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Income Taxes

There was an income tax benefit of $119,000 for the three months ended September 30, 2013 as the Company reversed $124,000 of federal income taxes that were recorded during the second quarter of 2013. There was no income tax provision for the three months ended September 30, 2012. The income tax provision for the nine months ended September 30, 2013 and 2012 was $15,000 and $2,000, respectively. The Company provides for income taxes using an asset and liability approach, under which deferred income taxes are provided based upon enacted tax laws and rates applicable to periods in which the taxes become payable.

The Company is subject to income tax in U.S. federal and various state jurisdictions. Presently, there are no ongoing income tax examinations in the jurisdictions where the Company operates.

As of September 30, 2013, the Company remains on a full valuation allowance deferred tax asset position. The realization of the Company’s deferred tax assets depends primarily on its ability to generate sufficient U.S. taxable income in future periods. The amount of deferred tax assets considered realizable may increase or decrease in subsequent quarters as management reevaluates the underlying basis for the estimates of future domestic taxable income.