Income tax (expense) benefit

9 Months Ended

Sep. 30, 2017

Income tax (expense) benefit

Income tax (expense) benefit

4.            Income tax (expense) benefit

In accordance with the FASB Accounting Standard Codification (ASC) Topic No. 270 “Interim Reporting” and ASC Topic No. 740 “Income Taxes” (Topic No. 740) at the end of each interim period, the Company is required to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. For the three months ended September 30, 2017, the Company recorded a tax expense of $1.9 million and for the three months ended September 30, 2016, the Company recorded a tax expense of $28,000. For the nine months ended September 30, 2017, the Company recorded a tax expense of $1.3 million and for the nine months ended September 30, 2016, the Company recorded a tax benefit of $1,000.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, including the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of its deferred tax assets.  On the basis of this evaluation, as of September 30, 2017 and December 31, 2016, the Company has recorded a valuation allowance of $62.8 million and $54.1 million, respectively. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as the Company’s projections for growth.