Note 4. Income Taxes

The Company's tax provision and the resulting effective tax rate for interim periods is determined based on its estimated annual effective tax rate adjusted for the effect of discrete items arising in that quarter.  The provision for income taxes consists of federal and state taxes in the US, California, Florida, and various other states.

 For the three and six months ended June 30, 2026, the Company recorded an income tax expense of $835 and $1,517, respectively, resulting in an effective tax rate of 20.86% and 20.37%.  The Company's taxable income is generated in the United States and taxed at a federal and state statutory rate of 27.52%.  Relative to federal and state statutory rate, the effective tax rate for the six months ended June 30, 2026, was reduced by the tax impact of research and development tax credits and stock compensation exercises and vestings.

For the three and six months ended June 30, 2025, the Company recorded an income tax expense of $275 and $945, respectively.  The effective tax rate for the three and six months ended June 30, 2025, was 6.85% and 13.86%.  Relative to the federal and states statutory rate, the effective tax rate for the six months ended June 30, 2025, was primarily impacted by the tax benefit for research and development tax credits for 2025 as compared to projected income before tax.

Based on the analysis of all available evidence, both positive and negative, the Company has concluded that, except for the capital loss carryforward of approximately $851, it currently does have the ability to generate sufficient taxable income in the necessary period to utilize the benefits for the deferred tax assets.  Accordingly, for the three- and six-month periods ending on  June 30, 2026, the Company recorded no change in the valuation allowance.  The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future.  If the Company incurs future losses, it may be necessary to record additional valuation allowance amounts related to the deferred tax assets recognized as of June 30, 2026.  The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax asset may be deemed appropriate in the future.

The Company's policy is to recognize interest and penalties associated with uncertain tax benefits as part of income tax provision and included accrued interest and penalties with the related income tax liability on the Company's Condensed Consolidated Balance Sheets.  To date, the Company has not recognized any interest and penalties in its Condensed Consolidated Statement of Operations, nor has it accrued for or made payments for interest and penalties.  The Company recorded $0 and $1,419 unrecognized tax benefits as of June 30, 2026 and June 30, 2025, respectively.  Following the completion of an updated analysis during 2025, management concluded that the Company's R&D tax credit position is adequately supported and meets the recognition criteria under ASC 740.  Accordingly, the entire uncertain tax position reserve was released during 2025.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S.  The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions.  The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.  Under OBBBA, the Company is permitted to claim 100% bonus depreciation and fully deduct domestic research expenditures under Section 174A.  These provisions accelerate tax deductions but do not create permanent tax differences; therefore, the impact is timing related only and does not materially affect the Company's financial statements.

The Company imports certain materials and products that are subject to U.S. government tariffs and import duties. On February 20, 2026, a US federal court ordered the U.S. government to begin refunding certain tariffs. The Company believes that some of the tariffs it has paid may be eligible for refund; however, the amount and timing of any potential refunds are uncertain. Accordingly, the Company has not recorded, nor plans to record, any benefit related to possible tariff refunds at this time.