Significant components of deferred tax assets are as follows:

The valuation allowance increased and in and respectively. The change in deferred tax assets resulted from current year net operating losses and changes to future tax deductions resulting from derivative valuations, the terms of stock compensation plans, and accrued liabilities.

 

The following table accounts for the differences between the expected federal tax benefit (based on the statutory U.S. federal income tax rate of and the actual tax provision:

 

As of the Company had approximately million of net operating loss (“NOL”) carryforwards for U.S. federal income tax purposes expiring in through As of the Company had approximately million of NOL carryforwards for California income tax purposes expiring in through respectively. The Company and Liquidmetal Golf, Inc. file on a separate company basis for federal income tax purposes. Accordingly, the federal NOL carryforwards of legal entity are not available to offset federal taxable income of the other. Liquidmetal Golf, Inc. had approximately million in federal NOL carryforwards, expiring in through

 

We recognize excess tax benefits associated with the exercise of stock options directly to shareholders’ equity only when realized. Accordingly, deferred tax assets are not recognized for NOL carryforwards resulting from excess tax benefits. As of deferred tax assets do not include approximately of these tax effected excess tax benefits from employee stock option exercise that are a component of our NOL carryforwards. Accordingly, additional paid-in capital will increase up to an additional if and when such excess tax benefits are realized.

 

As of the Company had approximately of Research & Development (“R&D”) credit carryforwards for U.S. federal income tax purposes expiring in through In addition, the Company has California R&D credit carryforwards of approximately which do not expire under current California law.

 

Section of the Internal Revenue Code (“IRC”) imposes limitations on the use of NOL’s and credits following changes in ownership as defined in the IRC. The limitation could reduce the amount of benefits that would be available to offset future taxable income each year, starting with the year of an ownership change. As a result of the completion of the complex analysis required by the IRC to determine if an ownership change has occurred, the Company has determined that its annual NOL carryforward limitation under Section of the IRC is per year.

     

The ability to realize the tax benefits associated with deferred tax assets, which includes benefits related to NOL’s, is principally dependent upon the Company’s ability to generate future taxable income from operations. The Company has provided a full valuation allowance for its net deferred tax assets due to the Company’s net operating losses.

 

The Company adopted the provisions of FASB ASC Topic – Income Taxes. At the adoption date and as of the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense which were for the years ended and

 

As of the tax years through and through are subject to examination by the federal and California taxing authorities, respectively.