The benefit from income taxes is based upon loss before income taxes as follows (in thousands):                               

 

 

 

The components of the benefit from income taxes are as follows (in thousands):          

 

 

ASC provides for the recognition of deferred tax assets if realization of such assets is more likely than   Based on the weight of available evidence, which includes the Company's historical operational performance and the reported cumulative net losses in all prior years, the Company has provided a full valuation allowance against its net deferred tax assets. 

 

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 deferred tax assets and liabilities are as follows (in thousands):

 

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance that increased by million and million during the years ended and respectively.

                              

As of the Company had federal and state net operating loss carryforwards of approximately million and million, respectively. As of the Company also had federal and state research credit carryforwards of million and million, respectively. The federal net operating loss and credit carryforwards expire in various amounts between fiscal years ending through if utilized. The state net operating loss carryforwards expire in various amounts between fiscal years ending through various dates, if utilized. The state research credits have expiration date.

 

The Internal Revenue Code Section limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. In the event the Company has had a change in ownership, utilization of the carryforwards could be restricted.

 

Based on its most recently performed study, the Company has concluded it had an ownership change on as defined by Section of the Internal Revenue Code (IRC), which is limiting the future realization of its net operating loss carryforwards since Based on this recent study, the Company believes that the application of Section will result in the forfeiture of million net operating loss carryforward for federal income tax purposes and million of net operating loss carryforward for California income tax purposes.

 

In addition, based on this recent study, the Company concluded that million of the federal and of the California research tax credit carryforwards would be subject to forfeiture due to Section ownership changes under IRC Section and/or possible credit amount reduction upon audit. As noted above, this is subject to review by the applicable taxing authority. Please note the research and development tax credit carryforwards above take into account this reduction.

 

The Company accounts for uncertainty in income taxes in accordance with ASC Tax positions are evaluated in a -step process, whereby the Company determines whether it is more likely than that a tax position will be sustained upon examination by the tax authority, including resolutions of any related appeals or litigation processes, based on technical merit. If a tax position meets the more-likely-than- recognition threshold it is then measured to determine the amount of benefit to be recognized in the financial statements. The Company’s policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. At there was liability for unrecognized tax benefits.

 

A reconciliation of the beginning and ending unrecognized tax benefit amounts for the year ended are as follows (in thousands):

 

 

The Company’s federal, state, and foreign tax returns are subject to examination by the tax authorities from inception due to net operating losses and tax carryforwards unutilized from such years.