What changed in this filing

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Item 1. Business

2025-09-04 compared with 2024-09-05 · 91 added, 89 removed, 162 unchanged (53% of the section changed)

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range of industries;

however, these motors comprise a de minimis portion of our business.

Our patented adaptive torque-limiting

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Discounts & Other

Our medical device products utilize

proprietary designs developed by us primarily under exclusive development and supply agreements and are currently machined in our Irvine,

California facility, and assembled in our Tustin, California facility, as are our rotary air motors.

Our medical device products are sold

primarily to original equipment manufacturers and our air motors are sold primarily to a wide range of distributors and end users.

In fiscal 2024, our top

three customers accounted for 88% of our sales compared to 92% in fiscal 2023.

Our medical device products

utilize proprietary designs developed by us primarily under exclusive development and supply agreements and are currently machined in

our Irvine, California facility, and assembled in our Tustin, California facility, as are our rotary air motors.

Our medical device products

are sold primarily to original equipment manufacturers and our air motors are sold to a wide range of distributors and end users.

In fiscal 2025, our top three

customers accounted for 94% of our sales compared to 88% in fiscal 2024.

In fiscal 2025, we had one customer, included in both medical

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customer intends to terminate its relationship with us.

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 will continue to supply their surgical

handpieces to them through calendar 2025 and, during the fourth quarter of fiscal 2021, they executed a product development agreement

and related statement of work for our assistance with the next generation of this handpiece.

Additionally, we continue to invest in property

and equipment as well as personnel to expand our capacity to achieve higher sales volumes.

To that end, we purchased the

Franklin Property in November 2020.

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.

We began operations in the new facility during the

fourth quarter of fiscal 2023.

While we believe that the efforts we completed to bring the facility operational will allow us ample capacity

to increase revenues significantly in future years, there can be no assurance that we will increase revenue.

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 will continue to supply

their surgical handpieces to them through calendar 2025 and, during the fourth quarter of fiscal 2021, they executed a product development

agreement and related statement of work for our assistance with the next generation of this handpiece.

During fiscal 2025, they launched

their next generation handpiece.

During the fourth quarter of fiscal 2025, the customer released the hold that it had placed on shipments

of the next generation handpiece in the third quarter of fiscal 2025, and we resumed production and shipments of the next generation handpiece

late in the fourth quarter of fiscal 2025.

Additionally, we continue to invest in property and equipment as well as personnel to expand

our capacity to achieve higher sales volumes.

To that end, we purchased

the Franklin Property in November 2020.

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.

We began operations in the new facility during

the fourth quarter of fiscal 2023.

While we believe that the efforts we completed to bring the facility operational will allow us ample

capacity to increase revenues significantly in future years, there can be no assurance that we will increase revenue.

Simultaneously, we are working

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added surcharges.

We do not intend to terminate any such relationship at this time, nor does management have knowledge that any supplier

or manufacturer intends to terminate its relationship with us.

Additionally, beginning in fiscal 2025, some of our suppliers have begun passing along tariff charges.

While we intend

to pass on these charges to our customers, we do not know if we will be successful in these endeavors.

We do not intend to terminate any

such relationship at this time, nor does management have knowledge that any supplier or manufacturer intends to terminate its relationship

Our commitment to product

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among other reasons, the launch of new products, the timing of customer orders based on end-user demand, and customer inventory levels.

We do not expect a reduction in fiscal 2025 revenue as compared to fiscal 2024 revenue and believe that the decline in backlog at June

30, 2024 compared to June 30, 2023 is related to timing of customer orders, although there can be no assurance that there will not be

a decline in future revenue.

Additionally, $10.2 million of our backlog at June 30, 2023 related to orders expected to be delivered in

We do not typically experience seasonal fluctuations in our shipments and revenues.

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segment as our business is currently operated.

We have reached this conclusion because the our Chief Executive Officer (“CEO”)

We have reached this conclusion because our Chief Executive Officer (“CEO”)

allocates resources, assesses performance, and manages our business as one segment.

Additionally, 99% of our business relates to designing,

manufacturing, and repairing medical devices.

Additionally, 99% of our business in fiscal 2025 relates

to designing, manufacturing, and repairing medical devices.

We primarily design, sell, and repair handheld medical devices and accessories.

medical devices, NRE and proto-type services, as well as repairs to all our customers and we utilize one machine shop and purchasing team

to procure and manufacture all the products that we sell.

The CEO utilizes consolidated operating income to analyze our business operations.

The markets for products in the

industries served by our customers are intensely competitive, and we face significant competition from a number of different sources.

We provide medical devices, NRE and proto-type services, as well as repairs to all our customers and we utilize one machine shop and purchasing

team to procure and manufacture all the products that we sell.

The CEO utilizes consolidated operating income to analyze our business

The markets for products in

the industries served by our customers are intensely competitive, and we face significant competition from a number of different sources.

Several of our competitors have significantly greater name recognition, as well as substantially greater financial, technical, product

development, and marketing resources, than us.

We compete in all of our

markets with other major medical device companies.

As a provider of outsourced services, we also compete with our customers’ own

internal development and manufacturing groups.

Competitive pressures and other factors, such as new product or new technology introductions

by us, our customers’ internal development and manufacturing departments, or our competitors, may result in price or market share

erosion that could have a material adverse effect on our business, results of operations, and financial condition.

Also, there can be

no assurance that our products and services will achieve broad market acceptance or will successfully compete with other products targeting

the same customers.

We compete in all of our markets

with other major medical device companies.

As a provider of outsourced services, we also compete with our customers’ own internal

development and manufacturing groups.

Competitive pressures and other factors, such as new product or new technology introductions by

us, our customers’ internal development and manufacturing departments, or our competitors, may result in price or market share erosion

that could have a material adverse effect on our business, results of operations, and financial condition.

Also, there can be no assurance

that our products and services will achieve broad market acceptance or will successfully compete with other products targeting the same

Research and Development

We conduct research and

development activities to both maintain and improve our market position.

Our research and development efforts involve the design and manufacture

of products that perform specific applications for our existing and prospective customers.

Our research and development activities are

We conduct research and development

activities to both maintain and improve our market position.

Our research and development efforts involve the design and manufacture of

products that perform specific applications for our existing and prospective customers.

Our research and development activities are focused

● expanding our knowledge base in the medical device industry to solidify our products with current customers

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● enhancing our existing product lines.

In certain instances, we may share

research and development costs with our customers by billing for non-recurring engineering (“NRE”) services often provided

In certain instances, we may

share research and development costs with our customers by billing for non-recurring engineering (“NRE”) services often provided

for under development portions of certain contracts.

Revenue recognized for NRE services represented 1% of our revenue in fiscal 2024

and 6% of our revenue in fiscal 2023.

During the fiscal years

ended June 30, 2024 and 2023, we incurred research and development expenses amounting to $3.2 million and $2.8 million, respectively,

which costs exclude labor and related expenses of approximately $224,000 and $724,000 in fiscal 2024 and 2023, respectively, that were

reimbursed by our customers through billings for NRE services.

Revenue recognized for NRE services represented 1% of our revenue in both fiscal

2025 and 2024.

During the fiscal years ended

June 30, 2025 and 2024, we incurred research and development expenses amounting to $3.6 million and $3.2 million, respectively, which

costs exclude labor and related expenses of approximately $73,000 and $224,000 in fiscal 2025 and 2024, respectively, that were reimbursed

by our customers through billings for NRE services.

Human Capital Management

Our employees are among

our most critical assets.

The success and growth of our business depends on our ability to attract, reward, retain and develop talent

in all levels of our organization, including, but not limited to, machine operators, assembly technicians, engineers, and management.

In order to attract and

retain highly qualified employees, we offer the following:

Our employees are among our

most critical assets.

The success and growth of our business depends on our ability to attract, reward, retain and develop talent in all

levels of our organization, including, but not limited to, machine operators, assembly technicians, engineers, and management.

In order to attract and retain

highly qualified employees, we offer the following:

· Competitive, reasonable, and equitable compensation programs;

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the effectiveness of our programs and to assist in developing new programs.

At June 30, 2024, we had

148 employees, two of whom were part time, and all of our employees were working at one or both of our facilities in Irvine, California

and Tustin, California.

At June 30, 2023, we had 146 employees, one of whom was part-time, and all were working at either our Irvine,

California facility or our Tustin, California facility, except for one employee who worked remotely out of state.

None of our employees

are a party to any collective bargaining agreements with us.

We consider our relationships with our employees to be good.

At June 30, 2025 and 2024,

we had 181 and 148 employees, respectively, two of whom were part time, and all were working at one or both of our facilities in Irvine,

California and Tustin, California.

None of our employees are a party to any collective bargaining agreements with us.

We consider our

relationships with our employees to be good.

Government Regulations

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review which may be undertaken in the future with respect to our products or processes.

Management believes that

each of our facilities has manufacturing systems and processes that are based on established Quality Management System standards.

Management believes that each

of our facilities has manufacturing systems and processes that are based on established Quality Management System standards.

we believe that both our Irvine, California and Tustin, California facilities are compliant with applicable Good Manufacturing Practices

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of the patents, if any, is not expected to cause any change in our revenue-generating operations as changing the legal manufacturer of

medical devices is a significant undertaking and the expiration of a patent would offer minimal inducement to make such a change.

medical devices is a significant undertaking and we believe the expiration of a patent would offer minimal inducement to make such a change.

We have no reason to believe

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registered trademarks relating to our products, including Pro-Dex ® , along with a number of other common law trademarks.

We have not entered into

any franchising agreements.

We have not granted, nor do we hold any, third-party licenses having terms under which we earn revenue or

incur expense in material amounts.

We have not entered into any

franchising agreements.

We have not granted, nor do we hold any, third-party licenses having terms under which we earn revenue or incur

expense in material amounts.

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-K

Item 1. Business