16. Income Taxes

The income tax benefit differs from the amount that would have resulted from applying the combined Canadian federal and provincial statutory income tax rate to loss from continuing operations before income taxes due to the following:

	December 31, 2022		January 1, 2022		January 2, 2021
	$		$		$
Loss from continuing operations before income taxes	(11,858	)	(7,600	)	(50,042	)
Canadian statutory rate	26.5%		26.5%		26.5%
Income tax benefit at statutory rate	(3,142	)	(2,014	)	(13,261	)
Stock-based compensation	978		(4,796	)	2,159
Disallowed executive compensation	374		138		2,801
Foreign tax rate differential	76		(31	)	(105	)
Excess tax benefits related to stock-based compensation
Change in valuation allowance	(471	)	975		560
Change in enacted tax rates	(340	)	(442	)	250
CARES Act	-		-		2,472
Change in valuation of state deferred tax assets	-		-		(3,900	)
Other	185		(258	)	1,374
Income tax benefit	(2,340	)	(6,428	)	(7,650	)

The components of loss from continuing operations before income taxes are shown below:

	December 31, 2022		January 1, 2022		January 2, 2021
	$		$		$
Canada	(11,181	)	(10,797	)	(14,700	)
U.S.	(2,506	)	3,855		(34,521	)
Other	1,829		(658	)	(821	)
Loss from continuing operations before income taxes	(11,858	)	(7,600	)	(50,042	)

The components of income tax expense (benefit) are shown below:

	December 31, 2022		January 1, 2022		January 2, 2021
	$		$		$
Current income tax expense (benefit):
Canada	84		(9	)	(154	)
U.S.	(55	)	(75	)	(14,148	)
Other	2,438		(359	)	589
	2,467		(443	)	(13,713	)

Deferred income tax expense (benefit):
Canada	-		299		(291	)
U.S.	(4,672	)	(6,129	)	5,532
Other	(135	)	(155	)	822
	(4,807	)	(5,985	)	6,063
Income tax benefit	(2,340	)	(6,428	)	(7,650	)

Deferred income taxes of the Company are comprised of the following:

	December 31, 2022		January 1, 2022
	$		$
Differences in property, plant and equipment and intangible assets	(28,088	)	(54,761	)
Capital and non-capital losses	17,335		26,751
Interest expense limitation (163j)	9,464		13,064
Tax benefit of scientific research expenditures	2,866		2,744
Stock-based compensation	2,160		680
Inventory basis differences	1,805		1,148
Right-of-use lease assets	(23,071	)	(13,224	)
Lease liabilities	23,609		13,346
Other accrued reserves	2,458		1,468
	8,538		(8,784	)
Less: valuation allowance	4,826		5,267
Deferred income tax asset (liability)	3,712		(14,051	)

The components of the deferred income tax asset (liability) are shown below:

	December 31, 2022		January 1, 2022
	$		$
Canada	(325	)	(325	)
U.S.	3,978		(13,649	)
Other	59		(77	)
Deferred income tax asset (liability)	3,712		(14,051	)

The components of the deferred income tax valuation allowance are as follows:

	December 31, 2022		January 1, 2022
	$		$
Balance, beginning of year	5,267		4,284
Increase (decrease) in valuation allowance	(441	)	983
Balance, end of year	4,826		5,267

As at December 31, 2022, the Company had approximately $2.3 million (January 1, 2022 - $1.6 million) in U.S. federal scientific research investment tax credits and $0.3 million (January 1, 2022 - $0.9 million) in U.S. state research and development tax credits, which will expire in varying amounts between 2023 and 2041.

As at December 31, 2022, the Company had U.S. federal non-capital loss carryforwards of approximately $48.4 million (January 1, 2022 - $64.8 million). In addition, the Company had state loss carryforwards of approximately $3.0 million as at December 31, 2022 (January 1, 2022 - $3.3 million). These amounts are available to reduce future federal and state income taxes.

As at December 31, 2022, the Company had Canadian capital losses of approximately $27.8 million (January 1, 2022 - $27.8 million) for which a full valuation allowance exists. These amounts are available to reduce future capital gains and do not expire. In addition, the Company had Canadian non-capital loss carryforwards of approximately $4.0 million (January 1, 2022 - $6.0 million). These amounts are available to reduce future taxable income and do not begin to expire until 2040.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determinations, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on this evaluation, as at December 31, 2022, a valuation allowance of $4.8 million (January 1, 2022 - $5.3 million) had been recorded against certain assets to reduce the net benefit recorded in the consolidated financial statements.

As the undistributed earnings of the Company's non-Canadian affiliates and associated companies are considered to be indefinitely reinvested, no provision for deferred taxes has been provided thereon.

For the years ended December 31, 2022, January 1, 2022 and January 2, 2021, the Company did not identify any material uncertain tax positions or recognize any related tax benefits. The Company believes it has adequately examined its tax positions taken or expected to be taken in a tax return; however, amounts asserted by taxing authorities could differ from the Company's positions. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Consistent with its historical financial reporting, the Company has classified interest and penalties related to income tax liabilities, when applicable, as part of interest expense in its consolidated statements of operations, and with the related liability on the consolidated balance sheets.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company's major taxing jurisdictions are the U.S. (including multiple states) and Canada (Ontario). The Company's 2019 through 2021 tax years (and any tax year for which available non-capital loss carryforwards were generated up to the amount of non-capital loss carryforward) remain subject to examination by the Internal Revenue Service for U.S. federal tax purposes, and tax years 2015 through 2021 remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other ongoing audits in various other jurisdictions that are not considered material to the Company's consolidated financial statements.