Note 9

Other Accrued Liabilities:

	December 31, 2018		December 31, 2017 (as restated)

Accrued warranty, current, see Note 1	$	156	$	109
Accrued compensation, including commissions and vacation		1,275		785
Accrued state sales use and other taxes		2,719		2,125
Distributor rights liability, current		-		85
Accrued professional fees and other accrued liabilities		350		477
Total other accrued liabilities	$	4,500	$	3,581

In the ordinary course of business, the Company is, from time to time, subject to audits performed by state taxing authorities. These actions and proceedings are generally based on the position that the arrangements entered into by the Company are subject to sales and use tax rather than exempt from tax under applicable law. The Company uses estimates when accruing its sales and use tax liability. All of the Company’s tax positions are subject to audit. One state has assessed the Company an amount of $801 for the period from March 2014 through August 2017. The Company has declined an informal offer to settle at a substantially lower amount and is currently in that jurisdiction’s administrative process of appeal. A second jurisdiction is also conducting an audit and has not made an assessment. If there is a determination that the true object of the Company’s recurring revenue model is not exempt from sales taxes and is not a prescription medicine or the Company does not have other defenses where the Company does not prevail, the Company may be subject to sales taxes in those particular states for previous years and in the future, plus potential interest and penalties for failure to pay such taxes.

The Company believes its state sales and use tax accruals have properly recognized that if the Company’s arrangements with customers are deemed to be subject to sales tax in a particular state are more likely than not, the basis for measurement of the state sales and use tax would be in accordance with ASC 405, Liabilities as a transaction tax. If and when the Company is successful in defending itself or in settling the sales tax obligation for a lesser amount, the reversal of this liability is to be recorded in the period the settlement is reached. However, the precise scope, timing and time period at issue, as well as the final outcome of any audit and actual settlement remain uncertain.

The Company records state sales tax collected and remitted for its customers on equipment sales on a net basis, excluded from revenue. The Company’s sales tax expense that is not presently being collected and remitted for the recurring revenue business are recorded in general and administrative expenses on the statement of operations and comprehensive loss.