18.

Income Taxes

The Company recorded a benefit for income taxes of

$0.7

million during the year ended

December 31, 2017,

and a benefit for income taxes of

$34.0

thousand during the year ended

December

31,

2016.

The Company recorded a provision for income taxes of

$0.8

million during the year ended

December

31,

2015.

The provision (benefit) for income taxes consisted of the following (in thousands):

	December 31, 201 7			December 31, 201 6
Current:
Federal	$	(702	)	$	(39	)
State		1			6
Total Current		(701	)		(33	)
Deferred:
Federal		—			(1	)
State		—			—
Total D eferred		—			(1	)
Provision (benefit) for income taxes	$	(701	)	$	(34	)

Net deferred tax assets as of D

ecember

31,

2017

and

2016

consist of the following (in thousands):

	December 31, 201 7			December 31, 201 6
Deferred tax assets:
Accruals and other	$	2,717		$	3,746
Research credits		6,530			5,670
Net operating loss carryforward		31,064			36,224
Section 59(e) R&D expenditures		12,156			16,782
Deferred revenue		18,384			24,836
AMT credit		—			703
Total deferred tax assets		70,851			87,961
Valuation allowance		(70,851	)		(87,961	)
Net deferred tax assets	$	—		$	—

Reconciliations of the statutory federal income tax to the Company

’s effective tax during the years ended

December

31,

2017,

2016

and

2015

are as follows (in thousands):

	Year Ended December 31,
	201 7			2016			2015
Tax at statutory federal rate	$	(17,751	)	$	(14,685	)	$	(8,037	)
State tax —net of federal benefit		350			(73	)		2,853
PIPE Warrant liability		(70	)		(260	)		(726	)
General Business credits		(316	)		(360	)		(455	)
Stock Options		42			1,115			1,559
Other		51			33			73
Change in valuation allowance		(17,110	)		14,196			5,493
Tax Reform – Tax Rate Change		34,103			—			—
Provision for income taxes	$	(701	)	$	(34	)	$	760

ASC

740

requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than

not.”

Realization of deferred tax assets is dependent on future taxable income, if any, the timing and the amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance

decreased by

$17.1

million during year ended

December

31,

2017

and increased by

$14.2

million and

$5.5

million during the years ended

2016

and

2015,

respectively.

As of

December

31,

2017,

the Company had federal net operating loss carryforwards of

$115.6

million, which begin to expire in

2029.

As of

December

31,

2017,

the Company had state net operating loss carryforwards of

$97.2

million, which begin to expire in

2028.

As of

December 31, 2017,

the Company had a federal alternative minimum tax credit carryover of

$0.7

million

which is now refundable under the tax reform enacted on

December 22, 2017

and classified as a non-current receivable on the Company’s balance sheet.

As of

December

31,

2017,

the Company had federal research credit carryovers of

$5.9

million, which begin to expire in

2026.

As of

December

31,

2017,

the Company had state research credit carryovers of

$3.6

million, which will carryforward indefinitely.

The Company has adopted ASU

2016

in calendar year end

December 31, 2017.

As a result of this adoption, the Company is reflecting the excess tax benefit related to share based compensation in the current year. The impact of this adoption results in a gross increase of

$2.9

million and

$2.0

million to federal and state NOLs respectively. The Company has recorded a full valuation allowance against its deferred tax assets.

Under Section

382

of the Internal Revenue Code of

1986,

as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than

50%

change (by value) in its equity ownership over a

three

year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research credits, to offset its post-change income

may

be limited. Based on an analysis performed by the Company as of

December

31,

2013,

it was determined that

two

ownership changes have occurred since inception of the Company. The

first

ownership change occurred in

2006

at the time of the Series A financing and, as a result of the change,

$1.4

million in federal and state net operating loss carryforwards will expire unutilized. In addition,

$26,000

in federal and state research and development credits will expire unutilized. The

second

ownership change occurred in

July 2013

at the time of the underwritten public offering; however, the Company believes the resulting annual imposed limitation on use of pre-change tax attributes is sufficiently high that the limit itself will

not

result in unutilized pre-change tax attributes. If it is determined that an ownership change occurred post

2013,

the Company’s tax attributes

may

be subject to limitation.

December 22, 2017,

the Tax Cuts and Jobs Act of

2017

(the “Act”) was signed into law resulting in significant changes to the Internal Revenue Code. The Act reduces the federal corporate income tax rate decrease from

35%

21%

effective for tax

periods beginning after

December 31, 2017,

changes U.S international taxation from a worldwide tax system to a territorial system, and a

one

-time transition tax on the untaxed cumulative foreign earnings and profits as of

December 31, 2017.

The Act also includes provisions for the elimination of the Alternative Minimum Tax, among other changes. The Company has calculated its best estimate of the impact of the Act in its year end income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing and as a result has recorded

$0.7

million as an additional income tax benefit in the

fourth

quarter of

2017,

the period in which the legislation was enacted. The provisional amount of

$0.7

million related to the reversal of AMT credits which are now refundable credits under the provisions of the Act. The Company has remeasured the deferred tax assets and liabilities based on the rate at which they are expected to reverse in the future.

provision or benefit has been recorded as the Company has recorded a full valuation allowance against its deferred tax assets. The effects of other provisions of the Act are

not

expected to have a material impact on the Company’s financial statements.

Uncertain Tax Positions

A reconciliation of the beginning and ending balances of the unrecognized tax benefits during t

he years ended

December

31,

2017,

2016

and

2015

is as follows (in thousands):

	Year Ended December 31,
	2017		2016		2015
Unrecognized benefit —beginning of period	$	2,162	$	1,939	$	1,667
Gross decreases —prior period tax positions		—		—		—
Gross increases —current period tax positions		203		223		272
Unrecognized benefit —end of period	$	2,365	$	2,162	$	1,939

The entire amount of the unrecognized tax benefits would

not

impact the Company

’s effective tax rate if recognized.

Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense and were immaterial. The Company files income tax returns in the United States and in California.

The tax years

2005

through

2017

remain open in both jurisdictions. The Company is

not

currently under examination by income tax authorities in federal, state or other foreign jurisdictions. The Company does

not

anticipate any significant changes within

months of this reporting date of its uncertain tax positions.