Note 11 - Income Taxes

The benefit (provision) for income taxes is comprised of the following:

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Current:
Federal	$	(354	)	$	12,154		$	8,036
State		(397	)		428			767
Foreign		-			-			9
		(751	)		12,582			8,812
Deferred:
Federal		-			(40	)		(3,331	)
State		-			(7	)		(1	)
		-			(47	)		(3,332	)
Total benefit (provision) for income taxes	$	(751	)	$	12,535		$	5,480

A reconciliation of the United States federal statutory income tax rate to our effective income tax rate is as follows:

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011

United States federal statutory rate		35.00	%		35.00	%		35.00	%
State taxes, net of federal benefit		(1.48	)%		1.07	%		2.19	%
Valuation allowance		(37.11	)%		(4.41	)%		(4.39	)%
Stock options		(0.17	)%		0.14	%		(1.92	)%
Prior year true-up		(1.32	)%		1.03	%		-
Warrants		2.10	%		(0.82	)%		(8.60	)%
Other		0.18	%		(0.32	)%		1.79	%
Balance at the end of the year		(2.80	)%		31.69	%		24.07	%

Deferred tax assets (liabilities) consist of the following:

	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Deferred tax assets:
Reserves and accruals	$	58		$	50		$	46
State tax		1			1			1
Research and development credits and other credits		907			-			-
Net operating loss carry forward		8,249			2,254			2,822
Stock based compensation		6,600			4,506			3,155
Other		154			177			211
Total deferred tax assets		15,969			6,988			6,235

Valuation allowance		(15,955	)		(6,969	)		(6,168	)
Deferred tax assets after valuation allowance		14			19			67

Deferred tax liability:
Depreciation and amortization		(14	)		(19	)		(20	)

Total deferred tax liability		(14	)		(19	)		(20	)

Net deferred tax assets	$	-		$	-		$	47

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets at December 31, 2013 will not be fully realizable. Accordingly, management has maintained a full valuation allowance against its net deferred tax assets at December 31, 2013. The net change in the total valuation allowance for the 12 months ended December 31, 2013 was an increase of $8,986. At December 31, 2013, we had federal and state net operating loss carry-forwards of approximately $23,468 and $37,993, respectively, expiring beginning in 2027 and 2016, respectively. At December 31, 2013, we had federal research and development credit carry-forwards of approximately $907 expiring beginning in 2031.

Internal Revenue Code Section 382 places a limitation (the "Section 382 Limitation") on the amount of taxable income can be offset by net operating loss carry forwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. Our capitalization described herein may have resulted in such a change. Generally, after a control change, a loss corporation cannot deduct net operating loss carry forwards generated in years prior to the deemed change of control under IRC Section 382 in excess of the Section 382 Limitation.

We are required to recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. As a result, we have provided contingent reserve under ASC 740-10 of $316, $128 and $128 at December 31, 2013, December 31, 2012 and December 31, 2011, respectively. Our tax returns are subject to review by various tax authorities. The returns are subject to review those from 2008 forward.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We have accrued interest or penalties during the 12 month period ended December 31, 2013 in the amount of $79.

A reconciliation of beginning and ending amounts of unrecognized tax benefits follows:

	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011

Balance at the beginning of the year	$	128	$	128	$	128
Additions based on tax positions related to the current year		-		-		-
Additions for tax positions of prior years		188		-		-
Settlements		-		-		-
Lapse of applicable statute of limitations		-		-		-
Balance at the end of the year	$	316	$	128	$	128