Income Taxes

6 Months Ended

Jul. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 3 – Income Taxes

For the 13-week periods ended July 30, 2022 and July 31, 2021, the Company recorded income tax expense of approximately $3.6 million, or 16.4% of the loss before income taxes, and a tax benefit of approximately $404,000, or 182.0% of income before income taxes, respectively. The change in income taxes for the 13-week period ended July 30, 2022, compared to the prior year period, was primarily due to the federal net operating loss carry-forward now projected by the Company for fiscal 2022, which is fully offset by a valuation allowance. This change in estimate caused the reversal of the tax benefit recorded in the first quarter of fiscal 2022.

For the 26-week periods ended July 30, 2022 and July 31, 2021, the Company recorded income tax expense of $298,000, or 0.9% of the loss before income taxes, and an income tax benefit of $74,000, or 3.3% of income before income taxes, respectively. Income taxes for the 26-week periods ended July 30, 2022 and July 31, 2021 were minimal due to valuation allowances against deferred tax assets.

Income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate to (loss) income before income taxes. A reconciliation of income tax expense (benefit) at the statutory federal income tax rate to the amount provided is as follows (in thousands):

	13-Week Period Ended						26-Week Period Ended
	July 30,			July 31,			July 30,			July 31,
	2022			2021			2022			2021
Tax at federal statutory rate	$	(4,637	)	$	47		$	(6,985	)	$	477
State income taxes, net of federal benefit		(12	)		1			(466	)		66
Tax credits		(181	)		(2	)		(126	)		(6	)
Executive compensation		205			1			116			15
Stock based compensation programs		117			(415	)		(553	)		(517	)
Valuation allowance		8,092			(36	)		8,307			(110	)
Other		38			—			5			1
Income tax expense (benefit)	$	3,622		$	(404	)	$	298		$	(74	)

The Company recognizes deferred tax assets and liabilities using estimated future tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities, including net operating loss carry forwards. Management assesses the realizability of deferred tax assets and records a valuation allowance if it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers the probability of future taxable income and our historical profitability, among other factors, in assessing the amount of the valuation allowance. Adjustments could be required in the future if the Company estimates that the amount of deferred tax assets to be realized is more than the net amount recorded. Any change in the valuation allowance could have the effect of increasing or decreasing the income tax provision in the statement of operations based on the nature of the deferred tax asset deemed realizable in the period in which such determination is made. As of July 30, 2022 and July 31, 2021, the Company recorded a full valuation allowance against deferred tax assets.