PRO DEX INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts) September 30, 2024 June 30, 2024 ASSETS Current Assets: Cash and cash equivalents $ 3,081 $ 2,631 Investments 4,738 4,217 Accounts receivable, net of allowance for credit losses of $ 3 and $ 0 at September 30, 2024 and at June 30, 2024, respectively 13,456 13,887 Deferred costs 211 262 Inventory 16,604 15,269 Prepaid expenses and other current assets 412 345 Total current assets 38,502 36,611 Land and building, net 6,132 6,155 Equipment and leasehold improvements, net 5,183 5,024 Right-of-use asset, net 1,370 1,473 Intangibles, net 47 54 Deferred income taxes 1,555 1,555 Investments 1,475 1,563 Other assets 44 42 Total assets $ 54,308 $ 52,477 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 4,442 $ 4,513 Accrued liabilities 4,019 3,359 Income taxes payable 423 632 Deferred revenue — 14 Notes payable 2,401 4,374 Total current liabilities 11,285 12,892 Lease liability, net of current portion 1,063 1,182 Notes payable, net of current portion 11,083 7,536 Total non-current liabilities 12,146 8,718 Total liabilities 23,431 21,610 Shareholders’ Equity: Common stock; no par value; 50,000,000 shares authorized; 3,297,510 and 3,363,412 shares issued and outstanding at September 30, 2024 and June 30, 2024, respectively 1,461 3,917 Retained earnings 29,416 26,950 Total shareholders’ equity 30,877 30,867 Total liabilities and shareholders’ equity $ 54,308 $ 52,477 The accompanying notes are an integral part of these condensed consolidated financial statements. PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share amounts) Three Months Ended September 30, 2024 2023 Net sales $ 14,892 $ 11,938 Cost of sales 9,742 8,280 Gross profit 5,150 3,658 Operating expenses: Selling expenses 48 25 General and administrative expenses 1,246 995 Research and development costs 843 805 Total operating expenses 2,137 1,825 Operating income 3,013 1,833 Other income (expense): Interest and dividend income 25 24 Unrealized gain (loss) on investments 433 ( 2,553 ) Interest expense ( 152 ) ( 133 ) Total other income (loss) 306 ( 2,662 ) Income (loss) before income taxes 3,319 ( 829 ) Provision for income taxes 853 ( 214 ) Net income (loss) $ 2,466 $ ( 615 ) Basic and diluted net income per share: Basic net income (loss) per share $ 0.76 $ ( 0.17 ) Diluted net income (loss) per share $ 0.75 $ ( 0.17 ) Weighted-average common shares outstanding: Basic 3,259,742 3,546,737 Diluted 3,292,142 3,546,737 Common shares outstanding 3,297,510 3,547,330 The accompanying notes are an integral part of these condensed consolidated financial statements. PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (In thousands) Three Months Ended September 30, 2024 2023 COMMON STOCK: Balance, beginning of period $ 3,917 $ 6,767 Share-based compensation expense 113 188 Share repurchases ( 2,311 ) — Shares withheld from common stock issued to employees to pay employee payroll taxes ( 273 ) — ESPP shares issued 15 32 Balance, end of period $ 1,461 $ 6,987 RETAINED EARNINGS: Balance, beginning of period $ 26,950 $ 24,823 Net income (loss) 2,466 ( 615 ) Balance, at end of period $ 29,416 $ 24,208 Balance, beginning of period 30,867 31,590 Net income (loss) 2,466 ( 615 ) Total shareholders’ equity $ 30,877 $ 31,195 The accompanying notes are an integral part of these condensed consolidated financial statements. PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended September 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 2,466 $ ( 615 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 302 283 Share-based compensation 113 188 Unrealized (gain) loss on marketable equity investments ( 433 ) 2,553 Non-cash lease (recovery) ( 5 ) ( 2 ) Amortization of loan fees 10 4 Credit loss expense 3 — Changes in operating assets and liabilities: Accounts receivable and other receivables 428 ( 1,082 ) Deferred costs 51 ( 97 ) Inventory ( 1,335 ) ( 97 ) Prepaid expenses and other assets ( 69 ) 95 Accounts payable and accrued expenses 579 35 Deferred revenue ( 14 ) — Income taxes ( 209 ) ( 873 ) Net cash provided by operating activities 1,887 392 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of equipment and improvements ( 431 ) ( 126 ) Net cash used in investing activities ( 431 ) ( 126 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable ( 3,427 ) ( 1,330 ) Proceeds from Minnesota Bank & Trust loans, net of origination fees 4,990 — Proceeds from stock option exercises and ESPP contributions 15 32 Payments of employee taxes on net issuance of common stock ( 273 ) — Repurchases of common stock ( 2,311 ) — Net cash used in financing activities ( 1,006 ) ( 1,298 ) Net increase (decrease) in cash and cash equivalents 450 ( 1,032 ) Cash and cash equivalents, beginning of period 2,631 2,936 Cash and cash equivalents, end of period $ 3,081 $ 1,904 The accompanying notes are an integral part of these condensed consolidated financial statements. PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Unaudited) (In thousands) Three Months Ended September 30, 2024 2023 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 162 $ 140 Cash paid during the period for income taxes: Federal income tax payments $ 690 $ 565 California income tax payments 372 74 Massachusetts income tax payments — 21 Total income tax payments $ 1,062 $ 660 The accompanying notes are an integral part of these condensed consolidated financial statements. PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Pro-Dex, Inc. (“we,” “us,” “our,” “Pro-Dex,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and consist of a normal recurring nature. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2024. Recently Issued and Not Yet Adopted Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tas Disclosures (Topic 740) . ASU 2023-09 expands the existing rules on income tax disclosures. This update requires entities to disclose specific categories in the tax rate reconciliation, provide additional information for reconciling items that meet a quantitative threshold and disclose additional information about income taxes paid on an annual basis. The new disclosure requirements are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating these new expanded disclosure requirements, but this standard will not impact our results of operations or financial position. In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures (Topic280) which expands disclosure requirements to require entities to disclose significant segment expenses that are regularly provided to or easily computed from information regularly provided to the chief operating decision maker. This update also requires all annual disclosures currently required by Topic 280 to be disclosed in interim periods. The new disclosure requirements are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Although our business, as currently operated, has only one segment, we are evaluating the new disclosure requirements to ensure compliance. NOTE 2. DESCRIPTION OF BUSINESS We specialize in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets. We have patented adaptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. We also manufacture and sell rotary air motors to a wide range of industries. In August 2020, we formed a wholly owned subsidiary, PDEX Franklin, LLC (“PDEX Franklin”), to hold title for an approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”) that we acquired on November 6, 2020, in order to allow for the continued growth of our business. The condensed consolidated financial statements include the accounts of the Company and PDEX Franklin and all significant inter-company accounts and transactions have been eliminated. This subsidiary has no separate operations. NOTE 3. NET SALES The following table presents the disaggregation of net sales by revenue recognition model (in thousands): Schedule of disaggregation of net sales Three months ended September 30, 2024 2023 Net Sales: Over-time revenue recognition $ 47 $ 190 Point-in-time revenue recognition 14,845 11,748 Total net sales $ 14,892 $ 11,938 The timing of revenue recognition, billings, and cash collections results in billed accounts receivables, unbilled receivables (presented as deferred costs on our condensed consolidated balance sheets) and customer advances and deposits (presented as deferred revenue on our condensed consolidated balance sheets), where applicable. Amounts are generally billed as work progresses in accordance with agreed upon milestones. The over-time revenue recognition model consists of non-recurring engineering (“NRE”) and prototype services and typically relates to NRE services related to the evaluation, design or customization of a medical device and is typically recognized over time utilizing an input measure of progress based on costs incurred compared to the estimated total costs upon completion. During the three months ended September 30, 2024 and 2023, we recorded $ 14,000 and $ 0 , respectively, of revenue that had been included in deferred revenue in the prior year. The revenue recognized from the contract liabilities consisted of satisfying our performance obligations during the normal course of business. The following tables summarize our contract assets and liability balances (in thousands): Schedule of contract assets and liability As of and for the Three Months Ended September 30, 2024 2023 Contract assets beginning balance $ 262 $ 494 Expenses incurred during the year 57 219 Amounts reclassified to cost of sales ( 102 ) ( 105 ) Amounts allocated to discounts for standalone selling price ( 6 ) ( 17 ) Contract assets ending balance $ 211 $ 591 As of and for the Three Months Ended September 30, 2024 2023 Contract liabilities beginning balance $ 14 $ — Payments received from customers — 43 Amounts reclassified to revenue ( 14 ) ( 43 ) Contract liabilities ending balance $ — $ — NOTE 4. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS Investments Investments are stated at fair market value and consist of the following (in thousands): Schedule of investments September 30, 2024 June 30, 2024 Marketable equity securities Short-term $ 4,738 $ 4,217 Long-term 1,475 1,563 Total Investments $ 6,213 $ 5,780 Investments at September 30, 2024 and June 30, 2024 had an aggregate cost basis of $ 4.0 million . Both current and long-term marketable equity securities include equity securities of public companies that are thinly traded. We classified certain investments as long-term in nature because if we decide to sell these securities, we may not be able to sell our position within one year. At September 30, 2024, the investments included unrealized gains of $ 2.2 million (gross unrealized gains of $ 2.7 million offset by gross unrealized losses of $ 518,000 ) . At June 30, 2024, the investments included net unrealized gains of $ 1.8 million (gross unrealized gains of $ 2.1 million offset by gross unrealized losses of $ 261,000 ). Of the total marketable equity securities at September 30, 2024 and June 30, 2024, $ 748,000 and $ 987,000 , respectively, represent an investment in the common stock of Air T, Inc. Two of our Board members are also board members of Air T, Inc. and both either individually or through affiliates, own an equity interest in Air T, Inc. Our Chairman, one of the two Board members aforementioned, also serves as the Chief Executive Officer and Chairman of Air T, Inc. Another of our Board members is employed by Air T, Inc. as its Chief of Staff. The shares were purchased through 10b5-1 Plans, that, in accordance with our internal policies regarding the approval of related-party transactions, were approved by our then three Board members that are not affiliated with Air T, Inc. We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Richard (“Rick”) Van Kirk, and two non-management directors, Raymond (“Ray”) Cabillot and Nicholas (“Nick”) Swenson, who chairs the committee. Both Nick and Ray are active investors with extensive portfolio management expertise. We leverage the experience of these committee members to make investment decisions for our surplus operating capital or borrowed funds. Additionally, many of our securities holdings include stocks of public companies that either Nick or Ray or both may own from time to time either individually or through the investment funds that they manage, or other companies whose boards they sit on, such as Air T, Inc. Inventory Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands): Schedule of inventory September 30, 2024 June 30, 2024 Raw materials/purchased components $ 7,438 $ 6,703 Work in process 5,728 5,103 Sub-assemblies/finished components 2,810 2,342 Finished goods 628 1,121 Total inventory $ 16,604 $ 15,269 Intangibles Intangibles consist of the following (in thousands): Schedule of intangibles September 30, 2024 June 30, 2024 Patent-related costs $ 208 $ 208 Less accumulated amortization ( 161 ) ( 154 ) $ 47 $ 54 Patent-related costs consist of legal fees incurred in connection with both patent applications and a patent issuance and will be amortized over the estimated life of the product(s) that is or will be utilizing the technology, or expensed immediately in the event the patent office denies the issuance of the patent. Future amortization expense is estimated to be $ 27,000 for fiscal 2025 and $ 20,000 for fiscal 2026. NOTE 5. WARRANTY The warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses and is included in accrued expenses in the accompanying condensed consolidated balance sheets. As of September 30, 2024 and June 30, 2024, the warranty reserve amounted to $ 300,000 and $ 277,000 , respectively. Warranty expenses are included in cost of sales in the accompanying condensed consolidated statements of operations. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates and are included in current period warranty expense. Information regarding the accrual for warranty costs for the three months ended September 30, 2024 and 2023 are as follows (in thousands): Schedule of accrual warranty costs As of and for the Three Months Ended September 30, 2024 2023 Beginning balance $ 277 $ 200 Accruals during the period 90 24 Changes in estimates of prior period warranty accruals ( 18 ) ( 2 ) Warranty amortization/utilization ( 49 ) ( 33 ) Ending balance $ 300 $ 189 NOTE 6. NET INCOME (LOSS) PER SHARE We calculate basic net income (loss) per share by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted income per share reflects the effects of potentially dilutive securities, which consist entirely of outstanding stock options and performance awards. The following table presents reconciliations of the numerators and denominators of the basic and diluted income per share computations. For the three months ended September 30, 2023, 64,800 dilutive securities, consisting exclusively of performance awards, were excluded from the diluted loss per share because the impact would be anti-dilutive. In the tables below, income amounts represent the numerator, and share amounts represent the denominator (in thousands, except per share amounts): Schedule of net income per share Three Months Ended September 30, 2024 2023 Basic: Net income (loss) $ 2,466 $ ( 615 ) Weighted-average shares outstanding 3,260 3,547 Basic earnings (loss) per share $ 0.76 $ ( 0.17 ) Diluted: Net income (loss) $ 2,466 $ ( 615 ) Weighted-average shares outstanding 3,260 3,547 Effect of dilutive securities 32 — Weighted-average shares used in calculation of diluted earnings per share 3,292 3,547 Diluted earnings (loss) per share $ 0.75 $ ( 0.17 ) NOTE 7. INCOME TAXES Deferred income taxes are provided on a liability 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 bases. 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 or loss, with some consideration given to our estimates of future taxable income or loss by jurisdictions in which we operate and the period over which our deferred tax assets would be recoverable. Our deferred tax asset is net of a valuation allowance in the amount of $ 71,000 as of September 30, 2024 and June 30, 2024. We recognize accrued interest and penalties related to unrecognized tax benefits when applicable. As of September 30, 2024 and 2023, we recognized accrued interest of $ 6,000 and $ 7,000 , respectively, related to unrecognized tax benefits. Our effective tax rate for both the three months ended September 30, 2024 and 2023, is 26 % and is slightly less than our combined expected federal and applicable state corporate income tax rates due primarily to federal and state research credits. 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. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2021, and later. However, because of our prior net operating losses and research credit carryovers, our tax years from June 30, 2013, 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 In September 2016, our Board approved the establishment of the 2016 Equity Incentive Plan, which was approved by our shareholders at our 2016 Annual Meeting. The 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. Performance Awards In December 2017, the Compensation Committee of our Board of Directors granted 200,000 performance awards to our employees under our 2016 Equity Incentive Plan, which will generally be paid in shares of our common stock. Whether any performance awards vest, and the amount that does vest, is tied to the completion of service periods that range from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices. The weighted-average fair value of the performance awards granted was $ 4.46 , calculated using the weighted-average fair market value for each award, using a Monte Carlo simulation. In February 2020, the Compensation Committee reallocated 48,000 previously forfeited awards, having the same remaining terms and conditions, to certain employees. The weighted-average fair value of the performance awards reallocated in 2020 was $ 16.90 , calculated using the weighted-average fair market value for each award, using a Monte Carlo simulation. In December 2021, the Compensation Committee reallocated an additional 17,500 previously forfeited awards, having the same remaining terms and conditions, to other employees. The weighted average fair value of the performance awards reallocated in 2021 was $ 20.34 , calculated using the weighted average fair market value for each award, using a Monte Carlo simulation. In October 2023, the Compensation Committee reallocated an additional 15,200 previously forfeited awards, having the same remaining terms and conditions, to other employees. The weighted average fair value of the performance awards reallocated in 2023 was $ 10.04 , calculated using the weighted average fair market value for each award, using a Monte Carlo simulation. We recorded share-based compensation expense of $ 7,000 and $ 15,000 for the three months ended September 30, 2024 and 2023, respectively, related to these performance awards. On September 30, 2024, there was approximately $ 48,000 of unrecognized compensation cost related to these non-vested performance awards, which is expected to be expensed over the weighted-average period of 1.75 years. On July 1, 2024, it was determined by the Compensation Committee of our Board of Directors that the vesting of performance awards for 40,000 shares of common stock had been achieved. Each participant elected a net issuance to cover their individual withholding taxes and therefore we issued 25,134 shares and paid $ 273,000 of participant-related payroll tax liabilities. Non-Qualified Stock Options In December 2020, the Compensation Committee of our Board of Directors granted 310,000 non-qualified stock options to our directors and certain employees under the 2016 Equity Incentive Plan. The vesting of these stock options is tied to the completion of service periods that range from 18 months to 10.5 years from inception and the achievement of our common stock trading at certain pre-determined prices. We recorded compensation expense of $ 104,000 and $ 168,000 for the three months ended September 30, 2024 and 2023, respectively, related to these stock options. The weighted-average fair value of the stock option awards granted was $ 16.72 , calculated using a Monte Carlo simulation. As of September 30, 2024, none of these stock options had vested and there was approximately $ 1.5 million of unrecognized compensation cost related to these non-vested stock options. Employee Stock Purchase Plan In September 2014, our Board approved the establishment of an Employee Stock Purchase Plan (the “ESPP”). The ESPP conforms to the provisions of Section 423 of the Internal Revenue Code, has coterminous offering and purchase periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per-share purchase price that approximates a 15% discount from the market price of a share of our common stock at the end of the purchase period. Our Board of Directors also approved the provision that shares formerly reserved for issuance under former stock option plans in excess of shares issuable pursuant to outstanding options, aggregating 704,715 shares, be reserved for issuance pursuant to the ESPP. The ESPP was approved by our shareholders at our 2014 Annual Meeting. In October 2023, our Board approved an amendment to the ESPP (the “ESPP Amendment”), which extended the term of the ESPP for an additional ten years from January 2025 to January 2035. The ESPP Amendment was approved by our shareholders at our 2023 Annual Meeting. During the three months ended September 30, 2024 and 2023, 940 and 2,021 shares were purchased, respectively, under the ESPP and allocated to employees based upon their contributions at discount prices of $ 16.22 and $ 15.82 , respectively, per share. As of September 30, 2024, on a cumulative basis, since the inception of the ESPP plan, employees have purchased a total of 36,442 shares. During the three months ended September 30, 2024 and 2023, we recorded stock compensation expense in the amount of $ 3,000 and $ 6,000 , respectively, relating to the ESPP. NOTE 9. MAJOR CUSTOMERS & SUPPLIERS Information with respect to customers that accounted for sales in excess of 10% of our total sales in either of the three-month periods ended September 30, 2024 and 2023 is as follows (in thousands, except percentages): Schedule of sales by major customers Three Months Ended September 30, 2024 2023 Amount Percent of Total Amount Percent of Total Total revenue $ 14,892 100 % $ 11,938 100 % Customer concentration: Customer 1 $ 11,377 76 % $ 8,375 70 % Customer 2 1,837 12 % 1,209 10 % Customer 3 760 5 % 1,165 10 % Total $ 13,974 93 % $ 10,749 90 % Information with respect to accounts receivable from those customers that comprised more than 10% of our gross accounts receivable at either September 30, 2024 and June 30, 2024 is as follows (in thousands, except percentages): Schedule of accounts receivable September 30, 2024 June 30, 2024 Total gross accounts receivable $ 13,459 100 % $ 13,887 100 % Customer concentration: Customer 1 $ 10,090 75 % $ 10,488 76 % Customer 2 2,581 19 % 2,423 17 % Total $ 12,671 94 % $ 12,911 93 % During the three months ended September 30, 2024 and 2023, we had two and three suppliers, respectively, that each accounted for more than 10 % of total inventory purchases. Amounts owed to the fiscal 2024 significant suppliers at September 30, 2024 totaled $ 1.7 million, and $ 248,000 , respectively, and at June 30, 2024 totaled $ 1.4 million and $ 416,000 , respectively. NOTE 10. NOTES PAYABLE AND FINANCING TRANSACTIONS Minnesota Bank & Trust (“MBT”) As previously disclosed, we have several outstanding term loans as well as a revolving loan (the “Amended Revolving Loan”) with MBT. Additionally, on July 31, 2024 (the “Fourth Amendment Date”), we entered into Amendment No. 4 to our Amended and Restated Credit Agreement (the “Fourth Amendment”) with MBT which amends the Company’s Amended and Restated Credit Agreement. The Fourth Amendment (i) provides for a new term loan, Term Loan C, in the amount of $ 5.0 million, (ii) uses the proceeds from Term Loan C to repay the entire $ 3.0 million balance that was outstanding on the Fourth Amendment Date under the Amended Revolving Loan, and (iii) terminates our Supplemental Loan, under which no amounts had been drawn. Loan origination fees in the amount of $ 10,000 were paid to MBT in conjunction with Term Loan C. The balance on our outstanding loans (in thousands) is as follows (exclusive of unamortized loan fees): Schedule of unamortized loan September 30, 2024 June 30, 2024 Notes Payable: Term Loan A $ 3,579 $ 3,834 Term Loan B 533 571 Term Loan C 4,916 — Property Loan 4,501 4,551 Amended Revolving Loan — 3,000 Total notes payable $ 13,529 $ 11,956 Term Loan A and B both bear interest at a fixed rate of 3.84 % per annum, the Property Loan bears interest at a fixed rate of 3.55 % per annum and both Term Note C and the Amended Revolving Loan bear interest at an annual rate equal to the greater of (a) 5 % , or (b) SOFR for a one-month period from the website of the CME Group Benchmark Administration Limited plus 2.5% (the “Adjusted Term SOFR Rate”). Term Loan A and B are both fully amortizing and mature on November 1, 2027 , Term Loan C is fully amortizing and matures on August 1, 2029 , the Property Loan matures on November 1, 2030 , at which time a balloon payment of $ 3.1 million is due, and the Amended Revolving Loan matures on December 29, 2025 . Any payment on Term Loan A, Term Loan B, Term Loan C, the Property Loan, or Amended Revolving Loan (collectively, the “Loans”) not made within seven days after the due date is subject to a late payment fee equal to 5 % of the overdue amount. Upon the occurrence and during the continuance of an event of default, the interest rate of all Loans will be increased by 3 % and MBT may, at its option, declare all of the Loans immediately due and payable in full. The Loans are secured by substantially all of the Company’s assets pursuant to a Security Agreement entered into on September 6, 2018, between the Company and MBT. The Amended Credit Agreement, Amended Security Agreement, Term Note A, Term Note B, Term Note C, Property Note, and Amended Revolving Note contain representations and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type. We believe that we are in compliance with all of our debt covenants as of September 30, 2024, but there can be no assurance that we will remain in compliance for the duration of the term of these loans. NOTE 11. COMMON STOCK Share Repurchase Program In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to 1 million shares of our common stock, as the prior repurchase plan authorized by our Board in 2013 was nearing completion. In accordance with, and as part of, these share repurchase programs, our Board has approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or “Plan”). During the three months ended September 30, 2024, we repurchased 91,976 shares at an aggregate cost, inclusive of fees under the Plan, of $ 2.3 million. During the three months ended September 30, 2023 we did not repurchase any shares. On a cumulative basis since 2013, we have repurchased a total of 1,473,325 shares under the share repurchase programs at an aggregate cost, inclusive of fees, of $ 23.0 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. NOTE 12. LEASES Our operating lease right-of-use asset and long-term liability are presented separately on our condensed consolidated balance sheet. The current portion of our operating lease liability as of September 30, 2024, in the amount of $ 466,000 , is presented within accrued expenses on the condensed consolidated balance sheet. As of September 30, 2024, our operating lease has a remaining lease term of three years and an imputed interest rate of 5.53 % . Cash paid for amounts included in the lease liability was $ 130,000 for the three months ended September 30, 2024, excluding $ 41,000 paid for common area maintenance charges. As of September 30, 2024, the maturity of our lease liability is as follows (in thousands): Schedule of maturities of lease liabilities Operating Lease Fiscal Year: 2025 $ 404 2026 551 2027 567 2028 143 Total lease payments 1,665 Less imputed interest ( 136 ) Total $ 1,529 NOTE 13. COMMITMENTS AND CONTINGENCIES Legal Matters We may be involved from time to time in legal proceedings arising either in the ordinary course of our business or incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material or adverse. NOTE 14. SUBSEQUENT EVENTS We have evaluated subsequent events through the date of this filing. There were no subsequent events that require disclosure.