Entity information:
11.
Income Taxes
 
On
December 22, 2017,
the Tax Cuts and Jobs Act (the “
2017
Tax Act”) was signed into law. The
2017
Tax Act makes broad and complex changes to the U.S. tax code that affected our income tax rate in
2017.
The
2017
Tax Act reduces the U.S. federal corporate income tax rate from
35%
to
21%.
The
2017
Tax Act also establishes new tax laws that will affect
2018.
  ASC
740
requires a company to record the effects of a tax law change in the period of enactment, however, shortly after the enactment of the
2017
Tax Act, the SEC staff issued SAB
118,
which allows a company to record a provisional amount when it does
not
have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law. The measurement period ends when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond
one
year.
 
A
lthough we have incurred operating losses since inception, in
2017,
we recorded income tax expense of
$1,040
related to goodwill and certain intangible assets. Additionally, we have made a reasonable estimate of the impact of the
2017
Tax Act and we recorded an income tax benefit of
$4,189
as a result of the remeasurement of deferred tax assets and liabilities at the maximum federal rate decrease to
21%
from
35%.
We are continuing to gather additional information related to estimates surrounding the remeasurement of deferred taxes to more precisely compute the remeasurement of deferred taxes and the impact of the transition tax.    Components of income tax benefit are as follows:
 
   
201
7
  
Current
:
        
Federa
l
   $
–
  
Stat
e
    
–
  
Foreig
n
    
–
  
      –  
Deferred
:
        
Federa
l
    
(3,313
 )
Stat
e
    
164
  
Foreig
n
    
–
  
     
(3,149
 )
Income tax benefi
t
   $
(3,149
 )
 
A reconciliation of the statutory U.S. federal tax rate and effective tax rates is as follows:
 
   
201
7
    
201
6
    
201
5
  
Federal statutory taxe
s
    
34.0
 %    
34.0
 %    
34.0
 %
State income taxes, net of federal tax benefi
t
    
7.3
 %    
1.3
 %    
4.8
 %
Foreign taxes less than the domestic rat
e
    
(1.0
 %)    
(0.2
 %)    
3.7
 %
Permanent difference
s
    
32.3
 %    
(0.5
 %)    
1.5
 %
Nondeductible acquisition cost
s
    
15.3
 %    
(20.0
 %)    
0.0
 %
Change in valuation allowanc
e
    
(109.7
 %)    
(14.8
 %)    
(154.9
 %)
Changes in rates and other true-up
s
    
55.0
 %    
0.3
 %    
110.9
 %
Othe
r
    
(0.1
 %)    
(0.1
 %)    
0.0
 %
     
33.1
 %    
0.0
 %    
0.0
 %
 
Deferred income taxes are recorded based upon differences between the financial reporting and income tax basis of assets and liabilities. The following deferred income taxes are recorded:
 
   
201
7
    
201
6
  
Deferred tax assets
:
                
Federal net operating loss carryforwar
d
   $
52,142
     $
75,734
  
State loss carryforwar
d
    
8,245
      
4,717
  
Goodwil
l
    
11,394
      
17,857
  
Allowance for doubtful account
s
    
368
      
628
  
Stock-based compensatio
n
    
4,053
      
4,992
  
Accrued expense
s
    
14
      
508
  
Inventor
y
    
23
      
31
  
Othe
r
    
2,497
      
3,049
  
Total gross deferred tax asset
s
    
78,736
      
107,516
  
Deferred tax liabilities
:
                
Fixed asset
s
    
(8,972
 )    
(13,546
 )
Intangible asset
s
    
(16,832
 )    
(28,783
 )
Total gross deferred tax liabilitie
s
    
(25,804
 )    
(42,329
 )
Valuation allowanc
e
    
(61,387
 )    
(78,794
 )
Total deferred liability, ne
t
   $
(8,455
 )   $
(13,607
 )
 
In assessing the realizability of deferred tax assets, management considers whether it is more likely than
not
that some portion of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, available taxes in the carryback periods, projected future taxable income and tax planning strategies in making this assessment.
Accordingly, we have provided a valuation allowance of
$61,387
and
$78,794
to offset the net deferred tax assets at
December 31, 2017
and
2016,
respectfully. The
$17,407
net decrease in the valuation allowance for
2017
primarily reflects the change in the federal corporate tax rate due to the Tax Cuts and Jobs Act that was enacted on
December 22, 2017.
The
$1,486
net increase in the valuation allowance for
2016
primarily reflects the net change in federal and state loss carry forward deferred tax assets.
 
We have approximately
$2
48,297
in U.S. federal net operating loss carryforwards that expire between
2019
through
2037,
approximately
$15,828
in Canadian federal and provincial net operating loss carryforwards that expire between
2026
through
2037
and approximately
$173,955
in state loss carryforwards that expire between
2018
through
2037.
Section 
382
of the U.S. Internal Revenue Code imposes an annual limitation on the amount of net operating loss carryforwards that can be used to offset taxable income when a corporation has undergone significant changes in stock ownership. We believe that an annual limit will be imposed by Section 
382
on our net operating loss carryforwards, however, should taxable income be generated in future years, we expect to be able to utilize our net operating loss carryforwards during their respective carryforward periods
.
 
We have
no
unrecognized tax benefits and there are
no
uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within the next
12
months. Substantially all tax years remain open by federal, state and foreign tax jurisdictions.