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Item 1. Financial Statements

2025-05-01 compared with 2025-01-30 · 356 added, 313 removed, 259 unchanged (72% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands except per share

(In thousands, except share amounts)

Current Assets:

Cash and cash equivalents

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

Accounts receivable, net of allowance for expected credit losses of $ 0 at March 31, 2025 and at June 30, 2024, respectively

Deferred costs

9 unchanged sentences

Accounts payable

Accrued liabilities

Income taxes payable

Accrued expenses

Deferred revenue

Notes payable

Income taxes payable

Total current liabilities

4 unchanged sentences

Shareholders’ equity:

Common stock;

Common shares;

no par value;

50,000,000 shares authorized;

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

3,261,043 and 3,363,412 shares issued and outstanding at March 31, 2025 and June 30, 2024, respectively

Retained earnings

5 unchanged sentences

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

Cost of sales

8 unchanged sentences

Interest and other income

Income (loss) before income taxes

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

Gain on sale of investments

Income before income taxes

Income tax expense

Basic net income per share:

Diluted net income per share:

Weighted average common shares outstanding:

6 unchanged sentences

(In thousands)

Common stock:

Common shares:

Balance, beginning of period

1 unchanged sentence

Share repurchases

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

Shares withheld from common stock issued to pay employee payroll taxes

ESPP shares issued

Balance, end of period

Balance, at end of period

Retained earnings:

Balance, beginning of period

Net income (loss)

Balance, end of period

Balance, at end of period

Balance, beginning of period

7 unchanged sentences

(In thousands)

Nine Months Ended

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

Amortization of loan fees, net

Share-based compensation

Unrealized (gain) loss on marketable equity investments

Non-cash lease recovery

Amortization of loan fees, net

Non-cash straight-line lease amortization

Gain on sale of investments

Credit loss expense

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Purchases of equipment and improvements

Net cash used in investing activities

Proceeds from sale of investments

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchases of common stock

Proceeds from ESPP contributions

Proceeds from exercise of options and ESPP contributions

Payment of employee payroll taxes on net issuance of common stock

Proceeds from Minnesota Bank & Trust revolving loan

Proceeds from Minnesota Bank & Trust revolving loan, net of fees

Principal payments on notes payable and revolving loan

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

6 unchanged sentences

(In thousands)

Six Months Ended

Supplemental disclosures of cash flow information:

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these condensed consolidated financial statements.

PRO-DEX, INC.

AND SUBSIDIARY

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BASIS OF PRESENTATION

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.

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.

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.

should be read in conjunction with the financial statements presented in our Annual Report on Form 10-K for the fiscal year ended June

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

of operations for such interim periods are not necessarily indicative of the results that may be expected for the full year.

information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended June

Issued and Not Yet Adopted Accounting Pronouncements

December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

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.

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

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.

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.

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:

Improvements to Reportable Segment Disclosures (Topic280), which

expands disclosure requirements to require entities to disclose significant segment expenses that are regularly provided to, or easily

computed from information regularly provided to, the 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

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.

DESCRIPTION OF BUSINESS

We specialize in the design, development,

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This subsidiary has no separate operations.

PRO-DEX, INC.

AND SUBSIDIARY

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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.

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 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):

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.

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

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Amounts reclassified to cost of sales

allocated to discounts for standalone selling price

Amounts allocated to discounts for standalone selling price

Contract assets ending balance

PRO-DEX, INC.

of and for the

Contract liabilities

beginning balance

received from customers

reclassified to revenue

liabilities ending balance

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

Marketable equity securities:

Total Investments

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

FAIR VALUE MEASUREMENTS

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.

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.

have categorized our cash equivalents and investments within the fair value hierarchy as follows:

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.

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.

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

Schedule of fair value, assets and liabilities

Value Measurement at March 31, 2025

Financial Assets:

Cash equivalents

Marketable equity securities – short-term

Marketable equity securities – long-term

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Value Measurement at June 30, 2024

Financial Assets:

Cash equivalents

Marketable equity securities – short-term

Marketable equity securities – long-term

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.

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 ).

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.

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.

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.

(“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:

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.

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.

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.

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, 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.

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 investments

Raw materials /purchased components

Work in process

Sub-assemblies/finished components

Finished goods

Total inventory

Land and building

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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.

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

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.

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

consist of the following (in thousands):

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the issuance of the patent.

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 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.

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

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Information regarding the

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

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

of and for the

Three Months Ended

Beginning balance

1 unchanged sentence

Changes in estimates of prior period warranty accruals

Warranty amortization

Warranty amortization and utilization

Ending balance

NET INCOME (LOSS) PER SHARE

Nine Months Ended

Beginning balance

Accruals during the period

Changes in estimates of prior period warranty accruals

Warranty amortization and utilization

Ending balance

NET INCOME PER SHARE

We calculate basic net

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.

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.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents

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.

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

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):

below, income amounts represent the numerator, and share amounts represent the denominator (in thousands, except per share amounts):

Schedule of net income per share

Net income (loss)

Weighted average shares outstanding

Basic income (loss) per share

Net income (loss)

Basic income per share

Weighted average shares outstanding

1 unchanged sentence

Weighted average shares used in calculation of diluted earnings 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

are recognized for temporary differences.

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.

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 December 31, 2024 and

2023, we recognized accrued interest of $ 54,000 and $ 61,000 , respectively, related to unrecognized tax benefits.

Diluted income per share

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 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

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.

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.

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

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.

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.

Our 2016 Equity Incentive

1 unchanged sentence

stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards.

As of December

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.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Performance Awards

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.

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

2 unchanged sentences

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 granted non-qualified stock options for 310,000 shares of common stock to our directors and certain employees under the 2016

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.

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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.

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

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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.

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”) 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.

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.

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.

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 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.

ended March 31, 2025 and 2024, we recorded ESPP share-based compensation expense in the amount of $ 5,000 and $ 3,000 , respectively.

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.

AND SUBSIDIARY

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with respect to customers that accounted for sales in excess of 10% of our total sales in

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

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

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

Months Ended December 31,

Three Months Ended March 31,

Percent of Total

1 unchanged sentence

Customer concentration:

Ended December 31,

Nine Months Ended March 31,

Percent of Total

2 unchanged sentences

Information with respect

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):

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

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Customer concentration:

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

three and nine months ended March 31, 2025 and 2024, we had three suppliers accounting for 10% or more of total inventory purchases.

owed to these three suppliers at March 31, 2025 or June 30, 2024, is as follows (in thousands, except percentages).

Schedule of suppliers accounting

Total accounts payable

Supplier concentration:

PAYABLE AND FINANCING TRANSACTIONS

Minnesota Bank & Trust

10 unchanged sentences

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):

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

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 .

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

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Total notes payable

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) 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”)

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”).

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.

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 .

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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 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.

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.

Our operating lease right-of-use

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

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

The current portion of our operating

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):

lease liability as of March 31, 2025, in the amount of $ 487,000 , is presented within accrued expenses on the condensed consolidated balance

As of March 31, 2025, the

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

Schedule of maturities of lease liabilities

2 unchanged sentences

Less imputed interest:

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

COMMITMENTS AND CONTINGENCIES

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We have evaluated subsequent

events through the date of this report.

There were no subsequent events that require disclosure.

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.

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