Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 10: Income Taxes

The provision for income taxes for the years ended December 31, 2021 and 2020 is as follows (in thousands):

	2021			2020
Current:
Federal	$	7		$	(13	)
State		135			387
		142			374
Deferred:
Federal		70			1,173
State		(96	)		102
		(26	)		1,275
Valuation allowance		-			(588	)
Total income tax expense	$	116		$	1,061

Our deferred tax assets and liabilities are as follows (in thousands):

	2021			2020
Allowance for doubtful accounts	$	5		$	23
Inventory reserve and uniform capitalization		38			18
Accrued expenses and other liabilities		40			36
Deferred revenue		72			(140	)
Other assets		338			198
Property and equipment		(158	)		(128	)
Intangibles		201			121
Goodwill		(114	)		(50	)
Net operating loss carryforwards		1,577			1,895
Total deferred tax assets		1,999			1,973
Valuation allowance		—			—
Net deferred tax assets after valuation allowance	$	1,999		$	1,973

A reconciliation of the United States statutory income tax rate to the effective income tax rate for the years ended December 31, 2021 and 2020 is as follows (in thousands):

	2021			2020
Federal taxes at statutory rate	$	321		$	824
State and local income taxes		26			482
Permanent differences		(231	)		343
Valuation allowance		—			(588	)
Provision for income taxes	$	116		$	1,061
Effective tax rate		7.6	%		27.1	%

Our deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

F-21

We have net operating loss carryforwards available in certain jurisdictions to reduce future taxable income. Future tax benefits for net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. This determination is based on the expectation that related operations will be sufficiently profitable or various tax business and other planning strategies will enable us to utilize the net operating loss carryforwards. Our evaluation of the realizability of deferred tax assets considers both positive and negative evidence. The weight given to potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. As of December 31, 2021, we did not record a valuation allowance related to the U.S. federal and state temporary items.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code under section 382. The annual limitation may result in the expiration of net operating loss carryforwards before utilization. As of December 31, 2021, we had federal and state net operating loss carryforwards of approximately $5.9 million and $6.3 million, respectively. As of December 31, 2020, we had federal and state net operating loss carryforwards of approximately $7.4 million and $6.3 million, respectively. These loss carryforwards will expire in varying amounts beginning 2025 through 2037.

We continue to remain subject to examination by U.S. federal authority for the years 2018 through 2021 and for various state authorities for the years 2017 through 2021, with few exceptions.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act permits net operating loss carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows net operating losses incurred in 2018, 2019, 2020 and 2021 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act has also made significant changes to depreciation rules and interest deduction limitation rules, among other provision. We have evaluated the provisions of the CARES Act and we do not expect that the net operating loss carryback provision or any other tax related provisions of the CARES Act would result in a material benefit to us.