Income Taxes

9 Months Ended

Sep. 30, 2020

NOTE 8 – INCOME TAXES

Income tax expense (benefit) was $1.2 million and $135,000 for the three months ended September 30, 2020 and 2019, respectively, and $1.6 million and ($167,000) for the nine months ended September 30, 2020 and 2019, respectively. Included in these amounts were $784,000 and $934,000 related to increases in our deferred tax valuation allowance for the three and nine months ended September 30, 2020. As of September 30, 2020, the deferred tax asset valuation allowance was $934,000, reducing our net deferred tax asset to $3.0 million at that date. We did not have a deferred tax asset valuation allowance at December 31, 2019.

Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred asset will not be realized. As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses, with less weight placed on future projected profitability. The realization of deferred tax assets is dependent on the existence of taxable income of the appropriate character (e.g., ordinary or capital) within the carry-back and carry-forward periods available under tax law, which would consider future reversals of existing taxable temporary differences and taxable income in prior carryback years as permitted under tax law.

Due to recent changes in market conditions and current events related to

COVID-19,

the board and management continue to assess the Company’s deferred tax assets including forecasted future projected income and future reversals of existing temporary differences. As such, there may be additional deferred tax asset impairment in subsequent periods.

- 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.

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