Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

( 13 ) Income Taxes

The Company’s provision for income taxes for the years ended

December 31, 2019,

2018

and

2017

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, 2019,

2018

and

2017.

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,
	2019			2018			2017
Tax at federal statutory rate	$	(3,089	)	$	(2,937	)	$	(4,185	)
State, net of federal benefit		(414	)		(455	)		(1,238	)
Research and development credit		(225	)		(236	)		(135	)
Stock-based compensation		446			440			344
Change in Federal Tax Rate		-			-			8,172
Other		5			22			7
Change in valuation allowance		3,277			3,166			(2,965	)
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, 2019

and

2018

were as follows (in thousands):

	Years ended December 31,
	2019			2018
Accrued compensation	$	148		$	84
Inventory adjustments		297			276
Depreciation and amortization		98			113
Stock-based compensation		744			648
Net operating loss and tax credit carryforwards		23,809			20,698
Other		11			12
Gross Deferred Tax Asset		25,107			21,831
Valuation Allowance		(25,107	)		(21,831	)
Net deferred tax asset	$	-		$	-

The Company has approximately

$80.5

million and

$58.6

million of federal and state net operating loss carryforwards, respectively, as of

December 31, 2019.

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

2019

and

2018

federal NOLs having

no

expiration date.

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, the Company’s ability to utilize net operating loss 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,

2019,

the Company has federal and state research and development credits of approximately

$2.4

million and

$1.8

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, 2019

or

2018.

The net increase in the total valuation allowance for the year ending

December 31, 2019

is

$3.2

million, primarily from the net operating losses generated. 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.

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): 

	Years ended December 31,
	2019		2018
Balance, beginning of year	$	891	$	725
Additions based on tax positions related to the current year		155		166
Balance, end of year	$	1,046	$	891

Recognition of approximately

$753,000

and

$636,000

of unrecognized tax benefits would impact the effective rate at

December 31, 2019

and

2018

respectively, if recognized. Contributing to the increase in amount impacting the rate in

2018

was the consideration of the federal tax rate change as a result of the Tax Act. Increases in

2019

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.