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Item 1. Financial Statements

2025-01-30 compared with 2024-10-31 · 361 added, 301 removed, 211 unchanged (76% of the section changed)

FINANCIAL STATEMENTS

PRO-DEX, INC.

CONDENSED CONSOLIDATED

BALANCE SHEETS

(In thousands, except share amounts)

AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands except per share

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses

of $ 3 and $ 0 at September 30, 2024 and at June 30, 2024, respectively

Accounts receivable, net of allowance for expected credit losses of $ 27 and $ 0 at December 31, 2024 and at June 30, 2024, respectively

Deferred costs

5 unchanged sentences

Intangibles, net

Deferred income taxes

Deferred income taxes, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

14 unchanged sentences

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

3,260,390 and 3,363,412 shares issued and outstanding at December 31, 2024 and June 30, 2024, respectively

Retained earnings

1 unchanged sentence

Total liabilities and shareholders’ equity

accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

PRO-DEX, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

Months Ended September 30,

(In thousands, except share and per share

Cost of sales

5 unchanged sentences

Operating income

Other income (expense):

Interest and dividend income

Unrealized gain (loss) on investments

Interest expense

Total other income (loss)

Unrealized gain (loss) on marketable equity investments

Interest and other income

Income (loss) before income taxes

Provision for income taxes

income (loss)

Basic and diluted net income per share:

Income tax benefit (expense)

Net income (loss)

Basic net income (loss) per share

Net income (loss) per share

Diluted net income (loss) per share:

Net income (loss) per share

Weighted-average common shares outstanding:

Common shares outstanding

accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

PRO-DEX, INC.

2 unchanged sentences

(In thousands)

September 30,

Common stock:

2 unchanged sentences

Share repurchases

Shares withheld from common stock issued to employees to pay employee

payroll taxes

Shares withheld from common stock issued to employees to pay employee payroll taxes

ESPP shares issued

3 unchanged sentences

Net income (loss)

Balance, at end of period

Balance, end of period

Balance, beginning of period

1 unchanged sentence

Total shareholders’ equity

accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

PRO-DEX, INC.

2 unchanged sentences

(In thousands)

Three Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation and amortization

2 unchanged sentences

Non-cash lease recovery

Amortization of loan fees

Amortization of loan fees, net

Credit loss expense

Changes in operating assets and liabilities:

Accounts receivable and other receivables

Accounts receivable

Deferred costs

2 unchanged sentences

Deferred revenue

Net cash provided by operating activities

Income taxes payable

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of investments

Purchases of equipment and improvements

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on notes payable

Proceeds from Minnesota Bank & Trust loans, net of origination fees

Proceeds from stock option exercises and ESPP contributions

Payments of employee taxes on net issuance of common stock

Repurchases of common stock

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Proceeds from ESPP contributions

Payment of employee payroll taxes on net issuance of common stock

Proceeds from Minnesota Bank & Trust revolving loan

Principal payments on notes payable and revolving loan

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

accompanying notes are an integral part of these condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

September 30,

Six Months Ended

Supplemental disclosures of cash flow information:

Cash paid during the period for interest

Cash paid during the period for income taxes:

Cash paid during the period for income taxes by jurisdiction:

Federal income tax payments

2 unchanged sentences

Total income tax payments

accompanying notes are an integral part of these condensed consolidated financial statements.

Non-cash investing and financing activity:

Cashless stock option exercise

The accompanying notes are an integral part of

these condensed consolidated financial statements.

PRO-DEX, INC.

AND SUBSIDIARY

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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

GAAP”) for interim financial information and the instructions to Form 10-Q and applicable

provisions of 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.

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.

presentation have been included.

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.

Issued and Not Yet Adopted Accounting Pronouncements

December 2023, the FASB issued ASU No.

December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

Improvements to Income Tax Disclosures (Topic 740) .

ASU 2023-09 expands the existing rules on income tax

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.

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.

Early adoption is permitted.

currently evaluating these new expanded disclosure requirements, but this standard will not impact our results of operations or financial

November 2023, the FASB issued ASU 2023-07, Segment Reporting:

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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.

business, as currently operated, has only one segment, we are evaluating the new disclosure requirements to ensure compliance.

DESCRIPTION OF BUSINESS

computed from information regularly provided to, the entity’s 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

Although our business, as currently operated, has only one segment, we are evaluating the new disclosure requirements to ensure

We specialize in the design, development,

1 unchanged sentence

thoracic, and maxocranial facial markets.

We have patented adaptive torque-limiting software and proprietary sealing solutions which

We have patented adaptive torque-limiting software and proprietary sealing solutions that

appeal to our customers, primarily medical device distributors.

1 unchanged sentence

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.

square foot industrial building in Tustin, California (the “Franklin Property”) that we acquired in November 2020, 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.

The following table presents the

disaggregation of net sales by revenue recognition model (in thousands):

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents

the disaggregation of net sales by revenue recognition model (in thousands):

Schedule of disaggregation of net sales

months ended September 30,

Over-time revenue recognition

1 unchanged sentence

Total net sales

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 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.

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 and six months ended December 31, 2024 we recorded $ 0

and $ 14,000 , respectively, of revenue that had been included in deferred revenue in the prior year.

During the three and six months ended

December 31, 2023, we did no t record any 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):

from contract liabilities consisted of satisfying our performance obligations during the normal course of business.

As of December 31,

2024 and 2023, we did no t have any deferred revenue.

The following tables summarize our contract

assets (in thousands):

Schedule of contract assets and liability

Three Months Ended

September 30,

of and for the

Contract assets beginning balance

1 unchanged sentence

Amounts reclassified to cost of sales

Amounts allocated to discounts for standalone selling price

allocated to discounts for standalone selling price

Contract assets ending balance

Three Months Ended

September 30,

Contract liabilities beginning balance

Payments received from customers

Amounts reclassified to revenue

Contract liabilities ending balance

COMPOSITION OF CERTAIN FINANCIAL

STATEMENT ITEMS

are stated at fair market value and consist of the following (in thousands):

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

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

Raw materials/purchased components

Work in process

Sub-assemblies/finished components

Finished goods

Total inventory

are stated at market value and consist of the following (in thousands):

Schedule of investments

1 unchanged sentence

Total 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

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 ).

the total marketable equity securities at September 30, 2024 and June 30, 2024, $ 748,000 and $ 987,000 , respectively, represent an investment

at December 31, 2024 and June 30, 2024 had an aggregate cost basis of $ 4.0 million .

Our investments include equity investments of thinly traded securities some of which are classified 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 December 31, 2024, investments included

net unrealized gains of $ 2.3 million (gross unrealized gains of $ 2.7 million offset by gross unrealized losses of $ 341,000 ).

2024, investments included net unrealized gains of $ 1.8 million (gross unrealized gains of $ 2.1 million offset by gross unrealized losses

of $ 261,000 ).

the total marketable equity securities at December 31, 2024 and June 30, 2024, $ 941,000 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.

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.

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.

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.

6, 2023, in conjunction with the execution of a supply agreement with Monogram Technologies, Inc., formerly Monogram Orthopaedics Inc.

(“Monogram”), we exercised a previously held warrant (the “Monogram Warrant”) in full in cash totaling $1,250,000

and received 1,828,551 shares of Monogram common stock (NasdaqCM:

The fair value of the Monogram common stock is reflected in

short term in the table above.

Our Chief Executive Officer, Richard (“Rick”) Van Kirk, is also a Monogram board member.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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

Raw materials/purchased components

Work in process

Sub-assemblies/finished components

Finished goods

Total inventory

cash from time to time through our Investment Committee, which is comprised of one management director, Rick Van Kirk, and two non-management

directors, Raymond Cabillot and Nicholas Swenson, who chairs the committee.

Cabillot and Swenson are active investors with

extensive portfolio management expertise.

We leverage the experience of these committee members to make investment decisions for the investment

of our surplus operating capital or borrowed funds.

Additionally, many of our securities holdings include stocks of public companies that

either Messrs.

Cabillot or Swenson 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.

Land and building

Land and building consist

of the following (in thousands):

Schedule of land and building

accumulated depreciation

November 2020, we acquired the Franklin Property for a total purchase price of $ 6.5 million, of which we paid $1.3 million in cash and

the balance of $5.2 million we financed (the “Property Loan”) through Minnesota Bank & Trust (“MBT”) (see

Note 10) and we substantially completed the build-out of the property in the first quarter of fiscal 2022.

We began operations in the

new facility during the fourth quarter of fiscal 2023.

The building is being amortized on a straight-line basis over a period of 30 years.

consist of the following (in thousands):

Schedule of intangibles

September 30,

Patent-related costs

Less accumulated amortization

accumulated amortization

Patent-related

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the issuance of the patent.

Future amortization expense is estimated to be $ 27,000 for fiscal 2025 and $ 20,000 for fiscal 2026.

Future amortization expense is expected to be $ 14,000 for the remainder of fiscal 2025 and $ 26,000 in fiscal

2026, at which time we expect these costs will be fully amortized.

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.

accrued liabilities in the accompanying condensed consolidated balance sheets.

As of December 31, 2024 and June 30, 2024, the warranty

reserve amounted to $ 312,000 and $ 277,000 , respectively.

Warranty expenses are included in cost of sales in the accompanying condensed

consolidated statements of income.

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.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Information regarding the

accrual for warranty costs for the three months ended September 30, 2024 and 2023 are as follows (in thousands):

accrual for warranty costs for the three and six months ended December 31, 2024 and 2023, are as follows (in thousands):

Schedule of accrual warranty costs

Three Months Ended

September 30,

of and for the

Beginning balance

1 unchanged sentence

Changes in estimates of prior period warranty accruals

Warranty amortization/utilization

Warranty amortization

Ending balance

1 unchanged sentence

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

Diluted income per share reflects the effects of potentially dilutive securities, which consist entirely of outstanding stock

options and performance awards.

income (loss) per share by dividing net income by the weighted-average number of common shares outstanding during the reporting period.

In income generating periods, the weighted-average number of common shares outstanding reflects the effects of potentially dilutive securities,

which consist entirely of outstanding stock options, restricted stock, 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):

reconciliations of the numerators and denominators of the basic and diluted earnings (loss) per share computations for net income (loss).

Because we incurred a net loss for the six months ended December 31, 2023, basic and diluted loss were the same, as the inclusion of 64,800

common shares potentially issuable under the terms of outstanding performance awards would have had an anti-dilutive effect.

In the tables

below, net income amounts represent the numerator, and weighted average shares outstanding amounts represent the denominator (in thousands,

except share and per share amounts):

Schedule of net income per share

Months Ended September 30,

Net income (loss)

Weighted average shares outstanding

Basic earnings (loss) per share

Basic income (loss) per share

Net income (loss)

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Weighted average shares used in calculation of diluted earnings per share

Diluted earnings (loss) per share

Diluted income (loss) per share

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

income taxes are provided on a liability method whereby deferred tax assets and liabilities

1 unchanged sentence

differences are the differences between the reported amounts of assets and liabilities and

their tax bases.

their tax basis.

Deferred tax assets are reduced by a valuation

5 unchanged sentences

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.

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.

income tax, as well as income tax of California and Colorado, as well as Massachusetts through fiscal year ended June 30, 2024.

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.

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.

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.

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.

Our 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.

As of December

31, 2024, performance awards for 200,000 shares of common stock, non-qualified stock options for 372,000 shares of common stock, and 18,000

restricted shares of common stock have been granted under the 2016 Equity Incentive Plan.

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

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.

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.

In October 2023, the Compensation

Committee of our Board (the “Compensation Committee”) reallocated previously forfeited performance awards for 15,200 shares

of common stock, having the same remaining terms and conditions as the forfeited awards, to other employees.

The weighted average fair

value of the performance awards reallocated in 2023 was $ 10.17 , calculated using the weighted average fair market value for each award,

using a Monte Carlo simulation.

During the three months ended December 31, 2024, and 2023, we recorded share-based compensation expense

of $ 7,000 and $ 30,000 , respectively, related to outstanding performance awards.

During the six months ended December 31, 2024, and 2023,

we recorded share-based compensation expense of $ 14,000 and $ 45,000 , respectively, related to outstanding performance awards.

31, 2024, there was approximately $ 41,000 of unrecognized compensation cost related to non-vested performance awards, which is expected

to be expensed over a weighted-average period of 1.50 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.

determined by the Compensation Committee that the vesting of performance awards for 40,000 shares of common stock had been achieved.

participant elected a net issuance to cover their individual withholding taxes and, therefore, we issued participants 25,134 shares of

common stock and paid $ 273,000 of participant-related payroll tax liabilities.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Committee granted non-qualified stock options for 310,000 shares of common stock 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.

years from the date of grant and the achievement of our common stock trading at certain pre-determined prices.

The weighted average fair

value of the stock option awards granted in fiscal 2021 was $ 16.72 , calculated using a Monte Carlo simulation.

During the three months

ended December 31, 2024 and 2023, we recorded compensation expense of $ 104,000 and $ 168,000 , respectively, related to these options.

the six months ended December 31, 2024 and 2023, we recorded compensation expense of $ 208,000 and $ 335,000 , respectively, related to these

As of December 31, 2024, none of these stock options had vested and there was approximately $ 1.4 million of unrecognized compensation

cost related to these stock options.

Restricted Shares

In November 2024, the Compensation

Committee awarded 18,000 restricted shares of common stock to our directors and certain employees under the 2016 Equity Incentive Plan.

The shares vest ratably over five years from the date of grant.

The fair value of the restricted shares on the date of grant was $ 857,000 ,

based upon the closing price of our common stock on the date of grant.

During the three months ended December 31, 2024, we recorded $ 19,000

of compensation expense related to these restricted shares.

As of December 31, 2024, there was approximately $ 838,000 of unrecognized

compensation cost related to these restricted shares.

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.

approved the establishment of an Employee Stock Purchase Plan (the “ESPP”) and reserved 704,715 shares of our common stock

for issuance pursuant to 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.

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.

An amendment to the ESPP to extend its term for an additional ten

years (through 2035) was approved by our Board in October 2023 and 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.

MAJOR CUSTOMERS & SUPPLIERS

ended December 31, 2024 and 2023, we did not record any share-based compensation expense relating to the ESPP, due to the fact that no

six-month offering period ended during either quarter.

During the six months ended December 31, 2024 and 2023, 940 and 2,021 shares of

our common stock were purchased under the ESPP, respectively, and allocated to employees based upon their contributions at prices of $ 16.22

and $ 15.82 , respectively, per share.

On a cumulative basis, since the inception of the ESPP, employees have purchased a total of 36,442

shares of our common stock.

During the six months ended December 31, 2024 and 2023, we recorded share-based compensation expense in the

amount of $ 3,000 and $ 6,000 , respectively, relating to the ESPP.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MAJOR CUSTOMERS AND SUPPLIERS

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):

either of the three-month or the six-month periods

ended December 31, 2024 and 2023, is as follows (in thousands, except percentages):

Schedule of sales by major customers

Months Ended September 30,

Total revenue

Months Ended December 31,

Percent of Total

Customer concentration:

Ended December 31,

Percent of Total

Customer concentration:

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):

to accounts receivable from those customers that comprised more than 10% of our gross accounts receivable at either December 31, 2024

or June 30, 2024, is as follows (in thousands, except percentages):

Schedule of accounts receivable

1 unchanged sentence

Customer concentration:

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.

NOTES PAYABLE AND FINANCING TRANSACTIONS

Minnesota Bank & Trust (“MBT”)

previously disclosed, we have several outstanding term loans as well as a revolving loan (the “Amended Revolving Loan”) with

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):

During the three months ended

December 31, 2024 and 2023, we had three and four suppliers, respectively, that accounted for 10 % or more of total inventory purchases,

and during the six months ended December 31, 2024 and 2023, we had three suppliers that accounted for more than 10 % of our total inventory

Amounts owed to the fiscal 2024 three most significant suppliers at December 31, 2024, totaled $ 1.8 million, $ 657,000 and $ 485,000 ,

respectively, and at June 30, 2024, totaled $ 1.4 million, $ 372,000 and $ 416,000 , respectively.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES PAYABLE

AND FINANCING TRANSACTIONS

Minnesota Bank & Trust

previously disclosed, we have several outstanding term loans as well as a revolving loan (the “Amended Revolving Loan”) under

our Amended and Restated Credit Agreement with MBT (as subsequently amended, the “Amended Credit Agreement”).

31, 2024 (the “Fourth Amendment Date”), we entered into Amendment No.

4 to the Amended Credit Agreement (the “Fourth

Amendment”) which, (i) provided for a new term loan, Term Loan C, in the amount of $ 5.0 million, (ii) used 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) terminated 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.

On December 23, 2024, we entered into Amendment No.

5 to the Amended Credit Agreement (the

“Fifth Amendment”), which extended the maturity date of the Amended and Revolving Loan from December 29, 2025, to December

The balance on

our outstanding loans (in thousands) is as follows (exclusive of unamortized loan fees):

Schedule of unamortized loan

4 unchanged sentences

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 .

and Term Note C bears interest at an annual rate equal to the greater of (a) 5 % , or (b) the SOFR one-month rate plus 2.5 % (the

“Adjusted Term SOFR Rate”).

The Amended Revolving Loan bears interest at an annual rate

equal to the greater of (a) 4%, or (b) t he Adjusted Term SOFR Rate.

Term Loan A and Term Loan 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 in the principal amount of $ 3.1 million is due (plus any accrued and unpaid interest), and the Amended Revolving

Loan matures on December 29, 2026 .

payment on Term Loan A, Term Loan B, Term Loan C, the Property Loan, or Amended Revolving Loan (collectively, the “Loans”)

1 unchanged sentence

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.

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.

and during the continuance of an event of default under any of the Loans, 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 between the Company and MBT.

The Property Loan is secured by the Franklin Property

pursuant to a Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing in favor of MBT and by an assignment

of Leases and Rents by PDEX Franklin in favor of MBT (collectively, the “Property Loan Security Agreements”).

Amended Credit Agreement, Amended Security Agreement, Property Loan Security Agreements,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 December

31, 2024, but there can be no assurance that we will remain in compliance for the duration of the term of the Loans.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

approved a new share repurchase program authorizing us to repurchase up to one 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.

Board approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor provided by Rule 10b5-1

under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or “Plan”).

During the three and six months

ended December 31, 2024, we repurchased 38,172 and 130,148 shares, respectively, at an aggregate cost, inclusive of fees under the Plan,

of $ 1.2 million and $ 3.5 million, respectively.

During both the three and six months ended December 31, 2023, we repurchased 6,285 shares

at an aggregate cost, inclusive of fees under the Plan, of $ 107,000 .

On a cumulative basis, since implementation of the share repurchase

program in 2013, we have repurchased a total of 1,511,497 shares under the share repurchase program at an aggregate cost, inclusive of

fees, of $ 24.2 million.

All repurchases under the 10b5-1 Plans were administered through an independent broker.

Our operating lease right-of-use

asset and long-term liability are presented separately on our condensed consolidated balance sheet.

asset and long-term liability are presented separately on our condensed consolidated balance sheets.

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,

lease liability as of December 31, 2024, in the amount of $ 476,000 , is presented within accrued liabilities on the condensed consolidated

balance sheets.

As of December 31, 2024,

our operating lease has a remaining lease term of two years and nine months and an imputed interest rate of 5.53 % .

Cash paid for amounts

included in the lease liability for the three and six months ended December 31, 2024 totaled $ 135,000 and $ 265,000 , respectively, and

for December 31, 2023 totaled $ 131,000 and $ 258,000 , respectively.

As of December 31, 2024,

the maturity of our lease liability is as follows (in thousands):

5 unchanged sentences

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.

We may be involved from

time to time in various legal proceedings arising either in the ordinary course of our business or incidental to our business.

be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse.

SUBSEQUENT EVENTS

We have evaluated subsequent events through the date

of this filing.

We have evaluated subsequent

events through the date of this report.

There were no subsequent events that require disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements