PRO DEX INC 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 0-14942 PRO-DEX, INC. (Exact name of registrant as specified in its charter) ——————— colorado 84-1261240 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2361 McGaw Avenue , Irvine , California 92614 (Address of principal executive offices and zip code) ( 949 ) 769-3200 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value PDEX NASDAQ Capital Market Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the registrant’s classes of common stock outstanding as of the latest practicable date: 3,261,043 shares of common stock, no par value, as of April 30, 2025. PRO-DEX, INC. AND SUBSIDIARY QUARTERLY REPORT ON FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2025 TABLE OF CONTENTS Page PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Unaudited) 1 Condensed Consolidated Balance Sheets as of March 31, 2025 and June 30, 2024 1 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2025 and 2024 2 Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended March 31, 2025 and 2024 3 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2025 and 2024 4 Notes to Condensed Consolidated Financial Statements 6 ITEM 2 . MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18 ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25 ITEM 4 . CONTROLS AND PROCEDURES 25 PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 26 ITEM 1A. RISK FACTORS 26 ITEM 2 . UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 26 ITEM 5. OTHER INFORMATION 26 ITEM 6. EXHIBITS 26 SIGNATURES 27 i PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts) March 31, 2025 June 30, 2024 ASSETS Current Assets: Cash and cash equivalents $ 4,473 $ 2,631 Investments 5,417 4,217 Accounts receivable, net of allowance for expected credit losses of $ 0 at March 31, 2025 and at June 30, 2024, respectively 15,861 13,887 Deferred costs 141 262 Inventory 23,432 15,269 Prepaid expenses and other current assets 619 345 Total current assets 49,943 36,611 Land and building, net 6,085 6,155 Equipment and leasehold improvements, net 5,344 5,024 Right of use asset, net 1,158 1,473 Intangibles, net 33 54 Deferred income taxes, net 1,555 1,555 Investments 111 1,563 Other assets 44 42 Total assets $ 64,273 $ 52,477 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 5,962 $ 4,513 Accrued expenses 3,542 3,359 Deferred revenue — 14 Income taxes payable 385 632 Note payable 8,428 4,374 Total current liabilities 18,317 12,892 Lease liability, net of current portion 813 1,182 Notes payable, net of current portion 9,861 7,536 Total non-current liabilities 10,674 8,718 Total liabilities 28,991 21,610 Shareholders’ equity: Common shares; no par value; 50,000,000 shares authorized; 3,261,043 and 3,363,412 shares issued and outstanding at March 31, 2025 and June 30, 2024, respectively 551 3,917 Retained earnings 34,731 26,950 Total shareholders’ equity 35,282 30,867 Total liabilities and shareholders’ equity $ 64,273 $ 52,477 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (In thousands, except per share amounts) Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Net sales $ 17,414 $ 14,293 $ 49,099 $ 38,819 Cost of sales 11,616 10,291 33,080 28,357 Gross profit 5,798 4,002 16,019 10,462 Operating expenses: Selling expenses 113 17 211 79 General and administrative expenses 1,098 1,012 3,732 3,208 Research and development costs 947 760 2,731 2,353 Total operating expenses 2,158 1,789 6,674 5,640 Operating income 3,640 2,213 9,345 4,822 Interest expense ( 246 ) ( 138 ) ( 602 ) ( 409 ) Unrealized gain (loss) on marketable equity investments 550 ( 1,192 ) 1,060 ( 3,785 ) Interest and other income 15 30 61 76 Gain on sale of investments 595 — 595 — Income before income taxes 4,554 913 10,459 704 Income tax expense 1,279 258 2,678 164 Net income $ 3,275 $ 655 $ 7,781 $ 540 Basic net income per share: Net income $ 1.00 $ 0.19 $ 2.36 $ 0.15 Diluted net income per share: Net income $ 0.98 $ 0.19 $ 2.31 $ 0.15 Weighted average common shares outstanding: Basic 3,261,043 3,451,423 3,296,744 3,531,249 Diluted 3,337,312 3,523,823 3,366,099 3,603,649 Common shares outstanding 3,261,043 3,451,423 3,261,043 3,451,423 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (In thousands) Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Common shares: Balance, beginning of period $ 366 $ 7,078 $ 3,917 $ 6,767 Share-based compensation expense 158 201 401 588 Share repurchases — ( 1,722 ) ( 3,504 ) ( 1,830 ) Shares withheld from common stock issued to pay employee payroll taxes — — ( 305 ) — ESPP shares issued 27 18 42 50 Balance, at end of period $ 551 $ 5,575 $ 551 $ 5,575 Retained earnings: Balance, beginning of period $ 31,456 $ 24,708 $ 26,950 $ 24,823 Net income 3,275 655 7,781 540 Balance, at end of period $ 34,731 $ 25,363 $ 34,731 $ 25,363 Balance, beginning of period 31,822 31,786 30,867 31,590 Net income (loss) 3,275 655 7,781 540 Total shareholders’ equity $ 35,282 $ 30,938 $ 35,282 $ 30,938 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended March 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,781 $ 540 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 925 854 Amortization of loan fees, net 16 ( 6 ) Share-based compensation 401 588 Unrealized (gain) loss on marketable equity investments ( 1,060 ) 3,785 Non-cash straight-line lease amortization ( 24 ) ( 12 ) Gain on sale of investments ( 595 ) — Credit loss expense — 1 Changes in operating assets and liabilities: Accounts receivable ( 1,974 ) ( 2,565 ) Deferred costs 121 163 Inventory ( 8,163 ) 1,925 Prepaid expenses and other assets ( 277 ) ( 776 ) Accounts payable and accrued expenses 1,601 710 Deferred revenue ( 14 ) 35 Income taxes payable ( 247 ) ( 63 ) Net cash provided by (used in) operating activities ( 1,509 ) 5,179 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments — ( 1,250 ) Purchases of equipment and improvements ( 1,153 ) ( 876 ) Proceeds from sale of investments 1,907 — Net cash provided by (used in) investing activities 754 ( 2,126 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchases of common stock ( 3,504 ) ( 1,830 ) Proceeds from exercise of options and ESPP contributions 42 50 Payment of employee payroll taxes on net issuance of common stock ( 305 ) — Proceeds from Minnesota Bank & Trust revolving loan, net of fees 12,890 2,000 Principal payments on notes payable and revolving loan ( 6,526 ) ( 2,990 ) Net cash provided by (used in) financing activities 2,597 ( 2,770 ) Net increase in cash and cash equivalents 1,842 283 Cash and cash equivalents, beginning of period 2,631 2,936 Cash and cash equivalents, end of period $ 4,473 $ 3,219 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Unaudited) (In thousands) Nine Months Ended March 31, 2025 2024 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 573 $ 409 Cash paid during the period for income taxes by jurisdiction: Federal income tax payments $ 2,090 $ 885 California income tax payments 1,100 74 Massachusetts income tax payments — 21 Total income tax payments $ 3,190 $ 980 Non-cash investing and financing activity: Cashless stock option exercise $ 117 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 5 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 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. In the opinion of management, all adjustments considered necessary for a fair 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. Recently Issued and Not Yet Adopted Accounting Pronouncements In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Disaggregation of Income Statement Expenses . The ASU’s purpose is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). This ASU is effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating these new expanded disclosure requirements, but this standard will not impact our results of operations or financial position. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax 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. 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 that 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 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. 6 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Net Sales: Over-time revenue recognition $ 186 $ 234 $ 274 $ 762 Point-in-time revenue recognition 17,228 14,059 48,825 38,057 Total net sales $ 17,414 $ 14,293 $ 49,099 $ 38,819 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 and nine months ended March 31, 2025, we recorded $ 0 and $ 14,000 respectively, of revenue that had been included in deferred revenue in the prior year. During the three and nine months ended March 31, 2024, we did not 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): Schedule of contract assets and liability As of and for the Three Months Ended March 31, As of and for the Nine Months Ended March 31, 2025 2024 2025 2024 Contract assets beginning balance $ 152 $ 412 $ 262 $ 494 Expenses incurred during the year 70 106 159 376 Amounts reclassified to cost of sales ( 81 ) ( 179 ) ( 274 ) ( 505 ) Amounts allocated to discounts for standalone selling price — ( 8 ) ( 6 ) ( 34 ) Contract assets ending balance $ 141 $ 331 $ 141 $ 331 As of and for the Three Months Ended March 31, As of and for the Nine Months Ended March 31, 2025 2024 2025 2024 Contract liabilities beginning balance $ — $ — $ 14 $ — Payments received from customers — 225 — 267 Amounts reclassified to revenue — ( 190 ) ( 14 ) ( 232 ) Contract liabilities ending balance $ — $ 35 $ — $ 35 7 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 4. FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income, and cost approaches is permissible. We consider the principal or most advantageous market in which it would transact and assumptions that market participants would use when pricing the asset or liability. Fair Value Hierarchy . The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels. We have categorized our cash equivalents and investments within the fair value hierarchy as follows: Level 1 – applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. These Level 1 assets include our money market accounts, which are classified as cash equivalents. We have categorized our cash equivalents as Level 1 assets as there are quoted prices in active markets for identical assets or liabilities. Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by observable market data. At March 31, 2025 and June 30, 2024, we have categorized our investments in marketable equity securities as Level 2 assets. Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. We held no Level 3 assets or liabilities at March 31, 2025 or June 30, 2024. Schedule of fair value, assets and liabilities Fair Value Measurement at March 31, 2025 Level 1 Level 2 Level 3 Level 4 Financial Assets: Cash equivalents $ 33 $ — $ — $ 33 Marketable equity securities – short-term — 5,417 — 5,417 Marketable equity securities – long-term — 111 — 111 Total $ 33 $ 5,528 $ — $ 5,561 8 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Fair Value Measurement at June 30, 2024 Level 1 Level 2 Level 3 Level 4 Financial Assets: Cash equivalents $ 45 $ — $ — $ 45 Marketable equity securities – short-term — 4,217 — 4,217 Marketable equity securities – long-term — 1,563 — 1,563 Total $ 45 $ 5,780 $ — $ 5,825 Investments in marketable equity securities at March 31, 2025 and June 30, 2024 had an aggregate cost basis of $ 2,651,000 and $ 3,964,000 , respectively. The long-term investments include equity investments of thinly traded securities that we 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. During the quarter ended March 31, 2025, we sold one of our marketable equity securities previously reported in long term investments for $1.9 million in cash and recorded a realized gain in the amount of $ 595,000 . At March 31, 2025, the investments included net unrealized gains of $ 2.9 million (gross unrealized gains of $ 3.4 million offset by gross unrealized losses of $ 493,000 ). 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 gains of $ 261,000 ). Of the total marketable equity securities at March 31, 2025 and June 30, 2024, $ 797,000 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. On October 6, 2023, in conjunction with the execution of a supply agreement with Monogram Technologies, Inc., formerly Monogram Orthopaedics Inc. (“Monogram”), we exercised a warrant to purchase common stock of Monogram (the “Monogram Warrant”) in full in cash totaling $1,250,000 and received 1,828,551 shares of Monogram common stock (NasdaqCM: MGRM). The fair value of the Monogram common stock is reflected in marketable equity securities – short term in the tables above. Our Chief Executive Officer, Richard Van Kirk (“Rick”), is also a Monogram board member. We invest surplus 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. Both Messrs. Cabillot and Swenson 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 Messrs. Cabillot or Swenson or both may own from time to time either individually or through the investment funds they manage, or other companies whose boards they sit on, such as Air T, Inc. 9 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 5. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS 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 investments March 31, 2025 June 30, 2024 Raw materials /purchased components $ 10,065 $ 6,703 Work in process 9,332 5,103 Sub-assemblies/finished components 2,856 2,342 Finished goods 1,179 1,121 Total inventory $ 23,432 $ 15,269 Land and building Land and building consist of the following (in thousands): Schedule of land and building March 31, 2025 June 30, 2024 Land $ 3,684 $ 3,684 Building 2,815 2,815 Total 6,499 6,499 Less: accumulated depreciation ( 414 ) ( 344 ) $ 6,085 $ 6,155 On November 6, 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 11). 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. For each of the three months ended March 31, 2025, and 2024 we recorded $ 23,000 of depreciation expense and for each of the nine months ended March 31, 2025 and 2024 we recorded $ 70,000 of depreciation expense. The building is being amortized on a straight-line basis over a period of 30 years Intangibles Intangibles consist of the following (in thousands): Schedule of intangibles March 31, 2025 June 30, 2024 Patent-related costs $ 208 $ 208 Less: accumulated amortization ( 175 ) ( 154 ) $ 33 $ 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. For each of the three months ended March 31, 2025 and 2024, we recorded $ 7,000 of amortization expense and for each of the nine months ended March 31, 2025 and 2024, we recorded $ 21,000 of amortization expense. Future amortization expense is expected to be $ 7,000 for the remainder of fiscal 2025 and $ 26,000 during fiscal 2026, at which time we expect these costs to be fully amortized. 10 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 6. 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 March 31, 2025 and June 30, 2024, the warranty reserve amounted to $ 326,000 and $ 277,000 , respectively. Warranty expenses are included in cost of sales in the accompanying condensed consolidated income statements. 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 and nine months ended March 31, 2025 and 2024, are as follows (in thousands): Schedule of accrual warranty costs As of and for the Three Months Ended March 31, 2025 2024 Beginning balance $ 312 $ 194 Accruals during the period 51 102 Changes in estimates of prior period warranty accruals 11 — Warranty amortization and utilization ( 48 ) ( 23 ) Ending balance $ 326 $ 273 As of and for the Nine Months Ended March 31, 2025 2024 Beginning balance $ 277 $ 200 Accruals during the period 189 155 Changes in estimates of prior period warranty accruals ( 14 ) 7 Warranty amortization and utilization ( 126 ) ( 89 ) Ending balance $ 326 $ 273 NOTE 7. NET INCOME PER SHARE We calculate basic net income per share by dividing net income by the weighted-average number of common shares outstanding during the reporting period. The weighted-average number of common shares outstanding used in the calculation of diluted income per share reflects the effects of potentially dilutive securities, in income generating periods, which consist entirely of outstanding stock options, restricted shares, and performance awards. 11 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents reconciliations of the numerators and denominators of the basic and diluted earnings per share computations for net income. 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 March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Basic: Net income $ 3,275 $ 655 $ 7,781 $ 540 Weighted average shares outstanding 3,261 3,451 3,297 3,531 Basic income per share $ 1.00 $ 0.19 $ 2.36 $ 0.15 Diluted: Net income $ 3,275 $ 655 $ 7,781 $ 540 Weighted average shares outstanding 3,261 3,451 3,297 3,531 Effect of dilutive securities 76 73 69 73 Weighted average shares used in calculation of diluted earnings per share 3,337 3,524 3,366 3,604 Diluted income per share $ 0.98 $ 0.19 $ 2.31 $ 0.15 NOTE 8. 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 basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Significant management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such determination is based primarily on our historical taxable income, with some consideration given to our estimates of future taxable income by jurisdictions in which we operate and the period over which our deferred tax assets would be recoverable. We recognize accrued interest and penalties related to unrecognized tax benefits when applicable. As of March 31, 2025 and 2024, we recognized accrued interest of $ 60,000 and $ 69,000 , respectively, related to unrecognized tax benefits. The effective tax rate for each of the three months ended March 31, 2025 and 2024 was 28 % . The effective tax rate for the nine months ended March 31, 2025 and 2024 was 26 % and 23 % , respectively. The increase in the fiscal 2025 effective tax rate is due primarily to the release in fiscal 2024 of a $ 60,000 valuation allowance related to previously recognized unrealized losses on investments. We have not had a similar release of a valuation allowance during fiscal 2025. We are subject to U.S. federal income tax, as well as income tax of California and Colorado. We were also subject to income tax of Massachusetts through fiscal year ended June 30, 2024. Our U.S. federal income taxes are currently open to audit under the statute of limitations by the Internal Revenue Service for the fiscal years ended June 30, 2021 and after. However, because of our prior net operating losses and research credit carryovers, our tax years from June 30, 2013 and after are open to audit. We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months. NOTE 9. SHARE-BASED COMPENSATION Our 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our 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 March 31, 2025, 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. 12 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Performance Awards In October 2023, the Compensation Committee reallocated previously forfeited performance awards for 15,200 shares of common stock, having the same remaining terms and conditions, 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 March 31, 2025 and 2024, we recorded share-based compensation expense of $ 7,000 and $ 31,000 , respectively, related to outstanding performance awards. During the nine months ended March 31, 2025 and 2024, we recorded share-based compensation expense of $ 20,000 and $ 76,000 , respectively, related to outstanding performance awards. On March 31, 2025, there was approximately $ 34,000 of unrecognized compensation cost related to non-vested performance awards expected to be expensed over the weighted-average period of 1.27 years. On July 1, 2024, it was determined by the Compensation Committee 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 participants 25,134 shares of common stock 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 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 options granted was $ 16.72 , calculated using a Monte Carlo simulation. In December 2021, the Compensation Committee reallocated 5,000 previously forfeited non-qualified stock options, having the same remaining terms and conditions, to another employee at a weighted average fair value of $6.69 calculated using a Monte Carlo simulation. During the three months ended March 31, 2025 and 2024, we recorded compensation expense of $ 104,000 and $ 168,000 , respectively, related to these stock options. During the nine months ended March 31, 2025 and 2024, we recorded compensation expense of $ 312,000 and $ 503,000 , respectively, related to these stock options. As of March 31, 2025, 26,250 of these stock options have vested and there was approximately $ 1.2 million of unrecognized compensation cost related to the non-vested non-qualified 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 and nine months ended March 31, 2025, we recorded $ 43,000 and $ 62,000 , respectively, of compensation expense related to these restricted shares. As of March 31, 2025, there was approximately $ 795,000 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”), which was approved by our shareholders at our 2014 Annual Meeting. 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 that 704,715 shares, be reserved for issuance pursuant to the ESPP. 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 March 31, 2025 and 2024, we recorded ESPP share-based compensation expense in the amount of $ 5,000 and $ 3,000 , respectively. During the three months ended March 31, 2025 and 2024, 653 and 983 shares were purchased, respectively, and allocated to employees based upon their contributions at prices of $ 41.11 and $ 18.32 , respectively, per share. During the nine months ended March 31, 2025 and 2024, we recorded ESPP share-based compensation expense in the amount of $ 7,000 and $ 9,000 , respectively. On a cumulative basis, since the inception of the ESPP, employees have purchased a total of 37,095 shares of our common stock under the ESPP. 13 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 10. MAJOR CUSTOMERS AND SUPPLIERS Information with respect to customers that accounted for sales in excess of 10% of our total sales in either of the three-month and the nine-month periods ended March 31, 2025 and 2024, is as follows (in thousands, except percentages): Schedule of sales by major customers Three Months Ended March 31, 2025 2024 Amount Percent of Total Amount Percent of Total Net sales $ 17,414 100 % $ 14,293 100 % Customer concentration: Customer 1 $ 13,397 77 % $ 10,679 75 % Customer 2 1,917 11 % 1,385 10 % Total $ 15,314 88 % $ 12,064 85 % Nine Months Ended March 31, 2025 2024 Amount Percent of Total Amount Percent of Total Net sales $ 49,099 100 % $ 38,819 100 % Customer concentration: Customer 1 $ 38,288 78 % $ 27,491 71 % Customer 2 5,538 11 % 4,087 11 % Total $ 43,826 89 % $ 31,578 82 % Information with respect to accounts receivable from those customers who comprised more than 10% of our gross accounts receivable at either March 31, 2025 or June 30, 2024, is as follows (in thousands, except percentages): Schedule of accounts receivable March 31, 2025 June 30, 2024 Total gross accounts receivable $ 15,861 100 % $ 13,887 100 % Customer concentration: Customer 1 $ 11,872 75 % $ 10,488 76 % Customer 2 2,312 15 % 2,423 17 % Total $ 14,184 90 % $ 12,911 93 % 14 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) During the three and nine months ended March 31, 2025 and 2024, we had three suppliers accounting for 10% or more of total inventory purchases. Amounts owed to these three suppliers at March 31, 2025 or June 30, 2024, is as follows (in thousands, except percentages). Schedule of suppliers accounting March 31, 2025 June 30, 2024 Total accounts payable $ 5,962 100 % $ 4,513 100 % Supplier concentration: Supplier 1 $ 1,995 34 % $ 1,405 31 % Supplier 2 652 11 % 416 9 % Supplier 3 430 7 % 371 8 % Total $ 3,077 52 % $ 2,192 48 % NOTE 11. NOTES PAYABLE AND FINANCING TRANSACTIONS Minnesota Bank & Trust As 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”). On July 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 Revolving Loan from December 29, 2025, to December 29, 2026. On April 8, 2025, we entered into Amendment No. 6 to the Amended Credit Agreement (the “Sixth Amendment”), which among other things, increased the revolving line of credit under the Amended Revolving Loan from $7,000,000 to $ 11,000,000 . Loan origination fees in the amount of $ 8,000 were paid to MBT in connection with the Sixth Amendment. The balance on our outstanding loans at March 31, 2025 and June 30, 2024 (in thousands) is as follows (exclusive of unamortized loan fees): Schedule of unamortized loan March 31, 2025 June 30, 2024 Notes Payable: Term Loan A $ 3,058 $ 3,834 Term Loan B 455 571 Term Loan C 4,417 — Property Loan 4,399 4,551 Amended Revolving Loan 6,000 3,000 Total notes payable $ 18,329 $ 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 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) the 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 . 15 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 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”). The Amended Credit Agreement, Security Agreement, Property Loan Security Agreements, Term Loan A, Term Loan B, Term Loan C, Property Loan, and Amended Revolving Loan 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 March 31, 2025, but there can be no assurance that we will remain in compliance for the duration of the term of the Loans. NOTE 12. COMMON STOCK Share Repurchase Program In December 2019, our Board 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 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 months ended March 31, 2025, we did no t repurchase any shares. During the nine months ended March 31, 2025, we repurchased 130,148 shares at an aggregate cost, inclusive of fees under the Plan of $ 3.5 million. During the three and nine months ended March 31, 2024, we repurchased 90,605 and 96,890 shares, respectively, at an aggregate cost, inclusive of fees under the Plan, of $ 1,723,000 and $ 1,830,000 , respectively. 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 of $ 24.2 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. NOTE 13. 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 March 31, 2025, in the amount of $ 487,000 , is presented within accrued expenses on the condensed consolidated balance sheet. As of March 31, 2025, the maturity of our lease liability is as follows (in thousands): Schedule of maturities of lease liabilities Operating Lease Fiscal Year: 2025 $ 135 2026 551 2027 567 2028 143 Total lease payments 1,396 Less imputed interest: ( 96 ) Total $ 1,300 16 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) As of March 31, 2025, the operating lease for our Irvine, California headquarters has a remaining lease term of two years and six months and an imputed interest rate of 5.53 % . Cash paid for our operating lease for the three and nine months ended March 31, 2025, was $ 149,000 and $ 442,000 , respectively. Cash paid for our operating lease for the three and nine months ended March 31, 2024, was $ 143,000 and $ 425,000 , respectively. NOTE 14. COMMITMENTS AND CONTINGENCIES Legal Matters 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. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse. NOTE 15. SUBSEQUENT EVENTS We have evaluated subsequent events through the date of this filing. Other than the amendment to the Amended Credit Agreement discussed further in Note 11, there were no subsequent events that require disclosure. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this report. COMPANY OVERVIEW The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the results of operations and financial condition of Pro-Dex, Inc. (“Company,” “Pro-Dex,” “we,” “our,” or “us”) for the three-month and nine-month periods ended March 31, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this report. This report contains certain forward-looking statements and information. The cautionary statements included herein should be read as being applicable to all related forward-looking statements wherever they may appear. Our actual future results could differ materially from those discussed herein. Except for the historical information contained herein, the matters discussed in this report, including, but not limited to, discussions of our product development plans, business strategies, strategic opportunities, and market factors influencing our results, are forward-looking statements that involve certain risks and uncertainties. Actual results may differ from those anticipated by us as a result of various factors, both foreseen and unforeseen, including, but not limited to, our ability to continue to develop new products and increase sales in markets characterized by rapid technological evolution, our ability to optimize our operations at our Franklin facility, consolidation within our target marketplace and among our competitors, the impact of tariffs on the cost of our raw materials and purchased components, employee turnover, competition from larger, better capitalized competitors, and our ability to realize returns on opportunities. Many other economic, competitive, governmental, and technological factors could impact our ability to achieve our goals. You are urged to review the risks, uncertainties, and other cautionary language described in this report, as well as in our other public disclosures and reports filed with the Securities and Exchange Commission (“SEC”) from time to time, including, but not limited to, the risks, uncertainties, and other cautionary language discussed in our Annual Report on Form 10-K for our fiscal year ended June 30, 2024. 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 (“CMF”) 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. Our principal headquarters are located at 2361 McGaw Avenue, Irvine, California 92614 and our phone number is (949) 769-3200. Our Internet address is www.pro-dex.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, and other SEC filings are available free of charge through our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. In addition, our Code of Ethics and other corporate governance documents may be found on our website at the Internet address set forth above. Our filings with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov and company specific information at www.sec.gov/edgar/searchedgar/companysearch.html. Basis of Presentation The condensed consolidated results of operations presented in this report are not audited and those results are not necessarily indicative of the results to be expected for the entirety of the fiscal year ending June 30, 2025. Our fiscal year ends on June 30 and our fiscal quarters end on September 30, December 31, and March 31. Unless otherwise stated, all dates refer to our fiscal year and those fiscal quarters. 18 Critical Accounting Estimates and Judgments Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements. Management believes that there have been no significant changes during the three and nine months ended March 31, 2025 to the items that we disclosed as our critical accounting policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Business Strategy and Future Plans Our business today is almost entirely driven by sales of our medical devices. Many of our significant customers place purchase orders for specific products that were developed under various development and/or supply agreements. Our customers may request that we design and manufacture a custom surgical device or they may hire us as a contract manufacturer to manufacture a product of their own design. In either case, we have extensive experience with autoclavable, battery-powered, and electric, multi-function surgical drivers and shavers. We continue to focus a significant percentage of our time and resources on providing outstanding products and service to our valued principal customers. During the first quarter of fiscal 2021, our largest customer executed an amendment to our existing supply agreement such that we shall continue to supply their surgical handpieces to them through calendar 2025 and we are currently in discussions with them to renew the agreement. Simultaneously, we are working to build top-line sales through active proposals of new medical device products with new and existing customers. Our patented adaptive torque-limiting software has been very well received in the CMF and thoracic markets. In November 2020, we purchased an approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”). This building is located approximately four miles from our Irvine, California headquarters and was acquired to provide us additional capacity for our expected continued future growth, including anticipated expanded capacity for the manufacture of batteries and new products. We began operations in the new facility during the fourth quarter of fiscal 2023 and believe that the additional capacity will allow for our continued expected growth. Our current objectives are focused primarily on maintaining our relationships with our current medical device customers, investing in research and development activities to design unique medical devices as well as Pro-Dex branded drivers to leverage our torque-limiting software, expanding our manufacturing capacity through the continuation of operations at the Franklin Property, and promoting active product development proposals to new and existing customers for both orthopedic shavers and screw drivers for a multitude of surgical applications, while monitoring closely the progress of all these individual endeavors. While we expect revenue growth in the future, it may not be a consistent trajectory but rather periods of incremental growth that current expenditures are helping to create. However, there can be no assurance that we will be successful in any of these objectives. 19 Description of Business Operations Revenue The majority of our revenue is derived from designing, developing, and manufacturing surgical devices for the medical device industry. The proportion of total sales by type is as follows (in thousands, except percentages): Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 % of Revenue % of Revenue % of Revenue % of Revenue Net Sales: Medical device products $ 11,913 68 % $ 9,782 68 % $ 34,057 69 % $ 26,536 68 % Industrial and scientific 265 2 % 211 1 % 576 1 % 591 2 % Dental and component 45 — 62 1 % 118 — 146 — NRE & Proto-type 186 1 % 234 2 % 274 1 % 762 2 % Repairs 5,099 29 % 4,433 31 % 15,096 31 % 11,749 30 % Discounts and other (94 ) — (429 ) (3 %) (1,022 ) (2 %) (965 ) (2 %) $ 17,414 100 % $ 14,293 100 % $ 49,099 100 % $ 38,819 100 % Certain of our medical device products utilize proprietary designs developed by us under exclusive development and supply agreements. All of our medical device products utilize proprietary manufacturing methods and know-how, and are manufactured in our Irvine, California facility, and are assembled in our Tustin, California facility, along with our industrial products. Details of our medical device sales by type is as follows (in thousands, except percentages): Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 % of Total % of Total % of Total % of Total Medical device sales: Orthopedic $ 8,607 72 % $ 6,765 69 % $ 24,631 72 % $ 17,136 65 % CMF 2,354 20 % 2,247 23 % 6,395 19 % 6,641 25 % Thoracic 952 8 % 770 8 % 3,031 9 % 2,759 10 % Total $ 11,913 100 % $ 9,782 100 % $ 34,057 100 % $ 26,536 100 % Sales of our medical device products increased $2.1 million, or 22%, and $7.5 million, or 28%, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year. Our medical device revenue to our largest customer, included in orthopedic sales above, increased $1.8 million and $7.5 million, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year due primarily to the launch of that customer’s next generation handpiece. As can be common with new product launches in the industry, the customer’s internal design of the next generation handpiece continues to evolve, and the customer has recently informed us that it is holding off on next generation handpiece shipments in favor of continued shipments and enhanced repair of the legacy handpieces as the customer continues to refine the next generation handpiece’s design. Although we cannot predict the timing of the customer’s further transition to the next generation handpiece at this time, we fully anticipate a resumption of shipments of the next generation handpiece once the design enhancements are finalized, coupled with larger orders of the legacy handpiece during the interim. Additionally, recurring revenue from distributors of thoracic drivers increased $182,000 and $272,000, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year. Our CMF sales revenue increased $107,000 and decreased $246,000, for the three and nine months ended March 31, 2025, respectively, compared to the corresponding periods of the prior fiscal year. While we do not have much visibility into our customers’ distribution networks, this level of change in thoracic and CMF sales (whether an increase or decrease) is not uncommon and fluctuations occur based upon required inventory levels. Sales of our compact pneumatic air motors, reported as industrial and scientific sales above, increased $54,000, or 26%, and decreased $15,000, or 3%, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year. These are legacy products with no substantive marketing efforts . Our NRE and proto-type revenue decreased $48,000, or 21%, and $488,000, or 64%, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year, due to a decrease in billable contracts for various NRE projects undertaken for our customers. Sales of our dental products and components decreased $17,000, or 27%, and $28,000, or 19%, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year. We expect future declines in this area as we are no longer manufacturing dental products, but rather are simply selling remaining component inventory. Repair revenue increased $666,000 or 15%, and $3.3 million, or 29%, for the three and nine months ended March 31, 2025, respectively, compared to the corresponding periods of the prior fiscal year primarily due to an increased number of repairs of the orthopedic handpiece we sell to our largest customer. This increase relates to the continuation of the previously disclosed enhanced repair program. 20 At March 31, 2025, we had a backlog of approximately $49.5 million, of which $12.8 million is scheduled to be delivered in the fourth quarter of fiscal 2025 and the balance is scheduled to be delivered next fiscal year. Our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts. We may experience variability in our new order bookings due to various reasons, including, but not limited to, the timing of major new product launches and customer planned inventory builds. However, we do not typically experience seasonal fluctuations in our shipments and revenues. Cost of Sales and Gross Margin (in thousands except percentages) Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 % of Total % of Total % of Total % of Total Cost of sales: Product cost $ 10,997 95 % $ 9,815 95 % $ 30,799 93 % $ 28,156 99 % Under(over)-absorption of manufacturing costs 424 3 % 170 2 % 1,983 6 % (146 ) — Inventory and warranty charges 195 2 % 306 3 % 298 1 % 347 1 % Total cost of sales $ 11,616 100 % $ 10,291 100 % $ 33,080 100 % $ 28,357 100 % Three Months Ended March 31, Nine Months Ended March 31, Year over Year ppt Change 2025 2024 2025 2024 Three Months Nine Months Gross margin 33 % 28 % 33 % 27 % 5 6 Cost of sales for the three months ended March 31, 2025, increased $1.3 million, or 13%, compared to the corresponding period of the prior fiscal year. The increase in total costs of sales is consistent with the 22% increase in revenue for the same period. Under-absorption of manufacturing costs increased by $254,000 for the three months ended March 31, 2025, compared to the corresponding period of the prior fiscal year. During the third quarter of fiscal 2025 we increased our assembly department labor and overhead rates to reduce the under absorption of our indirect costs. Costs relating to inventory and warranty charges decreased $111,000 for the three months ended March 31, 2025, compared to the corresponding period of the prior fiscal year, due to a slight decrease in both inventory reserves and warranty accruals. Gross profit increased by approximately $1.8 million, or 45%, for the three months ended March 31, 2025, compared to the corresponding period of the prior fiscal year, primarily as a result of the increase in medical device and repair revenue for the same periods as described above. Gross margin as a percentage of sales increased by approximately 5 percentage points compared to the corresponding period of the prior fiscal year due primarily to favorable product mix. Cost of sales for the nine months ended March 31, 2025, increased by 4.7 million, or 17%, compared to the corresponding period of the prior fiscal year. The increase in total costs of sales is consistent with the 27% increase in revenue for the same period. Under-absorption of manufacturing costs increased by $2.1 million for the nine months ended March 31, 2025, compared to the corresponding period of the prior fiscal year and as discussed above we have increased our assembly labor and overhead rates to better absorb our indirect manufacturing costs. Inventory and warranty charges decreased slightly by approximately $49,000, or 14%, for the nine months ended March 31, 2025, compared to the corresponding period of the prior fiscal year. 21 Gross profit increased by $5.6 million, or 53%, for the nine months ended March 31, 2025, compared to the corresponding period of the prior fiscal year, primarily as a result of the increase in medical device and repair revenue for the same periods as described above. Gross margin as a percentage of sales increased by 6 percentage points compared to the corresponding period of the prior fiscal year primarily related to a more favorable product mix. Operating Expenses Operating Costs and Expenses (in thousands except percentages) Three Months Ended March 31, Nine Months Ended March 31, Year over Year % Change 2025 2024 2025 2024 Three Months Nine Months % of Net Sales % of Net Sales % of Net Sales % of Net Sales Operating expenses: Selling expenses $ 113 1 % $ 17 — $ 211 — $ 79 — 565 % 167 % General and administrative expenses 1,098 6 % 1,012 7 % 3,732 8 % 3,208 9 % 9 % 16 % Research and development costs 947 5 % 760 5 % 2,731 6 % 2,353 6 % 25 % 16 % $ 2,158 12 % $ 1,789 12 % $ 6,674 14 % $ 5,640 15 % 21 % 18 % Selling expenses consist of salaries and other personnel-related expenses for our business development department, as well as advertising and marketing expenses, and travel and related costs incurred in generating and maintaining our customer relationships. Selling expenses for the three and nine months ended March 31, 2025, increased $96,000, or 565%, and $132,000, or 167%, respectively, compared to the corresponding periods of fiscal 2024. The increase relates primarily to recruiting fees and personnel costs related to our new Director of Business Development who we hired in December, 2024. General and administrative expenses (“G&A”) consist of salaries and other personnel-related expenses of our accounting, finance, facilities, business systems, and human resource personnel, as well as costs for outsourced information technology services, professional fees, directors’ fees, and other costs and expenses attributable to being a public company. G&A increased $86,000 and $524,000, respectively, during the three and nine months ended March 31, 2025, when compared to the corresponding periods of the prior fiscal year. The increases relate primarily to increased bonus accruals, personnel costs, and legal expenses, offset by decreased audit fees and stock compensation expense. Research and development costs generally consist of salaries, employer-paid benefits, and other personnel- related costs of our engineering and support personnel, as well as allocated facility and information technology costs, professional and consulting fees, patent-related fees, lab costs, materials, and travel and related costs incurred in the development and support of our products. Research and development costs for the three and nine months ended March 31, 2025, increased $187,000, or 25%, and $378,000, or 16%, compared to the corresponding periods of the prior fiscal year. This relates to an increase in legal fees related to intellectual property matters as well as an increase in spending related to in-house battery production and sustaining engineering efforts related to our existing products. The majority of our research and development costs relate to sustaining activities related to products we currently manufacture and sell, but we also have created a product roadmap to develop future products. Many of our product development efforts are undertaken only upon completion of an analysis of the size of the market, our ability to differentiate our product from our competitors’, as well as an analysis of our specific sales prospects with new and/or existing customers. The research and development costs represent between 41% and 44% of total operating expenses for all periods presented and are expected to increase in the future as we continue to invest in product development efforts. 22 Interest & Other Income Interest income for the three and nine months ended March 31, 2025 and 2024, includes interest and dividends from our money market accounts and investment portfolio. Interest Expense Interest expense consists primarily of interest expense related to the notes payable described more fully in Note 11 to the condensed consolidated financial statements contained elsewhere in this report. Unrealized Gain (Loss) on Marketable Equity Investments The unrealized gain (loss) on marketable equity investments relates to our investment portfolio more fully described in Note 4 to the condensed consolidated financial statements contained elsewhere in this report. All of these investments are recorded at estimated fair value and as of March 31, 2025, all of these investments relate to common stock of publicly traded companies whose stock price is subject to significant volatility. Gain on Sale of Investments During the third quarter ended March 31, 2025, we sold some of the stocks in our portfolio of equity investments receiving proceeds of $1.9 million and recording a gain on the sale in the amount of $595,000. Income Tax Expense The effective tax rate for each of the three months ended March 31, 2025 and 2024 was 28%. These tax rates are consistent with our combined expected federal and applicable state corporate income tax rates. The effective tax rate for the nine months ended March 31, 2025 and 2024 was 26% and 23%, respectively, and is less than our combined expected federal and applicable state corporate income tax rates due to a tax benefit recognized as a result of common stock awarded to employees under previously granted performance awards in the first quarter of fiscal 2025 as described more fully in Note 9 to the condensed consolidated financial statements contained elsewhere in this report, and to the release of a valuation allowance in the prior fiscal year related to previously recognized unrealized losses on investments. Liquidity and Capital Resources Cash and cash equivalents at March 31, 2025, increased $1.9 million to $4.5 million as compared to $2.6 million at June 30, 2024. The following table includes a summary of our condensed statements of cash flows contained elsewhere in this report. As of and For the Nine Months Ended March 31, 2025 2024 (in thousands) Cash provided by (used in): Operating activities $ (1,509 ) $ 5,179 Investing activities $ 754 $ (2,126 ) Financing activities $ 2,597 $ (2,770 ) Cash and Working Capital: Cash and cash equivalents $ 4,473 $ 3,219 Working capital $ 31,626 $ 25,538 23 Operating Activities Net cash used in operating activities was $1.5 million for the nine months ended March 31, 2025, primarily due to net income of $7.8 million including realized gains on the sale of investments in the amount of $595,000 offset by an $8.2 million increase in inventory and a $2.0 million increase in receivables. Offsetting these uses of cash, accounts payable and accrued expenses increased by $1.6 million. The increases in these balance sheet accounts reflect our continued and expected future revenue growth. Net cash provided by operating activities was $5.2 million for the nine months ended March 31, 2024, primarily due to net income of $540,000, non-cash unrealized losses on marketable equity investments of $3.8 million, depreciation and amortization of $854,000, share-based compensation of $588,000 as well as a decrease in inventory of $1.9 million. Offsetting these sources of cash, our accounts receivable increased by $2.6 million consistent with our increase in revenue. Investing Activities Net cash provided by investing activities for the nine months ended March 31, 2025, was $754,000 and relates to the sale of some of our marketable securities for $1.9 million offset by purchases of capital equipment and improvements of $1.2 million. Net cash used in investing activities for the nine months ended March 31, 2024, was $2.1 million and related to the exercise of the Monogram Warrant for cash in the amount of $1,250,000 (See Note 4 to the condensed consolidated financial statements contained elsewhere in this report) as well as equipment and improvements purchases in the amount of $876,000. Financing Activities Net cash provided by financing activities for the nine months ended March 31, 2025, totaled $2.6 million and related primarily to the net increase in borrowings of $6.4 million from Minnesota Bank & Trust (“MBT”) more fully described in Note 11 to the condensed consolidated financial statements contained elsewhere in this report offset by $3.5 million attributable to the repurchase of 130,148 shares of our common stock pursuant to our share repurchase program. Net cash used in financing activities for the nine months ended March 31, 2024, totaled $2.8 million and related primarily to the $1.8 million repurchase of 96,890 shares of our common stock pursuant to our share repurchase program as well as $990,000 of net principal payments on our loans from MBT more fully described in Note 11 to the condensed consolidated financial statements contained elsewhere in this report. Financing Facilities & Liquidity Requirements for the next twelve months As of March 31, 2025, our working capital was $31.6 million. We currently believe that our existing cash and cash equivalent balances together with our accounts receivable balances will provide us sufficient funds to satisfy our cash requirements as our business is currently conducted for at least the next 12 months. In addition to our cash and cash equivalent balances, we expect to derive a portion of our liquidity from our cash flows from operations. We may also liquidate some or all of our investment portfolio or borrow further against our $11.0 million Amended Revolving Loan with MBT (see Note 11 to condensed consolidated financial statements contained elsewhere in this report), which we amended in April 2025 in order to provide us additional borrowing capacity. We are focused on preserving our cash balances by monitoring expenses, identifying cost savings, and investing only in those development programs and products that we believe will most likely contribute to our profitability. As we execute our current strategy, however, we may require debt and/or equity capital to fund our working capital needs and requirements for capital equipment to support our manufacturing and inspection processes. In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials to satisfy our backlog, which can be subject to extensive variability. 24 Investment Strategy We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Richard Van Kirk, and two non-management directors, Raymond Cabillot and Nicholas Swenson, who chairs the committee. Both Messrs. 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. The Investment Committee approved each of the investments comprising the $5.5 million of marketable public equity securities held at March 31, 2025. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer and principal accounting officer) have concluded based on their evaluation as of March 31, 2025, that our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are not effective due to a material weakness. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In accordance with SEC rules, an evaluation was performed under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer of the effectiveness, as of March 31, 2025, of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). “Internal control over financial reporting” includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis. A material weakness was discovered relating to controls related to the existence of inventory during fiscal 2024 and we are continuing to remediate this weakness. While we believe that our inventory exists and is accurately recorded and properly valued at March 31, 2025, we are continuing to expand our internal controls over the existence of inventory and hired a warehouse manager in the second quarter of fiscal 2025 to ensure that we successfully implement effective standard operating procedures, provide adequate training to stockroom personnel, and continue our cycle count procedures. Internal Control Over Financial Reporting During the three months ended March 31, 2025, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Inherent Limitations on the Effectiveness of Controls In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 25 PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 14 to condensed consolidated financial statements contained elsewhere in this report. ITEM 1A. RISK FACTORS Our business, future financial condition, and results of operations are subject to a number of factors, risks and uncertainties, which are disclosed in Item 1A, entitled “Risk Factors” in Part I of our Annual Report on Form 10-K for our fiscal year ended June 30, 2024, as well as any amendments thereto or additions and changes thereto contained in this quarterly report on Form 10-Q for the quarter ended March 31, 2025. Additional information regarding some of those risks and uncertainties is contained in the notes to the condensed consolidated financial statements included elsewhere in this report and in Part I, Item 2, entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The risks and uncertainties disclosed in our Form 10-K, our quarterly reports on Form 10-Q and other reports filed with the SEC are not necessarily all of the risks and uncertainties that may affect our business, financial condition and results of operations in the future. There have been no material changes to the risk factors as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, except as provided in any amendments thereto and those set forth below. Recently proposed tariffs could have a negative effect on our business, results of operations, financial condition, and liquidity. Starting in the first quarter of 2025, the United States government announced additional tariffs on goods imported into the U.S. from numerous countries and multiple nations countered with reciprocal tariffs and other actions in response. The U.S. government stated that it is willing to negotiate with other countries regarding the tariffs. While we manufacture our products locally, we source raw materials and purchased components through an extensive supply chain, and the tariffs may negatively impact demand and result in an increase in some product costs. We are currently analyzing the impacts of tariffs and actions that can be taken to moderate and/or minimize their effects. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 5. OTHER INFORMATION Insider Trading Arrangements and Policies During the quarter ended March 31, 2025, one of our directors, Nicholas Swenson, terminated a “Rule 10b5-1 trading arrangement” as such term is defined in Item 408(a) of Regulations S-K. No additional directors or officers informed us of the adoption , modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K. ITEM 6. EXHIBITS Exhibit Description 10.1 Amendment No. 6 to Amended and restated Credit Agreement dated April 8, 2025, by and between Pro-Dex, Inc. and UMB Bank, N.A. D/B/A Minnesota Bank and Trust, a division of UMB Bank N.A., successor-in-interest to Minnesota Bank and Trust, a division of HTLF Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 11, 2025). 10.2 Second Amended and restated revolving Credit Note dated April 8, 2025, made by Pro-Dex, Inc. in favor of UMB Bank, N.A. D/B/A Minnesota Bank and Trust, a division of UMB Bank N.A., successor-in-interest to Minnesota Bank and Trust, a division of HTLF Bank (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 11, 2025) 31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PRO-DEX, INC. Date: May 1, 2025 /s/ Richard L. Van Kirk Richard L. Van Kirk Chief Executive Officer (principal executive officer) Date: May 1, 2025 /s/ Alisha K. Charlton Alisha K. Charlton Chief Financial Officer (principal financial officer and principal accounting officer) 27 EXHIBIT INDEX Exhibit Description 10.1 Amendment No. 6 to Amended and restated Credit Agreement dated April 8, 2025, by and between Pro-Dex, Inc. and UMB Bank, N.A. D/B/A Minnesota Bank and Trust, a division of UMB Bank N.A., successor-in-interest to Minnesota Bank and Trust, a division of HTLF Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 11, 2025). 10.2 Second amended and restated revolving Credit Note dated April 8, 2025, made by Pro-Dex, Inc. in favor of UMB Bank, N.A. D/B/A Minnesota Bank and Trust, a division of UMB Bank N.A., successor-in-interest to Minnesota Bank and Trust, a division of HTLF Bank (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 11, 2025) 31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 28