15.

INCOME TAXES

December 22, 2017,

the SEC issued guidance under Staff Accounting Bulletin

No.

118,

Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB

118”

) directing taxpayers to consider the impact of the Tax Act as “provisional” when it does

not

have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. The changes in the Tax Act are broad and complex. The final impacts of the Tax Act

may

differ from the Company

’s estimates due to, among other things, changes in interpretations of the Tax Act, further legislation related to the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the Company has utilized to calculate the impacts of the Tax Act. The SEC has issued rules that would allow for a measurement period of up to

one

year after the enactment date of the Tax Act to finalize the related tax impacts. The Company currently anticipates finalizing any resulting adjustments by the end of our next fiscal year ending

December 29, 2018.

The Company, based on current knowledge, did estimate the impact of SAB

118

on its income tax provision for the

fifty-two

week period ended

December 30, 2017.

The total impact was an increase to its current year tax expense of

$1.2

million, including

$1.0

million for a reduction in deferred tax benefit and

$0.2

million related to transition repatriation taxes.

Generally, the Company

’s relative income or loss generated in each of its jurisdictions can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income, versus U.S. pretax income. Current Canadian tax rates are approximately

26.5%

and current Serbian tax rates are typically between

15.0%

and

20.0%.

The consolidated effective income tax rate for fiscal

2017

was

920.4%

as compared to

46.8%

for the comparable prior year period. Because of several unusual and large components, especially relative to the Company’s small consolidated pretax loss in dollars, the Company does

not

consider its fiscal

2017

effective tax rate of

920.4%

to be meaningful in and of itself. In order to provide context for the consolidated effective income tax rate of the fiscal

2017,

the material components of the fiscal

2017

tax provision, as delineated below, must be considered. The income tax provisions reconciled to the tax computed at the statutory Federal rate are as follows:

	December 3 0, 201 7			December 31, 2016
Tax (benefit) expense on taxable (loss) income at statutory rate of 34.0%	$	(83	)	$	1,123
State and Puerto Rico income taxes, net of Federal income tax benefit		(248	)		263
U SA 179D and Canadian R&D tax credits		(603	)		-
Permanent differences		458			186
Worthless stock deduction		(2,861	)		-
Foreign income tax rate s		(92	)		17
Impact on net deferred tax assets from 2018 Federal tax rate change		1,015			-
Transition repatriation taxes		198			-
Other		(39	)		(45	)
Total income tax (benefit) expense	$	(2,255	)	$	1,544

The Company

’s statutory federal tax rate for the

fifty-two

weeks ended

December 30, 2017

was

34.0%.

The Company experienced several material events for the

fifty-two

week period that impacted its net income tax benefit of

$2.3

million, including

) state and Puerto Rico income tax benefit of

$248;

) a USA

179D

and Canadian research and development tax credits of

$603;

) several permanent differences generating income tax expense of

$458;

) a worthless stock deduction for a subsidiary purchased in fiscal

1996

that was closed in fiscal

2017

which generated an income tax benefit of

$2.9

million;

) foreign tax benefit, primarily from Canada, of

$369;

and

) as a result of the federal tax rate change in fiscal

2018

21%,

an increase to income tax expense of

$1.0

million from a reduction in deferred tax assets, net of deferred tax liabilities and

$0.2

million related to transition repatriation taxes. The Company’s fiscal

2016

effective tax rate of

46.8%

was unusually high due to the following reasons:

) a small pretax loss in the Company’s Canadian operations; and

) normal permanent differences and fixed tax rates in Puerto Rico as both items were spread over a low base of pretax income in the United States.

The components of income tax expense (benefit) are as follows:

	Fiscal Years Ended
	December 30 , 201 7			December 31 , 2016
Current
Federal	$	(471	)	$	688
State and local		118			402
Foreign		237			(3	)

		(116	)		1,087
Deferred
Federal		(1,841	)		372
State		(495	)		108
Foreign		197			(23	)

		(2,139	)		457

Total	$	(2,255	)	$	1,544

The components of earnings before income taxes by United States and foreign jurisdictions were as follows:

	Fiscal Years Ended
	December 30 , 201 7			December 31 , 2016
United States	$	(1,660	)	$	3,430
Foreign Jurisdictions		1,415			(128	)

	$	(245	)	$	3,302

A reconciliation of the unrecognized tax benefits for the year

December 30, 2017:

Unrecognized Tax Benefits

Balance as of December 31, 2016	$	628
Charges for current year tax positions		-
Reserves for current year tax position		-

Balance as of December 30, 2017	$	628

The total amount of unrecognized tax benefits relating to the Company

’s tax positions is subject to change based on future events including, but

not

limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits will

not

change during the next

months. However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to change materially in the future.

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes and records such amounts to interest expense.

The Company recorded

expense for penalties or interest in the fiscal years ended

December 30, 2017

and

December 31, 2016.

December 30, 2017

and

December 31, 2016,

deferred tax assets and liabilities consist of the following:

	December 3 0, 201 7			December 31, 2016
Deferred tax assets:
Allowance for doubtful accounts	$	235		$	451
Federal and state net operating loss carryforward		2,501			-
Reserves and accruals		435			394
Other		53			323
Total deferred tax assets		3,224			1,168

Deferred tax liabilities:
Acquisition amortization, net		(206	)		(100	)
Prepaid expense deferral		(503	)		(750	)
Bonus depreciation to be reversed		(326	)		(466	)
Canada deferred tax liability, net		(431	)		(234	)
Total deferred tax liabilities		(1,466	)		(1,550	)
Total deferred tax (liability) asset, net	$	1,758		$	(382	)

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada,

Puerto Rico and Serbia. The Company and its subsidiaries file a consolidated U.S. Federal income tax return and file in various states. The Company’s federal income tax returns have been examined through

2010.

The Internal Revenue Service is currently examining fiscal tax years

2011,

2012,

2013

and

2015.

The State of New Jersey is currently examining fiscal tax years

2009

through

2012.

Except for New Jersey and other limited exceptions, the Company is

longer subject to audits by state and local tax authorities for tax years prior to

2012.

The Company is

longer subject to audit in Canada for the tax years prior to tax year

2013.

The Company is

longer subject to audit in Puerto Rico for the tax years prior to tax year

2007.