Note 10 - Income Taxes

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10.         Income taxes

During the nine months ended September 30, 2021, the Company recorded a non-cash credit to its valuation allowance of $224,000 increasing its valuation allowance against deferred tax assets to $8.5 million as of September 30, 2021.  The primary assets covered by this valuation allowance are net operating losses, which are approximately $36.0 million at September 30, 2021.  The Company did not make any cash payments for income tax in the three and nine month periods ended September 30, 2021 and 2020 due to its net operating loss carryforwards.

The Company maintains a valuation allowance against deferred tax assets that currently exceed our deferred tax liabilities. The primary assets covered by this valuation allowance are net operating loss carry-forwards. The valuation allowance was calculated in accordance with the provisions of ASC 740, Income Taxes, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance. The Company’s results over the most recent four-year period were heavily affected by business restructuring activities. The Company’s cumulative loss represented sufficient negative evidence to require a valuation allowance. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support its reversal, resulting in no deferred tax asset balance being recognized. Should the Company determine that it will not be able to realize all or part of its deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made.

As of September 30, 2021, the Company has no deferred tax assets not covered by a valuation allowance. During the nine months ended September 30, 2021, the Company received the income tax refund resulting from the Alternative Minimum Tax (“AMT”) credit.

The Company’s effective tax rate for the current and prior year three and nine month periods were effectively 0% due to the change in the valuation allowance.