UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of Incorporation or organization)		54-0852979 (I.R.S. employer identification no.)

6850 Versar Center, Springfield, Virginia (Address of principal executive offices)		22151 (Zip code)

(703) 750-3000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.01 par value
(Title of Class)

NYSE Amex
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

The aggregate market value of the voting stock held by non-affiliates of the registrant as of December 31, 2008 was approximately $25,790,780.

The number of shares of Common Stock outstanding as of September 4, 2009 was 9,083,835.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement to be filed with the Securities and Exchange Commission with respect to the 2009 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

 

 

Explanatory Note

Versar, Inc. is filing this amendment to Form 10-K for the fiscal year ended June 26, 2009, which was filed with the Securities and Exchange Commission on September 22, 2009, to correct the Report of Independent Registered Public Accounting Firm included on page F-1, which contained a typographical error. In accordance with the requirements of Rule 12b-15 under the Securities Exchange Act of 1934, Versar is filing with this Amendment the complete text of its audited financial statements.

Except for the corrected report described above, this Form 10-K/A does not modify or update other disclosures in the Versar, Inc. 2009 Form 10-K.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(1) Financial Statements:

     The consolidated financial statements and financial statement schedules of Versar, Inc. and Subsidiaries are filed as part of this report and begin on page F-1.

a)

Report of Independent Registered Public Accounting Firm

	b)		Consolidated Balance Sheets as of June 26, 2009 and June 27, 2008
	c)		Consolidated Statements of Income for the Years Ended June 26, 2009, June 27, 2008, and June 29, 2007
	d)		Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended June 26, 2009, June 27, 2008 and June 29, 2007
	e)		Consolidated Statements of Cash Flows for the Years Ended June 26, 2009, June 27, 2008, and June 29, 2007
	f)		Notes to Consolidated Financial Statements

(2) Financial Statement Schedules:

a)

Schedule II — Valuation and Qualifying Accounts for the Years Ended June 26, 2009, June 27, 2008 and June 29, 2007

All other schedules, except those listed above, are omitted because they are not applicable or the required information is shown in the consolidated financial statements or note thereto.

(3) Exhibits:

     The exhibits to this Form 10-K are set forth in a separate Exhibit Index which is included on pages 30 through 32 of this report.

Exhibit Index

Item No.				Description		Reference
	3.1			Restated Articles of Incorporation of Versar, Inc. filed as an exhibit to the Registrant’s Registration Statement on Form S-1 effective November 20, 1986 (File No. 33-9391)			(A	)
	3.2			Amended and Restated By-Laws of Versar, Inc.			(AE	)
	4			Specimen of Certificate of Common Stock of Versar, Inc.			(A	)
	10.10			Incentive Stock Option Plan *			(B	)
	10.11			Executive Tax and Investment Counseling Program			(A	)
	10.12			Nonqualified Stock Option Plan *			(B	)
	10.105			4P Architect-Engineering Contract dated March 14, 2003			(W	)
	10.107			Line of Credit Commitment Letter, dated September 16, 2003 between the Registrant and United Bank			(W	)
	10.113			2002 Stock Incentive Plan*			(Y	)
	10.114			Employment Agreement dated February 8, 2005 between Versar, Inc. and Theodore M. Prociv*			(Z	)
	10.115			Form of Stock Option Agreement*			(Z	)
	10.116			Air National Guard Contract dated July 6, 2005			(Z	)
	10.117			2005 Stock Incentive Plan and definitions as approved by the Board of Directors on September 7, 2005 and by the stockholders on November 16, 2005			(AA	)
	10.123			Modification Agreement of the Revolving Commercial Note, dated September 24, 2007, between Registrant and United Bank			(AB	)
	10.124			Amendment to Employment Agreement dated February 8, 2005 between Versar, Inc. and Theodore M. Prociv, September 25, 2007*			(AB	)
	10.125			Amended and Restated Change of Control Severance Agreements dated March 17, 2008 between the Registrant and each of Lawrence W. Sinnott, James C. Dobbs, Paul W. Kendall, Michael Abram and Jeffrey A. Wagonhurst (In reliance on instruction 2 to Item 601 of Regulation S-K, the Registrant has filed the form of Change of Control Severance Agreement entered into with each of the individuals listed above).*			(AC	)
	10.126			Employment agreement between Charles S. Cox and Versar, Inc. entered into on February 2, 2009 and effective as of January 3, 2009.*			(AD	)
	10.127			Amendment to Employment Agreement dated September 3, 2008 between Versar, Inc. and Mr. Theodore M. Prociv.*			35-47
	10.128			Form of Indemnification Agreement*			(AE	)

Item No.				Description		Reference
	21			Subsidiaries of the Registrant			48
	23			Consent of Independent Registered Public Accounting Firm, Grant Thornton LLP to the incorporation by reference of the previously filed Forms S-8.**			49
	31.1			Certifications by Theodore M. Prociv, Chief Executive Officer and President Pursuant to Securities Exchange Rule 13a-14**			50
	31.2			Certifications by Lawrence W. Sinnott, Exec. Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer pursuant to Securities Exchange Rule 13a-14**			51
	32.1			Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 Of the Sarbanes-Oxley Act of 2002, for the period ending June 26, 2009 by Theodore M. Prociv, Chief Executive Officer and President**			52
	32.2			Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 Of the Sarbanes-Oxley Act of 2002, for the period ending June 26, 2009 by Lawrence W. Sinnott, Exec. Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer**			53

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

SIGNATURES		TITLE		DATE
/S/ Paul J. Hoeper		Chairman and Director		September 24, 2009
Paul J. Hoeper
/S/ Theodore M. Prociv		Chief Executive Officer, President, and		September 24, 2009
Theodore M. Prociv		Director
/S/ Lawrence W. Sinnott		Executive Vice President, Chief		September 24, 2009
Lawrence W. Sinnott		Operating Officer, Chief Financial Officer, Treasurer, and Principal Accounting Officer
/S/ Michael Markels, Jr.		Chairman Emeritus and Director		September 24, 2009
Michael Markels, Jr.
/S/ Robert L. Durfee		Director		September 24, 2009
Robert L. Durfee
/S/ James L. Gallagher		Director		September 24, 2009
James L. Gallagher

SIGNATURES		TITLE		DATE
/S/ James V. Hansen		Director		September 24, 2009
James V. Hansen
/S/ Amoretta M. Hoeber		Director		September 24, 2009
Amoretta M. Hoeber
/S/ Amir A. Metry		Director		September 24, 2009
Amir A. Metry
/S/ Anthony L. Otton		Director		September 24, 2009
Anthony L. Otten

Report of Independent Registered Public Accounting Firm

Board of Directors and
Shareholders of Versar, Inc.

We have audited the accompanying consolidated balance sheets of Versar, Inc. (a Delaware corporation) and subsidiaries as of June 26, 2009 and June 27, 2008, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended June 26, 2009. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15(2)(a). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Versar, Inc. as of June 26, 2009 and June 27, 2008 and the results of their operations and their cash flows for each of the three years in the period ended June 26, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/S/ Grant Thornton LLP

McLean, Virginia
September 21, 2009

VERSAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands, except per share amounts)

		June 26,				June 27,
		2009				2008
ASSETS
Current assets
Cash and cash equivalents		$	8,400			$	11,938
Accounts receivable, net			27,695				21,596
Prepaid expenses and other current assets			1,207				1,080
Deferred income taxes			720				1,015
Total current assets			38,022				35,629
Property and equipment, net			2,348				2,152
Deferred income taxes			765				517
Goodwill			776				776
Other assets			683				754
Total assets		$	42,594			$	39,828
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	7,405			$	7,731
Billings in excess of revenue			—				156
Accrued salaries and vacation			1,959				1,719
Accrued bonus			1,358				2,066
Other liabilities			1,787				1,686
Total current liabilities			12,509				13,358
Other long-term liabilities			1,431				1,417
Total liabilities			13,940				14,775
Commitments and contingencies
Stockholders’ equity
Common stock, $.01 par value; 30,000,000 shares authorized; 9,193,635 shares and 9,059,135 shares issued; 9,074,300 shares and 8,975,101 shares outstanding			92				91
Capital in excess of par value			27,734				27,115
Retained earnings (accumulated deficit)			1,615				(1,554	)
Treasury stock, at cost (119,335 and 84,034 shares, respectively)			(706	)			(578	)
Accumulated other comprehensive loss			(81	)			(21	)
Total stockholders’ equity			28,654				25,053
Total liabilities and stockholders’ equity		$	42,594			$	39,828

The accompanying notes are an integral part of these consolidated financial statements.

VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)

		Years Ended
		June 26,				June 27,				June 29,
		2009				2008				2007
GROSS REVENUE		$	112,196			$	115,602			$	102,726
Purchased services and materials, at cost			60,583				68,507				62,750
Direct costs of services and overhead			37,133				33,307				29,154
GROSS PROFIT			14,480				13,788				10,822
Selling, general and administrative expenses			8,876				8,297				6,669
OPERATING INCOME			5,604				5,491				4,153
OTHER EXPENSE
Loss on marketable securities			328				—				—
Interest expense (income)			36				(173	)			(24	)
INCOME BEFORE INCOME TAXES			5,240				5,664				4,177
Income tax expense (benefit)			2,071				2,273				(1,105	)
NET INCOME		$	3,169			$	3,391			$	5,282
NET INCOME PER SHARE — BASIC		$	0.35			$	0.38			$	0.64
NET INCOME PER SHARE — DILUTED		$	0.35			$	0.36			$	0.62
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING — BASIC			9,123				8,932				8,201
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING — DILUTED			9,150				9,331				8,466

The accompanying notes are an integral part of these consolidated financial statements.

VERSAR, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)

Years Ended June 26, 2009, June 27, 2008, and June 29, 2007

																										Accumu-
																										lated
														(Accumu-												Other
										Capital in				Lated												Compre-				Total
										Excess				Deficit)												hensive				Stock-
		Common Stock								of Par				Retained				Treasury								Income				holders’
		Shares				Amount				Value				Earnings				Shares				Stock				(Loss)				Equity
Balance, July 1, 2006			8,145			$	81			$	22,790			$	(10,227	)			(16	)		$	(72	)		$	—			$	12,572
Exercise of stock options			231				2				713				—				—				—				—				715
Issuance of restricted stock			21				1				84				—				—				—				—				85
Exercise of stock warrants			180				2				717				—				—				—				—				719
Stock exchange			129				1				327				—				—				—				—				328
Treasury stock			—				—				—				—				(38	)			(327	)			—				(327	)
Share-based compensation			—				—				48				—				—				—				—				48
Net income			—				—				—				5,282				—				—				—				5,282
Balance, June 29, 2007			8,706				87				24,679				(4,945	)			(54	)			(399	)			—				19,422
Exercise of stock options			275				3				1,052				—				—				—				—				1,055
Issuance of restricted stock			78				1				507				—				—				—				—				508
Treasury stock			—				—				—				—				(30	)			(179	)			—				(179	)
Share-based compensation			—				—				303				—				—				—				—				303
Tax benefit from exercise of stock options			—				—				574				—				—				—				—				574
Comprehensive Income Net income			—				—				—				3,391				—				—				—				3,391
Other Comprehensive Income Foreign currency translations Adjustments			—				—				—				—				—				—				(21	)			(21	)
Total Comprehensive Income			—				—				—				—				—				—				—				3,370
Balance, June 27, 2008			9,059				91				27,115				(1,554	)			(84	)			(578	)			(21	)			25,053
Exercise of stock options			26				—				48				—				—				—				—				48
Issuance of restricted stock			109				1				691				—				—				—				—				692
Treasury stock			—				—				—				—				(35	)			(128	)			—				(128	)
Tax shortfall in exercise of stock options			—				—				(120	)			—				—				—				—				(120	)
Comprehensive Income Net income			—				—				—				3,169				—				—				—				3,169
Other comprehensive income Foreign currency translations Adjustments			—				—				—				—				—				—				(60	)			(60	)
Total Comprehensive Income			—				—				—				—				—				—				—				3,109
Balance, June 26, 2009			9,194			$	92			$	27,734			$	1,615				(119	)		$	(706	)		$	(81	)		$	28,654

The accompanying notes are an integral part of these consolidated financial statements.

VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)

		Years Ended
		June 26,				June 27,				June 29,
		2009				2008				2007
Cash flows from operating activities
Net income		$	3,169			$	3,391			$	5,282
Adjustments to reconcile net income to net cash (used in) provided by continuing operations
Depreciation and amortization			958				876				687
Loss on sale of property and equipment			1				—				19
Provision for doubtful accounts receivable			155				1				336
Loss on marketable securities			328				—				—
Loss (gain) on life insurance policy cash surrender value			116				29				(39	)
Deferred tax (benefit) expense			(114	)			1,952				(1,200	)
Share-based compensation			692				811				132
Tax benefits on share-based compensation			—				(574	)			—
Changes in assets and liabilities
(Increase) decrease in accounts receivable			(6,256	)			909				(6,616	)
(Increase) decrease in prepaid expenses and other assets			60				199				187
(Decrease) increase in accounts payable			(260	)			(2,723	)			4,504
Increase in accrued salaries and vacation			240				115				130
(Decrease) increase in other liabilities			(823	)			(12	)			2,320
Net cash (used in) provided by continuing operations			(1,734	)			4,974				5,742
Changes in net assets/liabilities of discontinued operations			—				—				(285	)
Net cash (used in) provided by operating activities			(1,734	)			4,974				5,457
Cash flows from investing activities
Purchase of property and equipment			(1,172	)			(722	)			(693	)
Purchase of marketable securities			(3,000	)			—				—
Proceeds from sale of marketable securities			2,672				—				—
Premium paid on life insurance policies			(38	)			(39	)			(43	)
Short term financing loan			(200	)			—				—
Net cash used in investing activities			(1,538	)			(761	)			(736	)
Cash flows from financing activities
Purchase of treasury stock			(128	)			(179	)			(327	)
Proceeds from exercise of options and warrants			48				1,055				1,762
Tax benefit on exercise of share-based compensation			—				574				—
Net cash (used in) provided by financing activities			(280	)			1,450				1,435
Effect of exchange rate changes			14				(21	)			—
Net (decrease) increase in cash and cash equivalents			(3,538	)			5,642				6,156
Cash and cash equivalents at the beginning of the year			11,938				6,296				140
Cash and cash equivalents at the end of the year		$	8,400			$	11,938			$	6,296
Supplementary disclosure of cash flow information:
Cash paid during the period for
Interest		$	60			$	57			$	70
Income Taxes		$	1,762			$	199			$	55

The accompanying notes are an integral part of these consolidated financial statements.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A SIGNIFICANT ACCOUNTING POLICIES

     Principles of consolidation and business operations: Versar, Inc., a Delaware corporation organized in 1969 (the “Company” or “Versar”), is a project and program management firm that provides the government, municipalities, and the private sector with value-added, high quality innovative solutions for infrastructure, facilities management, construction, environmental quality, professional services, defense and homeland security needs. Versar operates in four primary business segments: (1) Program Management, (2) Compliance and Environmental Programs, (3) Professional Services, and (4) National Security. The accompanying consolidated financial statements include the accounts of Versar, Inc. and its wholly-owned subsidiaries (Versar or the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The Company’s major business segments are Program Management, Compliance and Environmental Programs, Professional Services, and National Security (see Note B). The Company has evaluated subsequent events through September 21, 2009, the date in which the financial statements were issued.

     Accounting estimates: The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

     Contract accounting: Contracts in process are stated at the lower of actual cost incurred plus accrued profits or incurred costs reduced by progress billings. The Company records income from major fixed-price contracts, extending over more than one accounting period, using the percentage-of-completion method. During performance of such contracts, estimated final contract prices and costs are periodically reviewed and revisions are made as required. The effects of these revisions are included in the periods in which the revisions are made. On cost-plus-fee type contracts, revenue is recognized to the extent of costs incurred plus a proportionate amount of fee earned, and on time-and-material contracts, revenue is recognized to the extent of billable rates times hours delivered plus material and other reimbursable costs incurred. Losses on contracts are recognized when they become known. Disputes arise in the normal course of the Company’s business on projects where the Company is contesting with customers for collection of funds because of events such as delays, changes in contract specifications and questions of cost allowability or collectibility. Such disputes, whether claims or unapproved change orders in the process of negotiation, are recorded at the lesser of their estimated net realized value or actual costs incurred and only when realization is probable and can be reliably estimated. Claims against the Company are recognized where loss is considered probable and reasonably determinable in amount. Management reviews outstanding receivables on a regular basis and assesses the need for reserves taking into consideration past collection history and other events that bear on the collectibility of such receivables.

     Pre-contract costs: Costs incurred by Versar prior to the execution of a contract, including bid and proposal costs, are expensed when incurred regardless of whether the bid is successful.

     Depreciation and amortization: Property and equipment are carried at cost. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. Assets are evaluated in accordance with SFAS 144 “Accounting for Impairment or Disposal of Long Lived Assets” and written down to fair value when appropriate.

     Goodwill and other intangible assets: The carrying value of goodwill is approximately $776,000 which relates to the acquisition of Versar Global Solutions, Inc., which is now part of the Program Management business segment. In performing its goodwill impairment analysis, management has utilized a market-based valuation approach to determine the estimated fair value of the Program Management business segment. Management engages outside professionals and valuation experts annually, to assist in performing this analysis and would test more often if events or circumstances warrant it. The Company has elected to perform the annual goodwill impairment review on June 30 of each year. An analysis was performed on public companies and company transactions to prepare a market-based valuation. Based upon the analysis, the estimated fair value of the Program Management business segment exceeds the carrying value of the net assets of $12.7 million. Therefore, management concluded that the goodwill was not impaired.

     Direct costs of services and overhead: These expenses represent the cost to Versar of direct and overhead staff, including recoverable overhead costs and unallowable costs that are directly attributable to contracts performed by the Company.

     Notes receivable: Include short term receivables made in order to accelerate and advance the Company’s business and business opportunities.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     Income taxes: The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of certain assets and liabilities. A valuation allowance is established, as necessary, to reduce deferred income tax assets to the amount expected to be realized in future periods.

     Asset retirement obligation: During fiscal year 2007, the Company recorded an asset retirement obligation associated with the estimated clean-up costs for its chemical laboratory in its National Security business segment. In accordance with SFAS 143, the Company estimated the costs to clean up the laboratory and return it to its original state at a present value of approximately $497,000. The Company currently estimates the amortization and accreation expense to be between $180,000 to $190,000 per year over the next 1¹/2 years. The Company is currently pursuing reimbursement for such costs and other costs from the U.S. Army as a significant portion of the chemical agent that was used in the chemical laboratory was government owned. If the Company determines that the estimated clean up cost is larger than expected or the likelihood of recovery from the U.S. Army is remote, such adjustments will be reflected when they become known in accordance with SFAS 143. At June 26, 2009, the Company has accrued approximately $586,000 long-term liability to clean up the chemical laboratory.

     Share-based compensation: The Company records share based compensation in accordance with Financial Accounting Standards Board (FASB) SFAS No. 123 (Revised 2004), “Share-Based Payment” (SFAS 123(R)). This statement requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (the “fair-value-based” method).

     As of June 26, 2009, options to purchase common stock under the plans were substantially vested except for options to purchase 10,000 shares of common stock, which will vest based on the achievement of market and service conditions.

     The Company did not record share-based compensation expense related to the vesting of the previously granted stock options in its fiscal year 2009. The Company recorded approximately $4,000 and $18,000 of share-based compensation expenses for fiscal years 2008 and 2007, respectively.

     The Company awarded 125,000 shares, 121,500 shares and 42,000 shares of restricted stock to directors and employees in fiscal years 2009, 2008 and 2007, respectively. Share-based compensation expense related to restricted stock for fiscal years 2009, 2008 and 2007 was approximately $692,000, $807,000 and $114,000, respectively.

     Net income per share: Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share also includes common equivalent shares outstanding during the period, if dilutive. The Company’s common equivalent shares consist of shares to be issued under outstanding stock options and shares of unvested restricted stock.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     The following is a reconciliation of weighted average outstanding shares for purposes of calculating basic net income per share compared to diluted net income per share, in thousands:

		Years Ended
		June 26,				June 27,				June 29,
		2009				2008				2007
		(In thousands)
Weighted average number of shares outstanding — basic			9,123				8,932				8,201
Effect of assumed exercise of stock options and vesting of restricted stock			27				399				265
Weighted average number of shares outstanding — diluted			9,150				9,331				8,466

     For fiscal years 2009, 2008 and 2007, options to purchase approximately 169,000, 10,000 and 30,000 shares, respectively, were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

     Deferred compensation: The Company permitted certain employees to defer a portion of their compensation, during fiscal years 1988 through 1991, to provide for future annual payments, including interest. Interest is accrued on a monthly basis at the amount stated in each employee’s agreement. The Company had liabilities for deferred compensation of $604,000 and $636,000 at June 26, 2009 and June 27, 2008, respectively, which are included in other long-term liabilities on the accompanying consolidated balance sheets. Versar purchased key-man life insurance policies to fund the amounts due under the deferred compensation agreements. The cash surrender value of the policies was $487,000 and $566,000 at June 26, 2009 and June 27, 2008, respectively. The face value of the life insurance policies is in excess of the deferred compensation liability.

     Cash and cash equivalents: All investments with an original maturity of three months or less when purchased are considered to be cash equivalents.

     Foreign Currency Translation: The financial position and results of operations of the Company’s foreign affiliates are translated using the local currency as the functional currency. Assets and liabilities of the affiliates are translated at the exchange rate in effect at year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income in stockholders’ equity. Gains and losses resulting from foreign currency transactions included in operations are not material for the periods presented. At June 26, 2009, the Company has approximately $540,000 of cash held in foreign banks.

     Fair value of financial instruments: The carrying amounts of Versar’s cash and cash equivalents, accounts receivable, accounts payable and amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value because of the short-term nature of these amounts.

     Classification: Certain prior year information has been reclassified to conform to current year presentation.

     New accounting pronouncements: In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R),Business Combinations (“SFAS 141(R)”). SFAS 141(R) changes the requirements for an acquiring entity’s recognition and measurement of the assets acquired and liabilities assumed in a business combination. This statement is effective for fiscal years beginning after December 15, 2008. This standard will have an impact on accounting for business combinations but the effect is dependent upon acquisitions at that time.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, (“FSP FAS 141(R)-1”). The FSP FAS 141(R)-1 amends and clarifies Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations. FSP FAS 141(R)-1 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. FSP FAS 141(R)-1 will have an impact on accounting for business combinations but the effect is dependent upon acquisitions at that time.

     In September 2006, the Financial Accounting Standard Board (“FASB”) issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, FASB issued FASB Staff Position (“FSP”) No. FAS 157-2, Effective Dates of FASB Statement No. 157, which deferred the effective date of SFAS 157 for all nonrecurring fair value measurements of nonfinancial assets and liabilities until fiscal years beginning after November 15, 2008. Our adoption of SFAS 157 on December 29, 2008 was limited to financial assets and liabilities and had no impact on our consolidated financial statements. We do not believe this standard will have an effect on the non-financial assets and non-financial liabilities in our consolidated financial statements.

     In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company does not believe the adoption of SFAS 160 will have a material impact on its consolidated financial statements.

     In April 2008, the Financial Accounting Standards board issued FASB Staff Position (FSP) FAS 142-3, “Determination of the Useful Life of Intangible Assets,” to provide guidance for determining the useful life of recognized intangible assets and to improve consistency between the period of expected cash flows used to measure the fair value of a recognized intangible asset and the useful life of the intangible asset as determined under FASB Statement 142, Goodwill and Other Intangible Assets. The FSP requires that an entity consider its own historical experience in renewing or extending similar arrangements. However, the entity must adjust that experience based on entity-specific factors included in Statement 142. If the Company lacks historical experience to consider for similar arrangements, it would consider assumptions that market participants would use about renewal or extension, as adjusted for the entity-specific factors under Statement 142. The Company will adopt FSP FAS 142-3 in fiscal year 2010. The Company believes that upon adoption, FSP FAS 142-3 will not have an effect on the Company’s financial statements.

     In November 2008, the Financial Accounting Standards Board ratified a consensus opinion reached by the Emerging Issues Task Force (EITF) on EITF Issue 08-6, “Equity Method Investment Accounting Considerations,” to clarify accounting and impairment considerations involving equity method investments after the effective date of both FASB Statement 141 (revised 2007), Business Combinations, and FASB Statement 160, Noncontrolling Interests in Consolidated Financial Statements. EITF Issue 08-6 includes the Task Force’s conclusions on how an equity method investor should (1) initially measure its equity method investment, (2) account for impairment charges recorded by its investee, and (3) account for shares issued by the investee. EITF Issue 08-6 is effective for fiscal years beginning on or after December 15, 2008. The Company adopted EITF Issue 08-6 effective June 26, 2009 on a prospective basis. The Company does not currently have any investments that are accounted for under the equity method, and as a result, does not expect the standard to have a significant effect on its financial statements.

     In May 2009, the FASB issued SFAS No. 165, Subsequent Events, (“SFAS No. 165”). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162, (“SFAS No. 168”). SFAS No. 168 establishes that the FASB Accounting Standards CodificationTM (“Codification”) will become the source for authoritative United States generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Effective for financial statements issued for interim and annual periods ending after September 15, 2009 the Codification will supersede all then-existing non-SEC accounting and reporting standards. Effective for the first quarter of 2010 references to legacy GAAP will be replaced by references to the Codification, where appropriate.

NOTE B BUSINESS SEGMENTS

     The Company evaluates and measures the performance of its business segments based on gross revenue, gross profit and operating income. As such, selling, general and administrative expenses, interest and income taxes have not been allocated to the Company’s business segments.

     The Company’s business is currently operated through four business segments as follows: Program Management, Compliance and Environmental Programs, Professional Services, and National Security.

     These segments were segregated based on the nature of the work, business processes, customer base and the business environment in which each of the segments operates.

     The Program Management business segment manages larger more complex projects with business processes and management unique to the rest of the Company. The Compliance and Environmental Programs business segment provides regulatory and environmental consulting support to several federal government and municipal agencies. The Professional Services business segment provides outsourced personnel to various government agencies providing our clients with cost-effective resources. The National Security business segment provides unique solutions to the federal government including testing and evaluation and personal protective solutions.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     Summary of financial information for each of the Company’s segments follows:

		Years Ended
		June 26,				June 27,				June 29,
		2009				2008				2007
		(In thousands)
GROSS REVENUE
Program Management		$	71,526			$	68,896			$	58,765
Compliance and Environmental Programs			19,649				30,429				29,839
Professional Services			11,476				8,101				7,318
National Security			9,545				8,176				6,804
		$	112,196			$	115,602			$	102,726
GROSS PROFIT (A)
Program Management		$	10,467			$	9,398			$	7,037
Compliance and Environmental Programs			884				2,390				2,313
Professional Services			1,734				1,290				1,257
National Security			1,395				710				215
		$	14,480			$	13,788			$	10,822
Selling, general and administrative expenses			(8,876	)			(8,297	)			(6,669	)
OPERATING INCOME		$	5,604			$	5,491			$	4,153

		Years Ended
		June 26,				June 27,
		2009				2008
		(In thousands)
IDENTIFIABLE ASSETS
Program Management		$	19,531			$	11,405
Compliance and Environmental Programs			5,910				8,762
Professional Services			2,561				1,554
National Security			2,447				2,693
Corporate and Other			12,145				15,414
Total Assets		$	42,594			$	39,828

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE C CUSTOMER INFORMATION

     A substantial portion of the Company’s service revenue is derived from contracts with the U.S. Federal government as follows:

		Years Ended
		June 26,				June 27,				June 29,
		2009				2008				2007
		(In Thousands)
U.S. Department of Defense		$	92,583			$	88,245			$	65,997
U.S. Environmental Protection Agency			1,891				2,399				2,753
Other U.S. Government Agencies			2,576				3,657				16,512
Total U.S. Federal Government		$	97,050			$	94,301			$	85,262

     Majority of the Department of Defense works are to support the reconstruction of Iraq and Afghanistan with the U.S. Air Force and U.S. Army. Revenue was approximately $63 million, $62 million and $40 million for fiscal years 2009, 2008 and 2007, respectively.

NOTE D NOTES RECEIVABLE

     In June 2009, the company agreed to provide short term interim financing of $400,000 to General Power Green Energy, LLC (GPC) to cover project start up costs. The project is to construct a green 25 mega watts co-generation plant by burning landfill gas in turbine engines equipped with a steam generation unit. The note carries an annual interest rate of 10 percent and is due by March 31, 2010 or earlier upon project financing. In addition, Versar will provide the program management and construct the facility. Versar also received a 7.5% ownership interest in connection with the loan. The Company has not valued the 7.5% ownership interest due to the fact that GPC is in its developmental stage. The fair value of the equity interest could not be determined at this time. Approximately, $200,000 of the note was funded in late June 2009 and the balance in July 2009. The notes receivable is included in the June 26, 2009 balance sheet as part of the other current assets.

NOTE E ACCOUNTS RECEIVABLE

		Years Ended
		June 26,				June 27,
		2009				2008
		(In thousands)
Billed receivables
U.S. Government		$	9,516			$	10,312
Commercial			8,483				2,063
Unbilled receivables
U.S. Government			9,742				9,282
Commercial			423				282
			28,164				21,939
Allowance for doubtful accounts			(469	)			(343	)
		$	27,695			$	21,596

     Unbilled receivables represent amounts earned which have not yet been billed and other amounts which can be invoiced upon completion of fixed-price contract milestones, attainment of certain contract objectives, or completion of federal and state governments’ incurred cost audits. Management anticipates that such unbilled

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

receivables will be substantially billed and collected in fiscal year 2010, therefore, they have been presented as current assets in accordance with industry practice.

NOTE F PROPERTY AND EQUIPMENT

		Estimated		Years Ended
		Useful Life		June 26,				June 27,
		in Years		2009				2008
				(In thousands)
Furniture and fixtures		10		$	824			$	827
Equipment		3 to 10			7,762				7,029
Capital leases		Life of lease			568				568
Leasehold improvements		Shorter of lease term or asset life			2,184				2,115
					11,338				10,539
Accumulated depreciation and amortization					(8,990	)			(8,387	)
				$	2,348			$	2,152

     Depreciation and amortization of property and equipment was $958,000, $876,000 and $687,000 for the years ended June 26, 2009, June 27, 2008 and June 29, 2007, respectively.

     Maintenance and repair expense approximated $233,000, $268,000 and $251,000 for the years ended June 26, 2009, June 27, 2008 and June 29, 2007, respectively.

NOTE G MARKETABLE SECURITIES

     During the first quarter of fiscal year 2009, the Company recorded a $352,000 loss on marketable securities the Company was holding in the FISCO Income Plus Fund. The FISCO fund received an immediate demand margin call from its broker, UBS. Rather than allow the fund the customary time to satisfy the margin call at the end of the day, UBS demanded the fund cover all calls and puts at high premiums immediately or indicated it would take control and start liquidating the fund. The fund has terminated its relationship with UBS and transferred the assets to a new custodian. The fund has taken legal action against UBS to cover its losses. The Company will participate in any recovery from any such action. The Company has liquidated its remaining assets from marketable securities and moved them to cash with its primary bank due to the volatile nature of the market. During the remaining periods of fiscal year 2009, the Company recovered $24,000 of the initial loss before the funds were liquidated from the FISCO fund. A loss on marketable securities of $328,000 is reflected in the consolidated statement of income for the year ended June 26, 2009, as a result of the liquidation of the FISCO fund.

NOTE H DEBT

     The Company has a line of credit facility with United Bank (the Bank) that provides for advances up to $7.5 million based upon qualifying receivables. Interest on borrowings is based upon the prime rate of interest less ¹/2%. Borrowing rates at June 26, 2009 and June 27, 2008 were 2.75% and 4.5%, respectively. The Company currently has a letter of credit of $455,147, which serves as collateral for surety bond coverage provided by the Company’s insurance carrier against project construction work. The letter of credit reduces the Company’s borrowing base on the line of credit. The line of credit capacity at of June 26, 2009 was approximately $7.0 million.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Obligations under the credit facility are guaranteed by the Company and each subsidiary individually and collectively are secured by accounts receivable, equipment and intangibles, plus all insurance policies on property constituting collateral. The line of credit matures in November 2009. The Company is in the process of renewing the new credit facility with United Bank. The Company has obtained a commitment letter from United Bank to extend its line of credit to September 30, 2010. The line of credit is and will continue to be subject to certain covenants related to the maintenance of financial ratios. These covenants require a minimum tangible net worth of $22.5 million; a maximum total liabilities to tangible net worth ratio not exceed 2.5 to 1; and a minimum current ratio of at least 1.25 to 1. Borrowings under the extended line of credit will be at prime less ¹/2% with a floor interest rate of 3.5%. Failure to meet the covenant requirements gives the Bank the right to demand outstanding amounts due under the line of credit, which may impact the Company’s ability to finance its working capital requirements. As of June 26, 2009, the Company had no outstanding borrowings and was in compliance with the financial covenants.

NOTE I STOCK OPTIONS

     In fiscal year 2009, the Company awarded 125,000 shares of restricted stock at a fair market value of approximately $621,000 to executive officers, employees and directors. The awards vest over a period of 4.5 months to 16.5 months. Stock-based compensation expense relating to vested stock options and restricted stock awards totaled approximately $692,000, $811,000 and $132,000 for fiscal years 2009, 2008 and 2007 and was included in the direct costs of services and overhead lines of the Consolidated Statements of Income. During fiscal year 2009, incentive stock options to purchase 6,000 shares of common stock and non-qualified stock options to purchase 20,000 shares of common stock with intrinsic value of approximately $6,200 and $42,000, respectively, were exercised. At June 26, 2009, there were approximately 39,000 shares of restricted stock valued at $181,000 to be amortized over the next 12 months.

     In November 2005, the stockholders approved the Versar, Inc. 2005 Stock Incentive Plan (the “2005 Plan”). The 2005 Plan provides for grants of incentive awards, including stock options, SARS, restricted stock, restricted stock units and performance based awards, to directors, officers and employees of the Company and its affiliates as approved from time to time by the Company’s Compensation Committee. Only employees may receive stock options classified as “incentive stock options”, also known as “ISO’s”. The per share exercise price for options and SARS granted under the 2005 Plan may not be less than the fair market value of the common stock on the date of grant. A maximum of 400,000 shares of common stock may be awarded under the 2005 Plan. No single director, officer, or employee may receive awards of more than 100,000 shares of common stock during the term of the 2005 Plan. The ability to make awards under the 2005 Plan will terminate in November 2015. As of June 26, 2009, approximately 90,000 shares are available for future grant under the 2005 Plan.

     The Company also maintains the Versar 2002 Stock Incentive Plan (the “2002 Plan”), the Versar 1996 Stock Option Plan (the “1996 Plan”) and the Versar 1992 Stock Option Plan (the “1992 Plan”).

     Under the 2002 Plan, restricted stock and other types of stock-based awards were granted to any employee, service provider or director to whom a grant was approved from time to time by the Company’s Compensation Committee. A “service provider” is defined for purposes of the 2002 Plan as an individual who is neither an employee nor a director of the Company or any of its affiliates but who provides the Company or one of its affiliates substantial and important services. As of June 26, 2009, there were vested stock options to purchase 282,970 shares of common stock outstanding under the 2002 Plan.

     Under the 1996 Plan, options were granted to key employees, directors and service providers at the fair market value on the date of grant. Each option expires on the earlier of the last day of the tenth year after the date of grant or after expiration of a period designated in the option agreement. The 1996 Plan has expired and no additional options may be granted under this plan. The Company will continue to maintain the plan until all previously granted options have been exercised, forfeited or expire. As of June 26, 2009, there were vested stock options to purchase 153,761 shares of common stock outstanding under the 1996 Plan.

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     Under the 1992 Plan, options were granted to key employees at the fair market value on the date of grant and became exercisable during the five-year period from the date of the grant at 20% per year. Options were granted with a ten year term and expire if not exercised by the tenth anniversary of the grant date. The 1992 Plan has expired and no additional options may be granted under this plan. The Company will continue to maintain the plan until all previously granted options have been exercised, forfeited or expire. As of June 26, 2009, there were vested stock options to purchase 83,500 shares of common stock outstanding under the 1992 Plan.

     Total incentive stock options granted under the 2002, 1996, and 1992 Plans are as follows:

						Weighted-
		Optioned				Average Option
		Shares				Price Per Share				Total
		(In thousands, except per share price)
Outstanding at June 30, 2006			1,026			$	3.13			$	3,210
Exercised			(332	)			2.87				(952	)
Cancelled			(27	)			3.72				(99	)
Reclassified to non-qualified			(12	)			3.50				(42	)
Outstanding at June 29, 2007			656			$	3.23			$	2,117
Exercised			(219	)			3.58				(784	)
Cancelled			(7	)			4.10				(27	)
Outstanding at June 27, 2008			430			$	3.03			$	1,306
Exercised			(6	)			2.19				(13	)
Cancelled			(3	)			3.45				(10	)
Outstanding at June 26, 2009			421			$	3.05			$	1,283

     Details of total exercisable incentive stock options at June 26, 2009 are as follows:

Number of

Number of

Shares

Shares

Weighted-

Weighted-

Underlying

Underlying

Range of

Average

Average

Exercisable

Options

Option Price

Option Price

Remaining Life

Options

(In thousands, except as noted)

261

$1.81 to $2.80

2.50

2.7-years

261

113

$3.40 to $3.82

3.73

5.1-years

113

47

$4.00 to $4.95

4.38

5.5-years

47

421

$

3.05

3.9-years

421

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

     Aggregate intrinsic value for all shares under the incentive stock option plan at June 26, 2009 is approximately $483,000.

     Total non-qualified stock options granted under the 2002, 1996, and 1992 plans as follows:

						Weighted-
		Optioned				Average Option
		Shares				Price Per Share				Total
		(In thousands, except per share price)
Outstanding at June 30, 2006			203			$	3.24			$	659
Exercised			(29	)			3.16				(92	)
Cancelled			(14	)			2.77				(37	)
Reinstated			10				3.49				33
Reclassified from ISO			12				3.50				42
Outstanding at June 29, 2007			182			$	3.32			$	605
Granted			10				7.77				78
Exercised			(51	)			4.87				(248	)
Outstanding at June 27, 2008			141			$	3.07			$	435
Exercised			(20	)		$	1.75				(35	)
Outstanding at June 26, 2009			121			$	3.31			$	400

     Details of total exercisable Non-Qualified Stock Options at June 26, 2009 are as follows:

														Number of
Number of														Shares
Shares						Weighted-				Weighted-				Underlying
Underlying		Range of				Average				Average				Exercisable
Options		Option Price				Option Price				Remaining Life				Options
(In thousands, except as noted)
55		$	1.81 to $2.80				1.91			3.5-years					55
27		$	3.10 to $3.65				3.35			3.4-years					27
29		$	4.14 to $4.58				4.35			5.5-years					29
10		$	7.77				7.77			8.4-years					—
121						$	3.31			4.3-years					111

     No stock options have been granted under the 2005 plan. Since its adoption, the Company has moved to granting restricted stock and restricted stock units in lieu of stock options.

     The Company recorded share-based compensation expense related to the vesting of the previously granted stock options in its consolidated financial statements of approximately $4,000 and $18,000 for fiscal years 2008 and 2007, respectively. The Company did not record any share-based compensation expenses related to the vesting of previously granted stock options in fiscal year 2009. Had the remaining unvested options to purchase 10,000 shares of common stock vested in fiscal year 2009, the Company would have recorded approximately $42,000 share based compensation expense. The aggregate intrinsic value for all shares under the non-qualified plan at June 26, 2009 is

VERSAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

approximately $109,000. Aggregate intrinsic value for vested shares under the non-qualified plan at June 26, 2009 is approximately $145,000.

NOTE J INCOME TAXES

     The income tax expense (benefit) applicable to income from continuing operations consists of the following:

		Years Ended
		June 26,				June 27,				June 29,
		2009				2008				2007
		(In thousands)
Current
Federal		$	1,945			$	274			$	85
State			198				47				10
Foreign			42				—				—
Deferred
Federal			(225	)			1,528				1,404
State			115				421				350
Foreign			(4	)			3				—
Valuation Allowance			—				—				(2,954	)
		$	2,071			$	2,273			$	(1,105	)

     Deferred tax assets are comprised of the following (in thousands):

		June 26,				June 27,
		2009				2008
Deferred Tax Assets:
Employee benefits		$	299			$	295
Bad debt reserves			173				130
All other reserves			296				275
Alternative minimum tax credits			—				134
Net operating losses			86				196
State tax net operating losses			—				112
Depreciation			335				432
Accrued expenses			461				242
Other			202				132
Total Deferred Tax Assets			1,852				1,948
Valuation Allowance			(48	)			(47	)
Deferred Tax Liabilities:
Goodwill			(189	)			(177	)
Asset retirement obligation			(79	)			(189	)
Foreign			(51	)			(3	)
Net Deferred Tax Assets		$	1,485			$	1,532