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Note 14 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
( 14 ) | Income Taxes
The Company’s provision for income taxes for the years ended December 31, 2018, 2017 and 2016 was $0 for all years. The provision for income taxes differs from the amount which would result by applying the federal statutory income tax rate to pre-tax loss for the years ended December 31, 2018, 2017 and 2016. The reconciliation of the provision computed at the federal statutory rate to the Company’s provision (benefit) for income taxes was as follows (in thousands):
|  | Years ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Tax at federal statutory rate |  | $ | (2,937 | ) |  | $ | (4,185 | ) |  | $ | (3,505 | )
State, net of federal benefit |  |  | (455 | ) |  |  | (1,238 | ) |  |  | (315 | )
Research and development credit |  |  | (236 | ) |  |  | (135 | ) |  |  | (89 | )
Stock-based compensation |  |  | 440 |  |  |  | 344 |  |  |  | 136 |
Nondeductible interest |  |  | — |  |  |  | — |  |  |  | 590 |
Warrant and derivative revaluation |  |  | — |  |  |  | — |  |  |  | 328 |
Change in Federal tax rate |  |  | — |  |  |  | 8,172 |  |  |  | — |
Other |  |  | 22 |  |  |  | 7 |  |  |  | 94 |
Change in valuation allowance |  |  | 3,166 |  |  |  | (2,965 | ) |  |  | 2,761 |
Total provision for income taxes |  | $ | — |  |  | $ | — |  |  | $ | — |
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss and tax credit carryforwards, net of any adjustment for unrecognized tax benefits. The components of the net deferred income tax assets as of December 31, 2018 and 2017 were as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |
Accrued compensation |  | $ | 84 |  |  | $ | 110 |
Inventory adjustments |  |  | 276 |  |  |  | 449 |
Depreciation and amortization - noncurrent |  |  | 113 |  |  |  | 146 |
Share-based compensation |  |  | 648 |  |  |  | 558 |
Net operating loss and tax credit carryforwards - noncurrent |  |  | 20,698 |  |  |  | 17,368 |
Other |  |  | 12 |  |  |  | 34 |
Gross deferred tax asset |  |  | 21,831 |  |  |  | 18,665 |
Valuation allowance |  |  | (21,831 | ) |  |  | (18,665 | )
Net deferred tax asset |  | $ | — |  |  | $ | — |
The Company has approximately $69.2 million and $54.4 million of federal and state net operating loss carryforwards, respectively, as of December 31, 2018. For tax reporting purposes, operating loss carryforwards are available to offset future taxable income; such carryforwards expire in varying amounts beginning in 2022 and 2028 for federal and state purposes, respectively, with 2018 federal NOLs having no expiration date. Under current federal and California law, the amounts of and benefits from net operating losses carried forward may be impaired or limited in certain circumstances. Events which may cause limitations in the amount of net operating losses that the company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three -year period. Generally, utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by section 382, which discusses limitations on NOL carryforwards and certain built-in losses following ownership changes, and section 383, which discusses, special limitations on certain excess credits, etc., of the Internal Revenue Code (IRC) of 1986, as amended and similar state provisions. Accordingly, our ability to utilize net operating losses carryforwards may be limited, potentially significantly, as the result of such an “ownership change”. The Company has not yet performed a comprehensive study to determine if it has undergone any ownership changes. If the Company is able to potentially utilize its net operating loss carryforwards, it will perform a comprehensive section 382 study to determine what, if any, limitation on its ability to utilize its NOLs exists. At December 31, 2018, the Company has federal and state research and development credits of approximately $2.0 million and $1.5 million available to offset future federal and state income taxes, respectively. The federal tax credit carryforward expires beginning in 2028. The state credit carryforwards have no expiration. The Company does not believe that these assets are realizable on a more-likely than not basis; therefore, the net deferred tax assets have been fully offset by a valuation allowance. The Company did not have deferred tax liabilities as of December 31, 2018 or 2017. The net increase in the total valuation allowance for the year ending December 31, 2018 is $3.2 million, primarily from the net operating losses generated. The net decrease in the total valuation allowance for the year ending December 31, 2017 was $3.0 million, primarily from the decrease in Federal Tax Rate applied to deferred tax assets, with an offsetting increase from net operating losses generated. No liability related to uncertain tax positions is reported in the financial statements. The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |
Balance, beginning of year |  | $ | 725 |  |  | $ | 608 |
Additions based on tax positions related to the current year |  |  | 166 |  |  |  | 117 |
Additions (reductions) for tax positions related to prior years |  |  | — |  |  |  | — |
Balance, end of year |  | $ | 891 |  |  | $ | 725 |
Recognition of approximately $636,000 and $511,000 of unrecognized tax benefits would impact the effective rate at December 31, 2018 and 2017 respectively, if recognized. Contributing to the increase in amount impacting the rate in 2017 was the consideration of the federal tax rate change as a result of the Tax Act. Increases in 2018 relate to increased research and development activity. The Company is subject to U.S. federal, California, Colorado, Florida and Minnesota income taxes. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company was incorporated in 2002 and is subject to U.S. federal, state, and local tax examinations by tax authorities for all prior years. US Tax Reform - Impact of the Tax Cuts and Jobs Act On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1 ) (the “Tax Act”) was signed into law. The Tax Act contains significant changes to corporate taxation, including; (i) the reduction of the corporate income tax rate from a maximum rate of 35% to 21%, (ii) the acceleration of expensing for certain business assets, (iii) the one -time transition tax related to the transition of U.S. international tax from a worldwide tax system to a territorial tax system, (iv) the repeal of the domestic production deduction, (v) additional limitations on the deductibility of interest expense, (vi) expanded limitations on executive compensation, (vii) acceleration of tax revenue recognition, (viii) capitalization of research and development expenditures and (ix) creation of new minimum taxes such as the base erosion anti-abuse tax (“BEAT”) and Global Intangible Low Taxed Income (“GILTI”) tax. After the enactment of the Tax Act, the Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin No. 118 ("SAB 118" ) to address the application of U.S. GAAP in situations when an entity does not have the necessary information available, prepared or analyzed (including computations) in reasonable details to complete the accounting for certain income tax effects of the Act. The Company has made adjustments to reduce its deferred tax assets and liabilities as of December 31, 2017, based on the reduction of the U.S. federal corporate rate from 34% to 21% and assessed the reliability of its deferred tax assets based on its understanding of the provisions of the new law. As of December 31, 2018, the Company completed its assessment of the impact of the Tax Act and determined no additional adjustments are required. The Company has considered required policy elections with respect to its treatment of potential base erosion anti-abuse tax (“BEAT”) and Global Intangible Low Taxed Income (“GILTI”). Companies can either account for taxes on BEAT and GILTI as incurred or recognize deferred taxes when basis differences exist that are expected to affect the amount of the BEAT and GILTI inclusion upon reversal. The Company has considered the provisions of the Act associated with BEAT and GILTI and noted that these are not applicable as of December 31, 2018. The Company expects to account for any taxes on BEAT and GILTI as incurred if applicable.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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