16.

INCOME TAXES

As of September 30, 2013 the net deferred tax asset (prior to any valuation allowance) was $39.7 million, and as of December 31, 2012, the net deferred tax asset (prior to any valuation allowance) was $28.8 million. The value of the net deferred tax asset (prior to any valuation allowance) on September 30, 2013 and December 31, 2012, includes the tax effect of unrealized gains or losses on available for sale securities. The deferred tax asset attributable to unrealized losses at September 30, 2013 was $10.5 million. The deferred tax liability attributable to unrealized gains at December 31, 2012 was $2.8 million. Management recorded a valuation allowance against the net deferred tax assets at September 30, 2013 and December 31, 2012 based on its estimate of future reversal and utilization. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income, and projected future reversals of deferred tax items. Based on these criteria, the Company determined that it was necessary to establish a full valuation allowance against the entire net deferred tax asset for all periods presented. At September 30, 2013, net operating loss carryforwards totaled $72.9 million and a December 31, 2012, net operating loss carryforwards totaled $81.2 million.

Based on the capital raise in the first half of 2013, management has made a preliminary assessment that a change in ownership in accordance with the guidelines of Section 382 of the Internal Revenue Code of 1986 has not occurred.

The Company’s taxes payable for the period ended September 30, 2013 are the result of the application of the alternative minimum tax.