Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

H. Income Taxes

        The provision for income tax expense was as follows:

	Fiscal Year Ended
(In thousands)	2011			2010			2009
Currently payable:
Federal	$	—		$	—		$	—
State		42			4			30
		42			4			30
Deferred:
Federal		1,369			(44	)		(4,926	)
State		201			(7	)		(725	)
		1,570			(51	)		(5,651	)
Valuation allowance for deferred tax assets		(1,570	)		51			5,651
Deferred provision		—			—			—
Total	$	42		$	4		$	30

        Net deferred tax assets (liabilities) are comprised of the following:

(In thousands)	December 31, 2011			January 1, 2011
Federal net operating loss carry forward	$	22,675		$	23,545
State net operating loss carry forwards		2,696			2,922
Depreciation		1,243			1,193
Goodwill and other intangible assets		265			473
Deferred compensation		174			383
Other		(262	)		(155	)
Valuation allowance		(26,791	)		(28,361	)
Net deferred tax assets	$	—		$	—

        We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. The Financial Accounting Standards Board guidance requires that companies assess whether valuation allowances should be established against their deferred tax assets based on the consideration of all available evidence that can be objectively verified. A company's current or previous losses are given more weight than its future outlook. In making such determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, historical and projected future taxable income, tax planning strategies and recent financial operations. Our three-year historical cumulative loss was a significant negative factor in determining that a valuation allowance on these assets continues to be appropriate. In the event we were to determine that we would be able to realize a portion, or all, of our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which could materially impact our financial position and results of operations.

        As of December 31, 2011, we had federal and state net operating loss carry forwards of approximately $22.7 million and $2.7 million, respectively. The federal net operating loss carry forward benefits of $3.6 million, $1.1 million, $1.7 million, $3.5 million, $11.1 million, and $1.7 million expire in 2025, 2026, 2027, 2028, 2029, and 2030, respectively. The state net operating loss carry forward benefits expire as follows: $1.2 million in 2011 through 2020 and $1.5 million in 2021 and beyond.

        The provision for income taxes differs from the amount of income tax determined by applying the federal statutory income tax rates to pretax (loss) income as a result of the following differences:

	Fiscal Year Ended
(In thousands)	2011			2010			2009
Income tax (benefit) at statutory federal rate	$	1,120		$	(157	)	$	(5,381	)
State and local taxes, net of federal (benefit)		189			(20	)		(764	)
Valuation allowance for deferred tax assets		(1,570	)		51			5,651
Meals and entertainment		50			53			83
Goodwill		(22	)		(22	)		(22	)
Other		275			99			463
Total tax provision	$	42		$	4		$	30

        The provisions of ASC 740 clarify the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of December 31, 2011, we determined our positions will more-likely-than-not be sustained if challenged.

        We recognize interest and penalties related to uncertain tax positions within interest and penalties expense. During fiscal years 2011, 2010 and 2009, we have not recognized expense for interest and penalties and do not have any amounts accrued as of December 31, 2011 and January 1, 2011, respectively, for the payment of interest and penalties.

        We file a consolidated income tax return in the US federal jurisdiction. We also file consolidated or separate company income tax returns in most states, Canada federal and Ontario province. As of December 31, 2011, there are no federal, state, or foreign income tax audits in progress. We are no longer subject to US federal audits for tax years before 2008, and with few exceptions, the same for state and local audits.