Income Taxes

3 Months Ended

May 28, 2022

Income Taxes

Income Taxes

7. Income Taxes

The Company recorded an income tax expense of $3,497 and $780 for the thirteen week periods ended May 28, 2022 and May 29, 2021, respectively. The effective tax rate for the thirteen week periods ended May 28, 2022 and May 29, 2021 was (3.3)% and (6.4)%, respectively. The effective tax rate for the thirteen week periods ended May 28, 2022 and May 29, 2021 was net of an adjustment of (37.6)% and (18.5)%, respectively, to adjust the valuation allowance against deferred tax assets.

The Company recognizes tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities.

The Company believes that it is reasonably possible that a decrease of up to $25,130 in unrecognized tax benefits related to state exposures may be necessary in the next twelve months; however, management does not expect the change to have a material impact on the results of operations or the financial position of the Company.

The Company regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain. Management will continue to monitor all available evidence related to the net deferred tax assets that may change the most recent assessment, including events that have occurred or are anticipated to occur. The Company continues to maintain a valuation allowance against net deferred tax assets of $1,862,823 and $1,822,710, which relates to federal and state deferred tax assets that may not be realized based on the Company's future projections of taxable income at May 28, 2022 and February 26, 2022, respectively.