Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 15: Income taxes

For fiscal years ended December 31, 2022, and January 1, 2022, the Company recorded an income tax benefit from continuing operation of approximately $6.7 million and an income tax provision of $273,000, respectively, and an income tax provision from discontinued operations of approximately $2.2 million and $0, respectively, which consisted of the following (in $000's):

 

 

 

Fiscal Years Ended

 

 

 

December 31, 2022

 

 

January 1, 2022

 

Current tax expense:

 

 

 

 

 

 

State

 

$

32

 

 

$

75

 

Federal

 

 

45

 

 

 

—

 

Current tax expense

 

 

77

 

 

 

75

 

Deferred tax benefit - domestic

 

 

(4,589

)

 

 

198

 

Total (benefit) provision of income taxes

 

$

(4,512

)

 

$

273

 

 

A reconciliation of the Company's income tax benefit (provision) with the federal statutory tax rate for the fiscal years ended December 31, 2022, and January 1, 2022, respectively, is shown below:

 

 

 

Fiscal Years Ended

 

 

 

December 31, 2022

 

 

January 1, 2022

 

U.S statutory rate

 

 

21.0

%

 

 

21.0

%

Federal income tax for installment sale

 

 

0.6

%

 

 

0.0

%

State tax rate

 

 

5.5

%

 

 

4.3

%

Foreign rate differential

 

 

-0.2

%

 

 

0.2

%

Permanent differences

 

 

0.4

%

 

 

2.3

%

Change in tax rates

 

 

2.8

%

 

 

0.2

%

Benefit from CARES Act carryback claim

 

 

0.0

%

 

 

-1.2

%

Change in valuation allowance

 

 

-96.4

%

 

 

-27.5

%

Other

 

 

0.4

%

 

 

-0.9

%

 

 

 

-65.9

%

 

 

-1.6

%

 

Income (loss) before provision of income taxes was derived from the following sources for fiscal years December 31, 2022 and January 1, 2022, respectively, as shown below (in $000's):

 

 

 

Fiscal Years Ended

 

 

 

December 31, 2022

 

 

January 1, 2022

 

United States

 

$

6,717

 

 

$

(16,074

)

Canada

 

 

(237

)

 

 

(540

)

Total

 

$

6,480

 

 

$

(16,614

)

 

The components of net deferred tax assets (liabilities) as of December 31, 2022 and January 1, 2022, respectively, are as follows (in $000's):

 

 

 

December 31, 2022

 

 

January 1, 2022

 

Deferred tax assets (liabilities):

 

 

 

 

 

 

Allowance for bad debts

 

$

—

 

 

$

795

 

Accrued expenses

 

 

1,723

 

 

 

2,118

 

Accrued compensation

 

 

82

 

 

 

91

 

Section 174 expenses

 

 

92

 

 

 

—

 

Prepaid expenses

 

 

(184

)

 

 

(375

)

Net operating loss

 

 

5,494

 

 

 

4,440

 

Lease liability

 

 

39

 

 

 

25

 

Tax credits

 

 

3

 

 

 

92

 

Share-based compensation

 

 

171

 

 

 

219

 

Intangibles

 

 

(4,782

)

 

 

(5

)

Property and equipment

 

 

(483

)

 

 

(407

)

Installment sale

 

 

(2,114

)

 

 

—

 

Unrealized losses

 

 

305

 

 

 

148

 

Section 163(j) interest

 

 

363

 

 

 

361

 

 

 

709

 

 

 

7,502

 

Less: valuation allowance

 

 

(904

)

 

 

(7,502

)

Net deferred tax assets (liabilities)

 

$

(195

)

 

$

—

 

 

As of December 31, 2022, the Company has net operating loss carryforwards of approximately $18.8 million 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. During the fourth quarter, management has released the valuation allowance of approximately $6.6 million which they believe will be utilized in the near future. The Company continues to have a full valuation allowance on certain foreign net operating losses. Management concluded that no valuation allowance was necessary, based on taxable temporary differences reversing in the near future to utilize tax attributes. The Company has recorded a valuation allowance of $0.9 million and $7.5 million as of December 31, 2022, and January 1, 2022, respectfully.

The Company annually conducts an analysis of its uncertain tax positions and has concluded that it has no uncertain tax positions as of December 31, 2022. 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 2018 through 2022 tax years remain subject to selection for examination as of December 31, 2022. None of the Company’s income tax returns are currently under audit. During the fourth quarter of fiscal 2022, the Company released the valuation allowance of approximately $6.6 million which they believe will be utilized in the near future. The Company continues to have a full valuation allowance on certain foreign net operating losses. The Company concluded that no valuation allowance was necessary, based on taxable temporary differences reversing in the near future. The Company has recorded a valuation allowance of $0.9 million and $7.5 million as of December 31, 2022 and January 1, 2022, respectfully.