INCOME TAXES

12 Months Ended

Jun. 25, 2023

INCOME TAXES [Abstract]

INCOME TAXES

NOTE F - INCOME TAXES:

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

	Fiscal Year Ended
	June 25, 2023			June 26, 2022
Current - Federal	$	—		$	—
Current - State		(107	)		(115	)
Deferred - Federal		(394	)		5,537
Deferred - State		(36	)		235
Provision for income taxes	$	(537	)	$	5,657

The effective income tax rate varied from the statutory rate for the fiscal years ended June 25, 2023 and June 26, 2022 as reflected below (in thousands):

	June 25, 2023			June 26, 2022
Federal income taxes based on a statutory rate of 21%	$	(452	)	$	(496	)
State income taxes (net of federal benefit)		(119	)		127
Permanent adjustments		(7	)		—
Return to provision		49			—
Change in valuation allowance		—			6,052
Other		(8	)		(26	)
Provision for income taxes	$	(537	)	$	5,657

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

	June 25, 2023		June 26, 2022
Allowance for bad debt	$	13	$	6
Deferred fees		49		45
Other reserves and accruals		619		652
Operating lease liabilities		330		444
Credit carryforwards		156		156
Net operating loss carryforwards		4,521		4,987
Total gross deferred tax asset		5,688		6,290
Valuation allowance		—		—
Total deferred tax assets	$	5,688	$	6,290

Right-of-use asset		(285	)		(387	)
Other deferred tax liabilities		(61	)		(131	)
Total deferred tax liabilities	$	(346	)	$	(518	)

Net deferred tax asset $ 5,342 $ 5,772

For the year ended June 25, 2023, the Company recorded an income tax expense of $0.5 million. The federal and state tax expense was $0.4 million and $0.1 million, respectively. The Company utilized net operating losses to offset federal taxes. As of June 25, 2023, the Company had federal net operating loss carryforwards totaling $21 million that are available to reduce future taxable income and will begin to expire in 2035. For the year ended June 26, 2022, the Company recorded an income tax benefit of $5.7 million including federal deferred tax benefit of $5.5 million and current/deferred state tax benefit of $0.2 million. As of June 26, 2022, the Company had net operating loss carryforwards totaling $23.1 million that are available to reduce future taxable income and will begin to expire in 2032, of which $1.8 million are limited to 80% and do not expire. Under the Tax Cuts and Jobs Act, approximately $1.4 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain subject to examination by the IRS are the years ended June 28, 2020 through June 26, 2022. Tax years that remain subject to examination by state authorities are the years ended June 30, 2019 through June 26, 2022.

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 assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. Based on this analysis, the Company reversed the full amount of the established valuation allowance as of June 26, 2022.

There are no uncertain tax positions. Management’s position is that all relevant requirements are met and necessary returns have been filed, and therefore the tax positions taken on the tax returns would be sustained upon examination.