9.	Income taxes:

(a)

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of March 29, 2014, the Company had no accrued interest related to uncertain tax positions due to available tax loss carry forwards. The tax years 2009 through 2014 remain open to examination by the major taxing jurisdictions to which the Company is subject.

The Company evaluates its deferred tax assets to determine if any adjustments to its valuation allowances are required. As part of this analysis, the Company could not reach the required conclusion that it would be able to more likely than not realize the value of both its U.S. and Canadian net deferred tax assets in the future. As a result, the Company has a non-cash valuation allowance of $56.8 million against the full value of the Company’s net deferred tax assets.

The significant items comprising the Company’s net deferred tax assets at March 29, 2014 and March 30, 2013 are as follows:


	Fiscal Year Ended
	March 29, 2014			March 30, 2013
	(In thousands)
Deferred tax assets:
Loss and tax credit carry forwards	$	41,889		$	41,776
Difference between book and tax basis of property and equipment		2,344			2,746
Interest expense limitations carry forward		7,525			6,292
Inventory allowances		608			759
Other reserves not currently deductible		724			874
Capital lease obligation		3,204			3,617
Expenses not currently deductible		419			439
Other		96			104

Net deferred tax asset before valuation allowance		56,809			56,607
Valuation allowance		(56,809	)		(56,607	)

Net deferred tax asset	$	—		$	—

The following table reconciles the unrecognized tax benefits at March 29, 2014 and March 30, 2013:


	Fiscal Year Ended
	March 29, 2014			March 30, 2013
	(In thousands)
Unrecognized tax benefits at the beginning of the year	$	—		$	—
Gross increase – tax position in current period		183			299
Applied against certain element of deferred tax assets		(183	)		(299	)

Unrecognized tax benefits at the end of the year	$	—		$	—

All unrecognized tax benefits would affect the effective tax rate if recognized.

The Company’s income tax expense (benefit) consists of the following components:


	Fiscal Year Ended
	March 29, 2014			March 30, 2013			March 31, 2012
	(In thousands)
Income tax expense (benefit):
Current	$	183		$	299		$	332
Deferred		(1,525	)		393			(820	)
Valuation allowance		1,360			(672	)		511

Income tax expense	$	18		$	20		$	23

The Company’s current federal tax payable at March 29, 2014 was $18,000 and $5,800 for March 30, 2013, and March 31, 2012.

The Company’s provision for income taxes varies from the amount computed by applying the statutory income tax rates for the reasons summarized below:


	Fiscal Year Ended
	March 29, 2014			March 30, 2013			March 31, 2012
Canadian statutory rate		26.4	%		26.2	%		27.5	%
Rate differential for U.S. operations		2.0	%		(7.3	)%		(139.1	)%
Adjustment to valuation allowance		(26.8	)%		21.0	%		493.9	%
Utilization of unrecognized losses and other tax attributes		0.0	%		(45.3	)%		(395.5	)%
Permanent differences and other		(2.1	)%		6.7	%		22.7	%

Total		(0.5	)%		1.3	%		9.5	%

(b)

At March 29, 2014, the Company had federal non-capital losses of Cdn$23.5 million ($21.2 million in U.S. dollars) available to reduce future Canadian federal taxable income and investment tax credits (“ITC’s”) in Canada of Cdn$260,000 ($235,000 in U.S. dollars) available to reduce future Canadian federal income taxes payable which will expire between 2022 and 2032.

(c)

As of March 29, 2014, Mayors had federal and state net operating loss carry forwards in the U.S. of approximately $106.4 million and $98.3 million, respectively. Due to Section 382 limitations from the change in ownership for the year ended March 29, 2003, the utilization of approximately $35.3 million of the pre-acquisition net operating loss carry forwards is limited to approximately $953,000 on an annual basis through 2022. The federal net operating loss carry forwards expire beginning in fiscal 2020 through fiscal 2033 and the state net operating loss carry forwards expire beginning in fiscal 2018 through fiscal 2033. Mayors also has an alternative minimum tax credit carry forward of approximately $1.0 million to offset future federal income taxes.