10. Income Taxes

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

	March 31, 2015			March 31, 2014
Deferred tax assets:
Net operating loss carry forwards	$	—		$	—
Research and development credits		—			—
Depreciation and amortization		(48	)		22
Accrued expenses and reserves		826			280
Stock compensation		3,462			1,941
Other, net		6			1
Total deferred tax assets		4,246			2,244
Valuation allowance		(4,246	)		(2,244	)
	$	—		$	—

A full valuation allowance has been established to offset the deferred tax assets as management cannot conclude that realization of such assets is more likely than not. Under the Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of our net operating loss and research tax credit carryforwards to offset taxable income may be limited based on cumulative changes in ownership. We have not completed an analysis to determine whether any such limitations have been triggered as of March 31, 2015. Until this analysis is completed, we have removed the deferred tax assets related to net operating losses and research credits from our deferred tax asset schedule. Further, until a study is completed and any limitation known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. The valuation allowance increased by approximately $2,002,000 and $1,277,000 for the years ended March 31, 2015 and 2014, respectively.

The Company had federal and state net operating loss carryforwards of approximately $59,334,000 and $58,850,000 at March 31, 2015, respectively. The federal and state net operating loss carryforwards will begin expiring in 2028, unless previously utilized. The net operating loss carryforwards included approximately $6,236,000 of windfall tax benefits related to stock compensation that will be recorded as an increase to additional paid in capital.

The Company had federal and state research tax credit carry forwards of approximately $790,000 and $987,000 at March 31, 2015, respectively. The federal research tax credit carryforwards begin expiring in 2028. The state research tax credit carryforwards do not expire.

In 2009 the Company adopted the accounting guidance for uncertainty in income taxes pursuant to ASC 740-10. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. The Company did not record any accruals for income tax accounting uncertainties for the year ended March 31, 2015.

The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The Company did not accrue either interest or penalties from inception through March 31, 2015.

The Company does not have any unrecognized tax benefits that will significantly decrease or increase within 12 months of March 31, 2015.

The Company is subject to tax in the United States and in the state of California. As of March 31, 2015, the Company’s tax years from inception are subject to examination by the tax authorities. The Company is not currently under examination by any U.S. federal or state jurisdictions.