9. Income Taxes

The Company’s geographical breakdown of its loss from continuing operations before provision for income taxes is as follows (in thousands):

	Years Ended March 31,
	2015			2014

Domestic	$	(28,399	)	$	(11,580	)
Foreign	(176		)	351

Loss before provision for taxes	$	(28,575	)	$	(11,229	)

The components of the provision for income taxes from continuing operations are as follows (in thousands):

	Years Ended March 31,
	2015			2014
Current
Federal	$	1		$
State	1			—
Foreign	97			123

Total current provision	$	99		$	123

Deferred
Federal	—			(3,495		)
State	—			(600		)
Foreign	(14		)	7

Total deferred provision	(14		)	(4,088		)


Total	$	85		$	(3,965	)

Reconciliations of the provisions for income taxes from continuing operations at the statutory rates to the Company’s provisions for income taxes from continuing operations are as follows:

	For the years ended March 31,
	2015		2014
Expected U.S. Federal tax expense (benefit)	(34.0	)%	(34.0	)%
State taxes	(3.6	)%	(3.5	)%
Foreign taxes	0.1	%	0.4	%
Goodwill impairment	23.9	%	—	%
Change in valuation allowance	13.6	%	—	%
Research and experimentation credit	(0.3	)%	—	%
Stock-based compensation expense	0.3	%	1.6	%
Other	0.3	%	0.1	%

Actual effective tax rate	0.3	%	(35.4	)%

Significant components of the Company’s net deferred tax assets are as follows at March 31 (in thousands):

	Years Ended March 31,
	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	13,114		$	9,583
Accruals and allowances recognized in different periods	313			408
Research and experimentation credit carryforwards	6,004			5,852
Property and equipment	54			50
Stock-based compensation expense	1,522			1,410

Total deferred tax assets	21,007			17,303
Less valuation allowance	(20,628		)	(16,844		)

Total net deferred tax assets	379			459
Deferred tax liabilities:
Currency translation adjustments	(119		)	(127		)
Intangibles	(137		)	(193		)

Net deferred tax assets	$	123		$	139

Recognition of deferred tax assets is appropriate when realization of these assets is more likely than not. Based upon the weight of available evidence, including the Company’s historical operating performance and the recorded cumulative net losses in prior fiscal periods, the Company has provided a full valuation allowance against its United States and United Kingdom deferred tax assets. The Company’s valuation allowance increased by $3.8 million in the year ended March 31, 2015.

The Company recognizes excess income tax benefits from stock option exercises in the additional paid in capital account in stockholders’ equity only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to the Company. There was no such excess income tax benefits recognized for the years ended March 31, 2015 or 2014.

As of March 31, 2015, the Company had U.S. federal, state, and foreign net operating loss carryforwards of approximately $37.3 million, $8.0 million, and $3.7 million, respectively. Of these amounts, $2.3 million and $0.2 million represent federal and state tax deductions in excess of recognized stock option compensation, respectively, which will be recorded as an adjustment to additional paid-in capital when they reduce taxes payable. If unused, the federal net operating loss carryforwards will begin to expire in 2019, the state net operating loss carryforwards will begin to expire in 2016. Foreign net operating losses may be carried forward indefinitely. Approximately $1.4 million of both the federal and state net operating loss carryforwards are subject to an annual limitation of approximately $0.2 million per year.

As of March 31, 2015, the Company had U.S. federal and state tax credit carryforwards of approximately $3.6 million and $3.7 million, respectively. Of the state amount, $0.1 million represents the amount of state tax credit utilized in lieu of state excess tax benefits under the “with-and-without” approach. The federal credit will expire beginning in 2019, if not utilized. California state research and development credits can be carried forward indefinitely. With respect to the Company’s foreign subsidiaries in the UK and Germany, the Company intends to permanently reinvest earnings, therefore, no U.S. income or foreign tax withholding has been provided for in deferred income taxes. With respect to the Company’s foreign subsidiary in France, it is treated as a branch for U.S. income tax purposes, which results in its earnings being taxed in the U.S. There is no unrecognized deferred tax liability related to undistributed earnings due to cumulative losses sustained by these foreign subsidiaries.

As of March 31, 2015, the Company had gross unrecognized tax benefit of approximately $55,000 attributable to a Germany transfer pricing audit for the fiscal years 2009-2011. The Company did not have any gross unrecognized tax benefit for the year ended March 31, 2014. While it is often difficult to predict the final outcome of any particular uncertain tax position, management does not believe that it is reasonably possible that the estimates of unrecognized tax benefits will change significantly in the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Years Ended March 31,
(in thousands)	2015		2014
Beginning balance	$	—	$	—
Additions based on tax positions taken during a prior period	55		—

Ending balance	$	55	$	—

The Company files consolidated and separate income tax return in the U.S. federal jurisdiction and in certain state jurisdictions as well as foreign jurisdictions including France, Germany, and the United Kingdom. The Company is subject to income tax examinations for fiscal years after 2011 for France, fiscal years after 2009 for Germany, and fiscal years after 2008 for the United Kingdom. As a result of net operating loss carryforwards, the Company is subject to audit for fiscal years 1999 and forward for federal purposes and 2006 and forward for California purposes.

The Company’s subsidiary in Germany is currently under tax audit by the German tax authorities for the fiscal years 2009-2011.