v3.22.4
TAX EXPENSE
 12 Months Ended
Dec. 31, 2021
TAX EXPENSE  
TAX EXPENSE

NOTE 11 – TAX EXPENSE

 

The components of deferred income tax assets and (liabilities) are as follows:

 

 

 

(in thousands)

 

 

 

December 31,

 

 

December 31,

 

 

 

2020

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

Net Operating Losses

 

$1,350

 

 

$2,842

 

Inventory  

 

 

20

 

 

 

-

 

Reserves & Allowances

 

 

41

 

 

 

57

 

Gross deferred tax assets

 

 

1,411

 

 

 

2,899

 

 

 

 

 

 

 

 

 

 

Valuation allowance

 

 

(762)

 

 

(2,329)

 

 

 

 

 

 

 

 

 

Total deferred tax assets

 

 

649

 

 

 

570

 

 

 

 

 

 

 

 

 

 

Deferred tax Liabilities:

 

 

 

 

 

 

 

 

Depreciable asset basis differences

 

 

(649)

 

 

(570)

 

 

 

 

 

 

 

 

 

Total deferred tax liabilities

 

 

(649)

 

 

(570)

 

 

 

 

 

 

 

 

 

Net deferred tax assets (liabilities)

 

$-

 

 

$-

 

 

The Company did not incur income tax expense or benefit for the years ended December 31, 2020 or December 31, 2021. The reconciliation between the Company’s effective tax rate and the statutory tax rate is as follows:

 

 

 

(in thousands)

 

 

 

Predecessor

 

 

Successor

 

 

 

Period from January 1, 2020 through March 31, 2020

 

 

Period from
April 1, 2020 through December 31, 2020

 

 

Year Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

Expected income tax benefit at statutory tax rate, net

 

$(343)

 

$(437)

 

$(1,160)

 

 

 

 

 

 

 

 

 

 

 

 

 

State taxes (net of federal tax benefits):

 

 

(132)

 

 

(228)

 

 

(489)
Increase in valuation allowance

 

 

537

 

 

 

762

 

 

 

1,567

 

Loss on disposal

 

 

(62)

 

 

-

 

 

 

-

 

Debt discount

 

 

-

 

 

 

-

 

 

 

47

 

Debt forgiveness

 

 

-

 

 

 

(97)

 

 

-

 

Other

 

 

-

 

 

 

-

 

 

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported income tax expense (benefit)

 

$-

 

 

$-

 

 

$-

 

 

The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company's financial position, results of operations or cash flows.  Accordingly, the Company has not recorded any reserves, or related accruals or uncertain income tax positions as of December 31, 2021.

 

Federal and New Jersey tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 (Section 382).  The Company does not believe a change in ownership, as defined by Section 382, has occurred but a formal study has not been completed.

 

The Company has net operating loss carryforwards for federal and New Jersey income tax purposes of approximately $10,212,429 and $8,281,188, respectively, as of December 31, 2021. The federal net operating loss carryforwards, if not utilized, will carryover indefinitely. The state net operating loss carryforwards, if not utilized, will expire beginning in 2040.