What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2023-02-02 · 272 added, 295 removed, 385 unchanged (60% of the section changed)

6 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 2 and $ 0 at December 31, 2022 and at June 30, 2022, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 2 and $ 0 at March 31, 2023 and at June 30, 2022, respectively

Deferred costs

10 unchanged sentences

Accrued expenses

Income taxes payable

Deferred revenue

Notes payable

Income taxes payable

Total current liabilities

7 unchanged sentences

50,000,000 shares authorized;

3,553,929 and 3,596,131 shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively

3,545,309 and 3,596,131 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively

Retained earnings

7 unchanged sentences

(In thousands, except per share

Three Months Ended

Six Months Ended

Cost of sales

2 unchanged sentences

General and administrative expenses

Loss on disposal of equipment

Research and development costs

17 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

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

Exercise of stock options

ESPP shares issued

Balance, end of period

Balance, at end of period

Retained earnings:

Balance, beginning of period

Balance, end of period

Balance, at end of period

Balance, beginning of period

6 unchanged sentences

(In thousands)

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Depreciation and amortization

Amortization of loan fees

Share-based compensation

Unrealized (gain) loss on marketable equity investments

Non-cash lease expense

Amortization of loan fees

Non-cash straight-line lease amortization

Gain on sale of investments

1 unchanged sentence

Deferred income taxes

Bad debt expense

Bad debt expense (recovery)

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable and other current receivables

Deferred costs

14 unchanged sentences

Payment of employee payroll taxes on net issuance of common stock

Proceeds from Minnesota Bank & Trust revolving loan

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

Principal payments on notes payable and revolving loan

Net cash 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

5 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

Supplemental disclosures of cash flow information:

8 unchanged sentences

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.

for interim financial information and the instructions to Form 10-Q and Regulation S-K.

they do not include all of the information and footnotes required by U.S.

The accompanying unaudited condensed consolidated financial statements

of Pro-Dex, Inc.

(“we,” “us,” “our,” “Pro-Dex,” or the “Company”) have been

prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) for interim financial

information and the instructions to Form 10-Q and 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, 2022.

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, 2022.

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, 2022.

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, 2022.

Issued Accounting Pronouncements

In June 2016, the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

In June 2016,

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

2016-13, “Financial

8 unchanged sentences

years beginning after December 15, 2022 (fiscal 2024 for the Company) with early adoption permitted.

We are currently reviewing this ASU

and its potential impact on our consolidated financial statements.

are no other recently issued accounting pronouncements that we have not yet adopted that we believe will have a material effect on our

financial statements.

We do not believe the adoption of

this ASU will have a significant impact on our consolidated financial statements.

no other recently issued accounting pronouncements that we have not yet adopted that we believe will have a material effect on our financial

DESCRIPTION OF BUSINESS

17 unchanged sentences

Schedule of disaggregation of net sales

Three Months Ended

Six Months Ended

Over-time revenue recognition

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based on costs incurred compared to the estimated total costs upon completion.

During the three and six months ended December 31, 2022,

During the three and nine months ended March 31, 2023,

we recorded $ 405,000 and $ 956,000 , respectively, of revenue that had been included in deferred revenue in the prior year.

During the three

and six months ended December 31, 2021, we recorded $ 98,000 of revenue that had been included in deferred revenue in the prior year.

and nine months ended March 31, 2022, we did no t record any revenue that had been included in deferred revenue in the prior year.

revenue recognized from the contract liabilities consisted of satisfying our performance obligations during the normal course of business.

Our entire deferred revenue balance of $ 851,000 at December 31, 2022, is currently expected to be recognized in the next 12 months.

Our entire deferred revenue balance of $ 57,000 at March 31, 2023, is currently expected to be recognized in the next 12-month period.

The following tables summarize

1 unchanged sentence

Schedule of contract assets and liability

As of and for the

Three Months Ended

As of and for the

Six Months Ended

of and for the

Contract assets beginning balance

1 unchanged sentence

Amounts reclassified to cost of sales

Amounts allocated to discounts for standalone selling price

allocated to discounts for standalone selling price

Contract assets ending balance

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the

Three Months Ended

As of and for the

Six Months Ended

of and for the

Contract liabilities beginning balance

2 unchanged sentences

Contract liabilities ending balance

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

11 unchanged sentences

Total marketable equity securities

at December 31, 2022 and June 30, 2022 had an aggregate cost basis of $ 2,714,000 and $ 2,796,000 ,

at March 31, 2023 and June 30, 2022, had an aggregate cost basis of $ 2,714,000 and $ 2,796,000 ,

respectively.

1 unchanged sentence

because if we decide to sell these securities we may not be able to sell our position within one year.

At December 31, 2022, the investments

included net unrealized gains of $ 146,000 (gross unrealized gains of $ 243,000 offset by gross unrealized losses of $ 97,000 ).

At March 31, 2023, the investments

included net unrealized losses of $ 31,000 (gross unrealized losses of $ 113,000 offset by gross unrealized gains of $ 82,000 ).

2022, the investments included net unrealized losses of $ 262,000 (gross unrealized losses of $ 369,000

offset by gross unrealized gains of $ 107,000 ).

the total marketable equity securities at December 31, 2022 and June 30, 2022, $ 1,134,000 and $ 755,000 , respectively, represent an investment

the total marketable equity securities at March 31, 2023 and June 30, 2022, $ 1,149,000 and $ 755,000 , respectively, represent an investment

in the common stock of Air T, Inc.

9 unchanged sentences

by our then three Board members that are not affiliated with Air T, Inc.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We invest surplus cash from time

to time through our Investment Committee, which is comprised of one management director, Richard Van Kirk, and two non-management directors,

Raymond Cabillot and Nicholas Swenson, who chairs the committee.

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 Mr.

Swenson are active investors with extensive

6 unchanged sentences

or other companies whose boards they sit on, such as Air T, Inc.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Land and building

1 unchanged sentence

following (in thousands):

Schedule of capital leased assets

Schedule of land and building

accumulated depreciation

Land and building

November 6, 2020, we acquired the Franklin Property for a total purchase price of $ 6.5 million, of which we paid $ 1.3 million in cash

and the balance of $ 5.2 million we financed through Minnesota Bank & Trust (“MBT”) (See Note 10).

We substantially completed

the build-out of the property in the first quarter of the fiscal 2022.

Currently, we are actively engaged in various verification and

validation activities and we moved certain employees into the new building during the third quarter of fiscal 2022.

We expect that we

will begin operations in the new facility during the third quarter of this fiscal year.

The building is being amortized on a straight-line

basis over a period of 30 years.

Intangibles consist

of the following (in thousands):

November 6, 2020, we acquired the Franklin Property for a total purchase price of $ 6.5

million, of which we paid $ 1.3

million in cash and the balance of $ 5.2

million we financed through Minnesota Bank & Trust (“MBT”) (See Note 10).

We substantially completed the build-out

of the property in the first quarter of this fiscal year.

Currently, we are actively engaged in various verification and validation

We expect that we will begin operations in the new facility during the fourth quarter of this fiscal year.

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

consist of the following (in thousands):

Schedule of intangibles

1 unchanged sentence

Less accumulated amortization

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.

Future amortization expense is expected to be $ 21,000 for the remainder of fiscal 2023 and $ 42,000 per fiscal

year through October 2025, at which time we expect these costs to be fully amortized.

During the three months ended December 31, 2021,

we impaired $ 46,000 in previously capitalized legal fees because although we were granted the underlying patent, in this case, we had

(and continue to have) no products either in development or sold that utilize the intellectual property protected by the patent.

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.

Since we do not know when, or if, our patent applications will be issued, the future amortization expense is not predictable.

Future amortization

expense is expected to be $ 7,000 for the remainder of fiscal 2023 and $ 27,000 per fiscal year through fiscal 2026, at which time we expect

these costs to be fully amortized.

During the three months ended December 31, 2021, we impaired $ 46,000 in previously capitalized legal

fees because although we were granted the underlying patent, in this case, we had (and continue to have) no products either in development

or sold that utilize the intellectual property protected by the patent.

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 expenses in the accompanying condensed consolidated balance sheets.

As of December 31, 2022 and June 30, 2022, the warranty reserve

warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses and is included

in accrued expenses in the accompanying condensed consolidated balance sheets.

As of March 31, 2023 and June 30, 2022, the warranty reserve

amounted to $ 252,000 and $ 340,000 , respectively.

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

statements of income.

income statements.

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

1 unchanged sentence

Warranty expense relating to new

product sales and changes to estimates for the three months ended December 31, 2022 and 2021 was $ 56,000 and $ 44,000 , respectively, and

for the six months ended December 31, 2022 and 2021 was $ 123,000 and $ 68,000 , respectively.

Information regarding the accrual

for warranty costs for the three and six months ended December 31, 2022 and 2021, are as follows (in thousands):

product sales and changes to estimates for the three months ended March 31, 2023 and 2022, was $ ( 77,000 ) and $ 102,000 , respectively,

and for the nine months ended March 31, 2023 and 2022, was $ 46,000 and $ 170,000 , respectively.

Information regarding the accrual for

warranty costs for the three and nine months ended March 31, 2023 and 2022, 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

Beginning balance

1 unchanged sentence

Changes in estimates of prior period warranty accruals

Warranty amortization

Warranty amortization and utilization

Ending balance

Nine Months Ended

Beginning balance

Accruals during the period

Changes in estimates of prior period warranty accruals

Warranty amortization and utilization

Ending balance

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

The weighted-average

number of common shares outstanding reflects the effects of potentially dilutive securities, in income generating periods, which consist

entirely of outstanding stock options and performance awards.

The following table presents reconciliations

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

In the tables below, net income

amounts represent the numerator, and weighted average shares outstanding amounts represent the denominator (in thousands, except per share

The Company calculates

basic net income per share by dividing net income by the weighted-average number of common shares outstanding during the reporting period.

The weighted-average number of common shares outstanding used in the calculation of diluted income per share reflects the effects of potentially

dilutive securities, in income generating periods, which consist entirely of outstanding stock options and performance awards.

The following table presents

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 weighted average shares outstanding calculation of basic and diluted per share

Three Months Ended

Six Months Ended

Weighted average shares outstanding

4 unchanged sentences

Diluted income per share

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

12 unchanged sentences

which our deferred tax assets would be recoverable.

We recognize accrued interest and

penalties related to unrecognized tax benefits when applicable.

As of December 31, 2022 and 2021,

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

We recognize accrued interest and penalties related to unrecognized tax

benefits when applicable.

As of March 31, 2023 and 2022, we recognized accrued interest of $ 59,000

and $ 70,000 , respectively, related to unrecognized tax benefits.

We are subject to U.S.

federal income

tax, as well as income tax of multiple state tax jurisdictions.

We are currently open to audit under the statute of limitations by the

Internal Revenue Service for the years ended June 30, 2019 and later.

Our state income tax returns are open to audit under the statute

of limitations for the years ended June 30, 2019 and later.

However, because of our prior net operating

losses and research credit carryovers, our tax years from June 30, 2007 are open to audit.

We do not anticipate a significant change

to the total amount of unrecognized tax benefits within the next 12 months.

federal income tax, as well as income tax of multiple

state tax jurisdictions.

We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years

ended June 30, 2019 and later.

Our state income tax returns are open to audit under the statute of limitations for the years ended June

30, 2019 and later.

However, because of our prior net operating losses and research credit carryovers,

our tax years from June 30, 2007 are open to audit.

We do not anticipate a significant change to the total amount of unrecognized

tax benefits within the next 12 months.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SHARE-BASED COMPENSATION

3 unchanged sentences

the “Former Stock Option Plans”).

The Employee Stock Option Plan and Directors’ Stock Option Plan were terminated in

The Employee Stock Option Plan and Director’s Stock Option Plan were terminated in

June 2014 and December 2014, respectively.

In September 2016, our Board approved

the establishment of the 2016 Equity Incentive Plan, which was approved by our shareholders at our 2016 Annual Meeting.

The 2016 Equity

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

In September 2016, our Board

approved the establishment of the 2016 Equity Incentive Plan, which was approved by our shareholders at our 2016 Annual Meeting.

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, 2022, 200,000 performance awards and 372,000 non-qualified stock options have been granted under the 2016 Equity Incentive

As of March 31, 2023, 200,000 performance awards and 372,000 non-qualified stock options have been granted under the 2016 Equity Incentive

Former Stock Option Plans

were granted under the Former Stock Option Plans during the three or six months ended December 31, 2022 and 2021.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

remaining stock options outstanding under the Former Stock Option Plans were exercised during the six months ended December 31,

As such, as of December 31, 2022, there was no unrecognized compensation cost under the

Former Stock Option Plans as there are no options outstanding.

The following is a summary

of stock option activity under the Former Stock Option Plans for the six months ended December 31, 2022 and 2021:

were granted under the Former Stock Option Plans during the three or nine months ended March 31, 2023 and 2022.

31, 2023, there was no unrecognized compensation cost under the Former Stock Option Plans, as all remaining outstanding

stock options have been exercised during fiscal 2023.

The following is a summary of stock

option activity for the nine months ended March 31, 2023 and 2022:

Schedule of stock option activity

Six Months Ended December 31,

Number of Shares

Nine Months Ended March 31,

Weighted-Average

Exercise Price

Number of Shares

Weighted-Average

5 unchanged sentences

Outstanding at end of period

Stock Options Exercisable at December 31,

Stock Options Exercisable at March 31,

Performance Awards

In December 2017, the Compensation

Committee of our Board of Directors granted 200,000 performance awards to our employees under our 2016 Equity Incentive Plan, which will

generally be paid in shares of our common stock.

Whether any performance awards vest, and the amount that does vest, is tied to the completion

of service periods that range from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined

The weighted-average fair value of the performance awards granted was $ 4.46 , calculated using the weighted-average fair market

value for each award, using a Monte Carlo simulation.

In February 2020, the Compensation Committee reallocated 48,000 previously forfeited

awards, having the same remaining terms and conditions, to certain employees.

The weighted-average fair value of the performance awards

reallocated in 2020 was $ 16.90 , calculated using the weighted-average fair market value for each award, using a Monte Carlo simulation.

In December 2021, the Compensation Committee reallocated an additional 17,500 previously forfeited awards, having the same remaining terms

and conditions, to other employees.

The weighted average fair value of the performance awards reallocated in 2021 was $ 20.34 , calculated

using the weighted average fair market value for each award, using a Monte Carlo simulation.

During the three months ended December 31,

2022, and 2021, we recorded share-based compensation expense of $ 30,000 and $ 21,000 , respectively, related to outstanding performance

During the six months ended December 31, 2022 and 2021, we recorded share-based compensation expense of $ 60,000 and $ 42,000 , respectively,

related to outstanding performance awards.

On December 31, 2022, there was approximately $ 262,000 of unrecognized compensation cost related

to non-vested performance awards, which is expected to be expensed over the weighted-average period of 2.50 years.

On July 1, 2022, it was determined

by the Compensation Committee of our Board of Directors that the vesting of performance awards for 37,500 shares of common stock had been

Each participant elected a net issuance to cover their individual withholding taxes and therefore we issued 23,641 shares and

paid $ 223,000 of participant-related payroll tax liabilities.

Committee of our Board of Directors granted 200,000 performance awards to our employees, which will generally be paid in shares of our

common stock.

Whether any performance awards vest, and the amount that does vest, is tied to the completion of service periods that range

from 7 months to 9.5 years at inception and the achievement of our common stock trading at certain pre-determined prices.

average fair value of the performance awards granted was $ 4.46 , calculated using the weighted average fair market value for each award,

using a Monte Carlo simulation.

In February 2020, the Compensation Committee reallocated 48,000 previously forfeited awards, having the

same remaining terms and conditions, to certain other employees.

The weighted average fair value of the performance awards reallocated

in 2020 was $ 16.90 , calculated using the weighted average fair market value for each award, using a Monte Carlo simulation.

2021, the Compensation Committee reallocated an additional 17,500 previously forfeited awards, having the same remaining terms and conditions,

to other employees.

The weighted average fair value of the performance awards reallocated in 2021 was $ 20.34 , calculated using the weighted

average fair market value for each award, using a Monte Carlo simulation.

During the three months ended March 31, 2023 and 2022, we recorded

share-based compensation expense of $ 30,000 and $ 81,000 , respectively, related to outstanding performance awards.

During the nine months

ended March 31, 2023 and 2022, we recorded share-based compensation expense of $ 91,000 and $ 123,000 , respectively, related to outstanding

performance awards.

On March 31, 2023, there was approximately $ 232,000 of unrecognized compensation cost related to non-vested performance

awards expected to be expensed over the weighted-average period of 2.25 years.

On July 1, 2022, it was

determined by the Compensation Committee of our Board of Directors that the vesting of performance awards for 37,500 shares of common

stock had been achieved.

Each participant elected a net issuance to cover their individual withholding taxes and therefore we issued 23,641

shares and paid $ 223,000 of participant-related payroll tax liabilities.

AND SUBSIDIARIES

4 unchanged sentences

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.

In December 2021, the Compensation

Committee reallocated 5,000 previously forfeited non-qualified stock options, having the same remaining terms and conditions, to another

During the three months ended December 31, 2022 and 2021, we recorded compensation expense of $ 140,000 and $ 254,000 , respectively,

related to these options.

During the six months ended December 31, 2022 and 2021, we recorded compensation expense of $ 312,000 and $ 527,000 ,

respectively, related to these options.

The weighted average fair value of the stock option awards granted was $ 16.72 , calculated using

a Monte Carlo simulation.

As of December 31, 2022, none of these stock options had vested and there was approximately $2.7 million of

unrecognized compensation cost related to these stock options.

In February 2021, the Compensation

Committee of our Board of Directors granted 62,000 non-qualified stock options 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 4 months to 1.3 years

at inception and the achievement of our common stock trading at certain pre-determined prices.

Of these 62,000 stock options, 57,750 vested

on July 1, 2021, as our common stock met the pre-determined prices set forth in the underlying agreements and the required service periods

were already satisfied.

Whether any stock options vest, and the amount that does vest, 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 was $ 16.72 , calculated using a Monte Carlo simulation.

2021, the Compensation Committee reallocated 5,000 previously forfeited non-qualified stock options, having the same remaining terms and

conditions, to another employee at a weighted average fair value of $ 6.69 calculated using a Monte Carlo simulation.

During the three

months ended March 31, 2023 and 2022, we recorded compensation expense of $ 168,000 and $ 271,000 , respectively, related to these options.

During the nine months ended March 31, 2023 and 2022, we recorded compensation expense of $ 479,000 and $ 799,000 , respectively, related

to these options.

As of March 31, 2023, none of these non-qualified options have vested and there was approximately $ 2.5 million of unrecognized

compensation cost related to these non-vested non-qualified stock options.

In February 2021, the Compensation

Committee of our Board of Directors granted 62,000 stock options to our directors and certain employees under the 2016 Equity Incentive

Whether any stock options vest, and the amount that does vest, is tied to the completion of service periods that range from 4 months

to 1.3 years at inception and the achievement of our common stock trading at certain pre-determined prices.

Of these stock options, 4,250

were forfeited and the remaining 57,750 vested on July 1, 2021, as our common stock met the pre-determined prices set forth in the underlying

We recorded compensation expense of $ 59,000 for the three and nine months ended March 31, 2021, related to these options.

The weighted fair value of the stock option awards granted was $ 3.16 , calculated using a Monte Carlo simulation.

Employee Stock Purchase Plan

In September 2014, our Board approved

the establishment of an Employee Stock Purchase Plan (the “ESPP”).

The ESPP conforms to the provisions of Section 423 of the

Internal Revenue Code, has coterminous offering and purchase periods of six months, and bases the pricing to purchase shares of our common

stock on a formula so as to result in a per-share purchase price that approximates a 15% discount from the market price of a share of

our common stock at the end of the purchase period.

The Board of Directors also approved the provision that shares formerly reserved for

issuance under the Former Stock Option Plans in excess of shares issuable pursuant to outstanding options, aggregating 704,715 shares,

be reserved for issuance pursuant to the ESPP.

The ESPP was approved by our shareholders at our 2014 Annual Meeting.

During the three months ended December

31, 2022 and 2021, we did no t 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, 2022 and 2021, 2,503 and 1,130 shares of our common stock

were purchased under the ESPP, respectively, and allocated to employees based upon their contributions at prices of $ 13.52 and $ 26.17 ,

In September 2014, our Board

approved the establishment of an Employee Stock Purchase Plan (the “ESPP”), which was approved by our shareholders at our

2014 Annual Meeting.

The ESPP conforms to the provisions of Section 423 of the Internal Revenue Code, has coterminous offering and purchase

periods of six months, and bases the pricing to purchase shares of our common stock on a formula so as to result in a per share purchase

price that approximates a 15% discount from the market price of a share of our common stock at the end of the purchase period.

of Directors also approved the provision that shares formerly reserved for issuance under the Former Stock Option Plans in excess of shares

issuable pursuant to outstanding options under those plans, aggregating 704,715 shares, be reserved for issuance pursuant to the ESPP.

During the three months

ended March 31, 2023 and 2022, we recorded ESPP share-based compensation expense in the amount of $ 8,000 and $ 5,000 , respectively, and

2,956 and 1,446 shares were purchased, respectively, and allocated to employees based upon their contributions at prices of $ 14.79 and

$ 21.11 , respectively, per share.

On a cumulative basis, since the inception of the ESPP, employees have purchased a total of 29,542 shares of

our common stock.

During the six months ended December 31, 2022 and 2021, we recorded share-based compensation expense in the amount of

$ 6,000 and $ 5,000 , respectively, relating to the ESPP.

During the nine months ended March 31, 2023 and 2022, we recorded ESPP share-based compensation expense

in the amount of $ 14,000 and $ 11,000 , respectively.

On a cumulative basis, since the inception of the ESPP, employees have purchased a

total of 32,249 shares of our common stock.

AND SUBSIDIARIES

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

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

ended December 31, 2022 and 2021, is as follows (in thousands, except percentages):

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

ended March 31, 2023 and 2022, is as follows (in thousands, except percentages):

Schedule of sales by major customers

Three Months Ended December 31,

Three Months Ended March 31,

Percent of Total

1 unchanged sentence

Customer concentration:

Six Months Ended December 31,

Months Ended March 31,

Percent of Total

1 unchanged sentence

Customer concentration:

Information with respect to accounts

receivable from those customers who comprised more than 10% of our gross accounts receivable at either December 31, 2022 or June 30, 2022,

Information with respect

to accounts receivable from those customers who comprised more than 10% of our gross accounts receivable at either March 31, 2023 or June

30, 2022, is as follows (in thousands, except percentages):

Schedule of accounts receivable of major customers

December 31, 2022

June 30, 2022

Schedule of accounts receivable

Total gross accounts receivable

Customer concentration:

During the three months ended December

31, 2022, we had four suppliers accounting for 10 % or more of total inventory purchases, and during the six months ended December 31,

2022, we had three suppliers that accounted for more than 10 % of our total inventory purchases.

During the three and six months ended

December 31, 2021, we had two suppliers accounting for 10 % or more of total inventory purchases.

Amounts owed to the fiscal 2023 three

most significant suppliers at December 31, 2022, totaled $1.5 million, $53,000 and $166,000, respectively, and at June 30, 2022, totaled

$721,000, $430,000 and $372,000, respectively.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three

and nine months ended March 31, 2023, we had two and three suppliers, respectively, accounting for 10 % or more of total inventory purchases.

During the three and nine months ended March 31, 2022, we had three and four suppliers, respectively, accounting for 10 % or more of total

inventory purchases.

Amounts owed to the significant suppliers who comprised more than 10% of total accounts payable at either March 31,

2023 or June 30, 2022, is as follows (in thousands, except percentages).

Schedule of accounts payable

Total accounts payable

Supplier concentration:

NOTES PAYABLE

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November 6, 2020 (the “Closing Date”), PDEX Franklin, a newly created wholly owned subsidiary of the Company, purchased an

approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”).

A portion of the purchase

price was financed by a loan from MBT to PDEX Franklin in the principal amount of approximately $ 5.2 million (the “Property Loan”)

pursuant to a Loan Agreement, dated as of the Closing Date, between PDEX Franklin and MBT (the “Property Loan Agreement”)

and corresponding Term Note (the “Property Note”) issued by PDEX Franklin in favor of MBT on the Closing Date.

Loan is secured by the Franklin Property pursuant to a Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture

Filing in favor of MBT (the “Deed”) and by an Assignment of Leases and Rents by PDEX Franklin in favor of MBT (the “Rents

Assignment”).

We paid loan origination fees to MBT on the Closing Date in the amount of $ 26,037 .

“Franklin Property (See Note 2).

A portion of the purchase price was financed by a loan from MBT to PDEX Franklin in the principal

amount of approximately $ 5.2 million (the “Property Loan”) pursuant to a Loan Agreement, dated as of the Closing Date, between

PDEX Franklin and MBT (the “Property Loan Agreement”) and corresponding Term Note (the “Property Note”) issued

by PDEX Franklin in favor of MBT on the Closing Date.

The Property Loan is secured by the Franklin Property pursuant to a Deed of Trust

with Assignment of Leases and Rents, Security Agreement and Fixture Filing in favor of MBT (the “Deed”) and by an Assignment

of Leases and Rents by PDEX Franklin in favor of MBT (the “Rents Assignment”).

We paid loan origination fees to MBT on the

Closing Date in the amount of $ 26,037 .

Property Loan bears interest at a fixed rate of 3.55 % per annum, which is subject to a 3% increase upon an event of default.

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of default that are customary for a loan of this type.

The balance owed on the Property Loan at December 31, 2022 is $ 4,842,000 .

The balance owed on the Property Loan at March 31, 2023 is $ 4,794,000 .

the Closing Date, we also entered into an Amended and Restated Credit Agreement with MBT (the “Amended Credit Agreement”),

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Commencing July 1, 2021 and continuing on the first day of each month

thereafter until the maturity date, we are required to make payments of principal and interest on Term Loan

A of approximately $ 97,000 plus any additional accrued and unpaid interest through the date of payment.

The balance owed on Term Loan

A as of December 31, 2022, is $ 5,317,000 .

Term Loan B matures on November 1, 2027 , and bears interest at a fixed rate of 3.84 % per annum.

Initial payments on the Term Loan B of

interest only were due on December 1, 2020 through June 1, 2021.

Commencing July 1, 2021 and continuing on the first day of each month

thereafter until the maturity date, we are required to make payments of principal and interest on Term Loan B of approximately $ 15,000 ,

thereafter until the maturity date, we are required to make payments of principal and interest on Term Loan A of approximately $ 97,000

plus any additional accrued and unpaid interest through the date of payment.

The balance owing on Term Note B was $ 792,000 on December

The balance owed on Term Loan A as of March 31, 2023, is

$ 5,075,000 .

The Term Loan B matures on November

1, 2027 , and bears interest at a fixed rate of 3.84 % per annum.

Initial payments on the Term Loan B of interest only were due on December

1, 2020 through June 1, 2021.

Commencing July 1, 2021 and continuing on the first day of each month thereafter until the maturity date,

we are required to make payments of principal and interest on Term Loan B of approximately $ 15,000 , plus any additional accrued and unpaid

interest through the date of payment.

The balance owing on Term Note B was $ 756,000 on March 31, 2023.

AND SUBSIDIARIES

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Loan may be borrowed against from time to time through its maturity date of December 29, 2024 , on the terms set forth in the Amended Credit

As of December 31, 2022, no amounts have been drawn against the Supplemental Loan.

As of March 31, 2023, no amounts have been drawn against the Supplemental Loan.

The Revolving Loan was also amended

(the “Amended Revolving Loan”) in connection with the Amendment to extend the maturity date of the from November 5, 2023 to

December 29, 2024 , to increase the Revolving Loan facility from $ 2,000,000 to $ 7,000,000 , and to increase the interest rate on the Revolving

Loan (as described below), evidenced by an Amended and Restated Revolving Credit Note (the “Amended Revolving Note”) made

by us in favor of MBT.

The Amended Revolving Loan may be borrowed against from time to time by us through its maturity date on the terms

set forth in the Amended Credit Agreement.

As of December 31, 2022, we had drawn $ 1,800,000 against the Amended Revolving Loan.

(the “Amended Revolving Loan”) in connection with the Amendment to extend the maturity date from November 5, 2023 to December

29, 2024 , to increase the Revolving Loan facility from $ 2,000,000 to $ 7,000,000 , and to increase the interest rate on the Revolving Loan

(as described below), evidenced by an Amended and Restated Revolving Credit Note (the “Amended Revolving Note”) made by us

in favor of MBT.

The Amended Revolving Loan may be borrowed against from time to time by us through its maturity date on the terms set

forth in the Amended Credit Agreement.

As of March 31, 2023, we had drawn $ 1,800,000 against the Amended Revolving Loan.

Loan origination

fees in the amount of $ 16,000 are payable to MBT in conjunction with the Revolving Loan and the Supplemental Loan.

fees in the amount of $ 16,000 were paid to MBT in conjunction with the Amended Revolving Loan and the Supplemental Loan.

The Amended Revolving Loan and

Supplemental Loan bear interest at an annual rate equal to the greater of (a) 5.0% 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”).

Commencing on the

first day of each month after we initially borrow against the Amended Revolving Loan and/or the Supplemental Loan and each month

thereafter until maturity, we are required to pay all accrued and unpaid interest on the Amended Revolving Loan and Supplemental

Loan through the date of payment.

Any principal on the Amended Revolving Loan and/or Supplemental Loan that is not previously

prepaid shall be due and payable in full on the maturity date (or earlier termination of the Amended Revolving Loan and/or

Supplemental Loan).

Supplemental Loan bear interest at an annual rate equal to the greater of (a) 5.0% 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”).

Commencing on the first day of

each month after we initially borrow against the Amended Revolving Loan and/or the Supplemental Loan and each month thereafter until maturity,

we are required to pay all accrued and unpaid interest on the Amended Revolving Loan and Supplemental Loan through the date of payment.

Any principal on the Amended Revolving Loan and/or Supplemental Loan that is not previously prepaid shall be due and payable in full on

the maturity date (or earlier termination of the Amended Revolving Loan and/or Supplemental Loan).

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

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and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type.

that we are in compliance with all of our debt covenants as of December 31, 2022, but there can be no assurance that we will remain in

compliance for the duration of the term of these loans.

that we are in compliance with all of our debt covenants as of March 31, 2023, but there can be no assurance that we will remain in compliance

for the duration of the term of these loans.

Share Repurchase Program

In December 2019, our

Board approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock, as the

prior repurchase plan authorized by our Board in 2013 was nearing completion.

In accordance with, and as part of, these share

repurchase programs, our Board approved the adoption of several prearranged share repurchase plans intended to qualify for the safe

harbor provided by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or

During the three and six months ended December 31, 2022, we repurchased 53,993 and 74,846 shares,

respectively, at an aggregate cost, inclusive of fees under the Plan, of $ 995,000 and

$ 1.3 million,

respectively.

During the three and six months ended December 31, 2021, we repurchased 24,336 and 27,952 shares,

respectively, at an aggregate cost, inclusive of fees under the Plan, of $ 577,000 and

respectively.

On a cumulative basis, since implementation of the share repurchase program in 2013, we have repurchased a total of 1,185,582 shares

under the share repurchase program at an aggregate cost, inclusive of fees, of $ 17.0 million.

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

In December 2019, our Board approved a new share repurchase

program authorizing us to repurchase up to 1 million shares of our common stock, as the prior repurchase plan authorized by our Board

in 2013 was nearing completion.

In accordance with, and as part of, these share repurchase programs, our Board approved the adoption of

several prearranged share repurchase plans intended to qualify for the safe harbor provided by Rule 10b5-1 under the Securities Exchange

Act of 1934, as amended (“10b5-1 Plan” or “Plan”).

During the three and nine months ended March 31, 2023, we repurchased

11,576 and 86,422 shares, respectively, at an aggregate cost, inclusive of fees under the Plan, of $ 198,000 and $ 1,547,000 , respectively.

During the three and nine months ended March 31, 2022, we repurchased 24,766 and 52,718 shares, respectively, at an aggregate cost, inclusive

of fees under the Plan, of $ 584,000 and $ 1,256,000 , respectively.

cumulative basis, since implementation of the share repurchase program in 2013, we have repurchased a total of 1,197,168 shares under

the share repurchase program at an aggregate cost of $ 17.2 million.

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

independent broker.

AND SUBSIDIARIES

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The current portion of our operating

lease liability as of December 31, 2022, in the amount of $ 397,000 , is presented within accrued expenses on the condensed consolidated

balance sheet.

As of December 31, 2022, our

operating lease has a remaining lease term of four

years and nine months and an imputed interest rate of 5.53 %.

Cash paid for amounts included in the lease liability for the three and six months ended December 31, 2022 totaled $ 127,000 and

$ 250,000 , respectively, and for December

31, 2021 totaled $ 123,000 and

$ 243,000 , respectively.

As of December 31, 2022, the maturity

of our lease liability is as follows:

lease liability as of March 31, 2023, in the amount of $ 406,000 , is presented within accrued expenses on the condensed consolidated balance

As of March 31, 2023, the

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

Schedule of maturities of lease liabilities

2 unchanged sentences

Less imputed interest:

As of March 31, 2023, the operating lease for

our Irvine, California headquarters has a remaining lease term of four years and six months and an imputed interest rate of 5.53 %.

paid for amounts included in the lease liability for the three and nine months ended March 31, 2023, was $ 139,000 and $ 418,000 , respectively.

Cash paid for amounts included in the lease liability for the three and nine months ended March 31, 2022, was $ 123,000 and $ 366,000 ,

respectively.

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.

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.

be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse.

SUBSEQUENT EVENTS

3 unchanged sentences

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