PRO DEX INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts) December 31, 2025 June 30, 2025 ASSETS Current assets: Cash and cash equivalents $ 7,953 $ 419 Investments 864 6,740 Accounts receivable, net of allowance for expected credit losses of $ 19 and $ 0 at December 31, 2025 and at June 30, 2025, respectively 17,883 16,433 Deferred costs 174 24 Inventory 21,710 22,213 Income tax receivable 266 1,056 Prepaid expenses and other current assets 336 410 Total current assets 49,186 47,295 Land and building, net 6,015 6,061 Equipment and leasehold improvements, net 4,757 5,153 Right-of-use asset, net 830 1,050 Intangibles, net 12 26 Deferred income taxes, net 1,277 1,415 Investments 135 148 Other assets 44 44 Total assets $ 62,256 $ 61,192 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 4,111 $ 4,614 Accrued liabilities 4,258 3,479 Income taxes payable 1,200 186 Deferred revenue 163 202 Notes payable 2,469 6,148 Total current liabilities 12,201 14,629 Lease liability, net of current portion 419 685 Notes payable, net of current portion 8,005 9,246 Total non-current liabilities 8,424 9,931 Total liabilities 20,625 24,560 Shareholders’ equity: Common stock; no par value; 50,000,000 shares authorized; 3,209,732 and 3,261,043 shares issued and outstanding at December 31, 2025 and June 30, 2025, respectively — 704 Retained earnings 41,631 35,928 Total shareholders’ equity 41,631 36,632 Total liabilities and shareholders’ equity $ 62,256 $ 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 December 31, Six Months Ended December 31, 2025 2024 2025 2024 Net sales $ 18,663 $ 16,793 $ 37,194 $ 31,686 Cost of sales 12,920 11,721 26,083 21,464 Gross profit 5,743 5,072 11,111 10,222 Operating expenses: Selling, general and administrative expenses 1,750 1,438 3,241 2,733 Research and development costs 734 942 1,502 1,784 Total operating expenses 2,484 2,380 4,743 4,517 Operating income 3,259 2,692 6,368 5,705 Other income (expense), net Interest expense ( 141 ) ( 204 ) ( 341 ) ( 357 ) Gain (loss) on marketable equity investments, net ( 250 ) 77 3,049 510 Interest and other income 60 21 74 46 Total other income (expense) ( 331 ) ( 106 ) 2,782 199 Income before income taxes 2,928 2,586 9,150 5,904 Provision for income taxes 741 546 2,283 1,398 Net income $ 2,187 $ 2,040 $ 6,867 $ 4,506 Basic and diluted net income per share: Basic net income per share $ 0.67 $ 0.63 $ 2.11 $ 1.36 Diluted net income per share $ 0.66 $ 0.61 $ 2.07 $ 1.33 Weighted-average common shares outstanding: Basic 3,249,260 3,261,145 3,255,507 3,314,207 Diluted 3,304,042 3,337,337 3,317,777 3,378,862 Common shares outstanding 3,209,732 3,260,390 3,209,732 3,260,390 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 December 31, Six Months Ended December 31, 2025 2024 2025 2024 Common stock: Balance, beginning of period $ 905 $ 1,461 $ 704 $ 3,917 Share-based compensation expense 165 130 325 243 Share repurchases ( 2,207 ) ( 1,192 ) ( 2,207 ) ( 3,504 ) Shares withheld from common stock issued to employees to pay employee payroll taxes ( 27 ) ( 33 ) ( 27 ) ( 305 ) ESPP shares issued — — 41 15 Reclassification of excess share repurchases (1) 1,164 — 1,164 — Balance, end of period — 366 — 366 Retained earnings: Balance, beginning of period 40,608 29,416 35,928 26,950 Net income 2,187 2,040 6,867 4,506 Shareholder distribution ( 1,164 ) — ( 1,164 ) — Balance, end of period 41,631 31,456 41,631 31,456 Balance, beginning of period 41,513 30,877 36,632 30,867 Net income 2,187 2,040 6,867 4,506 Total shareholders’ equity $ 41,631 $ 31,822 $ 41,631 $ 31,822 (1) During the three months ended December 31, 2025, our stock repurchases exceeded the value of cumulative common stock, and the excess has been reflected as a shareholder distribution, reducing our consolidated retained earnings. 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) Six Months Ended December 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,867 $ 4,506 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 625 615 Share-based compensation 325 243 Gain on marketable equity investments ( 3,049 ) ( 510 ) Non-cash lease recovery ( 23 ) ( 14 ) Deferred income taxes 138 — Amortization of loan fees, net 5 13 Credit loss expense 19 27 Changes in operating assets and liabilities: Accounts receivable ( 1,469 ) ( 4,606 ) Deferred costs ( 150 ) 109 Inventory 503 ( 4,342 ) Prepaid expenses and other assets 73 ( 991 ) Accounts payable and accrued expenses 254 3,030 Deferred revenue ( 39 ) ( 14 ) Income taxes 1,803 ( 329 ) Net cash provided by (used in) operating activities 5,882 ( 2,263 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of investments 8,938 — Purchases of equipment and improvements ( 168 ) ( 973 ) Net cash provided by (used in) investing activities 8,770 ( 973 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchases of common stock ( 2,207 ) ( 3,504 ) Proceeds from ESPP contributions 41 15 Payment of employee payroll taxes on net issuance of common stock ( 27 ) ( 305 ) Proceeds from notes payable and revolving loan 14,901 8,490 Principal payments on notes payable and revolving loan ( 19,826 ) ( 4,025 ) Net cash provided by (used in) financing activities ( 7,118 ) 671 Net increase (decrease) in cash and cash equivalents 7,534 ( 2,565 ) Cash and cash equivalents, beginning of period 419 2,631 Cash and cash equivalents, end of period $ 7,953 $ 66 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) Six Months Ended December 31, 2025 2024 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 363 $ 338 Cash paid during the period for income taxes by jurisdiction: Federal income tax payments $ 150 $ 1,570 California income tax payments — 1,100 Indiana income tax payments 20 — Florida income tax payments 170 — Total income tax payments $ 340 $ 2,670 Non-cash investing and financing activity: Cashless stock option exercise $ — $ 117 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Pro-Dex, Inc. (“we,” “us,” “our,” “Pro-Dex,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and applicable provisions of Regulation S-K. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. 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, 2025. Recently Adopted Accounting Standards In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606), which clarifies the application of derivative accounting to certain contracts and updates the guidance for share-based noncash consideration received from a customer in exchange for goods and services. Specifically, this ASU introduces a scope exception for contracts that are not exchange-traded and whose underlying is tied to operations or activities specific to one of the parties to the contract. It also clarifies the guidance for share-based consideration from a customer. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted and the option to apply on a prospective or modified retrospective basis. The Company early adopted this ASU on a prospective basis as of July 1, 2025. The Company expects this ASU to reduce the cost and complexity associated with analyzing and applying the derivative guidance to contracts with underlyings based on operations or activities specific to one of the parties of the contract, such as the contingent consideration received in exchange for the Company’s shares of common stock in Monogram Technologies, Inc. (“Monogram”) described more fully in Note 4. Recently Issued and Not Yet Adopted Accounting Pronouncements In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“DISE”). 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. In December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic270): Narrow-scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11. No other new accounting pronouncements issued or effective during the fiscal year have, or are expected to have, a material impact on our condensed consolidated financial statements. Segment Reporting As of December 31, 2025, we have identified one reportable segment, as our chief operating decision maker (“CODM”), the Company’s Chief Executive Officer, allocates resources, assesses performance, and manages our business as one segment. As our operations are managed at the consolidated level, there are no differences between the measurement of the reportable segment’s profit or loss and our condensed consolidated statement of operations. 6 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Reclassifications The Company’s selling expenses have been reclassified and combined with its general and administrative expenses in its consolidated statement of operations to conform to the current period presentation. Historically the Company has had only one employee in its sales department. Currently we have no employees in our sales department but in advance of the expanded disclosures required by DISE we are combining selling, general and administrative expenses to avoid potential disclosure of confidential compensation of one employee. NOTE 2. DESCRIPTION OF BUSINESS We specialize in the design, development, and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets. We have patented adaptive torque-limiting software and proprietary sealing solutions that appeal to our customers, primarily medical device distributors. 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. 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 December 31, Six Months Ended December 31, 2025 2024 2025 2024 Net Sales: Over-time revenue recognition $ 149 $ 41 $ 625 $ 89 Point-in-time revenue recognition 18,514 16,752 36,569 31,597 Total net sales $ 18,663 $ 16,793 $ 37,194 $ 31,686 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 six months ended December 31, 2025, we recorded $ 0 and $ 80,000 , respectively, of revenue that had been included in deferred revenue in the prior year. 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. The revenue recognized from contract liabilities consisted of satisfying our performance obligations during the normal course of business. As of December 31, 2025 and 2024, we had deferred revenue of $ 163,000 and $ 0 , respectively. 7 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 December 31, As of and for the Six Months Ended December 31, 2025 2024 2025 2024 Contract assets beginning balance $ 32 $ 211 $ 24 $ 262 Expenses incurred during the year 146 40 230 97 Amounts reclassified to cost of sales ( 4 ) ( 99 ) ( 80 ) ( 201 ) Amounts allocated to discounts for standalone selling price — — — ( 6 ) Contract assets ending balance $ 174 $ 152 $ 174 $ 152 As of and for the Three Months Ended December 31, As of and for the Six Months Ended December 31, 2025 2024 2025 2024 Contract liabilities beginning balance $ 122 $ — $ 202 $ 14 Payments received from customers 41 — 41 — Amounts reclassified to revenue — — ( 80 ) ( 14 ) Contract liabilities ending balance $ 163 $ — $ 163 $ — 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 December 31, 2025 and June 30, 2025, we categorized our investments in marketable equity securities as Level 2 assets. Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. We held no Level 3 assets or liabilities at December 31, 2025 or June 30, 2025. 8 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following tables summarize the fair value measurements within the fair value hierarchy of our financial instruments (in thousands): Schedule of fair value, assets and liabilities Fair Value Measurement at December 31, 2025 Level 1 Level 2 Level 3 Total Financial Assets: Cash equivalents $ 5,273 — $ — 5,273 Marketable equity securities – short-term — 864 — 864 Marketable equity securities – long-term — 135 — 135 Total $ 5,273 999 $ — 6,272 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 December 31, 2025 and June 30, 2025 had an aggregate cost basis of $ 1.4 million and $ 3.5 million, respectively. 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 December 31, 2025, the investments included unrealized losses of $ 402,000 . 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 December 31, 2025 and June 30, 2025, $ 864,000 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 Holdings, Inc. (“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 recorded 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 to us if Monogram completes five milestones related to proof-of concept, FDA 510(k) approval, and specific revenue milestones. The CVR payments, if earned, will 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. 9 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) We will record an additional gain upon receipt of CVR payments, if made. 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 in connection with Zimmer Biomet’s acquisition of Monogram 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. 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 December 31, 2025 June 30, 2025 Raw materials/purchased components $ 10,184 $ 10,397 Work in process 6,810 7,422 Sub-assemblies/finished components 3,901 2,874 Finished goods 815 1,520 Total inventory $ 21,710 $ 22,213 Intangibles Intangibles consist of the following (in thousands): Schedule of intangibles December 31, 2025 June 30, 2025 Patent-related costs $ 208 $ 208 Less: accumulated amortization ( 196 ) ( 182 ) $ 12 $ 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 intangible assets are expected to be fully expensed this fiscal year. 10 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 6. WARRANTY Our 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, 2025 and June 30, 2025, the warranty reserve amounted to $ 370,000 and $ 357,000 , 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. Information regarding the accrual for warranty costs for the three and six months ended December 31, 2025 and 2024, are as follows (in thousands): Schedule of accrual warranty costs As of and for the Three Months Ended December 31, As of and for the Six Months Ended December 31, 2025 2024 2025 2024 Beginning balance $ 379 $ 300 $ 357 $ 277 Accruals during the period 54 $ 48 $ 139 $ 138 Changes in estimates of prior period warranty accruals ( 9 ) ( 7 ) ( 38 ) ( 25 ) Warranty amortization ( 54 ) ( 29 ) ( 88 ) ( 78 ) Ending balance $ 370 $ 312 $ 370 $ 312 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 of outstanding stock options, restricted shares and performance awards. The following table presents reconciliations of the numerators and denominators of the basic and diluted earnings per share computations. In the tables below, net income amounts represent the numerator, and weighted average shares outstanding amounts represent the denominator (in thousands, except per share amounts): Schedule of net income per share Three Months Ended December 31, Six Months Ended December 31, 2025 2024 2025 2024 Basic: Net income $ 2,187 $ 2,040 $ 6,867 $ 4,506 Weighted average shares outstanding 3,249 3,261 3,256 3,314 Basic income per share $ 0.67 $ 0.63 $ 2.11 $ 1.36 Diluted: Net income $ 2,187 $ 2,040 $ 6,867 $ 4,506 Weighted average shares outstanding 3,249 3,261 3,256 3,314 Effect of dilutive securities 55 76 62 65 Weighted average shares used in calculation of diluted earnings per share 3,304 3,337 3,318 3,379 Diluted income per share $ 0.66 $ 0.61 $ 2.07 $ 1.33 11 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 8. INCOME TAXES Deferred income taxes are provided on a liability method whereby deferred tax assets and liabilities are recognized for temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Significant management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such determination is based primarily on our historical taxable income, with some consideration given to our estimates of future taxable income by jurisdictions in which we operate and the period over which our deferred tax assets would be recoverable. Our deferred tax asset is net of a valuation allowance in the gross amount of $ 90,000 as of December 31, 2025 and June 30, 2025. We recognize accrued interest and penalties related to unrecognized tax benefits when applicable. The effective tax rate for the three months ended December 31, 2025, and 2024 was 25 % and 21 % , respectively. The effective tax rate for the six months ended December 31, 2025, and 2024 was 25 % and 24 % , respectively. The effective tax rate in fiscal 2026 is slightly higher than the prior fiscal year due to a prior year windfall related to vesting of employee performance awards that did not recur in fiscal 2026. We are subject to U.S. federal income tax, as well as various state jurisdictions. Our U.S. federal income taxes are currently open to audit under the statute of limitations by the Internal Revenue Service for the fiscal years ended June 30, 2022 and later. However, because of our prior net operating losses and research credit carryovers, our tax years from June 30, 2020 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. 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 Our 2016 Equity Incentive Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. As of December 31, 2025, performance awards for 200,000 shares of common stock, non-qualified stock options for 372,000 shares of common stock, and 33,500 restricted shares of common stock have been granted under the 2016 Equity Incentive Plan. Performance Awards During both the three months ended December 31, 2025, and 2024, we recorded share-based compensation expense of $ 7,000 related to outstanding performance awards. During both the six months ended December 31, 2025, and 2024, we recorded share-based compensation expense of $ 14,000 related to outstanding performance awards. On December 31, 2025, there was approximately $ 14,000 of unrecognized compensation cost related to non-vested performance awards, which is expected to be expensed over a weighted-average period of six 6 months. On July 1, 2024, it was determined by the Compensation Committee that the vesting of performance awards for 40,000 shares of common stock had been achieved. Each participant elected a net issuance to cover their individual withholding taxes and, therefore, we issued participants 25,134 shares of common stock and paid $ 273,000 of participant-related payroll tax liabilities. 12 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 Equity Incentive Plan. The vesting of these stock options is tied to the completion of service periods that range from 18 months to 10.5 years from the date of grant and the achievement of our common stock trading at certain pre-determined prices. The weighted average fair value of the stock option awards granted in fiscal 2021 was $ 16.72 , calculated using a Monte Carlo simulation. During both the three months ended December 31, 2025 and 2024, we recorded compensation expense of $ 104,000 related to these options. During both the six months ended December 31, 2025 and 2024, we recorded compensation expense of $ 208,000 related to these options. As of December 31, 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 $ 937,000 of unrecognized compensation cost related to the non-vested stock options. Restricted Shares In November 2024, the Compensation Committee awarded 18,000 restricted shares of common stock to our directors and certain employees under the 2016 Equity Incentive Plan. The shares vest ratably over five years from the date of grant. The fair value of the restricted shares on the date of grant was $ 857,000 , based upon the closing price of our common stock on the date of grant. During the second quarter of fiscal 2026, 3,600 shares were vested and 872 shares were forfeited by employees to pay their individual withholding taxes and therefore we issued 2,728 shares of common stock and paid $ 27,000 of participant-related payroll tax liabilities. In November 2025, the Compensation Committee awarded 15,500 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 $ 478,000 , based upon the closing price of our common stock on the date of grant. During the three months ended December 31, 2025 and 2024, we recorded compensation expense of $ 53,000 and $ 19,000 , respectively, related to these restricted shares. During the six months ended December 31, 2025 and 2024, we recorded compensation expense of $ 96,000 and $ 19,000 , respectively, related to these restricted shares. As of December 31, 2025, there was approximately $ 1.1 million 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 either the beginning or the end of the purchase period, whichever is lower. 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. During the three months ended December 31, 2025 and 2024, 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, 2025 and 2024, 961 and 940 shares of our common stock were purchased under the ESPP, respectively, and allocated to employees based upon their contributions at prices of $ 42.34 and $ 16.22 , respectively, per share. On a cumulative basis, since the inception of the ESPP, employees have purchased a total of 38,056 shares of our common stock. During the six months ended December 31, 2025 and 2024, we recorded share-based compensation expense in the amount of $ 7,000 and $ 3,000 , respectively, relating to the ESPP. 13 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 10. MAJOR CUSTOMERS AND SUPPLIERS Information with respect to customers that accounted for sales in excess of 10% of our total sales in either of the three-month or the six-month periods ended December 31, 2025 and 2024, is as follows (in thousands, except percentages): Schedule of sales by major customers Three Months Ended December 31, 2025 2024 Amount Percent of Total Amount Percent of Total Net sales $ 18,663 100 % $ 16,793 100 % Customer concentration: Customer 1 $ 14,759 79 % $ 13,515 80 % Customer 2 1,686 9 % 1,784 11 % Total $ 16,445 88 % $ 15,299 91 % Six Months Ended December 31, 2025 2024 Amount Percent of Total Amount Percent of Total Net sales $ 37,194 100 % $ 31,686 100 % Customer concentration: Customer 1 29,259 79 % 24,892 79 % Customer 2 3,521 9 % 3,621 11 % Total $ 32,780 88 % $ 28,513 90 % Information with respect to accounts receivable from those customers that comprised more than 10% of our gross accounts receivable at either December 31, 2025 or June 30, 2025, is as follows (in thousands, except percentages): Schedule of gross accounts receivable December 31, 2025 June 30, 2025 Total gross accounts receivable $ 17,902 100 % $ 16,433 100 % Customer concentration: Customer 1 $ 14,632 82 % $ 11,895 72 % Customer 2 1,989 11 % 2,768 17 % Total. $ 16,621 93 % $ 14,663 89 % 14 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) During the three and six months ended December 31, 2025 and 2024, we had three suppliers that accounted for 10% or more of total inventory purchases. Information with respect to suppliers that accounted for in excess of 10% of our inventory purchases in either of the three-month or the six-month periods ended December 31, 2025 and 2024, is as follows (in thousands, except percentages): Schedule of inventory purchases Three Months Ended December 31, 2025 2024 Amount Percent of Total Amount Percent of Total Total Inventory purchases $ 6,918 100 % $ 7,319 100 % Supplier concentration: Supplier 1 $ 1,395 20 % $ 1,797 25 % Supplier 2 1,144 16 % 875 12 % Supplier 3 868 13 % 992 13 % Total $ 3,407 49 % $ 3,664 50 % Six Months Ended December 31, 2025 2024 Amount Percent of Total Amount Percent of Total Total inventory purchases $ 13,297 100 % $ 13,064 100 % Supplier concentration: Supplier 1 1,836 14 % 3,189 24 % Supplier 2 2,045 15 % 1,424 11 % Supplier 3 2,027 15 % 1,715 13 % Total $ 5,908 44 % $ 6,328 48 % Information with respect to accounts payable due to those suppliers that comprised more than 10% of our inventory purchases at either December 31, 2025 or June 30, 2025, is as follows (in thousands, except percentages): Schedule of accounts payable December 31, 2025 June 30, 2025 Total accounts payable $ 4,111 100 % $ 4,614 100 % Supplier concentration: Supplier 1 $ 1,650 40 % $ 735 16 % Supplier 2 501 12 % 1,016 22 % Supplier 3 92 2 % 298 6 % Total. $ 2,243 54 % $ 2,049 44 % 15 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 11. NOTES PAYABLE AND FINANCING TRANSACTIONS UMB BANK, N.A. (“UMB”) 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. The balance on our outstanding loans (in thousands) is as follows (exclusive of unamortized loan fees): Schedule of unamortized loan December 31, 2025 June 30, 2025 Notes Payable: Term Loan A $ 2,261 $ 2,795 Term Loan B 337 416 Term Loan C 3,667 4,167 Property Loan 4,242 4,347 Amended Revolving Loan — 3,706 Total notes payable $ 10,507 $ 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) the 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 UMB 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 December 31, 2025, but there can be no assurance that we will remain in compliance for the duration of the term of the Loans. 16 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 12. COMMON STOCK Share Repurchase Program In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock, as the prior repurchase plan authorized by our Board in 2013 was nearing completion. In accordance with, and as part of, these share repurchase programs, our Board approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor provided by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or “Plan”). During both the three and six months ended December 31, 2025, we repurchased 55,000 shares at an aggregate cost, inclusive of fees under the Plan, of $ 2.2 million. 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. On a cumulative basis, since implementation of the share repurchase program in 2013, we have repurchased a total of 1,566,497 shares under the share repurchase program at an aggregate cost, inclusive of fees, of $ 26.4 million. All repurchases under the 10b5-1 Plans were administered through an independent broker. As of December 31, 2025, our cumulative stock repurchases have exceeded our recorded value of common stock, and the excess has been reflected as a shareholder distribution, reducing our consolidated retained earnings. NOTE 13. LEASES Our operating lease right-of-use asset and long-term liability are presented separately on our condensed consolidated balance sheets. The current portion of our operating lease liability as of December 31, 2025, in the amount of $ 520,000 , is presented within accrued liabilities on the condensed consolidated balance sheets. As of December 31, 2025, our operating lease has a remaining lease term of one year and nine months and an imputed interest rate of 5.53 % . Cash paid for base rent amounts included in the lease liability for the three and six months ended December 31, 2025 totaled $ 139,000 and $ 273,000 , respectively, and for the three and six months ended December 31, 2024 totaled $ 135,000 and $ 265,000 , respectively. As of December 31, 2025, the maturity of our lease liability is as follows (in thousands): Operating Lease Fiscal Year: 2026 277 2027 567 2028 143 Total lease payments 987 Less imputed interest: ( 48 ) Total $ 939 17 PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 14. COMMITMENTS AND CONTINGENCIES Legal Matters We may be involved from time to time in various legal proceedings arising either in the ordinary course of our business or incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse. NOTE 15. SUBSEQUENT EVENTS We have evaluated subsequent events through the date of this report. There were no subsequent events that require disclosure. 18