Entity information:
13. Income Taxes
 
No provision was made for U.S. taxes on undistributed foreign earning as such earnings are considered to be permanently reinvested. It is not practicable to determine the amount of additional tax, if any that might be payable on those earnings if repatriated.
 
The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities at December 31, 2016 and 2015 are comprised of the following (in thousands):
  
 
 
As of December 31,
 
 
 
2016
 
2015
 
Deferred tax asset
 
 
 
 
 
 
 
Net operating loss carryforward
 
$
204,106
 
$
180,927
 
Research and development credit carry forwards
 
 
14,911
 
 
12,661
 
Stock based compensation and other
 
 
17,106
 
 
24,759
 
Total deferred tax assets
 
 
236,123
 
 
218,347
 
Valuation Allowance
 
 
(236,123)
 
 
(218,347)
 
Deferred tax asset, net of allowance
 
$
-
 
$
-
 
  
The Company has identified the United States, Maryland, Germany and United Kingdom as significant tax jurisdictions.
 
At December 31, 2016, the Company had Federal and State net operating loss carry forwards for income tax purposes of approximately $507.5 million and unused research and development tax credits of approximately $14.9 million available to offset future taxable income and income taxes, respectively, expiring in 2018 through 2036. The Company has foreign net operating loss carry forwards of $17.7 million in various jurisdictions. The Company has not performed a detailed analysis to determine whether an ownership change under Section 382 of the IRC has occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards attributable to periods before the change. Any limitation may result in expiration of a portion of the NOL or research and development credit carryforwards before utilization. The tax years 2013 through 2016 remain open to examination by federal agencies and other jurisdictions in which the Company operates.
 
During 2016 the Company reevaluated the pricing/deductibility of stock options granted and the value of warrants issued, resulting in the decrease in the potential future tax deduction from those instruments.
    
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. In case the deferred tax assets will not be realized in future periods, the Company has provided a valuation allowance for the full amount of the deferred tax assets at December 31, 2016 and 2015.
  
The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:
(dollars in thousands)
 
 
 
For the years ended
 
 
 
2016
 
2015
 
Statutory federal income tax rate
 
 
34.0
%
 
34.0
%
State taxes, net of federal tax benefit
 
 
1.8
%
 
5.4
%
Tax rate differential on foreign income
 
 
-2.3
%
 
0.0
%
Derivative gain or loss and other
 
 
7.6
%
 
5.8
%
Cancellation of shares
 
 
-16.6
%
 
0.0
%
Cancellation of warrants
 
 
-7.8
%
 
0.0
%
Other permanent items and true ups
 
 
2.7
%
 
0.0
%
R&D Credit
 
 
2.8
%
 
2.6
%
Change in valuation allowance
 
 
-22.2
%
 
-47.8
%
Income tax provision (benefit)
 
 
0.0
%
 
0.0
%
 
 
 
For the years ended
 
 
 
2016
 
2015
 
Federal
 
 
 
 
 
 
 
Current
 
$
-
 
$
-
 
Deferred
 
 
(11,160)
 
 
(41,583)
 
State
 
 
 
 
 
 
 
Current
 
 
-
 
 
-
 
Deferred
 
 
(1,427)
 
 
(6,659)
 
Foreign
 
 
 
 
 
 
 
Current
 
 
-
 
 
-
 
Deferred
 
 
(5,189)
 
 
-
 
Change in valuation allowance
 
 
17,776
 
 
48,242
 
Income tax provision (benefit)
 
$
-
 
$
-