Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

The provision for income tax attributable to continuing operations for the years ended December 31 is as follows:

	2022		2021
Current provision:
Federal	$	63	$	39
State		-		-
Total current provision		63		39
Deferred provision:
Federal		-		1,040
State		-		-
Total deferred provision		-		1,040
Provision:
Federal		63		1,079
State		-		-
Total provision	$	63	$	1,079

The current tax provision related to discontinued operations for the years ended December 31, 2022 and 2021 was $58 and $0, respectively. The deferred tax benefit related to discontinued operations for the years ended December 31, 2022 and 2021 was $(45) and $(256), respectively. These amounts are combined with amounts related to continuing operations on the consolidated statements of cash flows.

Income tax expense at the statutory tax rate is reconciled to the overall income tax expense for the years ended December 31 as follows:

	2022			2021
Federal income tax at statutory rates	$	(1,845	)	$	(1,442	)
State income taxes, net of federal tax effect		(74	)		(132	)
Permanent differences		-			(6	)
Rate difference in NOL Carryback		57			11
Other		22			(55	)
Change in state tax rate		149			57
Change in valuation allowance		1,754			2,646
Provision for income taxes	$	63		$	1,079

The effective tax rate for the years ended December 31, 2022 and 2021 was (0.7%) and (10.9%) respectively, which can differ from the statutory income tax rate due to various factors, including the establishment and change in a valuation allowance. During the year ended 2021, the Company established a valuation allowance on our deferred tax asset, which is reflected in income tax expense on the Consolidated Statements of Operations. The valuation allowance represents our determination that, more likely than not, we will be unable to realize the value of such assets at this time due to the uncertainty of future profitability.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. The net deferred tax assets and liabilities as of December 31, 2022 and 2021 are comprised of the following:
 

	2022			2021
Deferred tax assets:
Net operating loss carryforwards	$	1,659		$	531
Accounts receivable		20			30
Inventories		231			410
Accrued vacation and bonus		67			161
Intangibles and Goodwill		2,622			1,771
Operating lease liabilities		610			697
Other		231			168
Total deferred tax assets		5,440			3,768
Deferred tax liabilities:
Operating lease right-of-use assets		(546	)		(629	)
Prepaid expenses		(22	)		(21	)
Total deferred tax liabilities		(568	)		(650	)
Net deferred tax asset, before allowance		4,872			3,118
Valuation allowance		(4,872	)		(3,118	)
Net deferred tax asset	$	-		$	-

Net operating losses and tax credit carryforwards as of December 31, 2022 are as follows:

			Expiration Years
Net operating losses, state (After December 31, 2017)	$	2,452	Do not expire
Tax credits, federal	$	8	2042

Accounting for uncertainty in income taxes is based on a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We recognize in our Consolidated Financial Statements only those tax positions that are more-likely-than-not to be sustained as of the adoption date, based on the technical merits of the position. Each year we perform a comprehensive review of our material tax positions.

A valuation allowance has been provided as there is uncertainty that the deferred tax assets will be realized. The valuation allowance as of December 31, 2022, primarily relates to net operating loss carryforwards, goodwill, and intangible assets.

Our policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. As we had no uncertain tax benefits during 2022 and 2021, we had no accrued interest or penalties related to uncertain tax positions in either year.

We and our subsidiaries are subject to the following material taxing jurisdictions: United States and Colorado. The tax years that remain open to examination by the Internal Revenue Service are 2019 and years thereafter. The tax years that remain open to examination by the State of Colorado are 2018 and years thereafter.