Provision for Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Provision for Income Taxes

11) Provision for Income Taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management evaluates all available evidence about future taxable income and other possible sources of realization of deferred tax assets. A valuation allowance is established to reduce deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. To the extent the Company establishes a valuation allowance or increased the allowance in any given period, an expense is recognized within the provision for income taxes in the statement of income.

The Company recognizes the tax benefit from uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to income tax matters as other expense in the statement of income. Based on management’s evaluations, there are no uncertain tax positions requiring recognition as of the date of these financial statements.

The components of the Company’s net deferred tax assets as of March 31, 2022 and December 31, 2021, were as follows (in thousands):

Schedule of deferred tax assets
	March 31, 2022			December 31, 2021
Deferred tax assets:
Net Operating loss carry forward	$	537		$	1,445
Stock-based compensation		(4	)		(18	)
Fair Value of Warrant		—			(15	)
Total Deferred tax asset		533			1,412
Less: Valuation allowance	$	(533	)	$	(1,412	)
Deferred tax asset. net of valuation allowance		—			—
Deferred tax liabilities		—			—
Net Deferred tax asset		—			—

Income tax expense (benefit) was computed as follows:

Schedule of income tax expense benefit
	March 31, 2022		March 31, 2021
Federal income tax	$	—	$	—
State income tax		21		3
Total Income taxes ,Current provision		21		3
Deferred Income taxes (benefit)		—		—
Total Income expenses/ (benefit)	$	21	$	3

The Company’s effective tax rate is 0% for the quarter ended March 31, 2022 and 0% and for the quarter ended March 31, 2021 The future effective income tax rate depends on various factors, such as the Company’s income (loss) before taxes, tax legislation and the geographic composition of pre-tax income. 

The Company files a consolidated federal tax return with its parent and records its share of the consolidated federal tax expense on a separate return basis. The Company’s current tax expense is nil. There is no liability in 2021 on account of losses.

The Company’s federal and state income tax returns are generally subject to possible examination by the taxing authorities until the expiration of the related statute of limitations on those tax returns which is generally three years from the original filing deadline.The Company regularly reviews its deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences and tax planning strategies. The Company’s judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute the business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, the Company’s income tax provision would increase or decrease in the period in which the assessment is changed.