F-30
DividendYield.
We base the dividend yield assumptiononour history and expectationof dividendpayouts.We have not
paiddividends in the past anddonot expect to in the future.
Volatility.
We use an average of the historical stockprice volatility of our stock for theBlack-Scholesmodel.We computed
the historical stockvolatilitybasedon the expected termof the awards.
ExpectedLife.
The expected termof stockoptionswe have granted represents the periodof time that we expect them to be
outstanding.We estimated the expected termof optionswe have grantedbasedonhistorical exercise patterns.
Forfeitures.
We reduce stock-based compensation expense for estimated forfeitures. We estimate forfeitures at the time of
grant and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We estimate forfeitures basedon
historical experience. Our historical forfeiture estimates have not beenmateriallydifferent fromour actual forfeitures.
Warrants
InApril 2006, we granted themembers of SymphonyGenIsisHoldingsLLCwarrants topurchase 4.25million shares of
common stock at an exercise price of $8.93per share. InApril 2011, SymphonyGenIsisHoldingsLLC exercised the remaining
warrants andnone remain outstanding.
6. IncomeTaxes
We have net deferred tax assets relating primarily to net operating loss carryforwards, orNOL’s, and research and
development tax credit
s. Subject to certain limitations, wemayuse these deferred tax assets tooffset taxable income in
future periods. Sincewe have a historyof losses and the likelihoodof future profitability is not assured, we have provided a full
valuation allowance for the deferred tax assets inour balance sheet as ofDecember 31, 2013. Ifwe determine that we are able to
realize a portionor all of these deferred tax assets in the future, wewill record an adjustment to increase their recordedvalue and a
corresponding adjustment to increase income or additional paid in capital, as appropriate, in that same period.
Intraperiod tax allocation rules require us to allocate our provision for income taxes between continuingoperations andother
categories of earnings, such as other comprehensive income. Inperiods inwhichwe have a year-to-date pre-tax loss from continuing
operations andpre-tax income inother categories of earnings, such as other comprehensive income, wemust allocate the tax provision
to the other categories of earnings.We then record a related tax benefit in continuingoperations. During2013 and2012, we recorded
unrealizedgains onour investments in available-for-sale securities inother comprehensive income net of taxes. As a result, for the
years endedDecember 31, 2013 and2012,we recorded a $5.9million and$9.1million tax benefit, respectively, in continuing
operations and a $5.9million and$9.1million tax expense, respectively, inother comprehensive income.
We are subject to taxation in theUnitedStates andvarious state jurisdictions. Our tax years for 1998 and forward are subject
to examinationby theU.S. tax authorities andour taxyears for 1991 and forward are subject to examinationby theCalifornia tax
authorities due to the carryforwardof unutilizednet operating losses and research anddevelopment credits. Our tax years for 2006 and
2007 are currentlybeing audited byCalifornia’s FranchiseTaxBoard, or FTB. We donot expect that the results of these
examinationswill have amaterial effect on our financial conditionor results of operations.
The provision for income taxes on income from continuingoperationswere as follows (in thousands):
YearEndedDecember 31,
2013
2012
2011
Current:
Federal ............................................. $
— $
— $
—
State .................................................
2
2
11
Total current ....................................
2
2
11
Deferred:
Federal .............................................
(5,082)
(7,827)
—
State .................................................
(834)
(1,284)
—
Foreign ............................................
—
—
—
Total deferred ..................................
(5,916)
(9,111)
—
IncomeTaxExpense (Benefit) ........ $
(5,914) $
(9,109) $
11
carryforward
