12.

INCOME TAXES

For the three months ended March 31, 2015, the Company recorded income tax expense of $385, which is comprised of $382 current expense and $3 deferred expense. For the three months ended March 31, 2014, the Company recorded income tax expense of $14, which is comprised of $11 current expense and $3 deferred expense.

For the three months ended March 31, 2015 the current income tax expense included $355 of foreign tax expense related to Brazilian withholding taxes. Such taxes are applicable to licensing, technology services and royalty revenues earned within Brazil. The tax rate for such taxes is between 15%-18% and is based upon the character of the revenue and the jurisdiction of where it was earned.

As of December 31, 2014, the Company had $116,216 of federal net operating loss carryforwards that expire beginning in 2028, $69,698 of state net operating loss carryforwards that expire from 2015 through 2034, and $1,312 of research and development tax credits that expire beginning in 2028. The net operating loss carryforwards include approximately $71 for which a benefit will be recorded in additional paid-in capital when realized. In addition, the amount of the net operating loss and research and development tax credit carryforwards that may be utilized annually to offset future taxable income and tax liability may be limited as a result of certain ownership changes pursuant to Section 382 of the Internal Revenue Code.

The Company has completed a study, through November 30, 2014, to assess if any ownership changes would have caused limitations to net operating loss carryforwards. Based upon that study, the Company has concluded an ownership change occurred on September 19, 2008 and therefore there is the potential for $2,600 of net operating loss to be limited. For the period September 20, 2008 through November 30, 2014, the Company has determined that it is more likely than not that there has not been an ownership change under Section 382 through November 30, 2014.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is established for any deferred tax asset for which realization is not more likely than not. The net deferred tax liability as of March 31, 2015 and 2014 includes deferred tax liabilities related to amortizable goodwill, which are anticipated to reverse in an indefinite period and which are not currently available as a source of taxable income.

The Company recognizes in its consolidated financial statements only those tax positions that are “more likely than not” of being sustained upon examination by taxing authorities, based on the technical merits of the position. As of March 31, 2015, there are no uncertain tax positions. In addition, there are no amounts required to be included in the financial statements for interest or penalties on uncertain tax positions.