The provision for income taxes for the periods presented in the Consolidated Statements of Operations and Comprehensive Loss represents minimum California franchise taxes. Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 34% to pretax losses as a result of the following:
| Fiscal Years Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Computed expected tax benefit | (34.00 | )% | (34.00 | )% | ||||
| Tax effect of loss on debt extinguishment | — | % | 19.22 | % | ||||
| Tax effect of warrant modifications | 1.42 | % | 4.38 | % | ||||
| Tax effect of Warrant Liability mark to market | — | % | 1.36 | % | ||||
| Other losses not benefitted | 32.58 | % | 9.04 | % | ||||
| Other | 0.02 | % | 0.01 | % | ||||
| Income tax expense | 0.02 | % | 0.01 | % | ||||
Deferred income taxes reflect the net tax effect 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 our deferred tax assets are as follows (in thousands):
| March 31, | ||||||||||
| 2017 | 2016 | |||||||||
| Deferred tax assets: | ||||||||||
| Net operating loss carryovers | $ | 30,184 | $ | 26,606 | ||||||
| Basis differences in fixed assets | (4 | ) | - | |||||||
| Stock based compensation | 3,674 | 3,681 | ||||||||
| Accruals and reserves | 928 | 928 | ||||||||
| Total deferred tax assets | 34,782 | 31,215 | ||||||||
| Valuation allowance | (34,782 | ) | (31,215 | ) | ||||||
| Net deferred tax assets | $ | - | $ | - | ||||||
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $3,567,000 and $5,443,000 during the fiscal years ended March 31, 2017 and 2016, respectively. When realized, deferred tax assets related to employee stock options will be credited to additional paid-in capital.
As of March 31, 2017, we had U.S. federal net operating loss carryforwards of approximately $77.1 million, which will expire in fiscal years 2020 through 2037. As of March 31, 2017, we had state net operating loss carryforwards of approximately $67.6 million, which will expire in fiscal years 2018 through 2037.
U.S. federal and state tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of an ownership change of a corporation. We have not performed a change in ownership analysis since our inception in 1998 and accordingly some or all of our net operating loss carryforwards may not be available to offset future taxable income, if any.
We file income tax returns in the U.S. federal and Canadian jurisdictions and California and Maryland state jurisdictions. We are subject to U.S. federal and state income tax examinations by tax authorities for tax years 2000 through 2017 due to net operating losses that are being carried forward for tax purposes, but we are not currently under examination by tax authorities in any jurisdiction.
Uncertain Tax Positions
Our unrecognized tax benefits at March 31, 2017 and 2016 relate entirely to research and development tax credits. The total amount of unrecognized tax benefits at March 31, 2017 and 2016 is $290,500 and $142,400, respectively. If recognized, none of the unrecognized tax benefits would impact our effective tax rate. The following table summarizes the activity related to our unrecognized tax benefits.
| Fiscal Years Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Unrecognized benefit - beginning of period | $ | 142,400 | $ | 48,200 | ||||
| Current period tax position increases | 77,700 | 35,300 | ||||||
| Prior period tax position increases | 70,400 | 58,900 | ||||||
| Unrecognized benefit - end of period | $ | 290,500 | $ | 142,400 | ||||
Our policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. We incurred no interest or penalties related to unrecognized tax benefits in the years ended March 31, 2017 or 2016. We do not anticipate any significant changes of our uncertain tax positions within twelve months of this reporting date.