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Note 9 - Income Taxes | 12 Months Ended
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Jan. 01, 2023
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 9 — INCOME TAXES The components of loss before provision of income taxes and the components for the provision for income taxes are as follows (in thousands):
|  | Fiscal Years |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Loss before income taxes: |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | (4,116 | ) |  | $ | (6,461 | ) |  | $ | (11,170 | )
Foreign |  |  | (53 | ) |  |  | (36 | ) |  |  | 70 |
Loss before income taxes |  | $ | (4,169 | ) |  | $ | (6,497 | ) |  | $ | (11,100 | )
Provision for income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
State |  | $ | 3 |  |  | $ | 3 |  |  | $ | 3 |
Foreign |  |  | 36 |  |  |  | 22 |  |  |  | 39 |
Subtotal |  |  | 39 |  |  |  | 25 |  |  |  | 42 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Foreign |  |  | 59 |  |  |  | 94 |  |  |  | 9 |
Subtotal |  |  | 59 |  |  |  | 94 |  |  |  | 9 |
Provision for income taxes |  | $ | 98 |  |  | $ | 119 |  |  | $ | 51 |
The difference between income taxes computed at the statutory federal income tax rate and the provision for income taxes is attributable to the following (in thousands):
|  | Fiscal Years |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Income tax benefit at statutory rate |  | $ | (876 | ) |  | $ | (1,364 | ) |  | $ | (2,331 | )
State taxes |  |  | 3 |  |  |  | 3 |  |  |  | 3 |
Foreign taxes |  |  | 106 |  |  |  | 124 |  |  |  | 34 |
Stock compensation and other permanent differences |  |  | 21 |  |  |  | (155 | ) |  |  | 171 |
PPP loan forgiveness |  |  | — |  |  |  | (250 | ) |  |  | — |
R&D tax credits |  |  | (318 | ) |  |  | (230 | ) |  |  | (261 | )
Expired tax attributes |  |  | 3,563 |  |  |  | 3,303 |  |  |  | 208 |
Future benefit of deferred tax assets not recognized |  |  | (2,401 | ) |  |  | (1,312 | ) |  |  | 2,227 |
Provision for income taxes |  | $ | 98 |  |  | $ | 119 |  |  | $ | 51 |
Based on the available objective evidence, management believes it is more likely than not that the U.S. net deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its U.S. federal and state deferred tax assets at January 1, 2023. Any future release of the valuation allowance may be recorded as a tax benefit increasing net income. The Company believes it is more likely than not it will be able to realize its foreign deferred tax assets. Significant components of our deferred tax balances are as follows (in thousands):
|  | January 1, 2023 |  |  | January 2, 2022 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses |  | $ | 43,110 |  |  | $ | 45,197 |
Accruals and reserves |  |  | 1,284 |  |  |  | 1,347 |
Credits carryforward |  |  | 6,004 |  |  |  | 5,660 |
Depreciation and amortization |  |  | 6,488 |  |  |  | 7,820 |
Stock-based compensation |  |  | 1 |  |  |  | 403 |
Operating lease liability |  |  | 327 |  |  |  | 409 |
Gross deferred tax assets |  |  | 57,214 |  |  |  | 60,836 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Right-of-use asset |  |  | (328 | ) |  |  | (400 | )
Withholding tax on future distribution |  |  | (125 | ) |  |  | (125 | )
Gross deferred tax liabilities |  |  | (453 | ) |  |  | (525 | )
Net deferred tax assets |  |  | 56,761 |  |  |  | 60,311 |
Valuation allowance |  |  | (56,862 | ) |  |  | (60,353 | )
Total deferred tax liability |  | $ | (101 | ) |  | $ | (42 | )
Beginning January 1, 2022, the Tax Cuts and Jobs Act (the "Tax Act”) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to Internal Revenue Code (“IRC”) Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses. As a result of this provision of the Tax Act, the Company capitalized $5.4M of research expenses in the current year. As of January 1, 2023 , we had federal and state income tax net operating loss ("NOL") carryforwards of approximately $175.0 millio n and $91.2 million, respectively. Approximately $112.4 million in federal NOLs generated before January 1, 2018 expire beginning in 2023 through 2037. Federal NOLs of $62.9 million generated in years after January l, 2018 can be carried forward indefinitely. We had research credit carryforwards of approximately $3.9 million for federal and $5.0 for state income tax purposes as of January 1, 2023 . If not utilized, the federal carryforwards will expire beginning in 2026 through 2041. The California research credit carryforward can be carried forward indefinitely. Due to our history of losses, we believe that it is more likely than not that the deferred tax assets and benefits from these federal and state NOL and credit carryforwards will not be realized as of January 1, 2023. Accordingly, we established a valuation allowance of $56.9 million, tax-effected, as of the Fiscal Year ended January 1, 2023 due to uncertainties related to our ability to utilize our U.S. deferred tax assets before they expire. Events which may restrict utilization of a company’s net operating loss and credit carryforwards include, but are not limited to, certain ownership change limitations as defined in Internal Revenue Code Section 382 and similar state provisions. In the event the Company has had a change of ownership, utilization of carryforwards could be restricted to an annual limitation. The annual limitation may result in the expiration of net operating loss carryforwards and credit carryforwards before utilization. The Company has not undertaken a study to determine if its net operating losses are limited. In the event the Company previously experienced an ownership change, or should experience an ownership change in the future, the amount of net operating losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized. Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for on the undistributed earnings of certain foreign subsidiaries as of the end of fiscal 2022. The Company intends to reinvest these earnings indefinitely in the Company’s foreign subsidiaries. The Company believes that future domestic cash generation will be sufficient to meet future domestic cash needs. In previous years, the Company recorded a deferred tax liability of approximately $0.1 million on the undistributed earnings of non-U.S. subsidiaries. During fiscal 2022, there were no changes to this balance, and at January 1, 2023, the balance for this deferred tax liability was approximately $0.1 million. The foreign withholding taxes are not expected to have a material impact on the Company’s financial position and results of operation. Uncertain Tax Positions Changes in gross unrecognized benefits are as follows (in thousands):
|  | Fiscal Years |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Beginning balance of unrecognized tax benefits |  | $ | 2,118 |  |  | $ | 2,176 |  |  | $ | 2,117 |
Additions (subtractions) for tax positions related to the prior year |  |  | — |  |  |  | (7 | ) |  |  | 38 |
Additions for tax positions related to the current year |  |  | 185 |  |  |  | 128 |  |  |  | 114 |
Lapse of statutes of limitations |  |  | (54 | ) |  |  | (178 | ) |  |  | (93 | )
Ending balance of unrecognized tax benefits |  | $ | 2,249 |  |  | $ | 2,118 |  |  | $ | 2,176 |
Out of $2.2 million of unrecognized tax benefits, there are no unrecognized tax benefits that would result in a change in the Company's effective tax rate if recognized in future years. The accrued interest and penalties related to uncertain tax positions was not significant as of January 1, 2023, January 2, 2022 and January 3, 2021. The Company is not currently under tax examination in the U.S. and the Company’s historical net operating loss and credit carryforwards may be adjusted by the Internal Revenue Service, and other tax authorities until the statute closes on the year in which such tax attributes are utilized. The Company estimates that its unrecognized tax benefits will not change significantly within the next twelve months. The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates. The U.S. tax years from 2003 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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