Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Jan. 29, 2022
Income Taxes [Abstract]  
Income Taxes
Note 10. Income Taxes

Income tax expense consists of the following:

   
Fiscal Year
  
   
2021
    
2020
  
(amounts in thousands)
      
Federal - current
  
$
-
    
$
(3,542
)
State - current
    
27
      
-
  
Deferred
    
-
      
-
  
Income tax (benefit) expense
  
$
27
    
$
(3,542
)


A reconciliation of the Company’s effective income tax rate with the federal statutory rate is as follows:

   
Fiscal Year
  
  2021    
2020
  
Federal statutory rate
    
21.0
%
    
21.0
%
State income taxes, net of federal tax effect
    
(0.3
%)
    
0.0
%
Change in Valuation Allowance
    
(30.9
%)
    
(27.7
%)
Cash surrender value - insurance / benefit program
    
0.8
%
    
6.8
%
Uncertain tax position
    
-
 %
   
47.6
%
Other
    
9.1
%
    
(0.1
%)
Effective tax rate
    
(0.3
%)
    
47.6
%

The Other category is comprised of various items, including the impacts of non-deductible entertainment, penalties and parking benefits and the refundable portion of the federal alternative minimum tax carryover credit.

Significant components of the Company’s deferred tax assets are as follows:

   
January 29,
2022
    
January 30,
2021
  
(amounts in thousands)
      
DEFERRED TAX ASSETS
            
Accrued Expenses
  
$
159
    
$
71
  
Inventory
    
219
      
215
  
Retirement and compensation related accruals
    
3,769
      
3,981
  
Fixed assets
    
-
      
218
  
Federal and state net operating loss and credit carry forwards
    
91,468
      
90,206
  
Losses on investment
    
853
      
853
  
Others
    
107
      
107
  
Gross deferred tax assets before valuation allowance
    
96,575
      
95,651
  
Less: valuation allowance
    
(96,331
)
    
(95,022
)
Total deferred tax assets
  
$
244
    
$
629
  
                 
DEFERRED TAX LIABILITIES
                
Fixed assets
  $
(244 )   $
-  
Intangibles
  

-
    

(629
)
Total deferred tax liabilities
  
$
(244
)
  
$
(629
)
                 
NET DEFERRED TAX ASSET
  
$
-
    
$
-
  

The Company, at the end of fiscal 2021, has a net operating loss carryforward of $352.7 million for federal income tax purposes which will expire at various times throughout 2040 with a portion being available indefinitely. The Company has approximately $214.4 million of net operating loss carryforward for state income tax purposes as of the end of fiscal 2020 that expire at various times through 2040 and are subject to certain limitations and statutory expiration periods. The state net operating loss carryforwards are subject to various business apportionment factors and multiple jurisdictional requirements when utilized. The Company has federal tax credit carryforwards of $0.5 million which will expire in 2026. The Company has state tax credit carryforwards of $0.2 million.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. Based on the available objective evidence, management concluded that a full valuation allowance should be recorded against its deferred tax assets. As of January 29, 2022, the valuation allowance increased to $96.3 million from $95.0 million as of January 30, 2021. Management will continue to assess the valuation allowance against the gross deferred assets.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the respective years is provided below. Amounts presented excluded interest and penalties, where applicable, on unrecognized tax benefits:

   
Fiscal Year
  
   
2021
    
2020
  
(amounts in thousands)
      
Unrecognized tax benefits at beginning of year
  
$
413
    
$
1,930
  
Decreases in tax positions from prior years
    
-
      
(1,517
)
Unrecognized tax benefits at end of year
  
$
413
    
$
413
  

As of January 29, 2022, the Company had $0.4 million of gross unrecognized tax benefits, which would impact the Company’s effective tax rate if recognized. While it is reasonably possible that the amount of unrecognized tax benefits will increase or decrease within the next twelve months, the Company does not expect the change to have a significant impact on its results of operations or financial position. The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company has substantially concluded all federal income tax matters and all material state and local income tax matters through fiscal 2013.

The Company’s practice is to recognize interest and penalties associated with its unrecognized tax benefits as a component of income tax expense in the Company’s Consolidated Statements of Operations. As of January 29, 2022, the Company did not have any liability for unrecognized tax benefits.