Pro-Dex (NASDAQ: PDEX) posts stronger Q2 earnings, Monogram gain and lower debt
Pro-Dex, Inc. reported higher sales and profits for the three and six months ended December 31, 2025. Quarterly net sales rose to $18.7 million from $16.8 million, while net income increased to $2.2 million, or $0.66 diluted per share, up from $0.61.
For the six-month period, net sales grew to $37.2 million from $31.7 million and net income improved to $6.9 million, or $2.07 diluted per share, versus $1.33. Growth was driven mainly by orthopedic device sales tied to a next-generation handpiece for the company’s largest customer and stronger CMF driver demand, partially offset by lower repair revenue.
Pro-Dex realized $8.9 million of cash proceeds from the sale of Monogram Technologies shares and recorded a $6.8 million realized gain, contributing to stronger cash flow and lifting cash and cash equivalents to $8.0 million. Total notes payable fell to $10.5 million. Customer concentration remains high, with one customer representing about 79% of sales and 82% of accounts receivable, and order backlog was approximately $37.4 million.
Positive
- Strong earnings growth and cash generation: Six-month net sales rose to $37.2 million from $31.7 million and net income to $6.9 million from $4.5 million, while operating cash flow reached $5.9 million and debt was reduced from $15.4 million to $10.5 million.
Negative
- None.
Insights
Pro-Dex posted strong top-line growth, margin stability, and a sizable investment gain, while reducing debt.
Pro-Dex delivered solid operating performance. Six‑month net sales increased to
Cash generation improved meaningfully. Operating activities provided
Strategically, the Zimmer Biomet acquisition of Monogram crystallized a realized gain of
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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PRO-DEX, INC. AND SUBSIDIARY
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2025
TABLE OF CONTENTS
| Page | |
| PART I — FINANCIAL INFORMATION | |
| ITEM 1. FINANCIAL STATEMENTS (Unaudited) | 1 |
| Condensed Consolidated Balance Sheets as of December 31, 2025 and June 30, 2025 | 1 |
| Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2025 and 2024 | 2 |
| Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended December 31, 2025 and 2024 | 3 |
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2025 and 2024 | 4 |
| Notes to Condensed Consolidated Financial Statements | 6 |
| ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 15 |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 23 |
| ITEM 4. CONTROLS AND PROCEDURES | 23 |
| PART II — OTHER INFORMATION | |
| ITEM 1. LEGAL PROCEEDINGS | 24 |
| ITEM 1A. RISK FACTORS | 24 |
| ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 24 |
| ITEM 5. OTHER INFORMATION | 25 |
| ITEM 6. EXHIBITS | 25 |
| SIGNATURES | 26 |
i
PART I — FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
PRO-DEX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
| December
31, 2025 | June 30,
2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments | ||||||||
| Accounts receivable, net of allowance for expected credit losses of $ | ||||||||
| Deferred costs | ||||||||
| Inventory | ||||||||
| Income tax receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Land and building, net | ||||||||
| Equipment and leasehold improvements, net | ||||||||
| Right-of-use asset, net | ||||||||
| Intangibles, net | ||||||||
| Deferred income taxes, net | ||||||||
| Investments | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Income taxes payable | ||||||||
| Deferred revenue | ||||||||
| Notes payable | ||||||||
| Total current liabilities | ||||||||
| Lease liability, net of current portion | ||||||||
| Notes payable, net of current portion | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock; | — | |||||||
| Retained earnings | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 1 |
PRO-DEX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share amounts)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other income (expense), net | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain (loss) on marketable equity investments, net | ( | ) | ||||||||||||||
| Interest and other income | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Income before income taxes | ||||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic and diluted net income per share: | ||||||||||||||||
| Basic net income per share | $ | $ | $ | $ | ||||||||||||
| Diluted net income per share | $ | $ | $ | $ | ||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
PRO-DEX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands)
| Three
Months Ended December 31, | Six Months
Ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Common stock: | ||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | ||||||||||||
| Share-based compensation expense | ||||||||||||||||
| Share repurchases | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Shares withheld from common stock issued to employees to pay employee payroll taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| ESPP shares issued | — | — | ||||||||||||||
| Reclassification of excess share repurchases(1) | — | — | ||||||||||||||
| Balance, end of period | — | — | ||||||||||||||
| Retained earnings: | ||||||||||||||||
| Balance, beginning of period | ||||||||||||||||
| Net income | ||||||||||||||||
| Shareholder distribution | ( | ) | — | ( | ) | — | ||||||||||
| Balance, end of period | ||||||||||||||||
| Balance, beginning of period | ||||||||||||||||
| Net income | ||||||||||||||||
| Total shareholders’ equity | $ | $ | $ | $ | ||||||||||||
| (1) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
PRO-DEX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Six Months
Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Share-based compensation | ||||||||
| Gain on marketable equity investments | ( | ) | ( | ) | ||||
| Non-cash lease recovery | ( | ) | ( | ) | ||||
| Deferred income taxes | — | |||||||
| Amortization of loan fees, net | ||||||||
| Credit loss expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Deferred costs | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Income taxes | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of investments | — | |||||||
| Purchases of equipment and improvements | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repurchases of common stock | ( | ) | ( | ) | ||||
| Proceeds from ESPP contributions | ||||||||
| Payment of employee payroll taxes on net issuance of common stock | ( | ) | ( | ) | ||||
| Proceeds from notes payable and revolving loan | ||||||||
| Principal payments on notes payable and revolving loan | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
PRO-DEX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
(In thousands)
| Six Months
Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash paid during the period for income taxes by jurisdiction: | ||||||||
| Federal income tax payments | $ | $ | ||||||
| California income tax payments | — | |||||||
| Indiana income tax payments | — | |||||||
| Florida income tax payments | — | |||||||
| Total income tax payments | $ | $ | ||||||
| Non-cash investing and financing activity: | ||||||||
| Cashless stock option exercise | $ | — | $ | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
PRO-DEX, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Pro-Dex, Inc. (“we,” “us,” “our,” “Pro-Dex,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and applicable provisions of Regulation S-K. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2025.
Recently Adopted Accounting Standards
In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606), which clarifies the application of derivative accounting to certain contracts and updates the guidance for share-based noncash consideration received from a customer in exchange for goods and services. Specifically, this ASU introduces a scope exception for contracts that are not exchange-traded and whose underlying is tied to operations or activities specific to one of the parties to the contract. It also clarifies the guidance for share-based consideration from a customer. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted and the option to apply on a prospective or modified retrospective basis. The Company early adopted this ASU on a prospective basis as of July 1, 2025. The Company expects this ASU to reduce the cost and complexity associated with analyzing and applying the derivative guidance to contracts with underlyings based on operations or activities specific to one of the parties of the contract, such as the contingent consideration received in exchange for the Company’s shares of common stock in Monogram Technologies, Inc. (“Monogram”) described more fully in Note 4.
Recently Issued and Not Yet Adopted Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“DISE”). The ASU’s purpose is to improve disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general and administrative, and research and development). This ASU is effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating these new expanded disclosure requirements, but this standard will not impact our results of operations or financial position.
In December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic270): Narrow-scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.
No other new accounting pronouncements issued or effective during the fiscal year have, or are expected to have, a material impact on our condensed consolidated financial statements.
Segment Reporting
As of December 31, 2025, we have identified one reportable segment, as our chief operating decision maker (“CODM”), the Company’s Chief Executive Officer, allocates resources, assesses performance, and manages our business as one segment. As our operations are managed at the consolidated level, there are no differences between the measurement of the reportable segment’s profit or loss and our condensed consolidated statement of operations.
| 6 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
Reclassifications
The Company’s selling expenses have been reclassified and combined with its general and administrative expenses in its consolidated statement of operations to conform to the current period presentation. Historically the Company has had only one employee in its sales department. Currently we have no employees in our sales department but in advance of the expanded disclosures required by DISE we are combining selling, general and administrative expenses to avoid potential disclosure of confidential compensation of one employee.
NOTE 2. DESCRIPTION OF BUSINESS
We specialize in the design, development, and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets. We have patented adaptive torque-limiting software and proprietary sealing solutions that appeal to our customers, primarily medical device distributors. Additionally, we provide engineering, quality and regulatory consulting services to our customers. We also manufacture and sell rotary air motors to a wide range of industries; however, these motors comprise a de minimis portion of our business.
In August 2020, we formed a wholly owned subsidiary, PDEX Franklin, LLC (“PDEX Franklin”), to hold title for an approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”) that we acquired on November 6, 2020, in order to allow for the continued growth of our business. The condensed consolidated financial statements include the accounts of the Company and PDEX Franklin and all significant inter-company accounts and transactions have been eliminated. This subsidiary has no separate operations.
NOTE 3. NET SALES
The following table presents the disaggregation of net sales by revenue recognition model (in thousands):
| Schedule of disaggregation of net sales | ||||||||||||||||
| Three
Months Ended December 31, | Six Months
Ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net Sales: | ||||||||||||||||
| Over-time revenue recognition | $ | $ | $ | $ | ||||||||||||
| Point-in-time revenue recognition | ||||||||||||||||
| 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 $
| 7 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
The following tables summarize our contract assets and liability balances (in thousands):
| Schedule of contract assets and liability | ||||||||||||||||
As of and for the Three
Months Ended | As of and for the Six
Months Ended | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Contract assets beginning balance | $ | $ | $ | $ | ||||||||||||
| Expenses incurred during the year | ||||||||||||||||
| Amounts reclassified to cost of sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amounts allocated to discounts for standalone selling price | — | — | — | ( | ) | |||||||||||
| Contract assets ending balance | $ | $ | $ | $ | ||||||||||||
As of and for the Three
Months Ended | As of and for the Six
Months Ended | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Contract liabilities beginning balance | $ | $ | — | $ | $ | |||||||||||
| Payments received from customers | — | — | ||||||||||||||
| Amounts reclassified to revenue | — | — | ( | ) | ( | ) | ||||||||||
| Contract liabilities ending balance | $ | $ | — | $ | $ | — | ||||||||||
NOTE 4. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income, and cost approaches is permissible. We consider the principal or most advantageous market in which it would transact and assumptions that market participants would use when pricing the asset or liability.
Fair Value Hierarchy. The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.
We have categorized our cash equivalents and investments within the fair value hierarchy as follows:
Level 1 – applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. These Level 1 assets include our money market accounts, which are classified as cash equivalents. We have categorized our cash equivalents as Level 1 assets as there are quoted prices in active markets for identical assets or liabilities.
Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by observable market data. At December 31, 2025 and June 30, 2025, we categorized our investments in marketable equity securities as Level 2 assets.
Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. We held no Level 3 assets or liabilities at December 31, 2025 or June 30, 2025.
| 8 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
The following tables summarize the fair value measurements within the fair value hierarchy of our financial instruments (in thousands):
| Schedule of fair value, assets and liabilities | ||||||||||||||||
| Fair Value Measurement at December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial Assets: | ||||||||||||||||
| Cash equivalents | $ | — | $ | — | ||||||||||||
| Marketable equity securities – short-term | — | — | ||||||||||||||
| Marketable equity securities – long-term | — | — | ||||||||||||||
| Total | $ | $ | — | |||||||||||||
| Fair Value Measurement at June 30, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial Assets: | ||||||||||||||||
| Cash equivalents | $ | — | $ | — | ||||||||||||
| Marketable equity securities – short-term | — | — | ||||||||||||||
| Marketable equity securities – long-term | — | — | ||||||||||||||
| Total | $ | $ | — | |||||||||||||
Investments
at December 31, 2025 and June 30, 2025 had an aggregate cost basis of $
Of
the total marketable equity securities at December 31, 2025 and June 30, 2025, $
| 9 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
We will record an additional gain upon receipt of CVR payments, if made. As disclosed previously, in conjunction with making our original investment in Monogram during fiscal 2017, we were granted the exclusive right to develop, engineer, manufacture and supply certain products on its behalf. Those rights were transferred in connection with Zimmer Biomet’s acquisition of Monogram and remain in effect post-acquisition. We made this investment in the hope that it could generate meaningful additional revenue which has yet to occur but may be more likely to occur in the future because Zimmer Biomet has more financial resources to assist with commercialization of Monogram’s products. However, there is no guarantee or assurance as to the amount of revenue, if any, that we may ultimately recognize from our exclusive right to develop, engineer, manufacture and supply certain products for Monogram.
We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Mr. Van Kirk, and two non-management directors, Mr. Cabillot and Mr. Swenson, who chairs the committee. Both Messrs. Cabillot and Swenson are active investors with extensive portfolio management expertise. We leverage the experience of these committee members to make investment decisions for our surplus operating capital or borrowed funds. Additionally, many of our securities holdings include stocks of public companies that either Messrs. Swenson or Cabillot or both may own from time to time either individually or through the investment funds that they manage, or other companies whose boards they sit on, such as Air T, Inc.
NOTE 5. COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS
Inventory
Inventory is stated at the lower of cost (first-in, first-out) or net realizable value and consists of the following (in thousands):
| Schedule of investments | ||||||||
| December
31, 2025 | June 30,
2025 | |||||||
| Raw materials/purchased components | $ | $ | ||||||
| Work in process | ||||||||
| Sub-assemblies/finished components | ||||||||
| Finished goods | ||||||||
| Total inventory | $ | $ | ||||||
Intangibles
Intangibles consist of the following (in thousands):
| Schedule of intangibles | ||||||||
| December
31, 2025 | June 30,
2025 | |||||||
| Patent-related costs | $ | $ | ||||||
| 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. These intangible assets are expected to be fully expensed this fiscal year.
| 10 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 6. WARRANTY
Our
warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses and is included
in accrued liabilities in the accompanying condensed consolidated balance sheets. As of December 31, 2025 and June 30, 2025, the warranty
reserve amounted to $
Information regarding the accrual for warranty costs for the three and six months ended December 31, 2025 and 2024, are as follows (in thousands):
| Schedule of accrual warranty costs | ||||||||||||||||
As of and for the Three Months Ended | As of and for the Six Months Ended | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Accruals during the period | $ | $ | $ | |||||||||||||
| Changes in estimates of prior period warranty accruals | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Warranty amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||
NOTE 7. NET INCOME PER SHARE
We calculate basic net income per share by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted income per share reflects the effects of potentially dilutive securities, which consist of outstanding stock options, restricted shares and performance awards.
The following table presents reconciliations of the numerators and denominators of the basic and diluted earnings per share computations. In the tables below, net income amounts represent the numerator, and weighted average shares outstanding amounts represent the denominator (in thousands, except per share amounts):
| Schedule of net income per share | ||||||||||||||||
| Three
Months Ended December 31, | Six Months
Ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Basic: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic income per share | $ | $ | $ | $ | ||||||||||||
| Diluted: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Effect of dilutive securities | ||||||||||||||||
| Weighted average shares used in calculation of diluted earnings per share | ||||||||||||||||
| Diluted income per share | $ | $ | $ | $ | ||||||||||||
| 11 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 8. INCOME TAXES
Deferred income taxes are provided on a liability method whereby deferred tax assets and liabilities are recognized for temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Significant
management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax assets. Such
determination is based primarily on our historical taxable income, with some consideration given to our estimates of future taxable income
by jurisdictions in which we operate and the period over which our deferred tax assets would be recoverable. Our deferred tax asset is
net of a valuation allowance in the gross amount of $
We
recognize accrued interest and penalties related to unrecognized tax benefits when applicable. The effective tax rate for the three months
ended December 31, 2025, and 2024 was
We are subject to U.S. federal income tax, as well as various state jurisdictions. Our U.S. federal income taxes are currently open to audit under the statute of limitations by the Internal Revenue Service for the fiscal years ended June 30, 2022 and later. However, because of our prior net operating losses and research credit carryovers, our tax years from June 30, 2020 and after are open to audit. We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.
Additionally, the One Big Beautiful Bill Act of 2025, or the 2025 Act, enacted on July 4, 2025, makes changes to U.S. corporate income taxes including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025, and immediate expensing of research and development costs, with retroactive application for tax years starting after December 31, 2025. We are continuing our evaluation of the impact the adoption of the 2025 Act will have on our financial statements for the fiscal year ended June 30, 2026.
NOTE 9. SHARE-BASED COMPENSATION
Our
2016 Equity Incentive Plan provides for the award of up to
Performance Awards
During
both the three months ended December 31, 2025, and 2024, we recorded share-based compensation expense of $
On July 1, 2024, it was
determined by the Compensation Committee that the vesting of performance awards for
| 12 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
Non-Qualified Stock Options
In
December 2020, the Compensation Committee granted non-qualified stock options for
Restricted Shares
In
November 2024, the Compensation Committee awarded
In November 2025, the Compensation
Committee awarded
During
the three months ended December 31, 2025 and 2024, we recorded compensation expense of $
Employee Stock Purchase Plan
In
September 2014, our Board approved the establishment of an Employee Stock Purchase Plan (the “ESPP”) and reserved
During
the three months ended December 31, 2025 and 2024, we did not record any share-based compensation expense relating to the ESPP, due to
the fact that no six-month offering period ended during either quarter. During the six months ended December 31, 2025 and 2024,
| 13 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 10. MAJOR CUSTOMERS AND SUPPLIERS
Information with respect to customers that accounted for sales in excess of 10% of our total sales in either of the three-month or the six-month periods ended December 31, 2025 and 2024, is as follows (in thousands, except percentages):
| Schedule of sales by major customers | ||||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | Percent of Total | Amount | Percent of Total | |||||||||||||
| Net sales | $ | % | $ | % | ||||||||||||
| Customer concentration: | ||||||||||||||||
| Customer 1 | $ | % | $ | % | ||||||||||||
| Customer 2 | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| Six Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | Percent of Total | Amount | Percent of Total | |||||||||||||
| Net sales | $ | % | $ | % | ||||||||||||
| Customer concentration: | ||||||||||||||||
| Customer 1 | % | % | ||||||||||||||
| Customer 2 | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
Information with respect to accounts receivable from those customers that comprised more than 10% of our gross accounts receivable at either December 31, 2025 or June 30, 2025, is as follows (in thousands, except percentages):
| Schedule of gross accounts receivable | ||||||||||||||||
| December 31, 2025 | June 30, 2025 | |||||||||||||||
| Total gross accounts receivable | $ | % | $ | % | ||||||||||||
| Customer concentration: | ||||||||||||||||
| Customer 1 | $ | % | $ | % | ||||||||||||
| Customer 2 | % | % | ||||||||||||||
| Total. | $ | % | $ | % | ||||||||||||
| 14 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
During the three and six months ended December 31, 2025 and 2024, we had three suppliers that accounted for 10% or more of total inventory purchases. Information with respect to suppliers that accounted for in excess of 10% of our inventory purchases in either of the three-month or the six-month periods ended December 31, 2025 and 2024, is as follows (in thousands, except percentages):
| Schedule of inventory purchases | ||||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | Percent of Total | Amount | Percent of Total | |||||||||||||
| Total Inventory purchases | $ | % | $ | % | ||||||||||||
| Supplier concentration: | ||||||||||||||||
| Supplier 1 | $ | % | $ | % | ||||||||||||
| Supplier 2 | % | % | ||||||||||||||
| Supplier 3 | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| Six Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | Percent of Total | Amount | Percent of Total | |||||||||||||
| Total inventory purchases | $ | % | $ | % | ||||||||||||
| Supplier concentration: | ||||||||||||||||
| Supplier 1 | % | % | ||||||||||||||
| Supplier 2 | % | % | ||||||||||||||
| Supplier 3 | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
Information with respect to accounts payable due to those suppliers that comprised more than 10% of our inventory purchases at either December 31, 2025 or June 30, 2025, is as follows (in thousands, except percentages):
| Schedule of accounts payable | ||||||||||||||||
| December 31, 2025 | June 30, 2025 | |||||||||||||||
| Total accounts payable | $ | % | $ | % | ||||||||||||
| Supplier concentration: | ||||||||||||||||
| Supplier 1 | $ | % | $ | % | ||||||||||||
| Supplier 2 | % | % | ||||||||||||||
| Supplier 3 | % | % | ||||||||||||||
| Total. | $ | % | $ | % | ||||||||||||
| 15 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 11. NOTES PAYABLE AND FINANCING TRANSACTIONS
UMB BANK, N.A. (“UMB”)
We
have several outstanding term loans as well as a revolving loan (the “Amended Revolving Loan”) with UMB (formerly Minnesota
Bank & Trust or MBT). Additionally, on July 31, 2024 (the “Fourth Amendment Date”), we entered into Amendment No.
4 to our Amended and Restated Credit Agreement (the “Fourth Amendment”) which amended the Company’s Amended and Restated
Credit Agreement with UMB. The Fourth Amendment (i) provided for a new term loan, Term Loan C, in the amount of $
The balance on our outstanding loans (in thousands) is as follows (exclusive of unamortized loan fees):
| Schedule of unamortized loan | ||||||||
December 31, 2025 | June 30,
2025 | |||||||
| Notes Payable: | ||||||||
| Term Loan A | $ | $ | ||||||
| Term Loan B | ||||||||
| Term Loan C | ||||||||
| Property Loan | ||||||||
| Amended Revolving Loan | — | |||||||
| Total notes payable | $ | $ | ||||||
Term
Loan A and Term Loan B both bear interest at a fixed rate of
Any
payment on Term Loan A, Term Loan B, Term Loan C, the Property Loan, or Amended Revolving Loan (collectively, the “Loans”)
not made within seven days after the due date is subject to a late payment fee equal to
The Amended Credit Agreement, Amended Security Agreement, Property Loan Security Agreement, Term Note A, Term Note B, Term Note C, Property Note, and Amended Revolving Note contain representations and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type. We believe that we are in compliance with all of our debt covenants as of December 31, 2025, but there can be no assurance that we will remain in compliance for the duration of the term of the Loans.
| 16 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 12. COMMON STOCK
Share Repurchase Program
In December 2019, our Board
approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock, as the prior repurchase
plan authorized by our Board in 2013 was nearing completion. In accordance with, and as part of, these share repurchase programs, our
Board approved the adoption of several prearranged share repurchase plans intended to qualify for the safe harbor provided by Rule 10b5-1
under the Securities Exchange Act of 1934, as amended (“10b5-1 Plan” or “Plan”). During both the three and six
months ended December 31, 2025, we repurchased
As of December 31, 2025, our cumulative stock repurchases have exceeded our recorded value of common stock, and the excess has been reflected as a shareholder distribution, reducing our consolidated retained earnings.
NOTE 13. LEASES
Our operating lease right-of-use
asset and long-term liability are presented separately on our condensed consolidated balance sheets. The current portion of our operating
lease liability as of December 31, 2025, in the amount of $
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
As of December 31, 2025, the maturity of our lease liability is as follows (in thousands):
| Operating Lease | ||||||
| Fiscal Year: | ||||||
| 2026 | ||||||
| 2027 | ||||||
| 2028 | ||||||
| Total lease payments | ||||||
| Less imputed interest: | ( |
) | ||||
| Total | $ | |||||
| 17 |
PRO-DEX, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 14. COMMITMENTS AND CONTINGENCIES
Legal Matters
We may be involved from time to time in various legal proceedings arising either in the ordinary course of our business or incidental to our business. There can be no certainty, however, that we may not ultimately incur liability or that such liability will not be material and adverse.
NOTE 15. SUBSEQUENT EVENTS
We have evaluated subsequent events through the date of this report. There were no subsequent events that require disclosure.
| 18 |
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this report.
COMPANY OVERVIEW
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the results of operations and financial condition of Pro-Dex, Inc. (“Company,” “Pro-Dex,” “we,” “our,” or “us”) for the three-month and six-month periods ended December 31, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this report. This report contains certain forward-looking statements and information. The cautionary statements included herein should be read as being applicable to all related forward-looking statements wherever they may appear. Our actual future results could differ materially from those discussed herein.
Except for the historical information contained herein, the matters discussed in this report, including, but not limited to, discussions of our product development plans, business strategies, strategic opportunities, and market factors influencing our results, are forward-looking statements that involve certain risks and uncertainties. Actual results may differ from those anticipated by us as a result of various factors, both foreseen and unforeseen, including, but not limited to, our ability to continue to develop new products and increase sales in markets characterized by rapid technological evolution, our ability to optimize our operations at our Franklin facility, consolidation within our target marketplace and among our competitors, employee turnover, competition from larger, better capitalized competitors, and our ability to realize returns on opportunities. Many other economic, competitive, governmental, and technological factors could impact our ability to achieve our goals. You are urged to review the risks, uncertainties, and other cautionary language described in this report, as well as in our other public disclosures and reports filed with the Securities and Exchange Commission (“SEC”) from time to time, including, but not limited to, the risks, uncertainties, and other cautionary language discussed in our Annual Report on Form 10-K for our fiscal year ended June 30, 2025.
We specialize in the design, development, and manufacture of autoclavable, battery-powered, and electric, multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial (“CMF”) markets. We have patented adaptive torque-limiting software and proprietary sealing solutions that appeal to our customers, primarily medical device distributors. Additionally, we provide engineering, quality, and regulatory consulting services to our customers. We also manufacture and sell rotary air motors to a wide range of industries; however, these motors compromise a de minimis portion of our business.
Our principal headquarters are located at 2361 McGaw Avenue, Irvine, California 92614 and our phone number is (949) 769-3200. Our Internet address is www.pro-dex.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, and other SEC filings are available free of charge through our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. In addition, our Code of Ethics and other corporate governance documents may be found on our website at the Internet address set forth above. Our filings with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov and company specific information at www.sec.gov/edgar/searchedgar/companysearch.html.
Basis of Presentation
The condensed consolidated results of operations presented in this report are not audited and are not necessarily indicative of the results to be expected for the entirety of the fiscal year ending June 30, 2026, or any other interim period during such fiscal year. Our fiscal year ends on June 30 and our fiscal quarters end on September 30, December 31, and March 31. Unless otherwise stated, all dates refer to our fiscal year and those fiscal quarters.
| 19 |
Critical Accounting Estimates and Judgments
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements. Management believes that there have been no significant changes during the three and six months ended December 31, 2025 to the items that we disclosed as our critical accounting policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Business Strategy and Future Plans
Our business today is almost entirely driven by sales of our medical devices. Many of our significant customers place purchase orders for specific products that were developed under various development and/or supply agreements. Our customers may request that we design and manufacture a custom surgical device or they may hire us as a contract manufacturer to manufacture a product of their own design. In either case, we have extensive experience with autoclavable, battery-powered, and electric, multi-function surgical drivers and shavers. We continue to focus a significant percentage of our time and resources on providing outstanding products and service to our valued principal customers. During the second quarter of fiscal 2026, our largest customer executed an amendment to our existing supply agreement such that we shall continue to supply their surgical handpieces to them through calendar 2028. We are actively pursuing the acquisition of one of our significant suppliers to help meet the increased demand as a result of this contract extension.
We are also working to build top-line sales through active proposals of new medical device products with new and existing customers. Our patented adaptive torque-limiting software has been very well received in the CMF and thoracic markets. Additionally, our latest Pro-Dex branded product, the Helios driver for CMF applications, featuring our adaptive torque-limiting software, is expected to be released for production later this fiscal year. While we have had interest in this product, there is no guarantee that our existing customers or new customers will purchase this new driver.
In November 2020, we purchased an approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”). This building is located approximately four miles from our Irvine, California headquarters and was acquired to provide us additional capacity for our expected continued future growth, including anticipated expanded capacity for the manufacture of batteries and new products. We began operations in the new facility during the fourth quarter of fiscal 2023 and believe that the additional capacity will allow for our continued expected growth.
Our current objectives are focused primarily on maintaining our relationships with our current medical device customers, investing in research and development activities to design unique medical devices as well as Pro-Dex branded drivers to leverage our torque-limiting software, expanding our manufacturing capacity through the continuation of operations at the Franklin Property, and promoting active product development proposals to new and existing customers for both orthopedic shavers and screw drivers for a multitude of surgical applications, while monitoring closely the progress of all these individual endeavors. While we expect revenue growth in the future, it may not be a consistent trajectory but rather periods of incremental growth that current expenditures are helping to create. However, there can be no assurance that we will be successful in any of these objectives.
| 20 |
Description of Business Operations
Revenue
The majority of our revenue is derived from designing, developing, and manufacturing surgical devices for the medical device industry. The proportion of total sales by type is as follows (in thousands, except percentages):
| Three
Months Ended December 31, | Six
Months Ended December 31, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| % of Revenue | % of Revenue | % of Revenue | % of Revenue | |||||||||||||||||||||||||||||
| Net sales: | ||||||||||||||||||||||||||||||||
| Medical device products | $ | 15,172 | 81 | % | $ | 12,232 | 73 | % | $ | 29,554 | 79 | % | $ | 22,144 | 70 | % | ||||||||||||||||
| Industrial and scientific | 191 | 1 | % | 167 | 1 | % | 363 | 1 | % | 311 | 1 | % | ||||||||||||||||||||
| NRE & Prototype | 149 | 1 | % | 41 | — | 625 | 2 | % | 89 | — | ||||||||||||||||||||||
| Repairs | 3,147 | 17 | % | 4,862 | 29 | % | 6,977 | 19 | % | 9,998 | 32 | % | ||||||||||||||||||||
| Discounts and other | 4 | — | (509 | ) | (3 | %) | (325 | ) | (1 | %) | (856 | ) | (3 | %) | ||||||||||||||||||
| $ | 18,663 | 100 | % | $ | 16,793 | 100 | % | $ | 37,194 | 100 | % | $ | 31,686 | 100 | % | |||||||||||||||||
Certain of our medical device products utilize proprietary designs developed by us under exclusive development and/or supply agreements. All of our medical device products utilize proprietary manufacturing methods and know-how, are manufactured or machined in our Irvine, California facility, and are assembled in our Tustin, California facility (as are our industrial products). Details of our medical device sales by type is as follows (in thousands, except percentages):
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| % of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||
| Medical device sales: | ||||||||||||||||||||||||||||||||
| Orthopedic | $ | 11,884 | 78 | % | $ | 9,330 | 76 | % | $ | 22,938 | 78 | % | $ | 16,024 | 72 | % | ||||||||||||||||
| CMF | 3,105 | 21 | % | 1,839 | 15 | % | 5,933 | 20 | % | 4,041 | 18 | % | ||||||||||||||||||||
| Thoracic | 183 | 1 | % | 1,063 | 9 | % | 683 | 2 | % | 2,079 | 10 | % | ||||||||||||||||||||
| Total | $ | 15,172 | 100 | % | $ | 12,232 | 100 | % | $ | 29,554 | 100 | % | $ | 22,144 | 100 | % | ||||||||||||||||
Sales of our medical device products increased $2.9 million, or 24%, for the three months ended December 31, 2025, and increased $7.4 million, or 33%, for the six months ended December 31, 2025, compared to the corresponding periods of the prior fiscal year. Our orthopedic sales increased $2.6 million, or 27%, and $6.9 million, or 43%, respectively, for the three and six months ended December 31, 2025 compared to the corresponding period of the prior fiscal year, due primarily to the launch of our largest customer’s next generation handpiece. We expect to see similar increases in orthopedic sales for at least the remainder of this fiscal year. Recurring revenue from CMF drivers increased $1.3 million, or 69%, and $1.9 or 47%, respectively for the three and six months ended December 31, 2025 compared to the corresponding period of the prior fiscal year. Our thoracic sales decreased $880,000, or 83% and $1.4 million or 67%, respectively for the three and six months ended December 31, 2025 compared to the corresponding period of the prior fiscal year. While we do not have much visibility into our customers’ distribution networks, this level of change in thoracic and CMF sales (whether an increase or decrease) is not uncommon and fluctuations occur based upon our customers’ required inventory levels.
Sales of our compact pneumatic air motors, reported as “Industrial and scientific” sales above, increased $24,000, or 14%, and $52,000, or 17%, respectively, for the three and six months ended December 31, 2025, compared to the corresponding periods of the prior fiscal year. These are legacy products with no substantive marketing efforts and, as such, expect to see continued minimal revenue from these products in the future. Our non-recurring (“NRE”) and proto-type revenue increased $108,000, or 263%, and $536,000, or 602%, respectively, for the three and six months ended December 31, 2025, compared to the corresponding periods of the prior fiscal year, due to an increase in billable contracts for various NRE projects undertaken for our customers.
| 21 |
Repair revenue decreased $1.7 million, or 35%, and $3.0 million, or 30%, respectively, for the three and six months ended December 31, 2025, compared to the corresponding periods of the prior fiscal year, due to fewer repairs of the legacy orthopedic handpiece we sell to our largest customer. While we do not have much visibility into our largest customer’s distribution networks, they may be reducing repairs of legacy handpieces in favor of replacing them with the next generation handpiece, in which case we may continue to experience future declines in repair revenue.
At December 31, 2025, we had a backlog of approximately $37.4 million, of which $32.5 million is scheduled to be delivered in fiscal 2026 and the balance is scheduled to be delivered the following fiscal year. Our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts. We may experience variability in our new order bookings due to various reasons, including, but not limited to, the timing of major new product launches and customer planned inventory builds. However, we do not typically experience seasonal fluctuations in our shipments and revenues.
Cost of Sales and Gross Margin
(in thousands except percentages)
| Three
Months Ended December 31, | Six
Months Ended December 31, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| % of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||||||||||||||
| Product cost | $ | 11,810 | 91 | % | $ | 10,680 | 91 | % | $ | 24,218 | 93 | % | $ | 19,802 | 92 | % | ||||||||||||||||
| Under(over)-absorption of manufacturing costs | 876 | 7 | % | 1,008 | 9 | % | 1,495 | 6 | % | 1,559 | 7 | % | ||||||||||||||||||||
| Inventory and warranty charges | 234 | 2 | % | 33 | — | 370 | 1 | % | 103 | 1 | % | |||||||||||||||||||||
| Total cost of sales | $ | 12,920 | 100 | % | $ | 11,721 | 100 | % | $ | 26,083 | 100 | % | $ | 21,464 | 100 | % | ||||||||||||||||
| Three
Months Ended December 31, | Six
Months Ended December 31, | Year
over Year ppt Change | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | Three Months | Six Months | |||||||||||||||||||
| Gross margin | 31 | % | 30 | % | 30 | % | 32 | % | 1 | (2 | ) | |||||||||||||
Cost of sales for the three and six months ended December 31, 2025, increased $1.2 million, or 10%, and $4.6 million, or 21%, respectively, compared to the corresponding periods of the prior fiscal year. The increase in cost of sales is consistent with the 11% and 17% increase in revenue for the three and six months ended December 31, 2025, respectively, compared to the corresponding periods of the prior fiscal year. Additionally, under-absorption for the three and six months ended December 31, 2025, decreased $132,000 and $64,000, respectively, compared to the corresponding periods of the prior fiscal year. Inventory and warranty charges for the three and six months ended December 31, 2025, increased $201,000, or 609%, and $267,000 or 259%, respectively, compared to the corresponding periods of the prior fiscal year, primarily due to an increase in inventory reserves.
Gross profit increased by $671,000, or 13%, and $889,000, or 9%, for the three and six months ended December 31, 2025, respectively, compared to the corresponding periods of the prior fiscal year. Gross margin as a percentage of sales for the three months ended December 31, 2025, increased 1 percentage point, and for the six months ended December 31, 2025, decreased 2 percentage points, compared to the corresponding periods of the prior fiscal year.
| 22 |
Operating Expenses
Operating Costs and Expenses
(in thousands except % change)
| Three
Months Ended December 31, | Six
Months Ended December 31, | Year over Year % Change | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | Three Months | Six Months | |||||||||||||||||||||||||||||||||||
| % of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | |||||||||||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
| Selling expenses | $ | 39 | — | $ | 49 | — | $ | 112 | — | $ | 98 | — | (20 | %) | 14 | % | ||||||||||||||||||||||||
| General and administrative expenses | 1,711 | 9 | % | 1,389 | 8 | % | 3,129 | 9 | % | 2,635 | 8 | % | 23 | % | 19 | % | ||||||||||||||||||||||||
| Research and development costs | 734 | 4 | % | 942 | 6 | % | 1,502 | 4 | % | 1,784 | 6 | % | (22 | %) | (16 | %) | ||||||||||||||||||||||||
| $ | 2,484 | 13 | % | $ | 2,380 | 14 | % | $ | 4,743 | 13 | % | $ | 4,517 | 14 | % | 4 | % | 5 | % | |||||||||||||||||||||
Selling expenses consist of salaries and other personnel-related expenses for our business development department, as well as advertising and marketing expenses, and travel and related costs incurred in generating and maintaining our customer relationships. Selling expenses for the three months ended December 31, 2025 decreased $10,000 compared to the corresponding periods of fiscal 2025. Selling expenses for the six months ended December 31, 2025 increased $14,000 compared to the corresponding periods of fiscal 2025.
General and administrative expenses (“G&A”) consists of salaries and other personnel-related expenses of our accounting, finance, facilities, and human resource personnel, as well as costs for outsourced information technology services, professional fees, directors’ fees, and other costs and expenses attributable to being a public company. G&A expenses increased $322,000 and $494,000, respectively, during the three and six months ended December 31, 2025, when compared to the corresponding periods of the prior fiscal year. The increases relates primarily to a $225,000 bonus earned and paid to the Company’s Chief Executive Officer in the second quarter of fiscal 2026 as well as an overall increase in personnel costs and consulting fees related to the potential acquisition of one of our significant suppliers that we are currently pursuing.
Research and development costs generally consist of salaries, employer paid benefits, and other personnel- related costs of our engineering and support personnel, as well as allocated facility and information technology costs, professional and consulting fees, patent-related fees, lab costs, materials, and travel and related costs incurred in the development and support of our products. Research and development costs for the three and six months ended December 31, 2025, decreased $208,000 and $282,000, respectively, compared to the corresponding periods of the prior fiscal year. The decrease for the three months ended December 31, 2025, compared to the comparable period of the prior year is primarily related to an increase in billable project expenses of $64,000, a decrease in internal project expenses of $55,000, as well as decreases in recruiting fees of $13,000 and legal fees related to our intellectual property of $51,000. The decrease for the six months ended December 31, 2025, compared to the comparable period of the prior year is primarily related to a decrease in recruiting fees of $78,000, a decrease in internal project costs of $117,000, an increase in billable project expenses of $65,000 and a decrease in legal fees related to our intellectual property of $70,000. When our engineers are engaged in billable projects as opposed to internal projects, costs get shifted to cost of sales instead of research and development. While we are currently in development on two internal projects, project expenses for the periods presented in this report are not material.
The majority of our research and development costs relate to sustaining activities related to products we currently manufacture and sell. As we introduce new products into the market, we expect to see an increase in sustaining and other engineering expenses. Typical examples of sustaining engineering activities include, but are not limited to, end-of-life component replacement, especially in electronic components found in our printed circuit board assemblies, analysis of customer complaint data to improve process and design, replacement and enhancement of tooling and fixtures used in the machine shop, assembly operations, and inspection areas to improve efficiency and through-put.
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Other Income (Expense), net
Interest and Other Income
Interest income for the three and six months ended December 31, 2025, and 2024 includes interest and dividends from our money market accounts and investment portfolio.
Gain (Loss) on Investments
During the second quarter of fiscal 2026 Zimmer Biomet Holdings, Inc. acquired Monogram Technologies, Inc. (“Monogram”) and we received $4.04 in cash for each of the 2,212,378 common shares that we owned of Monogram prior to the close of the acquisition. Accordingly, we realized a gain in the amount of $6.8 million related to this investment described more fully in Note 4 to the condensed consolidated financial statements contained elsewhere in this report. During the three months ended December 31, 2025, we also reversed the previously recorded unrealized gain related to Monogram in the amount of $6.8 million, which fully offset the realized gain. In addition, we have also recorded unrealized gains and losses on our investment portfolio for the three and six months ended December 31, 2025 and 2024. All of our investments are recorded at estimated fair value as of December 31, 2025, and relate to common stock of publicly traded companies whose stock price is subject to significant volatility.
Interest Expense
Interest expense consists primarily of interest expense related to our UMB Bank (“UMB”) loans described more fully in Note 11 to the condensed consolidated financial statements contained elsewhere in this report.
Income Tax Expense
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 is 25% and 24%, respectively. The effective tax rate is slightly higher in fiscal 2026 than the prior year due to a windfall related to vesting of performance awards in fiscal 2025 that did not recur during the current fiscal year.
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 2025 increased $7.5 million to $8.0 million as compared to $419,000 at June 30, 2025. The following table includes a summary of our condensed statements of cash flows contained elsewhere in this report.
| As of and For the Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Cash provided by (used in): | ||||||||
| Operating activities | $ | 5,882 | $ | (2,263 | ) | |||
| Investing activities | $ | 8,770 | $ | (973 | ) | |||
| Financing activities | $ | (7,118 | ) | $ | 671 | |||
| Cash and Working Capital: | ||||||||
| Cash and cash equivalents | $ | 7,953 | $ | 66 | ||||
| Working Capital | $ | 36,985 | $ | 27,161 | ||||
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Operating Activities
Net cash provided by operating activities was $5.9 million for the six months ended December 31, 2025, primarily due to our net income of $6.9 million plus non-cash depreciation and share-based compensation of $625,000 and $325,000, respectively, less the net gains on marketable equity investments of $3.0 million. Additionally, income taxes payable increased by $1.8 million and inventory decreased by $503,000. Offsetting these cash inflows, our accounts receivable increased by $1.5 million consistent with increased revenue in fiscal 2026 compared to fiscal 2025.
Net cash used in operating activities was $2.3 million for the six months ended December 31, 2024, due in part to net income of $4.5 million and non-cash depreciation and amortization of $615,000 offset by non-cash unrealized gains on marketable equity investments of $510,000. Additionally, accounts receivable, inventory and prepaid and other assets increased $4.6 million, $4.3 million, and $991,000, respectively, for the six months ended December 31, 2024, offset by an increase in accounts payable and accrued expenses of $3.0 million. As our business continues to grow, we expect to see increases in both inventory and accounts payable. Our accounts receivable is similarly expected to increase during periods of increased revenue.
Investing Activities
Net cash generated from investing activities was $8.8 million and relates primarily to the proceeds received from our Monogram investment, more fully described in Note 4 to the condensed consolidated financial statements contained elsewhere in this report.
Net cash used in investing activities for the six months ended December 31, 2024 was $973,000 and related mostly to equipment purchases for our machine shop, assembly, and inspection.
Financing Activities
Net cash used in financing activities for the six months ended December 31, 2025, totaled $7.1 million and related primarily to the net principal payments of $4.9 million on our loans from UMB more fully described in Note 11 to the condensed consolidated financial statements contained elsewhere in this report, as well as repurchase of 55,000 shares of our common stock pursuant to our share repurchase program in the amount of $2.2 million.
Net cash provided by financing activities for the six months ended December 31, 2024, included net borrowings in the amount of $4.5 million primarily related to the Term Loan C described in Note 11 the condensed consolidated financial statements contained elsewhere in this report, offset by the repurchase of $3.5 million of our common stock pursuant to our share repurchase program, as well as $305,000 of employee payroll taxes related to shares of common stock issued to employees under previously granted performance awards and nonqualified stock options.
Financing Facilities & Liquidity Requirements for the Next Twelve Months
As of December 31, 2025, our working capital was $37.0 million. We currently believe that our existing cash and cash equivalents coupled with our accounts receivable balances as well as our expected cash flows from operations will provide us with sufficient funds to satisfy our cash requirements as our business is currently conducted for at least the next 12 months.
We are focused on maximizing our working capital by monitoring expenses, identifying cost savings, and investing only in those development programs and products that we believe will most likely contribute to our profitability. As we execute on our current strategy, however, we may require debt and/or equity capital to fund our working capital needs and requirements for capital equipment to support our manufacturing, assembly, and inspection processes. In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials to satisfy our backlog, which can be subject to extensive variability. We believe that if we need additional capital to fund our operations, we can borrow against our revolving loan with UMB which has an available balance of $11.0 million as of December 31, 2025.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer and principal accounting officer) conducted an evaluation of the design and operation of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer and principal accounting officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
In accordance with SEC rules, an evaluation was performed under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer of the effectiveness, as of December 31, 2025, of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). “Internal control over financial reporting” includes those policies and procedures that:
| (1) | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. |
Based on that evaluation as of December 31, 2025, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective.
Internal Control over Financial Reporting
During the three months ended December 31, 2025, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Inherent Limitations on the Effectiveness of Controls
In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 14 to condensed consolidated financial statements contained elsewhere in this report.
ITEM 1A. RISK FACTORS
Our business, future financial condition and results of operations are subject to a number of factors, risks and uncertainties, which are disclosed in Item 1A, entitled “Risk Factors” in Part I of our Annual Report on Form 10-K for our fiscal year ended June 30, 2025, as well as any amendments thereto or additions and changes thereto contained in this quarterly report on Form 10-Q for the quarter ended December 31, 2025. Additional information regarding some of those risks and uncertainties is contained in the notes to the condensed financial statements included elsewhere in this report and in Part I, Item 2, of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The risks and uncertainties disclosed in our Form 10-K, our quarterly reports on Form 10-Q, and other reports filed with the SEC are not necessarily all of the risks and uncertainties that may affect our business, financial condition and results of operations in the future. There have been no material changes to the risk factors as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Repurchases by the Company of its common stock during the quarter ended December 31, 2025 were as follows:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||
| October 1, 2025 to October 31, 2025 | — | — | — | 313,882 | ||||||||||||||
| November 1, 2025 to November 30, 2025 | 10,725 | $ | 33.34 | 9,853 | 304,029 | |||||||||||||
| December 1, 2025 to December 31, 2025 | 45,147 | $ | 41.53 | 45,147 | 258,882 | |||||||||||||
Shares repurchased during the period of November 1, 2025 to November 30, 2025 include 872 shares withheld to pay individual withholding taxes of employees of the Company in connection with the vesting of the employees’ restricted shares. All other repurchases were made pursuant to the Company’s previously announced repurchase program. For information concerning the Company’s repurchase program, please see the discussion under the caption “Share Repurchase Program” in Note 12 to the condensed consolidated financial statements included elsewhere in this report.
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ITEM 5. OTHER INFORMATION
Insider Trading Arrangements and Policies
ITEM 6. EXHIBITS
| Exhibit | Description | |
| 31.1 | Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32 | Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
PRO-DEX, INC. | |
| Date: January 29, 2026 | /s/ Richard L. Van Kirk | |
Richard L. Van Kirk (principal executive officer) |
| Date: January 29, 2026 | /s/ Alisha K. Charlton | |
Alisha K. Charlton (principal financial officer and principal accounting officer) |
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EXHIBIT INDEX
| Exhibit | Description |
| 31.1 | Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32 | Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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FAQ
How did Pro-Dex (PDEX) perform financially for the quarter ended December 31, 2025?
What were Pro-Dex’s results for the six months ended December 31, 2025?
How did the Monogram Technologies investment impact Pro-Dex’s results?
What is Pro-Dex’s current cash and debt position as of December 31, 2025?
How concentrated is Pro-Dex’s customer base based on the latest quarter?
What does Pro-Dex’s order backlog look like going forward?
Did Pro-Dex repurchase any of its common stock during the quarter?
