Note 13 - Income Taxes

12 Months Ended

Mar. 28, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13 Income Taxes

Following are the components of the provision for income taxes:

Fiscal years ended (in thousands)	March 28, 2020			March 30, 2019
Current
Federal	$	-		$	-
State		2			42
		2			42
Deferred
Federal		123			2
State		40			39
		163			41
Change in liability for uncertain tax positions		(9	)		1
Change in valuation allowance		(154	)		(42	)
Provision for income taxes	$	2		$	42

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

Fiscal years ended	March 28, 2020			March 30, 2019
(in thousands)
Net operating loss carryforwards	$	11,568		$	11,365
Income tax credits		365			349
Inventory reserves and additional costs capitalized		865			795
Fixed asset depreciation		23			17
Accrued vacation		55			49
Accrued bonuses		-			64
Accrued warranty		9			29
Accrued commissions		36			71
Deferred rent		-			21
Allowance for doubtful accounts		2			2
Non-qualified stock options		91			81
Unrealized warrant gain		(33	)		(33	)
State tax benefit		(8	)		9
Total deferred tax assets		12,973			12,819
Valuation allowances		(12,973	)		(12,819	)
	$	-		$	-

The following summarizes the difference between the income tax expense and the amount computed by applying the statutory federal income tax rates of

21%

for the years ended

March 28, 2020

and

March 30, 2019,

to income before income tax. The items comprising these differences consisted of the following for the fiscal years ended

March 28, 2020

and

March 30, 2019:

Year Ended (in thousands except percentages)
	March 28, 2020					March 30,2019
Statutory federal income tax (benefit)	$	(164	)	21.0	%	$	(210	)	21.0	%
Valuation allowance		154		(19.8	)		(42	)	4.2
State income tax, net of federal benefit		(54	)	6.9			(70	)	7.0
Net operating loss expiration		-		0			39		(3.9	)
Non tax-deductible expenses		81		(10.4	)		(15	)	1.5
Tax credits generated		(18	)	2.3			(2	)	0.2
Adoption of ASC 606 adjustment		-		0			329		(32.9	)
Other		3		(0.5	)		13		(1.3	)
Effective income tax	$	2		(0.5	%)	$	42		(4.2	%)

The increase in valuation allowance from

March 28, 2020

to

March 30, 2019

was

$154,000.

As of

March 28, 2020,

the Company had pre-tax federal net operating loss carryforwards of

$47,040,000

and state net operating loss carryforwards of

$24,198,000

available to reduce future taxable income.  The federal and state net operating loss carryforwards begin to expire from fiscal

2022

through

2038

and from

2029

through

2039,

respectively. The federal net operating loss amount of

$740,000

from the tax year ended

March 28, 2020

will have an indefinite life.  Utilization of net operating loss carryforwards

may

be subject to annual limitations due to certain ownership change limitations as required by Internal Revenue Code Section

382.

  In addition, the TJC Act imposes new limitations on the utilization of losses incurred in tax years beginning after

December 31, 2017.

Legislation under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) passed in

2020

temporarily suspends the limitation on losses for tax years beginning before

January 1, 2021.

The federal income tax credits begin to expire from

2032

through

2037

and state income tax credit carryforwards are carried forward indefinitely.

The Company has recorded a valuation allowance to reflect the estimated amount of deferred tax assets, which

may

not

be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Management considers both positive and negative evidence and tax planning strategies in making this assessment.

As of

March 28, 2020,

the Company recorded unrecognized tax benefits of

$132,000

related to uncertain tax positions. The unrecognized tax benefit is netted against the non-current deferred tax asset on the Consolidated Balance Sheet. The Company has

not

recorded a liability for any penalties or interest related to the unrecognized tax benefits.

The Company files U.S federal, California and New Hampshire state tax returns. The Company is generally

no

longer subject to tax examinations for years prior to the fiscal year

2015

for federal purposes and fiscal year

2014

for California purposes, except in certain limited circumstances.

A reconciliation of the beginning and ending amount of the liability for uncertain tax positions, excluding potential interest and penalties, is as follows:

	Fiscal Year 2020		Fiscal Year 2019
Balance as of beginning of year	$	123,000	$	122,000
Increase based on current year tax positions		9,000		1,000
Reductions for prior year tax positions		-		-
Balance as of end of year	$	132,000	$	123,000

The total amount of interest and penalties related to unrecognized tax benefits at

March 28, 2020

is

not

material. The amount of tax benefits that would impact the effective rate, if recognized, is

not

expected to be material. The Company does

not

anticipate any significant changes with respect to unrecognized tax benefits within the next

twelve

(

12

) months.