|12 Months Ended|
Feb. 03, 2019
|Income Tax Disclosure [Abstract]|
Note 5 – Income Taxes
On December 22, 2017, the Federal government of the United States enacted the U.S. Tax Cuts and Jobs Act (“the Tax Act”) which significantly changed existing U.S. tax laws including a reduction in the federal corporate income tax rate from 35% to 21%, repeal of the corporate alternative minimum tax (“AMT”) and refund certain existing AMT credits over several years, introduction of a capital investment deduction, limitation of the interest deduction, limitation of the use of net operating losses incurred on or after January 1, 2018 to offset future taxable income, limitation of the deduction for compensation paid to certain executive officers and extensive changes to the U.S. international tax system, as well as other changes. These changes generally took effect on January 1, 2018. The Company’s federal net operating losses that have been incurred prior to December 31, 2017 will continue to have a 20-year carryforward limitation applied and will need to be evaluated for recoverability in the future as such. Net operating losses incurred after December 31, 2017 will have an indefinite life, but usage will be limited to 80% of taxable income in any given year. On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act, SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, the Company has finalized the income tax effects of the Tax Act as of February 3, 2019 and had no change to its original estimates.
The components of deferred income taxes follow:
The income tax provision differs from the amount obtained by applying the statutory Federal income tax rate to pretax income as follows:
The Company is subject to federal, state and local corporate income taxes. The components of the provision for income taxes reflected on the consolidated statements of operations are set forth below:
Differences in terms of percentages are as follows:
At February 3, 2019 and February 4, 2018, pending the determination of the IRS that the NOLs of SAC were effectively inherited by the Company in the 2017 reorganization, the Company has net operating loss carryforwards available for federal income tax purposes of approximately $45,190,000 and $43,864,000, respectively, which are scheduled to expire in varying amounts from fiscal 2027 to fiscal 2037. In addition, the Company has approximately $35,674,000 and $35,908,000 of state net operating loss carryforwards as of February 3, 2019 and February 4, 2018, respectively. An allowance has been recorded against the net operating losses in accordance with ASC 740-10. The federal and state net operating loss net of reserves are $3,376,000 and $2,334,000 respectively for fiscal year ended February 3, 2019.
As defined in Section 382 of the Internal Revenue Code, certain ownership changes limit the annual utilization of federal net operating losses. As a result of issuance, sales and other transactions involving the Company’s stock, the Company experienced an ownership change during fiscal year ended February 3, 2019 which could cause such federal net operating losses to be subject to limitation under Section 382. There is no impact on the overall provision in the event the federal net operating losses are limited since the Company has a full valuation allowance against its deferred tax assets.
The Company is currently working with the IRS to resolve an administrative issue related to the amount and nature of its NOLs. The Company has consistently maintained a full valuation allowance against its NOLs. Accordingly, the resolution of the uncertain tax position regarding the Company’s NOL carryforward will have no impact on the Company’s financial position or results of operations.
During fiscal years ended February 3, 2019 and February 4, 2018, the Company increased/(decreased) the valuation allowance by approximately ($9,555,000) and ($4,165,000) respectively.
The changes in the amount of unrecognized tax benefits in 2019 and 2018 were as follows:
The Company adopted FASB ASU 2013-11. The pronouncement requires the Company to offset its uncertain tax positions against certain deferred tax assets in the same jurisdiction. As of February 3, 2019, the Company reclassified $10,753,384 of its uncertain tax positions against its related deferred tax assets.
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.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef