JanOne Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Jan. 02, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 13:

Income taxes

For fiscal year 2020 and 2019, we recorded an income tax benefit of $427 and $3,197, respectively, which consisted of the following:

	Fiscal Years Ended
	January 2, 2021			December 28, 2019
Current tax expense:
State	$	(46	)	$	(80	)
Federal		203			—
Current tax expense	$	157		$	(80	)
Deferred tax benefit - domestic		270			3,277
Benefit of income taxes	$	427		$	3,197

A reconciliation of our benefit of income taxes with the federal statutory tax rate for fiscal years 2020 and 2019 is shown below:

	Fiscal Years Ended
	January 2, 2021			December 28, 2019
U.S statutory rate		21.0	%		21.0	%
State tax rate		7.5	%		1.8	%
Foreign rate differential		0.4	%		0.2	%
Permanent differences		-0.1	%		-0.1	%
Change in valuation allowance		-24.5	%		-0.7	%
Other		0.6	%		-0.6	%
		4.9	%		21.6	%

Loss before benefit of income taxes was derived from the following sources for fiscal years 2020 and 2019 as shown below:

	Fiscal Years Ended
	January 2, 2021			December 28, 2019
United States	$	(8,270	)	$	(14,497	)
Canada		(655	)		(664	)
	$	(8,925	)	$	(15,161	)

The components of net deferred tax assets (liabilities) as of January 2, 2021 and December 28, 2019, are as follows:

	January 2, 2021			December 28, 2019
Deferred tax assets (liabilities):
Allowance for bad debts	$	823		$	802
Accrued expenses		1,769			1,623
Accrued compensation		76			62
Prepaid expenses		(304	)		(93	)
Net operating loss		3,477			2,045
Lease liability		35			504
Tax credits		290			256
Share-based compensation		176			125
Intangibles		(3,717	)		(4,585	)
Property and equipment		(214	)		(652	)
Unrealized losses (gains)		140			141
Section 163(j) interest		387			288
		2,938			516
Less: valuation allowance		(2,938	)		(786	)
Net deferred tax assets (liabilities)	$	—		$	(270	)

As of January 2, 2021, the Company has net operating loss carryforwards of approximately $10,221 for federal income tax purposes, which will be available to offset future taxable income. Due to recent tax legislation, these net operating losses are eligible for indefinite carryforward, limited by certain taxable income limitations. The Company evaluates all available evidence to determine if a valuation allowance is needed to reduce its deferred tax assets. Management has concluded that it is more likely than not that its existing tax benefits in the U.S. and Canada will not be realized. Accordingly, the Company has recorded a valuation allowance $2,938 at January 2, 2021 to reduce its deferred tax assets.

The Company annually conducts an analysis of its uncertain tax positions and has concluded that it has no uncertain tax positions as of January 2, 2021. The Company’s policy is to record uncertain tax positions as a component of income tax expense.

The Company files U.S. and state income tax returns in jurisdictions with differing statutes of limitations. The 2017 through 2020 tax years remain subject to selection for examination as of January 2, 2021. None of the Company’s income tax returns are currently under audit.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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