Income Taxes

12 Months Ended

Dec. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

Loss from operations before provision for income taxes was comprised of the following:

	FY 2023			FY 2022
	Year Ended			Year Ended
	December 30, 2023			December 31, 2022
United States	$	(9,673	)	$	(7,544	)
Foreign		193			62
Total	$	(9,480	)	$	(7,482	)

The provision for income taxes includes:

	FY 2023		FY 2022
	Year Ended		Year Ended
	December 30, 2023		December 31, 2022
Current:
Federal	$	—	$	—
State		31		47
Foreign		58		18
		89		65
Deferred:
Federal		1		1
State	$	—		(1	)
		1		—
Provision for income taxes	$	90	$	65

Our effective tax rate differs from the statutory federal income tax rate as shown in the following schedule:

	FY 2023			FY 2022
	Year Ended			Year Ended
	December 30, 2023			December 31, 2022
Income tax provision at statutory rate		21.0	%		21.0	%
State income taxes, net of federal benefit		3.2	%		5.1	%
Permanent differences		(0.3	)%		(0.4	)%
SBC		(1.4	)%		(1.7	)%
Rate change impact		(0.9	)%		(1.1	)%
Research and development credits		1.3	%		1.5	%
Change in valuation allowance		(24.0	)%		(24.0	)%
Foreign rate differential		(0.7	)%		(0.1	)%
Other		1.0	%		(1.2	)%
Effective tax rate		(0.8	)%		(0.9	)%

The tax effect of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets are presented below (in thousands):

	FY 2023			FY 2022
	Year Ended			Year Ended
	December 30, 2023			December 31, 2022
Deferred tax assets:
Net operating losses	$	13,268		$	11,264
Research and development credits		4,225			3,904
Accruals and reserves		1,573			2,505
Deferred revenue		2,593			2,640
Property and equipment		237			283
Intangible assets		281			344
Section 174 research and experimental expenditures capitalization		2,544			1,500
Stock compensation		725			717
Other tax credits		1			1
Total deferred tax asset		25,447			23,158
Less: Valuation allowance		(25,357	)		(23,078	)
Total deferred tax assets, net		90			80
Deferred tax liabilities:
Goodwill		(116	)		(104	)
Total deferred tax liabilities		(116	)		(104	)
Net deferred tax liabilities	$	(26	)	$	(24	)

Our accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of our deferred tax assets. Assessing the realizability of deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. Our management forecasts taxable income by considering all available positive and negative evidence including our history of operating income or losses and our financial plans and estimates which are used to manage the business. These assumptions require significant judgment about future taxable income. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced.

As of December 30, 2023, based on the Company's recent history of losses and its forecasted losses, management believes on the more likely than not basis that a full valuation allowance is required. Accordingly, in the fourth quarter of fiscal year 2023, the Company provided a full valuation allowance on its federal and state deferred tax assets. The Company's change in valuation allowance form prior year was $2.3 million. As of December 30, 2023, the Company had federal and state net operating loss (“NOL”) carry forwards of $53.6 million and $27.1 million, respectively. The federal NOL and the state NOL will begin to expire in 2032.

The Company has federal and state research credit carry forwards of approximately $2.5 million and $3.7 million, respectively. The federal research credit will begin to expire in 2024 and the state research credit can be carried forward indefinitely. In the event of a change in ownership as defined by IRC sections 382 and 383, the usage of the above mentioned NOLs and credits may be limited.

The Company accounts for uncertain tax positions in accordance with ASC 740, “Income Taxes.” ASC 740 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax provision that an entity takes or expects to take in a tax return. Additionally, ASC 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. Under ASC 740, an entity may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. In accordance with our accounting policy, we recognize accrued interests and penalties related to unrecognized tax benefits as a component of income tax expense. There is no accrued interest and penalty during the year ended December 30, 2023.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	FY 2023			FY 2022
	Year Ended			Year Ended
	December 30, 2023			December 31, 2022
Balance at the beginning of the year	$	1,368		$	1,308
Additions based upon tax positions related to the current year		104			110
Reductions based upon tax positions related to the prior year		(36	)		(50	)
Balance at the end of the year	$	1,436		$	1,368

If the ending balance of $1.4 million of unrecognized tax benefits as of December 30, 2023 were recognized, $0 of the recognition would affect the income tax rate. The Company does not anticipate any material change in our unrecognized tax benefits over the next twelve months. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business.

The Company files U.S. federal and state returns. The tax years 2012 to 2022 remain open in several jurisdictions, none of which have individual significance.

On August16, 2022, President Biden signed into law the Inflation Reduction Act, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases. The majority of the provisions of the Inflation Reduction Act of 2022 became effective beginning in 2023.

Under US GAAP, changes in income tax rates and law are accounted for in the period of enactment. For US federal purposes, the enactment date for US GAAP is the date the President signs the bill into law.

Management has reviewed the majority of the material provisions that would impact the Company and have determined that certain provisions in the IRA require accounting in the period of enactment but the majority of the provisions in the IRA with accounting implications will impact financial statements prospectively. We have reviewed the above provisions and based on the implication date and the application to the business, we don’t anticipate there to be any material impact of the tax law changes to the financial statements in 2023 or in the future.