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INCOME TAXES | 12 Months Ended
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Jun. 28, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income tax benefit consists of the following:
| Fiscal Year Ended
| June 28, 2025 |  | June 29, 2024
| (in thousands)
Current income tax provision (benefit): |  |  |
United States | $ | 112 |  |  | $ | 263 |
Foreign | 2,841 |  |  | 1,451 |
| 2,953 |  |  | 1,714 |
Deferred income tax provision (benefit): |  |  |
United States | (5,546) |  |  | (4,322) |
Foreign | (1,050) |  |  | 208 |
| (6,596) |  |  | (4,114) |
Total income tax benefit | $ | (3,643) |  |  | $ | (2,400) |
The Company has gross tax credit carryforwards of approximately $11.1 million at June 28, 2025 consisting of federal research and development (R&D) tax credits. Management has reviewed all deferred tax assets for purposes of determining whether a valuation allowance may be required. A valuation allowance against deferred tax assets is required if it is more likely than not that some of the deferred tax assets will not be realized. In spite of the Company’s current cumulative loss position before nonrecurring items such as cyber losses and restructuring costs, based upon the Company’s historical profitability and forecasted income, management determined that it is more likely than not that the deferred tax assets will be realized. The Company’s largest deferred tax assets are federal research and development tax credits, deferred research and development expenses, and interest expense deduction carryforwards. Company forecasts show that the credits will be utilized within the expiration period. Deferred research and development expenses will be deductible in fiscal year 2026 under the One Big Beautiful Bill Act. Interest expense deduction carryforwards, which never expire and carry forward indefinitely, are projected to be utilized in future periods as profitability increases and interest expense decreases. Profitability is forecasted in the coming years due to the nonrecurrence of significant expense items in recent years such as cyber losses and restructuring costs, the future cost benefits associated with the restructuring costs, and significant income and increased margins from multiple new customers. The Company has closely monitored the realizability of deferred tax assets, tracking book income, permanent differences, and nonrecurring items while projecting future utilization of deferred tax assets, and will continue to do so as future actual results are compared to forecasted results. On January 27, 2021, the Company received official notice from the Vietnamese tax authorities, confirming tax benefits awarded related to the Company’s principal product line in Vietnam (the “Tax Holiday”). Under the Tax Holiday, the tax rate applied to income derived from this product line will be zero percent for four years beginning with fiscal year 2021, then five percent for nine years, then ten percent for one year (as opposed to the normal twenty percent Vietnamese statutory rate). The Company continuously evaluates impact of tax law and regulatory changes. The Company noted no changes during the current quarter or fiscal year that would have a material impact on its provision for income taxes or overall income tax position. After the end of fiscal year 2025, on July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes several tax related provisions that may impact the Company beginning in fiscal year 2026. The Company is still evaluating the implications, and it is expected that these tax law changes will mitigate federal income taxes payable, but it is not expected to materially impact the Company’s overall tax position and effective tax rate. The 2017 Tax Cuts and Jobs Act (TCJA) mandated that, for tax years after fiscal year 2022, certain costs incurred for research and development (R&D) activities would no longer be allowed for immediate deduction but would be capitalized and amortized over 5 years (for R&D activities performed domestically) or 15 years (for R&D activities performed abroad). The Company began capitalizing and amortizing such costs in fiscal year 2023, resulting in an increase to income taxes payable that was largely offset by the utilization of R&D credit carryovers. However, one aspect of the OBBBA is to eliminate the capitalization requirement and the Company expects to expense any unamortized capitalized R&D costs in fiscal year 2026. In future years, repatriations of cash will generally be tax-free in the U.S. However, withholding taxes in China may still apply to any such future repatriations. In the fourth quarter of fiscal year 2025, Management changed its indefinite investment assertions relating to the portion of accumulated earnings and profits in China that may be repatriated in the future and updated its deferred tax liability based on the withholding tax expected in connection with future repatriation. Accordingly, management estimates that future repatriations of cash from China may result in approximately $0.3 million of withholding tax. There would be no offsetting foreign tax credits in the U.S. and as such, this potential liability is a direct cost associated with actual repatriations. Withholding taxes will not apply to future repatriations from Mexico or Vietnam. The Company expects to repatriate approximately $2.9 million from China, in the future. All other unremitted foreign earnings are expected to remain permanently reinvested for planned fixed assets purchases and improvements in foreign locations. The Company’s effective tax rate differs from the federal tax rate as follows:
| Fiscal Year Ended
| June 28, 2025 |  | June 29, 2024
| (in thousands)
Federal income tax provision at statutory rates | $ | (2,512) |  |  | $ | (1,089) |
State income taxes, net of federal tax effect | (264) |  |  | (145) |
Foreign tax rate differences | 284 |  |  | (71) |
Effect of income tax credits | (569) |  |  | (929) |
Previously unrecognized tax benefits | — |  |  | (232) |
Inflation adjustments | 115 |  |  | 132 |
Deferred income tax on unremitted foreign earnings | (474) |  |  | 39 |
Global Intangible Low-Taxed Income (GILTI) tax | — |  |  | 53 |
Provision to return reconciliation | (44) |  |  | (68) |
Equity compensation shortfall | 33 |  |  | 51 |
Foreign exchange gains/losses unrealized for tax purposes | (204) |  |  | (126) |
Other | (8) |  |  | (15) |
Income tax benefit | $ | (3,643) |  |  | $ | (2,400) |
The domestic and foreign components of loss before income taxes were:
| Fiscal Year Ended
| June 28, 2025 |  | June 29, 2024
| (in thousands)
Domestic | $ | (19,691) |  |  | $ | (13,539) |
Foreign | 7,730 |  |  | 8,352 |
Loss before income taxes | $ | (11,961) |  |  | $ | (5,187) |
Deferred income tax assets and liabilities consist of the following at:
| June 28, 2025 |  | June 29, 2024
| (in thousands)
Deferred tax assets: |  |  |
Tax credit carryforwards, net | $ | 8,121 |  |  | $ | 7,544 |
Inventory | 240 |  |  | 252 |
Identifiable intangibles | 185 |  |  | 247 |
Accruals | 2,764 |  |  | 2,340 |
Property, plant, and equipment | 13 |  |  | — |
ASC 606 deferred costs | 2,803 |  |  | 3,852 |
Lease liabilities | 2,721 |  |  | 3,542 |
Interest expense deduction carryforward | 5,362 |  |  | 2,765 |
Research and development expenses | 7,818 |  |  | 6,042 |
Other | 389 |  |  | 505 |
Deferred income tax assets | $ | 30,416 |  |  | $ | 27,089 |
Deferred tax liabilities: |  |  |
Accrued withholding tax - unremitted earnings | $ | (287) |  |  | $ | (796) |
Property, plant, and equipment | — |  |  | (127) |
Right-of-use assets | (2,737) |  |  | (3,609) |
Tax capital lease liabilities | (504) |  |  | (764) |
ASC 606 accelerated revenue | (2,826) |  |  | (3,882) |
Other | (665) |  |  | (798) |
Deferred income tax liabilities | $ | (7,019) |  |  | $ | (9,976) |
Net deferred income tax assets | $ | 23,397 |  |  | $ | 17,113 |
Balance sheet caption reported in: |  |  |
Long-term deferred income tax asset | $ | 23,397 |  |  | $ | 17,376 |
Long-term deferred income tax liability | — |  |  | (263) |
Net deferred income tax asset | $ | 23,397 |  |  | $ | 17,113 |
Uncertain Tax Positions: The Company has R&D tax credits that approximate $11.1 million that have 20-year carryforwards before expiring. The Company’s R&D tax credits expire in various fiscal years from 2033 to 2045. As of June 28, 2025, the Company had unrecognized tax benefits of $3.0 million related to its gross R&D tax credits. The unrecognized tax benefits relate to certain R&D tax credits generated from 2005 to 2025. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Fiscal Year Ended
| June 28, 2025 |  | June 29, 2024
| (in thousands)
Beginning balance | $ | 2,899 |  |  | $ | 3,028 |
Additions based on tax positions related to the current year | 80 |  |  | 110 |
Adjustment to prior year tax positions & amended tax returns | (16) |  |  | (7) |
Lapse of statute of limitations | — |  |  | (232) |
Ending balance | $ | 2,963 |  |  | $ | 2,899 |
The $3.0 million of unrecognized tax benefits at the end of fiscal year 2025, if recognized, would reduce the effective tax rate. Management does not anticipate any material changes to this amount during the next 12 months. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in its income tax provision. The Company has not recognized any interest or penalties in the fiscal years presented in these financial statements. The Company is subject to income tax in the U.S. federal jurisdiction, various state jurisdictions, Mexico, China and Vietnam. Certain years remain subject to examination but there are currently no ongoing exams in any taxing jurisdiction.

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