NOTE 3.

Income Taxes

During the three months ended March 29, 2014, the Company established a valuation allowance against deferred tax assets and as a result recorded an income tax provision for the six month period ended March 29, 2014 of $894,458. The valuation allowance is related to uncertainty with respect to the Company’s ability to realize its deferred tax assets. Deferred tax assets consist of net operating loss carryforwards, tax credits, inventory differences and other temporary differences.

During the six months ended March 30, 2013, the Company recorded an income tax benefit of $869,785 based on its expected effective tax rate for its fiscal year. The effective tax rate for the first six months of fiscal year 2013 was increased to 57.7% from 41% in the first quarter of fiscal 2013 due to a revision of the full year pre-tax forecast in the second fiscal quarter of 2013 and the tax benefit recorded related to the research credit, which was extended on January 2, 2013 by the America Taxpayer Relief Act of 2012. The effective tax rate, excluding discrete events for the six months ended March 30, 2013, was 50%.