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Income Taxes
 12 Months Ended
Dec. 29, 2012
Income Taxes [Abstract]  
Income Taxes

14. Income Taxes

Pre-tax book (loss) income from continuing operations was comprised of the following:

 

                         
    FY 2012
Year Ended
December 29,
2012		     FY 2011
Year Ended
December 31,
2011		     FY 2010
Year Ended
January 1,
2011		  

United States

   $ (270 )    $ 2,438     $ 1,961  

Foreign

     0       0       0  
   

 

 

    

 

 

    

 

 

  

Total

   $ (270 )    $ 2,438     $ 1,961  
   

 

 

    

 

 

    

 

 

  

The provision for (benefit from) income taxes from continuing operations includes:

 

                         
    FY 2012
Year Ended
December 29,
2012		     FY 2011
Year Ended
December 31,
2011		     FY 2010
Year Ended
January 1,
2011		  

Current:

                        

Federal

   $ (114 )    $ 267     $ 288  

State

     14       30       20  

Foreign

     0       0       0  
   

 

 

    

 

 

    

 

 

  
      (100 )      297       308  
   

 

 

    

 

 

    

 

 

  

Deferred:

                        

Federal

     0       0       0  

State

     0       0       0  
   

 

 

    

 

 

    

 

 

  

Income tax (benefit) provision

   $ (100 )    $ 297     $ 308  
   

 

 

    

 

 

    

 

 

  

The Company’s effective tax rate differs from the statutory federal income tax rate as shown in the following schedule:

 

                         
    FY 2012
Year Ended
December 29,
2012		     FY 2011
Year Ended
December 31,
2011		     FY 2010
Year Ended
January 1,
2011		  

Income tax provision at statutory rate

     34 %      34 %      34 % 

State income taxes, net of federal benefit

     (88 %)      (2 %)      (1 %) 

Permanent differences

     (89 %)      0 %      3 % 

Research and development credits

     0 %      (4 %)      (4 %) 

Change in valuation allowance

     180 %      (16 %)      (16 %) 
   

 

 

    

 

 

    

 

 

  

Effective tax rate

     37 %      12 %      16 % 
   

 

 

    

 

 

    

 

 

  

 

The tax effect of temporary differences and carry-forwards that give rise to significant portions of the net deferred tax assets are presented below (in thousands):

 

                 
    FY 2012
December 29,
2012		     FY 2011
December 31,
2011		  

Accruals and reserves

   $ 2,295     $ 2,775  

Deferred revenue

     38       70  

Fixed assets

     429       488  

Intangibles

     180       6,959  

Stock compensation

     753       789  

Net operating loss

     5,310       120  

Research and development credits

     1,008       508  

Other tax credits

     47       1  

Other

     1       (10 ) 
   

 

 

    

 

 

  

Net deferred tax asset

   $ 10,061     $ 11,700  

Valuation allowance

     (10,061 )      (11,700 ) 
   

 

 

    

 

 

  

Net deferred tax assets

   $ 0     $ 0  
   

 

 

    

 

 

  

The Company has recorded a full valuation allowance for its deferred tax assets based on its past losses and the uncertainty regarding the ability to project future taxable income.

As of December 29, 2012, the Company had federal and State net operating loss (“NOL”) carry forwards of $13.9 million and $11.7 million, respectively. Of the total state NOL carryover, $1.3 million relates to windfall stock option deductions which, when realized, will be credited to equity. The federal NOL will begin to expire in 2022 and the state NOL will begin to expire in 2020. The state of California suspended the ability of companies to utilize their NOLs for tax years 2011 and 2010.

The American Taxpayer Relief Act of 2012 was enacted on January 2, 2013. The Act reinstated the research and development credit retroactively to January 1, 2012 and extended it through 2013. As the law enactment is a subsequent event, no tax benefit from claiming the federal research and development credit has been considered for 2012. As of December 29, 2012, the Company had Federal and State research credit carry forwards of approximately $1.0 million and $1.5 million, respectively, available to offset future tax liabilities. The Federal credits will begin expiring in 2026 if not used. The state research credits do not expire.

The above net operating losses and research and development credits are subject to IRC sections 382 and 383. In the event of a change in ownership as defined by these code sections, the usage of the above mentioned NOL’s and credits may be limited.

The Company accounts for uncertain tax positions in accordance with ASC 740, Income Taxes. ASC 740 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax provision that an entity takes or expects to take in a tax return. Additionally, ASC 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. Under ASC 740, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. In accordance with our accounting policy, we recognize accrued interests and penalties related to unrecognized tax benefits as a component of income tax expense.

As of December 29, 2012, the Company had accrued $67 thousand for payment of interest related to unrecognized tax benefits.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

                         
    FY 2012
Year Ended
December 29,
2012		     FY 2011
Year Ended
December 31,
2011		     FY 2010
Year Ended
January 1,
2011		  

Balance at the beginning of the year

   $ 1,191     $ 865     $ 637  

Additions based upon tax positions related to the current year

     36       58       67  

Additions based upon tax positions related to the prior year

     0       268       161  

Reductions based upon tax positions related to the prior year

     (273 )      0       0  
   

 

 

    

 

 

    

 

 

  

Balance at the end of the year

   $ 954     $ 1,191     $ 865  
   

 

 

    

 

 

    

 

 

  

During fiscal 2012, the Company incurred a tax loss mainly from the disposal of discontinued operations and anticipates the ability to claim a tax refund of approximately $0.6 million by carrying back the loss to 2010 and 2011 for federal income tax purpose. As a result, the Company recognized a tax benefit of $0.3 million from the release and reclassification of the ASC 740 long term liability.

If the ending balance of $954 thousand of unrecognized tax benefits at December 29, 2012 were recognized, none of the recognition would affect the income tax rate. The Company does not anticipate any material change in its unrecognized tax benefits of $954 thousand over the next twelve months. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business.

The Company files U.S. federal and state returns as well as foreign return in France. The tax years 2007 to 2012 remain open in several jurisdictions, none of which have individual significance.