What changed in this filing

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Item 1. Financial Statements

2026-04-30 compared with 2026-01-29 · 448 added, 359 removed, 320 unchanged (72% of the section changed)

FINANCIAL STATEMENTS

PRO-DEX, INC.

AND SUBSIDIARY

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

2 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for expected credit losses of $ 19 and $ 0 at December 31, 2025 and at June 30, 2025, respectively

Accounts receivable

Deferred costs

10 unchanged sentences

Accounts payable

Accrued liabilities

Income taxes payable

Accrued expenses

Deferred revenue

Income taxes payable

Notes payable

5 unchanged sentences

Shareholders’ equity:

Common stock;

Common shares;

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

3,196,611 and 3,261,043 shares issued and outstanding at March 31, 2026 and June 30, 2025, respectively

Retained earnings

4 unchanged sentences

PRO-DEX, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

Three Months Ended

Six Months Ended

AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

Cost of sales

4 unchanged sentences

Operating income

Other income (expense), net

Interest expense

Gain (loss) on marketable equity investments, net

Gain on equity investments, net

Interest and other income

Total other income (expense)

Income before income taxes

1 unchanged sentence

Basic and diluted net income per share:

Basic net income per share

Diluted net income per share

Weighted average common shares outstanding:

3 unchanged sentences

PRO-DEX, INC.

AND SUBSIDIARY

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

(In thousands)

Common stock:

Common shares:

Balance, beginning of period

1 unchanged sentence

Share repurchases

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

Shares withheld from common stock issued to pay employee payroll taxes

ESPP shares issued

Reclassification of excess share repurchases (1)

Balance, end of period

Balance, at end of period

Retained earnings:

1 unchanged sentence

Shareholder distribution

Balance, end of period

Balance, at end of period

Balance, beginning of period

Total shareholders’ equity

(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.

(1) During the three and nine months ended March 31, 2026,

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

1 unchanged sentence

PRO-DEX, INC.

AND SUBSIDIARY

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to

net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of loan fees, net

Share-based compensation

Gain on marketable equity investments

Non-cash lease recovery

Gain on equity investments

Non-cash straight-line lease amortization

Deferred income taxes

Amortization of loan fees, net

Credit loss expense

Credit loss expense (recovery)

Changes in operating assets and liabilities:

4 unchanged sentences

Deferred revenue

Income taxes payable

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of investments

Purchases of investments

Purchase of APM, net of cash acquired

Purchases of equipment and improvements

Net cash provided by (used in) investing activities

Proceeds from sale of investments

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchases of common stock

Proceeds from ESPP contributions

Proceeds from exercise of options and ESPP contributions

Payment of employee payroll taxes on net issuance of common stock

Proceeds from notes payable and revolving loan

Proceeds from notes, net of fees

Principal payments on notes payable and revolving loan

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

3 unchanged sentences

PRO-DEX, INC.

AND SUBSIDIARY

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Supplemental disclosures

of cash flow information:

Supplemental disclosures of cash flow information:

Cash paid during the period for interest

7 unchanged sentences

Cashless stock option exercise

Promissory note issued in conjunction with APM acquisition

The accompanying notes are an integral part

of these condensed consolidated financial statements.

PRO-DEX, INC.

AND SUBSIDIARY

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

2 unchanged sentences

(“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

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

“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.

Adopted Accounting Standards

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

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.

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

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(“Monogram”) described more fully in Note 5.

Recently Issued and Not Yet Adopted Accounting Pronouncements

Issued and Not Yet Adopted Accounting Pronouncements

November 2024, the FASB issued ASU No.

2024-03, Disaggregation of Income Statement Expenses (“DISE”) .

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,

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).

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December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic 270):

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.

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.

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

of December 31, 2025, we have identified one reportable segment, as our chief operating decision maker (“CODM”), the Company’s

of March 31, 2026, 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.

PRO-DEX, INC.

AND SUBSIDIARY

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

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

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.

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.

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.

DESCRIPTION OF BUSINESS

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however, these motors

comprise a de minimis portion of our business.

comprise a de minimis portion of our business, and precision machined parts and assemblies for the aerospace and defense industries through

our newly acquired subsidiary Advanced Precision Machining, LLC (“APM”).

August 2020, we formed a wholly owned subsidiary, PDEX Franklin, LLC (“PDEX Franklin”), to hold title for an approximate 25,000

1 unchanged sentence

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.

following table presents the disaggregation of net sales by revenue recognition model (in thousands):

described more fully in Note 3, in February 2026, we acquired APM, a manufacturer located

in Costa Mesa, California.

APM manufactures several of our machined sub-assemblies and also manufactures parts and assemblies for the

aerospace and defense industries.

In addition, it serves as a Prime Contractor for the U.S.

Government and therefore maintains registrations

under the International Traffic in Arms Regulations (“ITAR”) as well as a Joint Certification Program (“JCP”)

certification.

The condensed consolidated financial statements include the accounts of the Company, PDEX Franklin and APM and all significant

inter-company accounts and transactions have been eliminated.

BUSINESS ACQUISITION

February 9, 2026, we completed the acquisition of all of the issued and outstanding membership interests of APM, a manufacturer of precision

machined components and assemblies for the medical, aerospace and defense industries.

The aggregate purchase price was $ 8,650,000 of which

$ 6,650,000 was paid in cash through a new term loan (Term Loan D) we borrowed from UMB Bank, N.A.

(see note 12) and $ 2,000,000 of which

is to be paid by the Company under the terms of a sixty-three month promissory note (the “Subordinated Promissory Note”) issued

to Advanced-Precision Machining Holding Company, Inc., the former owner of APM.

The Subordinated Promissory Note bears interest at 8 %

per annum and requires twenty-one quarterly payments of principal and accrued interest in the approximate amount of $ 118,000 .

This Subordinated

Promissory Note is subordinate to all debt issued under our Second Amended and Restated Credit and Security Agreement with UMB Bank, N.A.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following table summarizes the consideration paid and the estimated fair value of the assets acquired and liabilities assumed for APM

as of the acquisition date of February 9, 2026 (in thousands).

Schedule of estimated fair value of the assets acquired and liabilities assumed

Price Allocation

Consideration:

Promissory note payable to seller

Total Consideration

Fair value of assets acquired and liabilities assumed:

Accounts receivable

Prepaids and other assets

Customer relationships

Accounts payable and accrued expenses

Long-term lease liabilities

Net assets acquired

acquisition of APM was completed to support expansion of our business and broaden the Company’s customer base as well as to support

the increased demand resulting from the contract extension executed with our largest customer in the second quarter of this fiscal year.

We have accounted for this acquisition as a business combination using the acquisition method of accounting.

This method requires, among

other things, that assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition

The purchase price allocation reflected above is based upon our preliminary valuation and is subject to future adjustment.

Pro forma historical results of operations related to APM during the period prior to the acquisition date have not been presented because

they are not material to our condensed consolidated income statements.

The results of operations related to APM have been included

in the Company’s condensed consolidated income statements since the date of acquisition.

The fair value determination of assets

recorded and liabilities assumed are those of management.

The fair value determination of the customer relationships was based on the

excess of earnings method which is based on the prospective net cash flows of the existing customers.

The fair value determination of

the trade name was based upon a relief from royalty approach which assesses the royalty savings an entity realizes since it owns the asset

and isn’t required to pay a third-party license for its use.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents

the disaggregation of net sales by revenue recognition model (in thousands):

Schedule of disaggregation of net sales

2 unchanged sentences

Total net sales

The timing of revenue recognition,

billings, and cash collections results in billed accounts receivables, unbilled receivables (presented as deferred costs on our condensed

consolidated balance sheets), and customer advances and deposits (presented as deferred revenue on our condensed consolidated balance

sheets), where applicable.

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.

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.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following tables summarize our contract assets and liability balances (in thousands):

The timing of revenue

recognition, billings, and cash collections results in billed accounts receivables , unbilled receivables or contract assets

(presented as deferred costs on our condensed consolidated balance sheets), and customer advances and deposits (presented as

deferred revenue on our condensed consolidated balance sheets), where applicable.

Amounts are generally billed as work progresses in

accordance with agreed upon milestones.

The over-time revenue recognition model consists of non-recurring engineering

(“NRE”) and prototype services and typically relates to NRE services related to the evaluation, design, or customization

of a medical device and is typically recognized over time utilizing an input measure of progress based on costs incurred compared to

the estimated total costs upon completion.

During the three and nine months ended March 31, 2026, we recorded $ 122,000

and $ 202,000 ,

respectively, of revenue that had been included in deferred revenue in the prior fiscal year.

During the three and nine months ended

March 31, 2025, we recorded $ 0

and $ 14,000 ,

respectively, of revenue that had been included in deferred revenue in the prior fiscal year.

The revenue recognized from contract

liabilities consisted of satisfying our performance obligations during the normal course of business.

As of March 31, 2026 and 2025,

we had deferred revenue of $ 144,000

respectively.

The following tables summarize

our contract assets and liability balances (in thousands):

Schedule of contract assets and liability

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Amounts reclassified to cost of sales

allocated to discounts for standalone selling price

Amounts allocated to discounts for standalone selling price

Contract assets ending balance

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Contract liabilities ending balance

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE MEASUREMENTS

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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.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following tables summarize the fair value measurements within the fair value hierarchy of our financial instruments (in thousands):

At March 31, 2026 and June 30, 2025, we categorized our

investments in equity securities as Level 2 assets.

3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant

to the measurement of the fair value of the assets or liabilities.

We held no Level 3 assets or liabilities at March 31, 2026 or June

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

Value Measurement at December 31, 2025

Value Measurement at March 31, 2026

Financial Assets:

Cash equivalents

Marketable equity securities – short-term

Marketable equity securities – long-term

Equity securities – short-term

Equity securities – long-term

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Value Measurement at June 30, 2025

1 unchanged sentence

Cash equivalents

Marketable equity securities – short-term

Marketable equity securities – long-term

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.

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 ).

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.

Equity securities – short-term

Equity securities – long-term

at March 31, 2026 and June 30, 2025 had an aggregate cost basis of $ 1.8 million and $ 3.5

million, respectively .

Both short-term and long-term equity securities include equity securities of public companies that are thinly

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 March 31, 2026, the investments included unrealized losses of $ 309,000 .

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 ).

the total equity securities at March 31, 2026 and June 30, 2025, $ 986,000 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.

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.

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.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

In our third quarter

of fiscal 2026, Monogram achieved the first of five milestones, and accordingly we earned and recorded an additional gain in the amount

of $2.3 million.

There is no guarantee or assurance that any additional 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 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.

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.

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.

COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMPOSITION OF CERTAIN FINANCIAL STATEMENT

is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands):

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Patent-related costs

Customer relationships

Total Intangibles

accumulated amortization

4 unchanged sentences

These intangible assets are expected to be fully expensed this fiscal year.

PRO-DEX, INC.

AND SUBSIDIARY

the customer relationships and the tradename relate to our acquisition of APM described in Note 3 and will be amortized on a straight-line

basis over ten and seven years, respectively.

As of March 31, 2026, the

expected future amortization expense of our intangible assets is as follows (in thousands):

Schedule of amortization expense of our intangible assets

Amortization Expense

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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):

in accrued expenses in the accompanying condensed consolidated balance sheets.

As of March 31, 2026 and June 30, 2025, the warranty reserve

amounted to $254,000 and $357,000, respectively.

Warranty expenses are included in cost of sales in the accompanying condensed consolidated

income statements.

Changes in estimates to previously established warranty accruals result from current period updates to assumptions

regarding repair costs and warranty return rates and are included in current period warranty expense.

Information regarding the accrual

for warranty costs for the three and nine months ended March 31, 2026 and 2025, are as follows (in thousands):

Schedule of accrual warranty costs

As of and for the

Three Months Ended

As of and for the

Six Months Ended

of and for the

Beginning balance

8 unchanged sentences

per share reflects the effects of potentially dilutive securities, which consist of outstanding stock options, restricted shares and performance

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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):

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

In the tables

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

Schedule of net income per share

5 unchanged sentences

Diluted income per share

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

income taxes are provided on a liability method whereby deferred tax assets and liabilities are recognized for temporary differences.

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.

income taxes are provided on a liability method whereby deferred tax assets and liabilities

are recognized for temporary differences.

differences are the differences between the reported amounts of assets and liabilities and

their tax basis.

Deferred tax assets are reduced by a valuation

allowance when, in the opinion of management, it is more - likely - than - not

that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and

rates on the date of enactment.

management judgment is required in determining our provision for income taxes and the recoverability of our

deferred tax assets.

are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred

tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on

the date of enactment.

management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets.

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.

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.

are subject to U.S.

federal income tax, as well as various state jurisdictions.

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.

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.

SHARE-BASED COMPENSATION

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

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

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.

PRO-DEX, INC.

AND SUBSIDIARY

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.

deferred tax asset is net of a valuation allowance in the gross amount of $ 90,000 as of both March 31, 2026 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 March 31, 2026 and 2025 was 26 % and 28 % , respectively.

The decline in the effective tax rate for the three

months ended March 31, 2026 compared to the prior fiscal year is largely due to the creation of state tax nexus in Florida and Indiana

this fiscal year.

The effective tax rate for the nine months ended March 31, 2026 and 2025 was 25 % and 26 % , respectively.

We are subject to U.S.

income tax, as well as various state jurisdictions.

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.

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,

We do not expect the 2025 Act will have a material impact on our financial statements for fiscal 2026.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our 2016 Equity Incentive

Plan provides for the award of up to 1,500,000 shares of our common stock in the form of incentive stock options, nonstatutory stock options,

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

As of March 31,

2026, 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 March 31, 2026 and 2025, we recorded share-based compensation expense of $ 7,000 related to outstanding performance awards.

both the nine months ended March 31, 2026, and 2025, we recorded share-based compensation expense of $ 20,000 related to outstanding performance

On March 31, 2026, there was approximately $ 7,000 of unrecognized compensation cost related to non-vested performance awards,

which is expected to be expensed over a weighted-average period of three 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.

Non-Qualified Stock Options

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

The weighted average fair value of the stock option awards granted in fiscal 2021 was $ 16.72 , calculated using a Monte Carlo

During both the three months ended December 31, 2025 and 2024, we recorded compensation expense of $ 104,000 related to these

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.

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 March 31, 2026 and 2025, we recorded compensation expense of $ 104,000 related to these options.

During both the nine months ended

March 31, 2026 and 2025, we recorded compensation expense of $ 312,000 related to these options.

As of March 31, 2026, 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 $ 833,000 of unrecognized compensation cost related to the non-vested

stock options.

Restricted Shares

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.

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.

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

3 unchanged sentences

based upon the closing price of our common stock on the date of grant.

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

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.

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.

PRO-DEX, INC.

AND SUBSIDIARY

During the three months ended

March 31, 2026 and 2025, we recorded compensation expense of $ 67,000 and $ 43,000 , respectively, related to these restricted shares.

the nine months ended March 31, 2026 and 2025, we recorded compensation expense of $ 163,000 and $ 62,000 , respectively, related to these

restricted shares.

As of March 31, 2026, there was approximately $ 1.1 million of unrecognized compensation cost related to these restricted

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

March 31, 2026 and 2025, we recorded ESPP share-based compensation expense in the amount of $ 8,000 and $ 5,000 , respectively.

three months ended March 31, 2026 and 2025, 1,301 and 653 shares were purchased, respectively, under the ESPP and allocated to employees

based upon their contribution prices of $ 34.36 and $ 41.11 , respectively, per share.

During the nine months ended March 31, 2026 and 2025,

we recorded ESPP share-based compensation expense in the amount of $ 15,000 and $ 7,000 , respectively.

On a cumulative basis, since the

inception of the ESPP, employees have purchased a total of 39,357 shares of our common stock under the ESPP.

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):

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

either of the three-month and the nine-month periods ended

March 31, 2026 and 2025, is as follows (in thousands, except percentages):

Schedule of sales by major customers

Months Ended December 31,

Months Ended March 31,

Perfect of Total

Customer concentration:

Months Ended December 31,

Months Ended March 31,

Perfect of Total

Customer concentration:

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

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Information with respect

to accounts receivable from those customers who comprised more than 10% of our gross accounts receivable at either March 31, 2026 or

June 30, 2025, is as follows (in thousands, except percentages):

2 unchanged sentences

Customer concentration:

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

During the three and

nine months ended March 31, 2026 and 2025 we had three suppliers, respectively, that accounted for 10% or more of total inventory

One of our significant suppliers presented in the tables below is APM, our newly acquired subsidiary.

Accordingly amounts below exclude amounts purchased from or payable

to APM after the acquisition date of February 9, 2026.

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):

or the nine-month periods ended March 31, 2026 and 2025, is as follows (in thousands, except percentages):

Schedule of inventory purchases

Months Ended December 31,

Months Ended March 31,

Percent of Total

2 unchanged sentences

Supplier concentration:

Months Ended December 31,

Months Ended March 31,

Percent of Total

2 unchanged sentences

Supplier concentration:

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

to accounts payable due to those suppliers that comprised more than 10% of our inventory purchases at either March 31, 2026 or June 30,

2025, is as follows (in thousands, except percentages):

Schedule of accounts payable

December 31, 2025

June 30, 2025

Total accounts payable

Supplier concentration:

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES PAYABLE AND

FINANCING TRANSACTIONS

NOTES PAYABLE

AND FINANCING TRANSACTIONS

UMB Bank, N.A.

1 unchanged sentence

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 .

origination fees in the amount of $ 8,000 were paid to UMB in connection with the Sixth Amendment.

The Company entered into a Second Amended and Restated Credit and Security Agreement (the “Amended Credit

Agreement”) with UMB Bank, N.A.

on February 9, 2026, which among other things provided for financing to fund the cash portion of

the purchase price of APM as described in Note 3 by issuing Term Loan D in the principal amount of $6,650,000.

The Amended Credit

Agreement also extended the maturity date of the Amended Revolving Loan from December 29, 2026 to December 29, 2027, pursuant to

a Third Amended and Restated Revolving Credit Note entered into by the Company and UMB on February 9, 2026.

Loan origination fees in the

amount of $31,625 were paid to UMB in connection with the Amended Credit Agreement.

Advanced Precision Machining (“APM”)

Subordinated Promissory Note

On February 9, 2026 in connection

with the acquisition of APM as described in Note 3, we issued the seller a promissory note in the amount of $ 2,000,000 which bears interest

at 8 % per annum and requires twenty-one equal quarterly payments of principal and accrued interest in the amount of approximately $ 118,000

The promissory note contains covenants and obligations of the Company customary for a subordinated promissory note of this type.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The balance on

3 unchanged sentences

Property Loan

APM Subordinated Loan

Amended Revolving Loan

3 unchanged sentences

the website of the CME Group Benchmark Administration Limited plus 2.5% (the “Adjusted Term SOFR Rate”).

Amended Revolving Loan bears interest at an annual rate equal to the greater of (a) 4%, or (b) the Adjusted Term SOFR Rate.

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

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 .

payment on Term Loan A, Term Loan B, Term Loan C, the Property Loan, or Amended Revolving Loan (collectively, the “Loans”)

Term Note D bears

interest at the greater of (a) 4.5% or (b) the Adjusted SOFR Rate.

The Amended Revolving Loan bears interest at the greater of (a) 4%

or (b) the Adjusted SOFR Rate.

Term Loan A and Term Loan B are both fully amortizing and mature on November 1, 2027 , Term Loan C is fully

amortizing and matures on August 1, 2029 and Term Note D is fully amortizing and matures on February 1, 2031 .

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, 2027 .

payment on Term Loan A, Term Loan B, Term Loan C, Term Loan D, the Property Loan, or the 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.

7 unchanged sentences

an assignment of Leases and Rents by PDEX Franklin in favor of UMB (collectively, the “Property Loan Security Agreements”).

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

Credit Agreement, Security Agreement, Property Loan Security Agreement, Term Loan A, Term Loan B, Term Loan C, Term Loan D, Property

Loan, and Amended Revolving Loan contain representations and warranties, affirmative, negative and financial covenants, and events of

default that are customary for loans of this type.

We believe that we are in compliance with all of our debt covenants as of December

We believe that we are in compliance with all of our debt covenants as of March 31,

2026, but there can be no assurance that we will remain in compliance for the duration of the term of the Loans.

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Share Repurchase Program

5 unchanged sentences

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.

During the three and nine months

ended March 31, 2026, we repurchased 14,422 and 69,422 shares, respectively, at an aggregate cost, inclusive of fees under the Plan, of

$ 0.6 million and $ 2.8 million, respectively.

During both the three and nine months ended March 31, 2025, we repurchased 130,148 shares

at an aggregate cost, inclusive of fees under the Plan, of $ 3.5 million.

On a cumulative basis, since implementation of the share repurchase

program in 2013, we have repurchased a total of 1,580,919 shares under the share repurchase program at an aggregate cost, inclusive of

fees, of $ 27.0 million.

All repurchases under the 10b5-1 Plans were administered through an independent broker.

As of December 31, 2025, our

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2026, our

cumulative stock repurchases have exceeded our recorded value of common stock, and the excess has been reflected as a shareholder distribution,

1 unchanged sentence

Our operating lease right-of-use

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

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

Additionally, we acquired some equipment leases in conjunction with

our acquisition of APM in the third quarter of fiscal 2026.

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

lease liability as of March 31, 2026, in the amount of $ 838,000 , 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

As of March 31, 2026,

our operating lease related to our corporate office has a remaining lease term of one year and six months and an imputed interest

rate of 5.53 % .

Cash paid for rent inclusive of common area maintenance charges for the three and nine months ended March 31, 2026 totaled $ 156,000

and $ 456,000 ,

respectively, and for the three and nine months ended March 31, 2025 totaled $ 149,000

and $ 442,000 ,

respectively.

As of March 31, 2026, the

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

Schedule of maturities of lease liabilities

Operating Leases

Total lease payments

Less imputed interest:

PRO-DEX, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

We have evaluated subsequent

events through the date of this report.

events through the date of this filing.

There were no subsequent events that require disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements