Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 9 – Income Taxes


The components of the provision (benefit) for income taxes, in the consolidated statements of operations are as follows (in thousands):


    December 31, 2021     December 31, 2020  
    For the years ended  
    December 31, 2021     December 31, 2020  
Continuing Operations                
Federal   $ -     $ -  
State       1,318             12  
Current Total   $ 1,318     $ 12  
Federal     (1,511 )     -  
State     (775 )     -  
Deferred Total   $ (2,286 )   $ -  
Income taxes from continuing operations   $ (968 )   $ 12  


A reconciliation of the statutory federal income tax expense (benefit) to the effective tax is as follows (in thousands):


    2021     2020  
Statutory Rate - federal   $ 1,232     $ (377 )
State taxes, net of federal benefit     366       (31 )
Permanent differences and other     227       159  
Income taxes from continuing operations before valuation allowance   $ 1,825     $ (249 )
Change in valuation allowance     (2,793 )     261  
Income tax expense (benefit)   $ (968 )   $ 12  
Total   $ (968 )   $ 12  




The tax effects of the primary “temporary differences” between values recorded for assets and liabilities for financial reporting purposes and values utilized for measurement in accordance with tax laws giving rise to our deferred tax assets are as follows (in thousands):


    December 31, 2021     December 31, 2020  
    For the years ended  
    December 31, 2021     December 31, 2020  
Net operating loss and capital loss carryforward   $ 3,584     $ 5,020  
Right of use asset     1,348       1,086  
Other     2,531       370  
Capital lease obligations     (1,348 )     (1,086 )
Depreciation     (948 )     (419 )
Amortization     (2,989 )     -  
Valuation allowance     (2,178 )     (4,971 )
Total     -       -  


We recognize tax assets and liabilities for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for net operating loss carryforwards. Management evaluated the deferred tax assets for recoverability using a consistent approach that considers the relative impact of negative and positive evidence, including historical profitability and projections of future reversals of temporary differences and future taxable income. We are required to establish a valuation allowance for deferred tax assets if management determines, based on available evidence at the time the determination is made, that it is not more likely than not that some portion or all of the deferred tax assets will be realized.


A valuation allowance for all of our net deferred tax assets has been provided as we are unable to determine, at this time, that the generation of future taxable income against which the net operating losses (“NOL”) carryforwards could be used is more likely than not. As a result of ongoing losses from continuing operations the Company has concluded that it is more likely than not that it will not realize all of its deferred tax assets relating to federal and state filing jurisdictions. As of December 31, 2021, there is a valuation allowance of $2.2 million. As of December 31, 2021, the Company has state NOL carryforwards of $1.14 million, which begin to expire in 2024 and federal NOL carryforwards of $2.42 million. Most of the federal NOL, generated prior to the 2017 legislation commonly referred to as the Tax Cuts and Jobs Act (“TCJA”), was utilized in 2021 with the exception of $0.1 million, which may be carried forward for 20 years and begins to expire in 2026. The remaining amount of $2.3 million federal NOL generated in years 2018 and after may be carried forward indefinitely and its utilization is limited to 80% of taxable income for tax years post 2021. Some of the post 2017 NOL is attributable to 2021 Nebula acquisition, and it is Section 382 limited ($0.9 million NOL (Nebula carryforward) has an annual limitation of $0.3 million and the remaining post 2017 NOL of $1.4 million is not limited under Section 382).


We file a consolidated federal income tax return and separate company state returns as well as combined state returns where applicable.