8-K
PRO DEX INC (PDEX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934
Date of Report (Date of earliest event reported): February 3, 2022
PRO-DEX, INC.
(Exact name of registrant as specified in charter)
| Colorado | 0-14942 | 84-1261240 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
2361 McGaw Avenue
Irvine, California 92614
(Address of principal executive offices, zipcode)
(949) 769-3200
(Registrant’s telephone number includingarea code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, no par value | PDEX | NASDAQ Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company ☐ |
|---|
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
The information in this Item 2.02 of this Form 8-K, as well as Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On February 3, 2022, Pro-Dex, Inc. (the “Company”) is issuing a press release announcing its financial performance for the second quarter and six months ended December 31, 2021. A copy of the press release is attached to this Form 8-K as Exhibit 99.1, which is incorporated herein by this reference.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release dated February 3, 2022. |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document) |
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 hereunto duly authorized.
| Date: February 3, 2022 | Pro-Dex, Inc. | |
|---|---|---|
| By: | /s/ Alisha K. Charlton | |
| Alisha K. Charlton | ||
| Chief Financial Officer |
INDEX TO EXHIBITS
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release dated February 3, 2022. |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document) |
EXHIBIT 99.1
Contact: Richard L. Van Kirk, Chief Executive Officer
(949) 769-3200
For Immediate Release
PRO-DEX, INC. ANNOUNCES FISCAL 2022 SECOND QUARTER
AND SIX-MONTH RESULTS
IRVINE, CA, February 3, 2022
- PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2022 second quarter ended December 31, 2021. The Company also filed its Quarterly Report on Form 10-Q for the second quarter of fiscal year 2022 with the Securities and Exchange Commission today.
Quarter Ended December 31, 2021
Net sales for the three months ended December 31, 2021, increased $1.9 million, or 23%, to $10.2 million from $8.3 million for the three months ended December 31, 2020, due primarily to sales of the orthopedic surgical handpiece that we sell to our largest customer.
Gross profit for the three months ended December 31, 2021, increased $808,000, or 31%, to $3.4 million from $2.6 million for the same period in fiscal 2021, due primarily to increased sales. We also had fewer COVID-19 related paid absences in our machine shop, assembly, and quality operations in the second quarter of fiscal 2022 compared to the same period of the prior fiscal year.
Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended December 31, 2021, decreased $273,000, or 13%, to $1.8 million compared to $2.1 million in the prior fiscal year’s corresponding quarter, reflecting in part the higher number of billable engineering projects in the current fiscal quarter compared to the same period in the prior fiscal year.
Net income for the quarter ended December 31, 2021, was $925,000, or $0.25 per diluted share, compared to $1.8 million, or $0.44 per diluted share, for the corresponding quarter in fiscal 2021.
Six Months Ended December 31, 2021
Net sales for the six months ended December 31, 2021, increased $3.3 million, or 20%, to $20.2 million from $16.9 million for the six months ended December 31, 2020, due primarily to sales of the orthopedic surgical handpiece that we sell to our largest customer.
Gross profit for the six months ended December 31, 2021, increased $761,000, or 13%, compared to the same period in fiscal 2021 due to the increase in sales described above.
Operating expenses (which include selling, general and administrative, and research and development expenses) for the six months ended December 31, 2021, remained fairly flat compared to the prior fiscal year’s corresponding period.
Net income for the six months ended December 31, 2021, was $2.0 million, or $0.52 per diluted share, compared to $2.9 million, or $0.72 per diluted share, for the corresponding period in fiscal 2021.
Guidance
Pro-Dex, Inc. typically does not provide sales, earnings, or other guidance, however, during calendar 2021, we began to see some challenges in our supply chain in the form of delayed shipments, longer lead times, and surcharges, much of which our suppliers indicate have been caused by the COVID-19 pandemic. During early calendar 2022, we are seeing these conditions persist and worsen such that we expect them to negatively impact our financial performance in the third quarter and possibly the fourth quarter of fiscal 2022, reflected as a reduction in net sales. We continue to implement plans and processes to mitigate these challenges that many manufacturers similarly face. Our long-term prospects remain positive and we believe these challenges will negatively impact us only in the short-term.
CEO Comments
Richard L. (“Rick”) Van Kirk, the Company’s President and Chief Executive Officer, commented, “We are pleased with our second quarter and year-to-date results especially because our net sales growth reflects a $40M annual run rate and we are encouraged by our strong operating income for the quarter.” Mr. Van Kirk continued, “In addition, we have been engaged by several customers to provide various non-recurring engineering projects. To focus on these secured customer contracts, we have transferred resources from our internal research and development projects thus delaying the launch of our internal products.”
The amount spent on internal projects under development as well as the estimated market launch date and estimated future annual revenue is summarized below (in thousands):
| Three and Six Months Ended December 31, 2021 | Three and Six Months Ended December 31, 2020 | Est Market Launch^(1)^ | Est <br>Annual Revenue | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Research & Development costs: | $ | 615 | $ | 1,596 | $ | 989 | $ | 2,080 | ||||
| Products in development: | ||||||||||||
| ENT Shaver | 32 | 263 | 76 | 258 | Q4 2022 | $ | 1,000 | |||||
| Vital Ventilator | — | 108 | 8 | 65 | Q1 2023 | $ | 1,500 | |||||
| CMF Driver | — | — | 279 | 468 | (2) | $ | 1,000 | |||||
| Sustaining & Other | 583 | 1,225 | 626 | 1,289 | ||||||||
| Total | $ | 615 | $ | 1,596 | $ | 989 | $ | 2,080 | ||||
| (1) | Represents the calendar quarter of expected market launch. The internal projects currently under development<br>have been delayed because we have been engaged by our customers to complete several billable non-recurring engineering projects. | |||||||||||
| --- | --- | |||||||||||
| (2) | The CMF Driver was completed in the third quarter of fiscal 2021 and began shipping to our existing largest<br>customer under a distribution agreement we executed in the first quarter of fiscal 2021. | |||||||||||
| --- | --- |
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. Additionally, these costs include development projects that may be in their infancy and may or may not result in a full-fledged product development effort.
About Pro-Dex, Inc.:
Pro-Dex, Inc. specializes 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 adoptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. Pro-Dex, Inc. also sells rotary air motors to a wide range of industries. Pro-Dex's products are found in hospitals and medical engineering labs around the world. For more information, visit the Company's website at www.pro-dex.com.
Statements herein concerning the Company's plans, growth, and strategies may include 'forward-looking statements' within the context of the federal securities laws. Statements regarding the Company's future events, developments, and future performance (including, but not limited to, estimated product launch dates and estimated future revenue), as well as management's expectations, beliefs, plans, estimates, or projections relating to the future, are forward-looking statements within the meaning of these laws. The Company's actual results may differ materially from those suggested as a result of various factors. Interested parties should refer to the disclosure concerning the operational and business concerns of the Company set forth in the Company's filings with the Securities and Exchange Commission.
(tables follow)
PRO-DEX, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
| June 30, <br>2021 | |||
|---|---|---|---|
| ASSETS | |||
| Current Assets: | |||
| Cash and cash equivalents | 5,252 | $ | 3,721 |
| Investments | 1,241 | 1,295 | |
| Accounts receivable, net of allowance for doubtful accounts of 4 and 2 at December 31, 2021 and at June 30, 2021, respectively | 8,850 | 10,933 | |
| Deferred costs | 424 | 193 | |
| Inventory | 9,285 | 8,437 | |
| Prepaid expenses and other current assets | 1,036 | 434 | |
| Total current assets | 26,088 | 25,013 | |
| Land and building, net | 6,390 | 6,437 | |
| Equipment and leasehold improvements, net | 4,605 | 3,845 | |
| Right-of-use asset, net | 2,429 | 2,605 | |
| Intangibles, net | 157 | 186 | |
| Deferred income taxes, net | 463 | 463 | |
| Investments | 1,940 | 1,704 | |
| Other assets | 42 | 67 | |
| Total assets | 42,114 | $ | 40,320 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||
| Current Liabilities: | |||
| Accounts payable | 2,315 | $ | 2,288 |
| Accrued expenses | 1,812 | 2,198 | |
| Deferred revenue | 584 | 150 | |
| Note payable | 1,260 | 1,236 | |
| Total current liabilities | 5,971 | 5,872 | |
| Lease liability, net of current portion | 2,248 | 2,432 | |
| Income taxes payable | 991 | 397 | |
| Notes payable, net of current portion | 10,899 | 11,535 | |
| Total non-current liabilities | 14,138 | 14,364 | |
| Total liabilities | 20,109 | 20,236 | |
| Shareholders’ Equity: | |||
| Common shares; no par value; 50,000,000 shares authorized; 3,641,983 and 3,645,660 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively | 7,886 | 7,953 | |
| Retained earnings | 14,119 | 12,131 | |
| Total shareholders’ equity | 22,005 | 20,084 | |
| Total liabilities and shareholders’ equity | 42,114 | $ | 40,320 |
All values are in US Dollars.
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
| Three Months Ended<br> December 31, | Six Months Ended<br> December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net sales | $ | 10,173 | $ | 8,265 | $ | 20,161 | $ | 16,855 | ||||
| Cost of sales | 6,769 | 5,669 | 13,329 | 10,784 | ||||||||
| Gross profit | 3,404 | 2,596 | 6,832 | 6,071 | ||||||||
| Operating expenses: | ||||||||||||
| Selling expenses | 22 | 150 | 59 | 280 | ||||||||
| General and administrative expenses | 1,165 | 936 | 2,257 | 1,641 | ||||||||
| Research and development costs | 615 | 989 | 1,596 | 2,080 | ||||||||
| Total operating expenses | 1,802 | 2,075 | 3,912 | 4,001 | ||||||||
| Operating income | 1,602 | 521 | 2,920 | 2,070 | ||||||||
| Interest expense | (117 | ) | (75 | ) | (237 | ) | (129 | ) | ||||
| Unrealized gain (loss) on marketable equity investments | (300 | ) | 1,413 | (152 | ) | 1,306 | ||||||
| Interest and other income | 25 | 20 | 49 | 61 | ||||||||
| Gain on sale of investments | — | — | — | 12 | ||||||||
| Income from operations before income taxes | 1,210 | 1,879 | 2,580 | 3,320 | ||||||||
| Income tax expense | (285 | ) | (129 | ) | (592 | ) | (412 | ) | ||||
| Net income | $ | 925 | $ | 1,750 | $ | 1,988 | $ | 2,908 | ||||
| Basic net income per share: | ||||||||||||
| Net income | $ | 0.25 | $ | 0.45 | $ | 0.54 | $ | 0.75 | ||||
| Diluted net income per share: | ||||||||||||
| Net income | $ | 0.25 | $ | 0.44 | $ | 0.53 | $ | 0.72 | ||||
| Weighted average common shares outstanding: | ||||||||||||
| Basic | 3,657 | 3,861 | 3,654 | 3,856 | ||||||||
| Diluted | 3,767 | 4,012 | 3,774 | 4,014 | ||||||||
| Common shares outstanding | 3,642 | 3,861 | 3,642 | 3,861 |