Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision for (benefit) from income taxes is set forth below:

Successor
(in thousands) Year Ended
December 31, 2021		 December 16, 2020
through
December 31, 2020
Current:
U.S. Federal $ —  $ 4 
State —  — 
Total current income tax expense —  4 
Deferred:
U.S. Federal (7,833) (314)
State (2,192) (56)
Total deferred income tax benefit (10,025) (370)
Valuation allowance 10,337  — 
312  (370)
Income tax expense (benefit) $ 312  $ (366)

The reconciliation of income tax computed at the U.S. federal statutory rate of 21% to our effective tax rate is set forth below:

Successor
(in thousands) Year Ended
December 31, 2021		 December 16, 2020
through
December 31, 2020
Income tax provision at the U.S. federal statutory rate $ (25,407) $ 1,046 
Permanent differences 402  (181)
Share-based compensation 496  — 
State income taxes, net of federal benefit (1,888) (56)
Change in derivative liability (2,900) (1,175)
Goodwill impairment 19,820  — 
True-up 42  — 
Change in valuation allowance 10,337  — 
Change in rate (406) — 
Tax credits (184) — 
Total income tax (benefit) expense $ 312  $ (366)

The components of the Company's deferred tax assets (liabilities) at December 31, 2021 and December 31, 2020 are set forth below:
Successor
(in thousands) Year Ended
December 31, 2021		 December 16, 2020 through
December 31, 2020
Deferred tax assets (liabilities):
Allowance for doubtful accounts $ 57  $ 33 
Goodwill 2,794  — 
Deferred franchise fees 684  752 
Deferred rent 239  7 
Stock compensation 1,250  203 
Net operating losses, Federal 11,215  1,550 
Net operating losses, State 2,066  — 
Deferred payroll taxes 217  — 
Interest expense 3,540  — 
Tax credits 713  — 
Other 1,075  151 
     Gross deferred tax assets 23,850  2,696 
Valuation allowance (11,383) — 
     Net deferred tax assets 12,467  2,696 
Fixed assets (520) (1,876)
Intangible assets (13,300) (87)
Goodwill —  (20)
     Deferred tax liabilities (13,820) (1,983)
Total net deferred tax (liabilities) assets $ (1,353) $ 713 

As of December 31, 2021, the Company’s federal net operating loss carryforwards for income tax purposes was $53.4 million. On a tax-effected basis, the Company also had net operating losses of $2.1 million related to various state jurisdictions. $44.9 million of the federal net operating loss carryforwards will be carried forward indefinitely and will be available to offset 80% of taxable income. The remaining amount of the federal net operating loss carryforwards will expire at varying dates through 2037.

Pursuant to Sections 382 and 383 of the IRC and corresponding provisions of state law, the utilization of net operating loss carryforwards and tax credits may be limited as a result of a cumulative change in stock ownership of more than 50% over a three year period. The Company underwent such a change and consequently, the utilization of a portion of the net operating loss carryforwards and tax credits is subject to certain limitations.

In assessing the realizability of deferred income tax assets, ASC 740 requires that a more likely than not standard be met. If the Company determines that it is more likely than not that deferred income tax assets will not be realized, a valuation allowance must be established. The realization of deferred tax assets depends on the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies when making this determination. The Company has experienced cumulative losses in recent years which is significant negative evidence that is difficult to overcome in order to reach a determination that a valuation allowance is not required. Based on the Company's evaluation of its deferred tax assets, a valuation allowance of approximately $11.4 million has been recorded against the deferred tax asset.

The following table summarizes the Company's unrecognized tax benefits at December 31, 2021 and December 30, 2020:
Successor
(in thousands) Year Ended
December 31, 2021		 December 16, 2020 through
December 31, 2020
Beginning balance $ —  $ — 
Additions based on tax positions related to the current year $ —  $ — 
Additions for tax positions of prior years $ 660  $ — 
Ending balance $ 660  $ — 
The Company had outstanding federal refund claims of approximately $0.7 million as of December 31, 2021. In March 2022, the Company received approximately $0.7 million of those refund claims.