PRO DEX INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts) September 30, 2025 June 30, 2025 ASSETS Current Assets: Cash and cash equivalents $ 514 $ 419 Investments 10,038 6,740 Accounts receivable, net of allowance for credit losses of $ 2 and $ 0 at September 30, 2025 and at June 30, 2025, respectively 18,234 16,433 Deferred costs 32 24 Inventory 21,564 22,213 Income taxes receivable 106 1,056 Prepaid expenses and other current assets 235 410 Total current assets 50,723 47,295 Land and building, net 6,038 6,061 Equipment and leasehold improvements, net 4,969 5,153 Right-of-use asset, net 941 1,050 Intangibles, net 19 26 Deferred income taxes 1,415 1,415 Investments 149 148 Other assets 44 44 Total assets $ 64,298 $ 61,192 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 3,965 $ 4,614 Accrued liabilities 4,127 3,479 Income taxes payable 776 186 Deferred revenue 122 202 Notes payable 4,612 6,148 Total current liabilities 13,602 14,629 Lease liability, net of current portion 555 685 Notes payable, net of current portion 8,628 9,246 Total non-current liabilities 9,183 9,931 Total liabilities 22,785 24,560 Shareholders’ Equity: Common stock; no par value; 50,000,000 shares authorized; 3,262,004 and 3,261,043 shares issued and outstanding at September 30, 2025 and June 30, 2025, respectively 905 704 Retained earnings 40,608 35,928 Total shareholders’ equity 41,513 36,632 Total liabilities and shareholders’ equity $ 64,298 $ 61,192 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share amounts) Three Months Ended September 30, 2025 2024 Net sales $ 18,530 $ 14,892 Cost of sales 13,163 9,742 Gross profit 5,367 5,150 Operating expenses: Selling expenses 73 48 General and administrative expenses 1,417 1,246 Research and development costs 768 843 Total operating expenses 2,258 2,137 Operating income 3,109 3,013 Other income (expense): Interest and dividend income 14 25 Unrealized gain on investments 3,299 433 Interest expense ( 200 ) ( 152 ) Total other income 3,113 306 Income before income taxes 6,222 3,319 Provision for income taxes 1,542 853 Net income $ 4,680 $ 2,466 Basic and diluted net income per share: Basic net income per share $ 1.43 $ 0.76 Diluted net income per share $ 1.40 $ 0.75 Weighted-average common shares outstanding: Basic 3,261,753 3,259,742 Diluted 3,338,805 3,292,142 Common shares outstanding 3,262,004 3,297,510 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 September 30, 2025 2024 COMMON STOCK: Balance, beginning of period $ 704 $ 3,917 Share-based compensation expense 161 113 Share repurchases — ( 2,311 ) Shares withheld from common stock issued to employees to pay employee payroll taxes — ( 273 ) ESPP shares issued 40 15 Balance, end of period $ 905 $ 1,461 RETAINED EARNINGS: Balance, beginning of period $ 35,928 $ 26,950 Net income 4,680 2,466 Balance, at end of period $ 40,608 $ 29,416 Balance, beginning of period 36,632 30,867 Net income (loss) 4,680 2,466 Total shareholders’ equity $ 41,513 $ 30,877 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) Three Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,680 $ 2,466 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 311 302 Share-based compensation 161 113 Unrealized gain on marketable equity investments ( 3,299 ) ( 433 ) Non-cash lease (recovery) ( 9 ) ( 5 ) Amortization of loan fees 3 10 Credit loss expense 2 3 Changes in operating assets and liabilities: Accounts receivable and other receivables ( 1,803 ) 428 Deferred costs ( 8 ) 51 Inventory 649 ( 1,335 ) Prepaid expenses and other assets 175 ( 69 ) Accounts payable and accrued expenses ( 12 ) 579 Deferred revenue ( 80 ) ( 14 ) Income taxes 1,540 ( 209 ) Net cash provided by operating activities 2,310 1,887 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of equipment and improvements ( 98 ) ( 431 ) Net cash used in investing activities ( 98 ) ( 431 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable ( 11,595 ) ( 3,427 ) Proceeds from UMB Bank loans, net of origination fees 9,438 4,990 Proceeds from stock option exercises and ESPP contributions 40 15 Payments of employee taxes on net issuance of common stock — ( 273 ) Repurchases of common stock — ( 2,311 ) Net cash used in financing activities ( 2,117 ) ( 1,006 ) Net increase in cash and cash equivalents 95 450 Cash and cash equivalents, beginning of period 419 2,631 Cash and cash equivalents, end of period $ 514 $ 3,081 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) Three Months Ended September 30, 2025 2024 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 200 $ 162 Cash paid during the period for income taxes: Federal income tax payments $ — $ 690 California income tax payments 2 372 Total income tax payments $ 2 $ 1,062 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 with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and consist of a normal recurring nature. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2025. 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 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, selling, general and administrative, 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. NOTE 2. DESCRIPTION OF BUSINESS We specialize in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets. We have patented adaptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. Additionally, we provide engineering, quality, and regulatory consulting services to our customers. We also manufacture and sell rotary air motors to a wide range of industries; however, these motors comprise a de minimis portion of our business. In August 2020, we formed a wholly owned subsidiary, PDEX Franklin, LLC (“PDEX Franklin”), to hold title for an approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”) that we acquired on November 6, 2020, in order to allow for the continued growth of our business. The condensed consolidated financial statements include the accounts of the Company and PDEX Franklin and all significant inter-company accounts and transactions have been eliminated. This subsidiary has no separate operations. 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 September 30, 2025 2024 Net Sales: Over-time revenue recognition $ 476 $ 48 Point-in-time revenue recognition 18,054 14,844 Total net sales $ 18,530 $ 14,892 The timing of revenue recognition, billings, and cash collections results in billed accounts receivables, unbilled receivables (presented as deferred costs on our condensed consolidated balance sheets) and customer advances and deposits (presented as deferred revenue on our condensed consolidated balance sheets), where applicable. Amounts are generally billed as work progresses in accordance with agreed upon milestones. The over-time revenue recognition model consists of non-recurring engineering (“NRE”) and prototype services and typically relates to NRE services related to the evaluation, design or customization of a medical device and is typically recognized over time utilizing an input measure of progress based on costs incurred compared to the estimated total costs upon completion. During the three months ended September 30, 2025 and 2024, we recorded $ 80,000 and $ 14,000 respectively, of revenue that had been included in deferred revenue in the prior year. The revenue recognized from the contract liabilities consisted of satisfying our performance obligations during the normal course of business. The following tables summarize our contract assets and liability balances (in thousands): Schedule of contract assets and liability As of and for the Three Months Ended September 30, 2025 2024 Contract assets beginning balance $ 24 $ 262 Expenses incurred during the year 84 57 Amounts reclassified to cost of sales ( 76 ) ( 102 ) Amounts allocated to discounts for standalone selling price — ( 6 ) Contract assets ending balance $ 32 $ 211 As of and for the Three Months Ended September 30, 2025 2024 Contract liabilities beginning balance $ 202 $ 14 Payments received from customers — — Amounts reclassified to revenue ( 80 ) ( 14 ) Contract liabilities ending balance $ 122 $ — 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 September 30, 2025 and June 30, 2025, we categorized our investments in marketable equity securities as Level 2 assets. At September 30, 2025, our investment in Monogram Technologies, Inc. (“Monogram”) was valued at the cash price received in October 2025, upon its acquisition by Zimmer Biomet Holdings, Inc. (“Zimmer Biomet”) described below. 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 September 30, 2025 or June 30, 2025. Schedule of fair value, assets and liabilities Fair Value Measurement at September 30, 2025 Level 1 Level 2 Level 3 Total Financial Assets: Cash equivalents $ 33 $ — $ — $ 33 Marketable equity securities – short-term — 10,038 — 10,038 Marketable equity securities – long-term — 149 — 149 Total $ 33 $ 10,187 $ — $ 10,220 8 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Fair Value Measurement at June 30, 2025 Level 1 Level 2 Level 3 Total Financial Assets: Cash equivalents $ 33 $ — $ — $ 33 Marketable equity securities – short-term — 6,740 — 6,740 Marketable equity securities – long-term — 148 — 148 Total $ 33 $ 6,888 $ — $ 6,921 Investments at September 30, 2025 and June 30, 2025 had an aggregate cost basis of $ 3.5 million . Both short-term and long-term marketable equity securities include equity securities of public companies that are thinly traded. We classified certain investments as long-term in nature because if we decide to sell these securities, we may not be able to sell our position within one year. At September 30, 2025, the investments included unrealized gains of $ 6.6 million (gross unrealized gains of $ 6.8 million offset by gross unrealized losses of $ 185,000 ) . At June 30, 2025, the investments included net unrealized gains of $ 3.3 million (gross unrealized gains of $ 3.5 million offset by gross unrealized losses of $ 213,000 ). Of the total marketable equity securities at September 30, 2025 and June 30, 2025, $ 1,100,000 and $ 1,040,000 , 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 7, 2025, Zimmer Biomet announced that it had completed its acquisition of Monogram and soon after the announcement we received $4.04 per share in cash for each of the 2,212,378 common shares we owned of Monogram prior to the close of the acquisition, for total proceeds of $8.9 million. Accordingly, in our second quarter of fiscal 2026, we will record a realized gain in the amount of $6.8 million. In addition, we received 2,212,378 non-tradeable contingent value rights (“CVR’s”) payable in cash if Monogram completes five milestones related to proof-of concept, FDA 510(k) approval, and specific revenue milestones. The CVR payments, if made, range in value from $1.04 to $3.43 per CVR for a total amount of $12.37 should all milestones be attained. There is no guarantee or assurance that any milestones will be achieved. As disclosed previously, in conjunction with making our original investment in Monogram during fiscal 2017, we were granted the exclusive right to develop, engineer, manufacture and supply certain products on its behalf. Those rights were transferred to Zimmer Biomet and remain in effect post-acquisition. We made this investment in the hope that it could generate meaningful additional revenue which has yet to occur but may be more likely to occur in the future because Zimmer Biomet has more financial resources to assist with commercialization of Monogram’s products. However, there is no guarantee or assurance as to the amount of revenue, if any, that we may ultimately recognize from our exclusive right to develop, engineer, manufacture and supply certain products for Monogram. We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Mr. Van Kirk, and two non-management directors, Mr. Cabillot and Mr. 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. Swenson or Cabillot 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. 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 September 30, 2025 June 30, 2025 Raw materials/purchased components $ 10,185 $ 10,397 Work in process 6,904 7,422 Sub-assemblies/finished components 2,972 2,874 Finished goods 1,503 1,520 Total inventory $ 21,564 $ 22,213 Intangibles Intangibles consist of the following (in thousands): Schedule of intangibles September 30, 2025 June 30, 2025 Patent-related costs $ 208 $ 208 Less accumulated amortization ( 189 ) ( 182 ) Intangible assets, net $ 19 $ 26 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. These patent-related costs are expected to be fully amortized during fiscal 2026. 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 September 30, 2025 and June 30, 2025, the warranty reserve amounted to $ 379,000 and $ 357,000 , respectively. Warranty expenses are included in cost of sales in the accompanying condensed consolidated statements of operations. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates and are included in current period warranty expense. 10 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Information regarding the accrual for warranty costs for the three months ended September 30, 2025 and 2024 are as follows (in thousands): Schedule of accrual warranty costs As of and for the Three Months Ended September 30, 2025 2024 Beginning balance $ 357 $ 277 Accruals during the period 84 90 Changes in estimates of prior period warranty accruals ( 28 ) ( 18 ) Warranty amortization/utilization ( 34 ) ( 49 ) Ending balance $ 379 $ 300 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. Diluted income per share reflects the effects of potentially dilutive securities, which consist entirely of outstanding stock options, restricted shares and performance awards. The following table presents reconciliations of the numerators and denominators of the basic and diluted income per share computations. In the tables below, income amounts represent the numerator, and share amounts represent the denominator (in thousands, except per share amounts): Schedule of net income per share Three Months Ended September 30, 2025 2024 Basic: Net income $ 4,680 $ 2,466 Weighted-average shares outstanding 3,262 3,260 Basic earnings per share $ 1.43 $ 0.76 Diluted: Net income $ 4,680 $ 2,466 Weighted-average shares outstanding 3,262 3,260 Effect of dilutive securities 77 32 Weighted-average shares used in calculation of diluted earnings per share 3,339 3,292 Diluted earnings per share $ 1.40 $ 0.75 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 bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more - likely - than - not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Significant management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such determination is based primarily on our historical taxable income or loss, with some consideration given to our estimates of future taxable income or loss by jurisdictions in which we operate and the period over which our deferred tax assets would be recoverable. Our deferred tax asset is net of a valuation allowance in the gross amount of $ 90,000 as of September 30, 2025 and June 30, 2025. 11 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) We recognize accrued interest and penalties related to unrecognized tax benefits when applicable. As of September 30, 2025 and 2024, we recognized accrued interest of $ 4,000 and $ 6,000 , respectively, related to unrecognized tax benefits. Our effective tax rate for the three months ended September 30, 2025 and 2024, is 25 % and 26 % , respectively, and is slightly less than our combined expected federal and applicable state corporate income tax rates due primarily to federal and state research credits. Additionally, during the first quarter of fiscal 2026, we have added Florida and Indiana to our income tax nexus and both of these states have a lower income tax rate than California, where the majority of our state income tax has been paid historically. We are currently evaluating the impact of these changes to our deferred tax assets, and plan to record any adjustment in the second quarter of this fiscal year, but we do not expect a material change as a result. We are subject to U.S. federal income tax, as well as income tax of California, Colorado, Florida and Indiana as well as Massachusetts through fiscal year ended June 30, 2024. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2022, and later. However, because of our prior net operating losses and research credit carryovers, our tax years from June 30, 2020, are open to audit. We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months. Additionally, the One Big Beautiful Bill Act of 2025, or the 2025 Act, enacted on July 4, 2025, makes changes to U.S. corporate income taxes including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025, and immediate expensing of research and development costs, with retroactive application for tax years starting after December 31, 2025. We are continuing our evaluation of the impact the adoption of the 2025 Act will have on our financial statements for the fiscal year ended June 30, 2026. NOTE 9. SHARE-BASED COMPENSATION In September 2016, our Board approved the establishment of the 2016 Equity Incentive Plan, which was approved by our shareholders at our 2016 Annual Meeting. The 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. As of September 30, 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. Performance Awards We have recorded share-based compensation expense of $ 7,000 for the three months ended September 30, 2025 and 2024, related to our outstanding unvested performance awards. On September 30, 2025, there was approximately $ 21,000 of unrecognized compensation cost related to these non-vested performance awards, which is expected to be expensed over the weighted-average period of nine 9 months. On July 1, 2024, it was determined by the Compensation Committee of our Board of Directors that the vesting of performance awards for 40,000 shares of common stock had been achieved. Each participant elected a net issuance to cover their individual withholding taxes and therefore we issued 25,134 shares and paid $ 273,000 of participant-related payroll tax liabilities. Non-Qualified Stock Options In December 2020, the Compensation Committee of our Board of Directors granted 310,000 non-qualified stock options to our directors and certain employees under the 2016 Equity Incentive Plan. The vesting of these stock options was tied to the completion of service periods that ranged from 18 months to 10.5 years from inception and the achievement of our common stock trading at certain pre-determined prices. We recorded compensation expense of $ 104,000 for both the three months ended September 30, 2025 and 2024, related to these stock options. The weighted-average fair value of the stock option awards granted was $ 16.72 , calculated using a Monte Carlo simulation. As of September 30, 2025, 26,250 of these stock options have vested, 126,250 have been forfeited either due to termination or our stock price not attaining the pre-determined price, and 157,500 remain outstanding and unvested and there was approximately $ 1.0 million of unrecognized compensation cost related to the non-vested stock options. 12 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Restricted Shares In November 2024, the Compensation Committee awarded 18,000 restricted shares of common stock to our directors and certain employees under the 2016 Equity Incentive Plan. The shares vest ratably over five years from the date of grant. The fair value of the restricted shares on the date of grant was $ 857,000 , based upon the closing price of our common stock on the date of grant. During the three months ended September 30, 2025, we recorded $ 43,000 of compensation expense related to these restricted shares. As of September 30, 2025, there was approximately $ 710,000 of unrecognized compensation cost related to these restricted shares. Employee Stock Purchase Plan In September 2014, our Board approved the establishment of an Employee Stock Purchase Plan (the “ESPP”). The ESPP conforms to the provisions of Section 423 of the Internal Revenue Code, has coterminous offering and purchase periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per-share purchase price that approximates a 15% discount from the market price of a share of our common stock at either the beginning or end of the purchase period, whichever is lower. Our Board of Directors also approved the provision that shares formerly reserved for issuance under former stock option plans in excess of shares issuable pursuant to outstanding options, aggregating 704,715 shares, be reserved for issuance pursuant to the ESPP. The ESPP was approved by our shareholders at our 2014 Annual Meeting. In October 2023, our Board approved an amendment to the ESPP (the “ESPP Amendment”), which extended the term of the ESPP for an additional ten years from January 2025 to January 2035. The ESPP Amendment was approved by our shareholders at our 2023 Annual Meeting. In July 2025, the Compensation Committee of our Board of Directors amended the specific provisions of the ESPP to provide for a more favorable discount calculation for employees participating in the ESPP, as described above. During the three months ended September 30, 2025 and 2024, 961 and 940 shares were purchased, respectively, under the ESPP and allocated to employees based upon their contributions at discount prices of $ 42.34 and $ 16.22 , respectively, per share. As of September 30, 2025, on a cumulative basis, since the inception of the ESPP, employees have purchased a total of 38,056 shares. During the three months ended September 30, 2025 and 2024, we recorded stock compensation expense in the amount of $ 7,000 and $ 3,000 , respectively, relating to the ESPP. NOTE 10. MAJOR CUSTOMERS & SUPPLIERS Information with respect to customers that accounted for sales in excess of 10% of our total sales in either of the three-month periods ended September 30, 2025 and 2024 is as follows (in thousands, except percentages): Schedule of sales by major customers Three Months Ended September 30, 2025 2024 Amount Percent of Total Amount Percent of Total Total revenue $ 18,530 100 % $ 14,892 100 % Customer concentration: Customer 1 $ 14,500 78 % $ 11,377 76 % Customer 2 1,835 10 % 1,837 12 % Total $ 16,335 88 % $ 13,214 88 % 13 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Information with respect to accounts receivable from those customers that comprised more than 10% of our gross accounts receivable at either September 30, 2025 and June 30, 2025 is as follows (in thousands, except percentages): Schedule of accounts receivable September 30, 2025 June 30, 2025 Total gross accounts receivable $ 18,236 100 % $ 16,433 100 % Customer concentration: Customer 1 $ 15,251 84 % $ 11,895 72 % Customer 2 1,887 10 % 2,768 17 % Total $ 17,138 94 % $ 14,663 89 % During the three months ended September 30, 2025 and 2024, we had two suppliers, respectively, that each accounted for more than 10% of total inventory purchases. Amounts owed to the fiscal 2026 significant suppliers at September 30, 2025 totaled $ 439,000 , and $ 497,000 , respectively, and at June 30, 2025 totaled $ 299,000 and $ 1.0 million, respectively. NOTE 11. NOTES PAYABLE AND FINANCING TRANSACTIONS UMB Bank (“UMB”) As previously disclosed, we have several outstanding term loans as well as a revolving loan (the “Amended Revolving Loan”) with UMB (formerly Minnesota Bank & Trust or MBT). Additionally, on July 31, 2024 (the “Fourth Amendment Date”), we entered into Amendment No. 4 to our Amended and Restated Credit Agreement (the “Fourth Amendment”) which amended the Company’s Amended and Restated Credit Agreement with UMB. The Fourth Amendment (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 UMB 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 UMB in connection with the Sixth Amendment. 14 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The balance on our outstanding loans (in thousands) is as follows (exclusive of unamortized loan fees): Schedule of unamortized loan September 30, 2025 June 30, 2025 Notes Payable: Term Loan A $ 2,529 $ 2,795 Term Loan B 377 416 Term Loan C 3,917 4,167 Property Loan 4,295 4,347 Amended Revolving Loan 2,157 3,706 Total notes payable $ 13,275 $ 15,431 Term Loan A and Term Loan 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 Loan C bears interest at an annual rate equal to the greater of (a) 5 % , or (b) SOFR for a one-month period from the website of the CME Group Benchmark Administration Limited plus 2.5% (the “Adjusted Term SOFR Rate”). 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 , and Term Loan C is fully amortizing and matures on August 1, 2029 . The Property Loan matures on November 1, 2030 , at which time a balloon payment of $ 3.1 million is due, and the Amended Revolving Loan matures on December 29, 2026 . Any payment on Term Loan A, Term Loan B, Term Loan C, the Property Loan, or Amended Revolving Loan (collectively, the “Loans”) not made within seven days after the due date is subject to a late payment fee equal to 5 % of the overdue amount. Upon the occurrence and during the continuance of an event of default, the interest rate of all Loans will be increased by 3 % and MBT may, at its option, declare all of the Loans immediately due and payable in full. The Loans are secured by substantially all of the Company’s assets pursuant to a Security Agreement entered into on September 6, 2018, between the Company and UMB. 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 UMB and by an assignment of Leases and Rents by PDEX Franklin in favor of UMB (collectively, the “Property Loan Security Agreements”). The Amended Credit Agreement, Amended Security Agreement, Property Loan Security Agreement, Term Note A, Term Note B, Term Note C, Property Note, and Amended Revolving Note contain representations and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type. We believe that we are in compliance with all of our debt covenants as of September 30, 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 1 million shares of our common stock, as the prior repurchase plan authorized by our Board in 2013 was nearing completion. In accordance with, and as part of, these share repurchase programs, our Board has approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or “Plan”). During the three months ended September 30, 2025, we did no t repurchase any shares. During the three months ended September 30, 2024, we repurchased 91,976 shares at an aggregate cost, inclusive of fees under the Plan, of $ 2.3 million. On a cumulative basis since 2013, we have repurchased a total of 1,511,497 shares under the share repurchase programs at an aggregate cost, inclusive of fees, of $ 24.2 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. 15 PRO-DEX INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 September 30, 2025, in the amount of $ 509,000 , is presented within accrued expenses on the condensed consolidated balance sheet. As of September 30, 2025, our operating lease has a remaining lease term of two years and an imputed interest rate of 5.53 % . Cash paid for amounts included in the lease liability was $ 135,000 and $ 130,000 for the three months ended September 30, 2025 and 2024, respectively, excluding $ 15,000 and $ 41,000 , respectively, paid for common area maintenance charges. As of September 30, 2025, the maturity of our lease liability is as follows (in thousands): Schedule of maturities of lease liabilities Operating Lease Fiscal Year: 2026 $ 416 2027 567 2028 143 Total lease payments 1,126 Less imputed interest ( 63 ) Total $ 1,063 NOTE 14. COMMITMENTS AND CONTINGENCIES Legal Matters We may be involved from time to time in legal proceedings arising either in the ordinary course of our business or incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material or adverse. NOTE 15. SUBSEQUENT EVENTS We have evaluated subsequent events through the date of this filing. Other than the acquisition of Monogram by Zimmer Biomet on October 7, 2025, discussed in Note 4, there were no additional subsequent events that require recognition or disclosure. 16