and the repeal of net operating loss carryback, the Company has determined that total deferred tax assets should be fully offset by a valuation allowance. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. The Company has calculated the impact of the Tax Act in its year end income tax provision in accordance with its understanding of the Tax Act and guidance available as of the date of this filing. In December 2017, SAB 118 was issued to address the application of U.S. GAAP in situations when a registrant does not have all the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, additional work may be necessary for a more detailed analysis of the Company's deferred tax assets and liabilities. Any subsequent adjustment to the provisional amounts will be recorded in 2018 when the analysis is complete. Under ASC 740, Accounting for Income Taxes, the enactment of the Tax Act also requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. Consequently, the Company accounted for a provisional estimated reduction of the deferred tax assets from $72.7 million to $51.8 million with a corresponding decrease to the Company’s valuation allowance. The Company expects the new law to significantly reduce its tax rate in future periods, and its tax footnote reflects the effects of a federal tax rate reduction net of its valuation allowance. As of January 1, 2017, the Company adopted ASU 2016-09 and as a result recognized a stock compensation excess windfall, net of operating loss carryforwards that were converted into deferred tax net operating losses of $1.8 million, with a corresponding increase in valuation allowance of $1.8 million. Based on an analysis under Section 382 of the Internal Revenue Code (which subjects the amount of pre-change NOLs and certain other pre-change tax attributes that can be utilized to annual limitations), the Company experienced an ownership change in February 2017 which substantially limits the future use of its pre-change Net Operating Losses ("NOLs") and certain other pre-change tax attributes per year. The Company has excluded NOLs of $119.8 million and tax credit carryforwards of $15.4 million that will expire as a result of the annual limitations in these deferred tax assets as of December 31, 2017. To the extent that the Company does not utilize its carry-forwards within the applicable statutory carryforward periods, either because of Section 382 limitations or the lack of sufficient taxable income, the carryforwards will expire unused. As of December 31, 2017, the Company had federal net operating loss carry-forwards of approximately $13.6 million and state net operating loss carry-forwards of approximately $27.3 million to offset future taxable income. The net operating loss carryforwards begin to expire in 2036 for federal and 2028 for state purposes. California net operating losses of $24.3 million, $41.2 million, and $22.4 million, expired in the years 2017, 2016, and 2015, respectively. The Company had federal orphan credit of $1.0 million which if not utilized will expire in 2037. The Company also had $19.8 million of California research and development tax credits which have no expiration date. The Company files income tax returns in the U.S. federal jurisdiction, California, Maryland and Texas. The Company’s federal income tax returns for tax years 2014 and beyond remain subject to examination by the Internal Revenue Service. The Company’s state income tax returns for tax years 2013 and beyond remain subject to examination by state tax authorities. In addition, all of the net operating losses and research and development credit carry-forwards that may be used in future years are still subject to adjustment. The following table summarizes the Company's activity related to its unrecognized tax benefits (in thousands):
|  | Year Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance at January 1 |  | $ | 8,625 |  |  | $ | 9,666 |  |  | $ | 5,503 |
Increase related to current year tax position |  |  | 581 |  |  |  | 592 |  |  |  | 2,687 |
(Decrease) increase related to prior year tax position |  |  | (3,705 | ) |  |  | (1,633 | ) |  |  | 1,476 |
Balance at December 31 |  | $ | 5,501 |  |  | $ | 8,625 |  |  | $ | 9,666 |
As of December 31, 2017, the Company had a total of $4.5 million of net unrecognized tax benefits, none of which would affect the effective tax rate upon realization. The Company currently has a full valuation allowance against its U.S. net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Through December 31, 2017, the Company has not accrued interest or penalties related to uncertain tax positions.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration