Company: PDEX
Filing Date: 2025-01-30
Form Type: 10-Q
Source: 0001079973-25-000164
Chunk: 8

Company: PRO DEX INC
Filing Date: 2025-01-30
Form: 10-Q
Item: Item 2
Chunk 8
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allowance when, in the opinion of management, it is more-likely-than-not
that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.

Significant
management judgment is required in determining our provision for income taxes and the recoverability of our
deferred tax assets. Such determination is based primarily on our historical taxable income, with some consideration given to our
estimates of future taxable income by jurisdictions in which we operate and the period over
which our deferred tax assets would be recoverable.

We recognize accrued interest
and penalties related to unrecognized tax benefits when applicable. As of December 31, 2024 and
2023, we recognized accrued interest of $54,000 and $61,000, respectively, related to unrecognized tax benefits. The effective
tax rate for the three months ended December 31, 2024, and 2023 was 21% and 19%, respectively. The increase in the fiscal 2025 effective
tax rate is due primarily to the release in fiscal 2024 of a $60,000 valuation allowance related to previously recognized unrealized losses
on investments. We have not had a similar release of a valuation allowance during fiscal 2025. The effective tax rate for the six months
ended December 31, 2024 and 2023 was 24% and 45%, respectively. The fiscal 2024 effective tax rate was similarly impacted due to the release
of the valuation allowance recorded in the second quarter of fiscal 2024 and was a tax benefit since we had a year-to-date pre-tax loss.

We are subject to U.S. federal
income tax, as well as income tax of California and Colorado, as well as Massachusetts through fiscal year ended June 30, 2024. Our U.S.
federal income taxes are currently open to audit under the statute of limitations by the Internal Revenue Service for the fiscal years
ended June 30, 2021 and after.  However, because of our prior net operating losses and research credit carryovers, our tax years
from June 30, 2013 and after are open to audit. We do not anticipate a significant
change to the total amount of unrecognized tax
benefits within the next 12 months.

NOTE 8. SHARE-BASED COMPENSATION

Our 2016 Equity Incentive
Plan provides for the award of