Enom 2014 Annual Report Download - page 87

F-23
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities
are presented below (in thousands):
December 31, December 31,
2014 2013
Deferred tax assets:
Accrued liabilities not currently deductible .......................................................... $ 2,305 $ 4,193
Intangible assets—excess of tax basis over financial statement basis ................... 54,647 15,008
Indirect federal impact of deferred state taxes ...................................................... (3,198 ) 114
Deferred revenue ................................................................................................... 165 6,126
N
et operating losses .............................................................................................. 35,814 23,488
Stock-based compensation .................................................................................... 5,783 14,375
Other ..................................................................................................................... (56 ) 189
95,460 63,493
Deferred tax liabilities:
Deferred registration costs .................................................................................... - (23,832)
Prepaid expenses ................................................................................................... - (1,695)
Goodwill not amortized for financial reporting .................................................... - (26,206)
Intangible assets—excess of financial statement basis over tax basis ................... (1,245 ) (4,731)
Property and equipment ........................................................................................ (5,739 ) (8,674)
(6,984 ) (65,138)
Valuation allowance .............................................................................................. (88,476 ) (23,882)
N
et deferred tax liabilities ..................................................................................... $ - $ (25,527)
Current .................................................................................................................. $ 334 $ (22,415)
N
on-current ........................................................................................................... (334 ) (3,112)
$ - $ (25,527)
We had federal net operating loss (“NOL”) carryforwards of approximately $110.7 million and $71.0 million as of
December 31, 2014 and 2013, respectively, which expire between 2020 and 2032. In addition, as of December 31, 2014 and 2013 we
had state NOL carryforwards of approximately $8.3 million and $16.0 million, which expire between 2014 and 2032.
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, provide for annual limitations on the utilization of net
operating loss and credit carryforwards if we were to undergo an ownership change, as defined in Section 382. Changes in our equity
structure and the acquisitions by us of eNom, Trails.com, Maps a La Carte, Pagewise, Pluck, Indieclick, Creativebug, and Saatchi Art
resulted in such an ownership change. Currently, we do not expect the utilization of its net operating loss and tax credit carry-forwards
in the near term to be materially affected as no significant limitations are expected to be placed on these carry-forwards as a result of
its previous ownership changes.
We reduce the deferred tax asset resulting from future tax benefits by a valuation allowance if, based on the weight of the
available evidence, it is more likely than not that some portion or all of these deferred taxes will not be realized. We have determined
it is more likely than not that we will not realize the benefit of all our deferred tax assets and accordingly a valuation allowance of
$88.5 million and $23.9 million against its deferred taxes was required at December 31, 2014 and 2013, respectively. The change in
the valuation allowance for the year ended December 31, 2014 was an increase of $64.6 million. The valuation allowance is required
as a result of the timing of the reversal of deferred tax liabilities associated with tax deductible goodwill which is not certain and thus
not available to assure the realization of deferred tax assets. After consideration of these limitations associated with deferred tax
liabilities, we have deferred tax assets in excess of deferred tax liabilities at December 31, 2014. As we have no sustained history of
generating book income, the ultimate future realization of these excess deferred tax assets is not more likely than not and thus subject
to a valuation allowance.
Accounting standards related to stock-based compensation exclude tax attributes related to the exercise of employee stock
options from being realized in the financial statements until they result in a decrease to taxes payable. Therefore, we have not included
unrealized stock option tax attributes in our deferred tax assets. Cumulative tax attributes excluded through 2014 were $4.2 million.
The benefit of these deferred tax assets will be recorded to equity when they reduce taxes payable.
We are subject to the accounting guidance for uncertain income tax positions. We believe that its income tax positions and
deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on our
financial condition, results of operations, or cash flow.