Company: PDEX
Filing Date: 2025-05-01
Form Type: 10-Q
Source: 0001079973-25-000729
Chunk: 10

Company: PRO DEX INC
Filing Date: 2025-05-01
Form: 10-Q
Item: Item 8
Chunk 10
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 method whereby deferred
tax assets and liabilities are recognized for temporary differences. Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation 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 March 31, 2025 and 2024, we recognized accrued interest of $60,000 and $69,000, respectively, related
to unrecognized tax benefits. The effective tax rate for each of the three months ended March 31, 2025 and 2024 was 28%. The effective
tax rate for the nine months ended March 31, 2025 and 2024 was 26% and 23%, 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.

We are subject to U.S.
federal income tax, as well as income tax of California and Colorado. We were also subject to income tax of 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 9. SHARE-BASED
COMPENSATION

Our 2016 Equity Incentive
Plan provides for the award of up to 1,500,000 shares of our