15. Income Taxes

The components of loss before income taxes and the provision for income taxes for the years ended December 31, 2015, 2014 and 2013, by jurisdiction, are as follows (in thousands):

	2015									2014									2013
	U.S.			Foreign			Total			U.S.			Foreign			Total			U.S.			Foreign			Total
Loss before income taxes	$	(54,921	)	$	(769	)	$	(55,690	)	$	(87,459	)	$	(1,354	)	$	(88,813	)	$	(61,730	)	$	(1,350	)	$	(63,080	)
Income tax benefit		—			—			—			—			325			325			—			410			410

Net loss attributable to the Company	$	(54,921	)	$	(769	)	$	(55,690	)	$	(87,459	)	$	(1,029	)	$	(88,488	)	$	(61,730	)	$	(940	)	$	(62,670	)

The significant components deferred income tax (benefit) expense for the years ended December 31, 2015, 2014 and 2013, by jurisdiction, are as follows (in thousands):

	2015									2014									2013
	U.S.			Foreign			Total			U.S.			Foreign			Total			U.S.			Foreign			Total
Deferred tax (benefit) expense	$	(14,237	)	$	893		$	(13,344	)	$	(4,282	)	$	194		$	(4,088	)	$	(3,209	)	$	1,406		$	(1,803	)
Net operating loss carryforward (generated) expired		(8,345	)		895			(7,450	)		(8,974	)		625			(8,349	)		(6,536	)		(15	)		(6,551	)
Valuation allowance increase (decrease)		22,582			(1,788	)		20,794			13,256			(819	)		12,437			9,745			(1,391	)		8,354

Provision for income taxes	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

The Company's effective income tax rate differed from the federal statutory rate as follows:

	2015			2014			2013
U.S. Federal statutory tax rate		(35.0	)%		(35.0	)%		(35.0	)%
Deferred state taxes, net of federal benefit		(3.1	)%		(1.2	)%		(1.3	)%
Common stock warrant liability		(2.3	)%		20.6	%		20.6	%
Other, net		0.3	%		(0.2	)%		0.6	%
Change in valuation allowance		40.1	%		15.4	%		14.5	%

		0.0	%		(0.4	)%		(0.6	)%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2015 and 2014 are as follows (in thousands):

	U.S.						Foreign
	2015			2014			2015			2014
Intangible assets	$	—		$	—		$	1,469		$	1,269
Deferred revenue		7,017			4,492			—			—
Other reserves and accruals		6,411			1,492			—			—
Tax credit carryforwards		798			—			65			78
Property, plant and equipment		1,803			1,624			389			464
Amortization of stock-based compensation		13,145			10,623			—			—
Capitalized research & development expenditures		13,431			12,816			4,008			4,777
Net operating loss carryforwards		27,202			18,857			5,797			2,931

Total deferred tax asset		69,807			49,904			11,728			9,519
Valuation allowance		(62,584	)		(40,002	)		(11,520	)		(9,519	)

Net deferred tax assets	$	7,223		$	9,902		$	208		$	—

Intangible assets		(220	)		(335	)		—			—
Property, plant and equipment		—			—			(208	)		—
Non-employee stock based compensation		(1,556	)		(1,556	)		—			—
Section 382 recognized built in loss		(5,447	)		(8,011	)		—			—

Net deferred tax liability	$	(7,223	)	$	(9,902	)	$	(208	)	$	—

Net	$	—		$	—		$	—		$	—

The Company has early adopted, on a prospective basis, the recent accounting update which classifies all deferred tax assets and liabilities, along with any related valuation allowance, as a net noncurrent asset or liability on the consolidated balance sheet. Due to the full valuation allowance at December 31, 2015, the net deferred tax asset is zero. At December 31, 2014, deferred taxes were included on the consolidated balance sheet within other noncurrent assets of $1.4 million and other current liabilities of $1.4 million.

The Company has recorded a valuation allowance, as a result of uncertainties related to the realization of its net deferred tax asset, at December 31, 2015 and 2014 of approximately $74.1 million and $49.5 million, respectively. A reconciliation of the current year change in valuation allowance is as follows (in thousands):

	U.S.		Foreign			Total
Increase (decrease) in valuation allowance for current year increase in net operating losses	$	8,345	$	(895	)	$	7,450
Increase in valuation allowance for current year net increase in deferred tax assets other than net operating losses		14,237		641			14,878
Decrease in valuation allowance as a result of foreign currency fluctuation		—		(1,534	)		(1,534	)
Increase in valuation allowance due to acquisition of Hypulsion		—		3,789			3,789

Net increase in valuation allowance	$	22,582	$	2,001		$	24,583

The deferred tax assets have been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carryforwards and other deferred tax assets may not be realized. Included in the valuation allowance at December 31, 2015 and December 31, 2014 are $0.1 million of deferred tax assets resulting from the exercise of employee stock options, which upon subsequent realization of the tax benefits, will be allocated directly to paid-in capital.

Before the imposition of IRC Section 382 limitations described below, at December 31, 2015, the Company has unused federal and state net operating loss carryforwards of approximately $786.0 million, of which $117.0 million was generated from the operations of acquired companies prior to the dates of acquisition and $669 million was generated by the Company subsequent to the acquisition dates and through December 31, 2015.

Under Internal Revenue Code (IRC) Section 382, the use of loss carryforwards may be limited if a change in ownership of a company occurs. If it is determined that, due to transactions involving the Company's shares owned by its 5 percent or greater shareholders, a change of ownership has occurred under the provisions of IRC Section 382, the Company's federal and state net operating loss carryforwards could be subject to significant IRC Section 382 limitations.

Based on studies of the changes in ownership of the Company, it has been determined that IRC Section 382 ownership changes have occurred which significantly reduces that amount of pre-change net operating losses that can be used in future years to $13.5 million. In addition, net operating losses of $58.1 million incurred after the most recent ownership change are not subject to IRC Section 382 and are available for use in future years. Accordingly, the Company's deferred tax assets include $71.6 million of U.S. net operating loss carryforwards. The net operating loss carryforwards available at December 31, 2015, if unused will expire at various dates from 2017 through 2035.

The ownership changes also resulted in net unrealized built in losses per IRS Notice 2003-65 which should result in recognized built in losses during the five year recognition period. These recognized built in losses will translate into unfavorable book to tax add backs in the Company's 2016 to 2018 U.S. corporate income tax returns of approximately $14.3 million that resulted in a gross deferred tax liability of $5.4 million at December 31, 2015. This gross deferred tax liability offsets existing gross deferred tax assets effectively reducing the valuation allowance. This has no impact on the Company's current financial position, results of operations, or cash flows because of the full valuation allowance.

Approximately $0.8 million of research credit carryforwards generated after the most recent IRC Section 382 ownership change are included in the Company's deferred tax assets. Due to limitations under IRC Section 382, research credit carryforwards existing prior to the most recent IRC Section 382 ownership change will not be used and are not reflected in the Company's gross deferred tax asset at December 31, 2015.

At December 31, 2015, the Company has unused Canadian net operating loss carryforwards of approximately $8.3 million. The net operating loss carryforwards if unused will expire at various dates from 2016 through 2032. At December 31, 2015, the Company has scientific research and experimental development (SR&ED) expenditures of $16.0 million available to offset future taxable income in Canada. These SR&ED expenditures have no expiration date. At December 31, 2015, the Company has Canadian ITC credit carryforwards of $0.4 million available to offset future income tax. These credit carryforwards if unused will expire at various dates from 2016 through 2027. Approximately $0.4 million of the foreign net operating loss carryforwards and $0.3 million of the Canadian ITC credit carryforwards represent unrecognized tax benefits and are therefore, not reflected in the Company's deferred tax assets as of December 31, 2015.

At December 31, 2015, the Company has unused French net operating loss carryforwards of approximately $11.4 million. The net operating loss may carryforward indefinitely or until the Company changes its activity.

As of December 31, 2015, the Company has no un-repatriated foreign earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2015			2014			2013
Unrecognized tax benefits balance at beginning of year	$	522		$	1,033		$	1,579
Reductions for tax positions of prior years		—			(465	)		(471	)
Currency Translation		(85	)		(46	)		(75	)

Unrecognized tax benefits balance at end of year	$	437		$	522		$	1,033

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. During the year ended December 31, 2015 the Company recognized no benefit as the statute of limitations does not expire for the tax year ended 2007 until February 2016. The Company had $0.4 million of interest and penalties accrued at December 31, 2015 and December 31, 2014. During the first quarter of 2016, the statute of limitations will expire on the remaining unrecognized tax benefits.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities. Open tax years in the U.S. range from 2012 to 2015, and open tax years in foreign jurisdictions range from 2007 to 2015. However, upon examination in subsequent years, if net operating loss carryforwards and tax credit carryforwards are utilized, the U.S. and foreign jurisdictions can reduce net operating loss carryforwards and tax credit carryforwards utilized in the year being examined if they do not agree with the carryforward amount. As of December 31, 2015, the Company was not under audit in the U.S. or non-U.S. taxing jurisdictions.