PRO DEX INC Income Taxes Disclosure

7. INCOME TAXES

 

The provision for income taxes consists of the following amounts (in thousands):

 

Schedule of provision for income taxes
		Years Ended June 30,
		2025				2024
Current:
Federal		$	2,114			$	1,493
State			826				577
Deferred:
Federal			76				(1,210	)
State			64				(353	)
Income tax expense		$	3,080			$	507

 

The effective income tax rate from income from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages).

 

Schedule of reconciliation federal statutory income tax rates
		Years Ended June 30,
		2025								2024
		Amount				Percent Pretax Income				Amount				Percent Pretax Income
Income before income taxes		$	12,058				100	%		$	2,634				100	%
Computed “expected” income tax expense on income before income taxes		$	2,532				21	%		$	553				21	%
State tax, net of federal benefit			964				8	%			212				8	%
Tax incentives			(149	)			(1	%)			(214	)			(8	%)
Uncertain tax position			(116	)			(1	%)			(88	)			(3	%)
Stock based compensation			(164	)			(1	%)			2				—
Other			13				—				42				1	%
Income tax expense		$	3,080				26	%		$	507				19	%

 

 

Deferred income taxes reflect the net effects of loss and credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands):

Schedule of deferred income tax assets and liabilities
		June 30,
		2025				2024
Deferred tax assets:
Federal and state NOL carryforward		$	23			$	23
Research and other credits			65				65
Reserves			170				146
Accruals			436				309
Stock based compensation			1,096				1,008
Section 174 capitalization			756				738
Lease liability			353				488
Inventory			614				596
Other			12				5
Total gross deferred tax assets		$	3,525			$	3,378
Less: valuation allowance			(90	)			(90	)
Total deferred tax assets			3,435				3,288
Deferred tax liabilities:
Property and equipment, principally due to differing depreciation methods		$	(651	)		$	(675	)
Right of use asset			(313	)			(439	)
Deferred state tax			(61	)			(78	)
Unrealized gains			(995	)			(541	)
Total gross deferred tax liabilities			(2,020	)			(1,733	)
Net deferred tax assets		$	1,415			$	1,555

 

Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. As of June 30, 2025, our deferred tax asset valuation allowance primarily consists of state net operating loss carryforwards for states in which we have filed a final return. For the fiscal years ended June 30, 2025 and 2024, we recorded a net decrease to our valuation allowance of $0 and $1,000, respectively, on the basis of management’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized.

 

As of June 30, 2025, we did not have any net operating losses for federal and state income tax purposes for state jurisdictions in which we currently operate. We have no federal or state research and development and alternative minimum tax credit carry forwards at June 30, 2025.

 

As of June 30, 2025, we have accrued $159,000 of unrecognized tax benefits related to federal and state income tax matters that would reduce our income tax expense if recognized. If we are eventually able to recognize our uncertain tax positions, our effective tax rate would be reduced. Any adjustment to our uncertain tax positions would result in a cash outlay.

 

Information with respect to our accrual for unrecognized tax benefits is as follows (in thousands):

 

Schedule of accrual unrecognized tax benefits
		June 30,
		2025				2024
Unrecognized tax benefits:
Beginning balance		$	262			$	345
Additions based on federal tax positions related to the current year			11				15
Additions based on state tax positions related to the current year			11				17
Additions (reductions) for tax positions of prior years			(10	)			3
Reductions due to lapses in statutes of limitation			(115	)			(118	)
Ending balance		$	159			$	262

 

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examinations, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, we do not anticipate any significant changes to unrecognized tax benefits over the next twelve months.

 

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense when applicable. As of June 30, 2025, $28,000 of interest applicable to our unrecognized tax benefits has been accrued.

 

We are subject to U.S. federal income tax, as well as income tax of California and Colorado. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2022, and later.  However, because of our prior net operating losses and research credit carryovers, our tax years from June 30, 2020, are open to audit.

 

Additionally, the One Big Beautiful Bill Act of 2025, or the 2025 Act, enacted on July 4, 2025, makes changes to U.S. corporate income taxes including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025 and immediate expensing of research and development costs, with retroactive application beginning January 1, 2025. We are currently in the process of evaluating the impact of adoption of the 2025 Act to our financial position and results of operations for income tax purposes for the fiscal year ending June 30, 2025.