Note 4 - Income Taxes

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

4.

  Income Taxes

The Company records income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the tax rates and laws expected to be in effect when the differences are expected to reverse.

For the

three

 and

six

months ended

June 30, 2018

and

2017,

there was

no

income tax expense due to net operating loss carryforwards ("NOLs") and the Company recorded a full valuation allowance against its net deferred taxes. 

At

December 31, 2017,

the Company had, subject to the limitation discussed below,

$255.0

million of net operating loss carryforwards for U.S. tax purposes.  The Company's pre-

2018

NOL's will expire in varying amounts from

2023

through

2037,

if

not

utilized; and can offset

100%

of future taxable income for regular tax purposes. Any NOLs arising after

January 1, 2018

can generally be carried forward indefinitely and can offset up to

80%

of future taxable income for regular tax purposes. Since

January 1, 2018,

the alternative minimum tax is

no

longer applicable to corporations.

The use of the Company's NOLs will be limited if there is an "ownership change" in its common stock, generally a cumulative ownership change exceeding

50%

during a

three

year period, as determined under Section

382

of the Internal Revenue Code. As of

June 30, 2018,

the Company has

not

had an ownership change as defined by Section

382.

Given historical losses, uncertainties exist as to the future utilization of the NOL carryforwards. Therefore, the Company has established a valuation allowance of

$80.4

million for deferred tax assets at

December 31, 2017. 

As of

June 30, 2018,

the Company did

not

have any accrued interest or penalties related to uncertain tax positions. The tax years

2013

through

2017

remain open to examination by the tax jurisdictions to which the Company is subject.

New tax legislation, commonly referred to as the Tax Cuts and Jobs Act (H.R.

1

), was enacted on

December 22, 2017.

ASC

740,

Accounting for Income Taxes

, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after

December 31, 2017.

Since our federal deferred tax asset was fully offset by a valuation allowance, the reduction in the U.S. corporate income tax rate to

21%

did

not

materially affect the Company's financial statements. Significant provisions that are

not

yet effective but

may

impact income taxes in future years include: the repeal of the corporate alternative minimum tax, the limitation on the current deductibility of net interest expense in excess of

30%

of adjusted taxable income for levered balance sheets, a limitation on utilization of NOLs generated after tax year

2017

to

80%

of taxable income, the unlimited carryforward of NOLs generated after tax year

2017,

temporary

100%

expensing of certain business assets, additional limitations on certain general and administrative expenses, and changes in determining the excessive compensation limitation. Currently, the Company does

not

anticipate paying cash federal income taxes in the near term due to any of the legislative changes, primarily due to the availability of our NOL carryforwards. Future interpretations relating to the recently enacted U.S. federal income tax legislation which vary from our current interpretation and possible changes to state tax laws in response to the recently enacted federal legislation

may

have a significant effect on this projection.