6 .	Income Taxes

December 22, 2017,

the U.S. Government enacted the reconciled tax reform bill, commonly known as the Tax Cuts and Jobs Act of

2017

(the “TCJA”). The TCJA makes broad changes to the U.S. tax code including, but

not

limited to, reducing the Company’s federal statutory tax rate from

35%,

to an average rate of

29.4%

for the fiscal year ended

May 27, 2018,

and then

21%

for the

three

and

six

months ended

November 25, 2018

and thereafter; requiring companies to pay a

one

-time transition tax on certain unrepatriated earnings of foreign subsidiaries; generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations' creating a global intangibles low-taxed income inclusion and the base erosion anti-abuse tax, a new minimum tax. The TCJA also enhances and extends through

2026

the option to claim accelerated depreciation deductions on qualified property, however, the domestic manufacturing deduction, from which the Company has historically benefitted, has been eliminated.

March 2018,

FASB issued Accounting Standards Update

No.

2018

05,

Income Taxes Topic (

740

): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

No.

118,

("ASU

2018

05"

) to address the application of GAAP in situations when a registrant does

not

have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company's accounting for the Tax Act was incomplete as of

May 27, 2018.

As of

November 25, 2018,

the Company’s analysis for the Transition Tax and the re-measurement of deferred taxes due to the Tax Rate Reduction was considered to be complete and the Company does

not

expect its analysis to substantially change from its current result. The impact resulting from the completion of this analysis resulted in additional tax expense of

$347,000

for the

three

and

six

months ended

November 25, 2018.

Ongoing guidance and accounting interpretation for the Tax Act are expected over the coming months and years and the Company will consider any changes in the accounting of the TCJA in the period in which such additional guidance is issued.

The provision for income taxes for the

six

months ended

November 25, 2018

and

November 26, 2017

was

$342,000

and

$1.5

million, respectively. The effective tax rate for the

six

months ended

November 25, 2018

and

November 26, 2017

was

25%

and

35%,

respectively. The effective tax rate for the

six

months ended

November 25, 2018

was higher than the statutory federal income tax rate of

21%

primarily due to the impact of state taxes and stock-based compensation, partially offset by the generation of federal & state R&D Credits.

As of

November 25, 2018

and

May 27, 2018,

the Company had unrecognized tax benefits of approximately

$582,000

and

$479,000,

respectively. Included in the balance of unrecognized tax benefits as of

November 25, 2018

and

May 27, 2018

was approximately

$507,000

and

$372,000,

respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does

not

expect its unrecognized tax benefits to change significantly within the next

twelve

months.

The Company has elected to classify interest and penalties related to uncertain tax positions as a component of its provision for income taxes. The Company has accrued an insignificant amount of interest and penalties relating to the income tax on the unrecognized tax benefits as of

November 25, 2018

and

May 27, 2018.

Due to tax attribute carryforwards, the Company is subject to examination for tax years

2015

forward for U.S. tax purposes. The Company is also subject to examination in various state jurisdictions for tax years

2012

forward,

none

of which were individually material.

The Company’s estimated annual effective tax rate

may

be subject to further uncertainty due to the recent changes in U.S. tax rates and tax laws.