Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 17—INCOME TAXES

In the second quarter of 2021, the Company acquired Appliances Connection. Appliances Connection has a history of profitable operations. As such, the Company determined that it was more likely than not that it would have profitable operations in the future and therefore be able to realize the deferred tax assets and accordingly reversed the allowance for deferred tax assets in the second quarter of 2021.

As of December 31, 2021 and 2020, the Company had net operating loss carry forwards of approximately $5.2 million and $15.0 million, respectively, that may be available to reduce future years’ taxable income indefinitely. For the year ending December 31, 2021, we recorded a net valuation allowance release of $5.8 million, comprising a full release of the valuation allowance on the basis of management’s reassessment of the amount of is deferred tax assets that are more likely than not to be realized. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2021, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $5.8 million are realizable.

The components of the provision for income taxes for the years ended December 31, 2021 and 2020, consisted of the following (in thousands):

	December 31,			December 31,
	2021			2020
Current federal and state	$	534		$	-
Deferred federal and state		(4,910	)		698
Total provision (benefit) for income taxes	$	(4,376	)	$	698

The difference between the income tax expense (benefit) reported and amounts computed by applying the statutory federal rate of 21.0% to pretax income (loss) for the years ended December 31, 2021 and 2020, consisted of the following (in thousands):

	December 31,			December 31,
	2021			2020
Federal tax	$	692		$	(4,383	)
State tax, net of federal benefit		112			(891	)
Change in warrant value		-			538
Write-off of acquisition and other receivables		-			239
Acquisition costs		202			-
Change in state tax rates		436			-
Other		1			108
Valuation allowance		(5,819	)		5,087
Total income tax provision (benefit)	$	(4,376	)	$	698
Effective tax rate		(132.9	)%		(3.3	)%

Deferred income tax assets and liabilities at December 31, 2021 and 2020, consisted of the following temporary differences and carry-forward items (in thousands):

	December 31,			December 31,
	2021			2020
Inventory	$	326		$	107
Accrued expenses		196			1,590
Interest limitations		84			320
Reserves		4,065			-
Other		261			7
Lease liabilities		3,825			399
Loss carryforward		1,148			3,791
Valuation allowance		-			(5,797	)
Total deferred tax asset	$	9,905		$	417
Fixed assets	$	(142	)	$	-
Right-of-use assets		(10,139	)		(399	)
Intangibles		(3,491	)		(18	)
Total deferred tax liability	$	(13,772	)	$	(417	)
Total deferred tax liability, net	$	(3,867	)	$	-

The Company accrues interest and penalties related to unrecognized tax benefits. The Company does not believe it has any unrecognized tax benefits for December 31, 2021 and 2020 that would have a material impact on the financial statements. The Company’s income tax returns are open to examination by the Internal Revenue Service and various State jurisdictions.

	December 31,			December 31,
	2021			2020
Net deferred tax asset (liability)	$	(3,867	)	$	5,797
Valuation allowance	$	-		$	(5,797	)