Note 14 – Income Taxes

Successor

The Company has accumulated net losses and has not recorded an income tax provision or benefit for the United States (U.S.) federal and state income taxes during the year ended December 31, 2020 and for period from October 4, 2019 through December 31, 2019.


	For the Year Ended		October 4, 2019
	December 30,		through
	2020		December 31, 2019
Statutory federal income tax rate	21.0	%	21.0	%
State income taxes, net of federal taxes	3.6	%	3.5	%
Non-controlling interest	0.0	%	1.4	%
Other permanent items	(0.2)	%	(0.5)	%
Change in valuation allowance	(24.4)	%	(25.4)	%
Income taxes provision (benefit)	0.0	%	0.0	%

Net deferred tax assets consist of the following components:


	December 31,
	2020	2019
Deferred tax assets:
Net operating loss carryforwards	1,334,445	663,177
Stock-based compensation	141,914	65,597
Amortization	973	—
Passthrough entity	178,676	—
Other	45	—
Total deferred income tax assets	1,656,053	728,774
Deferred tax liabilities:
Depreciation	—	—
	—	—
Valuation allowance	(1,656,053)	(728,774)
Deferred tax asset, net of allowance	—	—

As of each reporting date, the Company considers existing evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets. The Company believes that it is more likely than not that the benefit for deferred tax assets will not be realized. In recognition of this uncertainty, a full valuation allowance was applied to the deferred tax assets. The Company did not record a tax provision for the year ended December 31, 2020 and for the period October 4, 2019 through December 31, 2019, due to the Company's estimate that the effective tax rate for each year is 0%.

Future realization depends on the Company's future earnings, if any, the timing and amount of which are uncertain as of December 31, 2020. In the future, should management conclude that it is more likely than not that the deferred tax assets are partially or fully realizable, the valuation allowance would be reduced to the extent of such expected realization and the amount would be recognized as a deferred income tax benefit in the Company's consolidated statements of operations.

At December 31, 2020 and 2019, the Company had net operating loss carryforwards of approximately $5.6 million and $2.8 million. Federal net operating losses of approximately $5.6 million carryforward indefinitely. State operating loss carryforwards of approximately $5.4 million carry forward indefinitely.

Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, a portion of the Company’s federal and state net operating loss carryforwards may be limited due to ownership changes that occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. Due to the existence of the valuation allowance, limitations created by the ownership changes will not impact the Company’s effective tax rate.

All tax years remain subject to examination by major taxing jurisdictions. There have been no material income tax related interest or penalties assessed or recorded during the year ended December 31, 2020 and period October 4, 2019 through December 31, 2019.

No liability related to uncertain tax positions is reported in the Company's consolidated financial statements.

Predecessor

Prior to the Business Combination, the Company was a Subchapter S pass-through entity for income tax purposes. Accordingly, the Company not subject to income taxes prior to the acquisition and therefore there is no tax provision related to the income.