United states securities and exchange commission

 

 

9. Income Taxes

Loss before provision for income taxes was as follows:

 

		Year Ended December 31,
		2016				2015				2014
		(in thousands)
United States		$	(41,649	)		$	(43,626	)		$	(36,783	)
Foreign			(11,752	)			(9,235	)			(4,587	)
Total		$	(53,401	)		$	(52,861	)		$	(41,370	)

 

The components of the provision (benefit) for income taxes were as follows:

 

		Year Ended December 31,
		2016				2015				2014
		(in thousands)
Current:
Federal		$	—			$	—			$	—
State			49				16				22
Foreign			183				65				63
Total			232				81				85
Deferred:
Federal			24				41				—
State			3				5				—
Foreign			(92	)			(10	)			(28	)
Total			(65	)			36				(28	)
Provision for income taxes		$	167			$	117			$	57

 

F-24

INSTRUCTURE, INC.

Notes to Consolidated Financial Statements

 

The following reconciles the differences between income taxes computed at the federal statutory rate of 35% and the provision for income taxes :

 

		Year Ended December 31,
		2016				2015				2014
		(in thousands)
Expected income tax benefit at the federal statutory rate		$	(18,156	)		$	(17,972	)		$	(14,066	)
State tax net of federal benefit			(1,767	)			(1,703	)			(904	)
Stock-based compensation			1,101				2,921				2,782
Stock warrant liability			(21	)			222				856
Difference in foreign tax rates			1,553				1,090				1,524
Research and development credits			(552	)			(397	)			(314	)
Change in valuation allowance			17,798				15,615				10,114
Other			211				341				65
Income tax provision		$	167			$	117			$	57

 

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net 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 our deferred tax assets and liabilities were as follows:

 

		Year Ended December 31,
		2016				2015				2014
		(in thousands)
Deferred tax assets:
Net operating loss carryforwards		$	53,693			$	37,152			$	22,626
Research and development credits			2,027				1,372				897
Accruals and reserves			3,614				3,285				2,746
Depreciation			382				157				286
Stock-based compensation			2,310				1,349				611
Total deferred tax assets			62,026				43,315				27,166
Deferred tax liabilities:
Intangible assets			(73	)			(47	)			(20	)
Capitalized costs			(1,774	)			(952	)			(409	)
Total deferred tax liabilities			(1,847	)			(999	)			(429	)
Valuation allowance			(60,122	)			(42,324	)			(26,709	)
Net deferred tax assets		$	57			$	(8	)		$	28

 

At December 31, 2016, we had $53,693,000 in tax-effected federal, state and foreign net operating loss carryforwards that, if unused, begin expiring in 2018. Additionally, we had $3,040,000 of tax-effected carryforwards related to excess tax benefits for stock-based compensation. These operating loss carryforwards, if unused, begin expiring in 2018. Finally, at December 31, 2016, we had $3,395,000 in income tax credits, consisting primarily of federal and state research and development tax credits. These tax credits, if unused, begin expiring in 2023.

We review all available evidence to evaluate our recovery of deferred tax assets, including our recent history of accumulated losses in all tax jurisdictions over the most recent three years as well as our ability to generate income in future periods. We have provided a valuation allowance against our U.S. net deferred tax assets as it is more likely than not that these assets will not be realized given the nature of the assets and the likelihood of future utilization.

The valuation allowance increased by $17,798,000 and $15,615,000 in 2016 and 2015, respectively, due to the increase in the deferred tax assets primarily due to the increase in the net operating loss carryforwards.

F-25