the 2009 Annual Report (pdf) - PLX Technology

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):
Years Ended December 31,
2009 2008
Deferred tax assets:
Accrued expenses and reserves…………………………………… $ 2,667 $ 1,526
Net operat ing loss carryforwards………………………………… 11,302 2,764
Research and development credits………………………………… 11,870 10,321
Depreciat ion…………………………………….…………………… 5,844 6,345
Share-based compensat ion…………………………………….…… 3,634 2,753
Ot her…………………………………….…………………………… 131 166
Gross deferred tax assets: 35,448 23,875
Valuat ion Allowance…………………………………….……………… (33,192) (23,875)
2,256 -
Deferred tax liabilities:
Acquisition relat ed int angibles…………………………………… (2,256) -
T ot al net deferred t ax asset s…………………………………….…… $ - $ -
At December 31, 2009, the Company had federal and state net operating loss carryforwards of $29.5 million and
$17.3 million, respectively. These carryforwards will expire at various dates beginning in 2012 through 2029, if not
utilized. In addition, as of December 31, 2009, the Company had federal and state tax credit carryforwards of
approximately $7.4 million and $11.3 million, respectively. The federal research and development credits will expire
beginning in 2019 and the state credits will carryforward indefinitely. Approximately $2.6 million of the federal and
$1.6 million of the state net operating loss carryforward relate to excess tax deductions from stock options which have
not yet been realized. SFAS 123R prohibits recognition of a deferred income tax asset for excess tax benefits due to
stock option exercises that have not yet been realized through a reduction in income tax payable.
Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due
to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state
provisions. The annual limitation may result in the expiration of net operating loss carryforwards before utilization.
Utilization of $26.9 million and $2.0 million of federal and state net operating loss is subject to an annual limitation
under the Internal Revenue Code of 1986, as amended, and similar state provisions. Utilization of $2.0 million of
federal research and development credits and $4.8 million of state research and development credits are subject to an
annual limitation under the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual
limitation may result in the expiration of the federal and state research and development credits before utilization.
Due to operating losses incurred, the Company created a full valuation allowance as of December 2002 for
deferred tax assets. As of December 2009, a valuation allowance continues to be recorded for the net deferred tax
asset based on management’s assessment that the realization of deferred tax assets is uncertain due to the history of
losses, the variability of operating results and the inability to conclude that it is more likely than not that sufficient
taxable income would be generated in future periods to realize those deferred tax assets. The Company will maintain
a full valuation allowance until sufficient positive evidence exists to support a reversal of the valuation allowance.
Approximately $10.3 million of the valuation allowance relates to acquired tax benefits, which will result in an
adjustment to tax expense, net of the related deferred liability on acquired intangibles when such benefits are realized.
On January 1, 2007, the Company adopted the guidance related to the accounting for uncertainty in income taxes
and as a result of the implementation, the Company recognized no material adjustment in the liability for
unrecognized income tax benefits.
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