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INCOME TAXES
 12 Months Ended
Jun. 26, 2016
INCOME TAXES  
INCOME TAXES

NOTE E - INCOME TAXES:

 

Provision for income taxes from continuing operations consists of the following (in thousands):

 

 

 

 

Fiscal Year Ended

 

 

 

June 26,

 

 

June 28,

 

 

 

2016

 

 

2015

 

Current - Federal

 

$

-

 

 

$

-

 

Current - Foreign

 

 

-

 

 

 

24

 

Current - State

 

 

4

 

 

 

29

 

Deferred - Federal

 

 

2,823

 

 

 

(674

)

Deferred - State

 

 

(114

)

 

 

(49

)

Provision for income taxes

 

$

2,713

 

 

$

(670

)

 Included in loss from discontinued operations is $58,000 and $86,000 of tax benefit for the fiscal years ended June 26, 2016 and June 28, 2015, respectively.

 

The effective income tax rate varied from the statutory rate for the fiscal years ended June 26, 2016 and June 28, 2015 as reflected below (in thousands):

 

 

 

June 26,

 

 

June 28,

 

 

 

2016

 

 

2015

 

Federal income taxes based on 34%

 

 

 

 

 

 

of pre-tax loss

 

$

(2,060

)

 

$

(796

)

State income tax, net of federal effect

 

 

(45

)

 

 

(13

)

Permanent adjustments

 

 

19

 

 

 

44

 

Valuation allowance

 

 

4,891

 

 

 

-

 

Foreign tax credits

 

 

-

 

 

 

24

 

Other

 

 

(92

)

 

 

71

 

  

 

$

2,713

 

 

$

(670

)

 

The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the following (in thousands):

 

 

 

June 26,

 

 

June 28,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

Reserve for bad debt

 

$

70

 

 

$

69

 

Deferred fees

 

 

105

 

 

 

124

 

Other reserves and accruals

 

 

1,246

 

 

 

536

 

 

 

 

1,421

 

 

 

729

 

Non Current

 

 

 

 

 

 

 

 

Credit carryforwards

 

 

747

 

 

 

180

 

Net operating loss carryforwards

 

 

197

 

 

 

1,633

 

Depreciable assets

 

 

2,526

 

 

 

51

 

 

 

 

 

 

 

 

 

 

Total gross deferred tax asset

 

 

4,891

 

 

 

2,593

 

 

 

 

 

 

 

 

 

 

Valuation allowance

 

 

(4,891

)

 

 

-

 

 

 

 

 

 

 

 

 

 

Net deferred tax asset

 

$

-

 

 

$

2,593

 

At the end of tax year ended June 26, 2016, the Company had net operating loss carryforwards totaling  $7.5 million that are available to reduce future taxable income and will begin to expire 2032.

 

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In the second quarter of fiscal year 2016, the Company recorded a $3.5 million valuation allowance against its net deferred tax assets. The valuation allowance was increased by $0.5 million in the third quarter of fiscal year 2016 to $4.0 million and again in the fourth quarter by $0.9 million to $4.9 million.  The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a "more likely than not" standard. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded valuation allowance.  Based on the Company's review of this evidence, management determined that a full valuation allowance against all of the Company's deferred tax assets was appropriate.