Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.4
Income Taxes
12 Months Ended
Dec. 31, 2022
Income Taxes  
Income Taxes

Note 7 – Income Taxes

The components of loss before income taxes consist of the following:

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​

​

​

​

​

​

​

​

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Fiscal Year Ended

​

    

December 31, 2022

    

January 1, 2022

​

January 2, 2021

Domestic operations

​

$

(965)

​

$

(10,460)

​

$

(1,738)

Foreign operations

​

 

646

​

 

472

​

 

532

Total loss before income taxes

​

$

(319)

​

$

(9,988)

​

$

(1,206)

​

The income tax provision consists of the following:

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​

​

​

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Fiscal Year Ended

​

    

December 31, 2022

    

January 1, 2022

​

January 2, 2021

Current:

 

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​

​

​

​

  

Federal tax

​

$

—

​

$

—

​

$

50

State tax

​

​

395

​

​

68

​

​

80

Foreign tax

​

 

237

​

​

283

​

 

177

Total current taxes

​

 

632

​

 

351

​

 

307

Deferred:

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​

​

​

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Federal tax

​

 

307

​

​

(6,628)

​

 

(453)

State tax

​

 

(195)

​

​

(407)

​

 

(225)

Total deferred taxes

​

 

112

​

 

(7,035)

​

 

(678)

Valuation allowance

​

 

(112)

​

 

7,035

​

 

678

Income tax provision

​

$

632

​

$

351

​

$

307

​

Income tax provision differs from the amount that would result from applying the federal statutory rate as follows:

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​

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​

​

​

​

​

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December 31, 2022

    

January 1, 2022

​

January 2, 2021

Income tax at U.S. federal statutory rate

​

$

(67)

​

$

(2,098)

​

$

(253)

Tax attributes written off

​

 

—

​

​

—

​

 

50

Share-based compensation

​

 

397

​

​

(4,602)

​

 

(318)

State income tax, net of federal tax effect

​

 

158

​

​

(269)

​

 

(115)

Foreign tax

​

 

194

​

​

243

​

 

144

Other

​

 

62

​

​

42

​

 

121

Change in valuation allowance

​

 

(112)

​

​

7,035

​

 

678

Effective tax provision

​

$

632

​

​

351

​

$

307

​

For fiscal years 2022, 2021 and 2020, the effective tax rate for the Company was (198.0)%, (3.5)% and (25.4)%, respectively. The Company’s effective tax rate for fiscal years 2022, 2021 and 2020 differs from the U.S. federal rate primarily as a result of non-deductible share-based compensation, the write-off of expired state net operating loss carryforwards, and the change in the valuation allowance maintained against the Company’s deferred tax assets.

Deferred tax assets and deferred tax liabilities consisted of the following:

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​

​

​

​

​

​

​

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December 31, 2022

    

January 1, 2022

Deferred tax assets:

 

​

  

 

​

  

Inventory and inventory related allowance

​

$

2,440

​

$

1,373

Lease liabilities

​

​

11,226

​

​

10,830

Share-based compensation

​

 

4,337

​

 

3,108

Intangibles

​

 

137

​

 

161

Sales and bad debt allowances

​

 

1,099

​

 

1,021

Accrued compensation

​

 

444

​

 

445

Net operating loss

​

 

28,728

​

 

32,102

Other

​

 

151

​

 

210

Total deferred tax assets

​

 

48,562

​

 

49,250

Valuation allowance

​

 

(37,565)

​

 

(37,637)

Net deferred tax assets

​

 

10,997

​

 

11,613

Deferred tax liabilities:

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​

 

  

Right-of-use assets

​

​

10,506

​

​

10,203

Tax over book depreciation

​

 

489

​

 

1,410

Other

​

 

2

​

 

—

Total deferred tax liabilities

​

 

10,997

​

 

11,613

Net deferred tax assets

​

$

—

​

$

—

​

As of December 31, 2022, federal and state net operating loss (“NOL”) carryforwards were $103,323 and $80,280, respectively. Federal NOL carryforwards of $1,026 were acquired in the acquisition of WAG which are subject to Internal Revenue Code section 382 and limited to an annual usage limitation of $135. Federal NOL carryforwards begin to expire in 2029, while state NOL carryforwards begin to expire in 2023. The state NOL carryforwards expire in the respective tax years as follows:

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​

​

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2023

    

$

3,013

2024

​

 

2,355

2025

​

 

3,296

2026

​

 

2,982

2027

​

 

4,855

Thereafter

​

 

63,779

​

​

$

80,280

​

Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Realization of deferred tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversal of existing taxable temporary differences. ASC 740 provides that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years or losses expected in early future years. As of December 31, 2022, mainly due to cumulative losses in recent years, the Company maintained a valuation allowance in the amount of $37,565 against deferred tax assets that were not more likely than not of being realized.

We are subject to U.S. federal income tax as well as income tax of foreign and state tax jurisdictions. The tax years 2018-2022 remain open to examination by the major taxing jurisdictions to which the Company is subject, except the Internal Revenue Service for which the tax years 2019-2022 remain open. The Company does not anticipate a significant change to the amount of unrecognized tax benefits within the next twelve months.

Included in accrued expenses are income taxes (receivable) payable of ($67) and $145 as of December 31, 2022 and January 1, 2022, respectively, consisting primarily of current foreign taxes. Included in other non-current liabilities are

income taxes payable of $990 and $803 as of December 31, 2022 and January 1, 2022, respectively, relating to accrued future foreign withholding taxes.