Income Taxes

12 Months Ended

Aug. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 10—Income Taxes

The components of loss before provision for income taxes are as follows:

	Fiscal Years Ended August 31,
	2021			2020			2019
	(amounts in thousands)
US	$	(10,189	)	$	(16,184	)	$	1,524
Total	$	(10,189	)	$	(16,184	)	$	1,524

The components of the provision for income taxes are as follows:

	Fiscal Years Ended August 31,
	2021		2020		2019
	(amounts in thousands)
Current:
Federal	$	—	$	—	$	—
State		106		53		129
Total current		106		53		129
Deferred:
Federal		—		1,047		(47	)
State		—		74		(14	)
Total deferred		—		1,121		(61	)
Total	$	106	$	1,174	$	68

The Company had an effective tax rate of (1.0)%, (7.3)%, and 4.5% for the fiscal years ended August 31, 2021, August 31, 2020, and August 31, 2019, respectively. The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate was as follows:

	Fiscal Years Ended August 31,
	2021			2020			2019
Tax at federal statutory rate		21.0	%		21.0	%		21.0	%
Employer tip credit		3.8			0.9			(20.2	)
Stock-based compensation		(0.2	)		(0.8	)		—
Change in valuation allowance		(24.7	)		(28.3	)		—
Other items		(0.1	)		0.5			(2.2	)
State tax, net of federal benefit		(0.8	)		(0.6	)		5.9
Effective tax rate		(1.0	)%		(7.3	)%		4.5	%

The Company recorded an income tax provision for the years ended August 31, 2021, 2020 and 2019 of $106 thousand, $1.2 million, and $68 thousand, respectively. The primary difference between the effective tax rate and the federal statutory tax rate relates to the recognition of valuation allowance against deferred tax assets, federal tax liabilities offset by employer tip credits, and non-deductible stock-based compensation.

The deferred income taxes reflect the tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

	As of August 31,
	2021			2020
	(amounts in thousands)
Deferred tax assets:
NOL carryover	$	7,324		$	6,472
General business credit		2,496			2,003
Lease liabilities		18,807			16,635
State tax deduction		22			12
Other		1,089			535
Gross deferred tax assets		29,738			25,657
Deferred tax liabilities:
Basis difference on fixed assets		(4,477	)		(4,593	)
Right-of-use assets		(16,880	)		(15,496	)
Gross deferred tax liabilities		(21,357	)		(20,089	)
Valuation allowance		(8,381	)		(5,568	)
Net deferred tax	$	—		$	—

As of August 31, 2021, the Company has U.S. federal net operating loss (“NOL”) carryover of $28.9 million and federal tax credit carryover of $2.5 million. If not utilized, $25.5 million of the federal NOL can be carried forward indefinitely, and the remainder will begin to expire in the fiscal year ending August 31, 2032. The federal tax credit will begin to expire in the fiscal year ending August 31, 2032. Utilization of the Company’s NOL and federal tax credit carryover may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended.

The Company has not recorded any unrecognized tax benefits as of August 31, 2021. Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain positions. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as income tax expense.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establish valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized. During the fiscal year ended August 31, 2021, the adverse effects of the COVID-19 pandemic have caused the Company to continue the need for valuation allowances against deferred tax assets. The total amount of the valuation allowances was $8.4 million.

On December 27, 2020, Congress passed, and the President signed into law, the Consolidated Appropriations Act, 2021 (the “Act”), which includes certain business tax provisions. The Act did not have a material impact on the Company’s effective tax rate or income tax expense for the fiscal year ended August 31, 2021.

On March 11, 2021, Congress passed, and the President signed into law, the American Rescue Plan Act, 2021 (the “ARP”), which includes certain business tax provisions. The ARP did not have a material impact on the Company’s effective tax rate or income tax expense for the fiscal year ended August 31, 2021.