NOTE 4-

Income Taxes:

The provision (benefit) for taxes on income includes the following:

	52 Weeks
	2014			2013

Current:
Federal	$	(91	)	$	47
State		3			122
		(88	)		169
Deferred:
Federal		-			-
State		-			-

	$	(88	)	$	169

The total tax provision differs from the expected amount computed by applying the statutory federal income tax rate to income before income taxes as follows:

	52 Weeks
	2014			2013
Provision (benefit) for federal income taxes at the applicable statutory rate	$	(1,477	)	$	1,049
Increase in provision (benefit) resulting from state income taxes, net of federal income tax benefit		61			488
Research & development tax credit		(25	)		(33	)
Non-taxable life insurance gain		(175	)		(280	)
Change in valuation allowance		1,598			(1,214	)
Other, net		(70	)		159
	$	(88	)	$	169

Deferred income taxes result from differences in the bases of assets and liabilities for tax and accounting purposes.

	2014			201 3
Receivables allowance	$	58		$	50
Returns allowance		163			165
Inventory packaging reserve		165			209
Inventory overhead capitalization		452			391
Incentive compensation		272			178
State taxes		8			49
Employee benefits		911			1,232
Other		84			2
Valuation allowance		(2,113	)		(2,276	)
Current tax assets, net	$	-		$	-

State taxes	$	263		$	186
Incentive compensation		257			487
Pension and health care benefits		6,366			5,356
Depreciation		(1,280	)		(1,623	)
Net operating loss carry-forward and credits		2,880			1,265
Valuation allowance		(8,486	)		(5,671	)
Non-current tax assets, net	$	-		$	-

The Company policy outlines measurable objective criteria that must be met before a release of the valuation allowance will occur. The three criteria set forth in the policy must all be satisfied before the valuation allowance can be reversed. The criteria are as follows: first, the Company’s available federal tax net operating loss ("NOL") must be zero; second, the prior thirty-six month cumulative book basis pre-tax income (loss), after considering “one-time” events, is positive; third, the Company considers its outlook of near term continued profitable operations and assesses any material negative and positive trends or events on the immediate horizon. As of October 31, 2014, the Company (1) has a federal tax NOL of $6,160, (2) has positive thirty-six month cumulative book income and (3) volatility and recent record highs in commodity costs create uncertainty about the Company's ability to generate future earnings. Only the second criterion has been satisfied, therefore, the Company will maintain a full valuation allowance against its deferred tax assets as of October 31, 2014. The weight of negative factors and level of economic uncertainty in our current business continued to support the conclusion that

the realization of our deferred tax assets does not meet the more likely than not standard. Therefore, a full valuation allowance will remain against the net deferred tax assets.

As of October 31, 2014, the Company had federal and state net operating loss carryforwards of approximately $6

,160 and $4,006 respectively. These loss carryforwards will expire at various dates from 2018 through 2033.

In July 2006, the FASB issued guidance to clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This interpretation prescribed a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also discussed derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of this guidance have been incorporated into Accounting Standards Codification ("ASC") 740-10.

As of October 31, 2014, we have provided a liability of $100 for unrecognized tax benefits related to various federal and state income tax matters. A significant portion of this amount would generally reduce our effective income tax rate if recognized in future reporting periods. However, due to the valuation allowance against its deferred tax assets, the unrecognized tax benefit would not have an effect on the Company’s effective income tax rate if recognized in future periods. We have not identified any new unrecognized tax benefits.

As of November 1, 2014, we have provided a liability of $100 for unrecognized tax benefits related to various federal and state income tax matters. A significant portion of this amount would generally reduce our effective income tax rate if recognized in future reporting periods. We have not identified any new unrecognized tax benefits.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	52 Weeks
	2014			2013

Balance at beginning of year	$	100		$	97
Additions based on tax positions related to the current year		-			-
Additions for tax positions of prior years		1			3
Reductions for tax positions of prior years		(1	)		-
Settlements		-			-

Balance at end of year	$	100		$	100

We recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of October 31, 2014, we had approximately $5 in accrued interest and penalties which is included as a component of the $100 unrecognized tax benefit noted above.

Our federal income tax returns are open to audit under the statute of limitations for the years ended October 31, 2011 through 2013.

We are subject to income tax in California and various other state taxing jurisdictions. Our state income tax returns are open to audit under the statute of limitations for the fiscal years ended October 31, 2009 through 2012.

We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.