11. Income Taxes

For the year ended December 31, 2013, we recorded no provision for income taxes related to pre-tax income due to the availability of deferred tax assets subject to a full valuation allowance to offset current year income. For the nine months ended December 31, 2012 and the year ended March 31, 2012, we recorded no benefit for income taxes on the taxable losses due to the full valuation allowance.

The Company’s effective tax rate differs from the statutory federal rate for the year ended December 31, 2013, the nine months ended December 31, 2012, and year ended March 31, 2012, as follows (in thousands):


	Year Ended					Nine Months Ended					Year Ended
	December 31,					December 31,					March 31,
	2013					2012					2012
Pretax Income (Loss)	$	7,308				$	(4,238	)			$	(11,944	)

Tax at federal statutory rate	$	2,485		34.00	%	$	(1,441	)	34.00	%	$	(4,061	)	34.00	%
State tax, net of federal tax benefit		563		7.7	%		(151	)	3.56	%		(855	)	7.16	%
Share-based compensation expense		(593	)	-8.11	%		(314	)	7.41	%		181		-1.52	%
Tax credits		(459	)	-6.28	%		—		0.00	%		(140	)	1.17	%
Change in valuation allowance		(2,534	)	-34.67	%		1,934		-45.63	%		5,409		-45.28	%
Change in unrecognized tax benefit		518		7.09	%		150		-3.54	%		—		0.00	%
Other		20		0.27	%		(178	)	4.20	%		(534	)	4.47	%

	$	—		0.00	%	$	—		0.00	%	$	—		0.00	%

The significant components of our deferred tax assets and liabilities at December 31, 2013 and 2012 are as follows (in thousands):


	December 31, 2013			December 31, 2012
Deferred tax assets
Net operating loss carryforwards	$	18,818		$	21,856
Reserves and accruals		2,804			1,365
Organizational and start-up costs		516			529
Credits & California incentives		216			254

Gross deferred tax asset		22,354			24,004
Valuation Allowance		(22,338	)		(23,939	)

Net deferred tax assets		16			65

Deferred tax liability
Depreciation and amortization	$	(16	)	$	(65	)

Net deferred tax liability	$	(16	)	$	(65	)

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2013, a full valuation allowance of $22.3 million has been recorded to recognize only deferred tax assets that are more likely than not to be realized.

At December 31, 2013, the Company had federal and state net operating loss (“NOL”) carry forwards of approximately $43.9 million and $40.7 million, respectively, to offset future taxable income. The Company’s federal and state net operating loss carry forwards will begin expiring in 2027 and 2016, respectively. Additionally, at December 31, 2013, the Company has federal and state research and development (“R&D”) tax credit carry forwards of approximately $0.6 million and $0.5 million, respectively. The federal credit carry forwards will begin expiring in 2016 and the state credits may be carried forward indefinitely.

In general, a corporation’s ability to utilize its NOL and R&D carryforwards may be substantially limited due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the capital (as defined) of a company by certain stockholders or public groups.

The following is a reconciliation of LC’s unrecognized tax benefits (in thousands):


	Year		Nine Months
	Ended		Ended
	December 31,		December 31,
	2013		2012
Balance as of the beginning of the calendar/fiscal year	$	367	$	240
Additions for tax positions related to the prior year		523		—
Additions for tax positions related to the current year		190		127

Balance as of the end of the calendar/fiscal year	$	1,080	$	367

If the cumulative unrecognized tax benefit is recognized there will be no effect on the Company’s effective tax rate due to the full valuation allowance.

Due to the nature of the unrecognized tax benefits and the existence of tax attributes, the Company has not accrued any interest or penalties associated with unrecognized tax benefits in the Consolidated Statement of Operations nor has the Company recognized a liability in the Consolidated Balance Sheet.

The Company does not believe the total amount of unrecognized benefit as of December 31, 2013, will increase or decrease significantly in the next twelve months.

The Company files income tax returns in the U.S. and various state jurisdictions. As of December 31, 2013, the Company’s federal tax returns for 2009 and earlier and the Company’s state tax returns for 2008 and earlier are no longer subject to examination by the taxing authorities. However, the Company’s tax attribute carry forwards from closed tax years may be subject to examination to the extent utilized in an open tax year.