Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.21.1
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.