XML 36 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
Due to our net losses for the years ended December 31, 2017 and 2016, and since we have recorded a full valuation allowance against deferred tax assets, there was no provision or benefit for income taxes recorded. The components of income/(loss) before income tax provision (benefit) as of December 31, 2017 and 2016 are as follows (in thousands):
|  | 2017 |  |  | 2016
U.S. | $ | (21,915) |  | $ | (20,387)
Foreign |  | (771) |  |  | (1,659)
| $ | (22,686) |  | $ | (22,046)
A reconciliation of the total income tax provision tax rate to the statutory federal income tax rate of 34% for the years ended December 31, 2017 and 2016 is as follows:
|  | 2017 |  |  | 2016 |
Income tax expense (benefit) at federal statutory rate |  |  | (34.0 | )% |  |  | (34.0 | )%
Income tax expense (benefit) at state statutory rate |  |  | (3.9 | )% |  |  | (3.4 | )%
Change in valuation allowance |  |  | (172.4 | )% |  |  | 16.8 | %
Change in state rate |  |  | (0.8 | )% |  |  | (0.1 | )%
Permanent interest adjustments |  |  | 0.2 | % |  |  | 0.2 | %
Stock compensation |  |  | 3.0 | % |  |  | 12.7 | %
Research credit |  |  | (1.1 | )% |  |  | (1.4 | )%
Foreign rate differential |  |  | 202.1 | % |  |  | 0.8 | %
NOLs expiring and adjustments to NOL |  |  | 7.0 | % |  |  | 6.0 | %
Other, net |  |  | (0.2 | )% |  |  | 2.5 | %
|  |  | (0.0 | )% |  |  | 0.0 | %
The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities as of December 31, 2017 and 2016 are as follows (in thousands):
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowances and reserves |  | $ | 140 |  |  | $ | 573 |
Accrued expenses |  |  | 154 |  |  |  | 701 |
Stock based compensation |  |  | 1,065 |  |  |  | 1,947 |
Net operating loss carryforwards |  |  | 87,426 |  |  |  | 125,182 |
Income tax credit carryforwards |  |  | 8,587 |  |  |  | 7,764 |
Property and equipment, principally due to differences in depreciation |  |  | 514 |  |  |  | 675 |
Other, net |  |  | 45 |  |  |  | 48 |
|  |  | 97,931 |  |  |  | 136,890 |
Valuation allowance |  |  | (97,089 | ) |  |  | (134,873 | )
Total deferred tax assets, net of allowance |  |  | 842 |  |  |  | 2,017 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Intangibles assets |  |  | (842 | ) |  |  | (2,017 | )
Total deferred tax liability |  |  | (842 | ) |  |  | (2,017 | )
Net deferred tax assets (liability) |  | $ | — |  |  | $ | — |
We have established a valuation allowance against our net deferred tax assets due to the uncertainty surrounding the realization of such assets. We periodically evaluate the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. We have recorded a full valuation allowance of $97.1 million as of December 31, 2017 as we do not believe it is more likely than not our net deferred tax assets will be realized. We decreased our valuation allowance by approximately $37.8 million during the year ended December 31, 2017. At December 31, 2017, we had federal, and state tax loss carry forwards of approximately $365.9 million, and $147.4 million. The federal and state net operating loss carry forwards begin to expire in 2019 and 2028, respectively, if unused. At December 31, 2017, we had federal and state tax credit carry forwards of approximately $5.1 million and $4.5 million, respectively, after reduction for uncertain tax positions. The Company has not performed a formal research and development credit study with respect to these credits. The federal credits will begin to expire in 2018, if unused, and the state credits carry forward indefinitely. Pursuant to the Internal Revenue Code (“IRC”) of 1986, as amended, specifically IRC §382 and IRC §383, our ability to use net operating loss and R&D tax credit carry forwards (“tax attribute carry forwards”) to offset future taxable income is limited if we experience a cumulative change in ownership of more than 50% within a three-year testing period. We have not completed an ownership change analysis pursuant to IRC Section 382 for taxable years ended after December 31, 2007. If ownership changes within the meaning of IRC Section 382 are identified as having occurred subsequent to 2007, the amount of remaining tax attribute carry forwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, our deferred tax assets associated with such tax attributes could be significantly reduced upon realization of an ownership change within the meaning of IRC §382. In December 2017, the Tax Cuts and Jobs Act (the "2017 Act) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. The 2017 Act also provides for a one-time transition tax on certain foreign earnings and the acceleration of depreciation for certain assets placed in service after September 27, 2017, as well as, prospective changes beginning in 2018, including additional limitations on executive compensation, limitations on the deductibility of interest and capitalization of research and development expenditures. While the 2017 Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provision, the global intangible low-taxed income ("GILTI") provisions and the base-erosion and anti-abuse tax ("BEAT") provisions. Reduction of the U.S. Corporate Income Tax Rate: The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company's deferred tax assets and liabilities were premeasured to reflect the reduction in the U.S. corporate income tax rate from 35 percent to 21 percent, resulting in a $45.8 million increase in tax expense for the year ended December 31, 2017 and a corresponding $(45.8) million decrease in net deferred tax assets as of December 31, 2017. The impact was fully offset by a valuation allowance. The Act will no longer allow deductions for compensation in excess of $1 million for certain employees, even if paid as commissions or performance based compensation. It also subjects the principal executive officer, principal financial officer and three other highest paid officers to the limitation and once the individual becomes a covered person, the individual will remain a covered person for all future years. The tax effects of these provisions require further analysis which is expected to be completed in the second half of 2018. The 2017 Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits ("E&P") through the year ended December 31, 2017. The Company's foreign subsidiary had an estimated accumulated deficit as of December 31, 2017. The Company does not expect it will be subject to this tax and therefore has not included any tax impacts related to the mandatory deemed repatriation in its consolidated financial statements. The GILTI provisions require the Company to include in its US income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary's tangible assets. While the Company may elect to account for GILTI tax in the period in which it is incurred, or recognize deferred taxes when basis differences exist that are expected to affect the amount of the GILTI inclusion upon reversal, the Company has not yet completed a detailed analysis of the GILTI and has not made a policy election as of December 31, 2017. The BEAT provisions in the 2017 Act eliminates the deduction of certain base-erosion payments made to foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax and does not anticipate any tax impacts of BEAT with the filing of its consolidated financial statements for 2017. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Act. The Company has recognized provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts due to among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the 2017 Act. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. The Company follows the provisions of income tax guidance which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. The guidance requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company has not recognized any liability for uncertain tax positions as of December 31, 2017 and 2016. Following is a tabular reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2017 and 2016 (in thousands):
|  | 2017 |  |  | 2016 |
Unrecognized Tax Benefits – Beginning |  | $ | 2,062 |  |  | $ | 1,987 |
Gross increases – tax positions in prior period |  |  | — |  |  |  | 1 |
Gross decreases – tax positions in prior period |  |  | — |  |  |  | (13 | )
Gross increase – current-period tax positions |  |  | 95 |  |  |  | 87 |
Unrecognized Tax Benefits – Ending |  | $ | 2,157 |  |  | $ | 2,062 |
The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal reduction in the deferred tax asset valuation allowance. The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months. The Company did not recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses as of December 31, 2017. The Company’s material tax jurisdictions are United States and California. To its knowledge, the Company is currently not under examination by the Internal Revenue Service or any other taxing authority. The Company’s tax years for 1998 (federal) and 1997 (CA) and forward can be subject to examination by the United States and California tax authorities due to the carry forward of net operating losses and research development credits.

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