Income Tax Expense

Net loss before income tax benefit attributable to U.S. and international operations, consists of the following:



	Year Ended December 31,
	2013			2012			2011
U.S.	$	(4,123	)	$	(22,270	)	$	(26,062	)
Foreign	(11,955		)	(12,973		)	(2,754		)
Net income (loss) before income tax	$	(16,078	)	$	(35,243	)	$	(28,816	)

Income tax expense (benefit) consists of the following:



	Year Ended December 31,
	2013			2012		2011
Current:
Federal	$	51		$	30	$	(148	)
State	138			176		27
Foreign	(300		)	319		35
Total current	$	(111	)	$	525	$	(86	)
Deferred:
Federal	$	(116	)	$	—	$	—
State	(16		)	—		—
Foreign	233			6		—
Total deferred	$	101		$	6	$	—
Total:
Federal	$	(65	)	$	30	$	(148	)
State	$	122		$	176	$	27
Foreign	$	(67	)	$	325	$	35
Income tax expense (benefit)	$	(10	)	$	531	$	(86	)

Income tax expense (benefit) was computed by applying the U.S. federal statutory rate of 34% to net income (loss) before taxes as follows:



	Year Ended December 31,
	2013			2012			2011
Income tax benefit at federal statutory rate	$	(5,467	)	$	(11,983	)	$	(9,797	)
State income tax expenses net of federal benefit	73			116			18
Meals and entertainment	298			210			264
Research and development credits	—			—			(342		)
Stock-based compensation	546			382			421
Contingent consideration	2,890			4,658			3,570
Foreign tax rate differential	656			4,736			1,025
Net change in valuation allowance	2,417			2,244			4,097
Return to provision true-up	(1,347		)	—			—
Other, net	(76		)	168			658
Income tax expense (benefit)	$	(10	)	$	531		$	(86	)

Significant components of the Company’s deferred tax assets and (liabilities) are as follows:



	Year Ended December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	53,247		$	54,389
Accrued expenses	846			711
Tax credits	8,590			8,400
Bad debt	131			183
Inventory	597			578
Capitalized research and development	3,740			—
Deferred compensation	3,043			2,364
Deferred tax assets	70,194			66,625
Valuation allowance	(49,793		)	(50,866		)
Total deferred tax assets	20,401			15,759
Deferred tax liabilities:
Developed technology and trademark	(14,997		)	(15,575		)
Trademarks and tradenames	(1,012		)	(1,029		)
Depreciation and amortization	(1,034		)	(101		)
Convertible debt	(4,116		)	—
Other	(377		)	(89		)
Total deferred tax liabilities	(21,536		)	(16,794		)
Net deferred tax liability	(1,135		)	(1,035		)

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that the domestic and foreign deferred tax assets will not be realized. Due to such uncertainties surrounding the realization of the domestic and foreign deferred tax assets, the Company maintains a valuation allowance of $(49.8) million against a substantial portion of its deferred tax assets as of December 31, 2013. For the year ended December 31, 2013, the total change in valuation allowance was $1.1 million, of which $2.4 million was recorded as a tax expense through the income statement. Realization of the deferred tax assets will be primarily dependent upon the Company's ability to generate sufficient taxable income prior to the expiration of its net operating losses.

At December 31, 2013, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $142.0 million and $109.0 million, respectively.

Federal and state net operating loss carryforwards begin expiring in 2013 and will continue to expire through 2033. The majority of the state net operating losses are attributable to California. In addition, the Company had research and development credits for federal and state income tax purposes of approximately $4.3 million and $4.1 million, respectively, which will begin to expire in 2020. The California research and development credits do not expire.

The table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2013 and 2012 that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation in excess of compensation recognized under GAAP. Those deferred tax assets include federal and state net operating losses. The Company utilizes the with-and-without approach in determining if and when such excess tax benefits are realized, and under this approach excess tax benefits of $7.3 million related to stock based compensation are the last to be realized.

In general, an "ownership change" results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since the Company's formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders' subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

The Company intends to complete a study in the future to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company's formation.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):



	Year Ended December 31, 2013
Balance at January 1, 2013	$	152
Additions for tax positions related to prior periods	4
Decreases related to prior year tax positions	(126		)
Lapse of statute of limitations	—
Balance at December 31, 2013	$	30

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. For the years ended December 31, 2013 and December 31, 2012, the amounts accrued or the payment of interest and penalties were not material.

The undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided on such undistributed earnings. As of December 31, 2013, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $0. Determination of the potential amount of unrecognized deferred U.S. income tax liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation; however, net operating losses and unrecognized foreign tax credits would be available to reduce some portion of the U.S. liability.

In general, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by taxing authorities for years before 2008, however, net operating loss and other tax attribute carryforwards utilized in subsequent years continue to be subject to examination by the tax authorities until the year to which the net operating loss and/or other tax attributes are carried forward is no longer subject to examination.