(7)	Income Taxes

For the three months ended December 23, 2018, the Company recorded an income tax expense of $129 thousand calculated at a rate consistent with the 21% statutory U.S. federal rate. For the three months ended December 23, 2018, income tax expense consisted of $1 thousand in state taxes and $128 thousand in deferred taxes. For the six months ended December 23, 2018, the Company recorded an income tax expense of $179 thousand calculated at a rate consistent with the 21% statutory U.S. federal rate. For the six months ended December 23, 2018, income tax expense consisted of $29 thousand in state taxes and $150 thousand in deferred taxes. The Company anticipates utilizing net operating loss carryforwards to offset any federal income taxes.

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. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. Based on the review of this evidence, the Company determined it was appropriate to reverse a portion of the valuation allowance against the deferred tax assets as of June 24, 2018.

As of December 23, 2018, the Company had $5.7 million of gross deferred tax assets partially offset by a valuation allowance of $2.4 million. The Company determined it was not necessary to further adjust the valuation allowance. However, the Company will continue to review the need for an adjustment to the valuation allowance.