8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 7, 2020

PRO-DEX, INC.

(Exact name of registrant as specified in its 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)

(949) 769-3200

(Registrant’s telephone number including area 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 under the Exchange Act (17 CFR 240.14a-12)
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¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the 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 May 7, 2020 Pro-Dex, Inc. (the “Company”) is issuing a press release announcing its financial performance for the third quarter and nine months ended March 31, 2020. 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 May 7, 2020.

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:  May 7, 2020	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 May 7, 2020.

Press Release

EXHIBIT 99.1

Contact:  Richard L. Van Kirk, Chief Executive Officer

(949) 769-3200

For Immediate Release

PRO-DEX, INC. ANNOUNCES FISCAL 2020 THIRD QUARTER

AND NINE-MONTH RESULTS

IRVINE, CA, May 7, 2020 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2020 third quarter ended March 31, 2020. The Company also filed its Quarterly Report on Form 10-Q for the third quarter of fiscal year 2020 with the Securities and Exchange Commission today.

Quarter Ended March 31, 2020

Net sales for the three months ended March 31, 2020 increased $1.6 million, or 24%, to $8.5 million from $6.9 million for the three months ended March 31, 2019, due  primarily to the launch or our thoracic driver to one of our existing CMF driver customers.  This product launch represents the expansion of our adoptive torque-limiting software algorithm into a surgical driver other than the maxocranial market.

Gross profit for the three months ended March 31, 2020 increased $947,000, or 42%, to $3.2 million from $2.3 million for the same period in fiscal 2019.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended March 31, 2020 increased $140,000 or 10% compared to the same period in fiscal 2019.

Net income for the quarter ended March 31, 2020 was $1.2 million or $0.30 per diluted share, compared to $732,000, or $0.17 per diluted share, for the corresponding quarter in fiscal 2019.

Nine Months Ended March 31, 2020

Net sales for the nine months ended March 31, 2019 increased $3.5 million, or 18%, to $23.7 million from $20.2 million for the nine months ended March 31, 2019, due primarily to increased repair revenues generated from our largest customer.

Gross profit for the nine months ended March 31, 2020 increased $1.6 million or 22% compared to the same period in fiscal 2019.  The gross profit increase is directly related to our 18% increase in revenue and our ability to better absorb our fixed manufacturing costs.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the nine months ended March 31, 2020 increased 17% to $4.0 million from $3.4 million in the prior fiscal year’s corresponding period.

Net income for the nine months ended March 31, 2020 was $3.6 million or $0.88 per diluted share compared to $3.3 million, or $0.75 per diluted share.

CEO Comments

“While we are pleased with our third quarter and year-to-date results, and the shipment of the thoracic driver, Pro-Dex’s priorities, in response to COVID-19, are the health and safety of our employees, our communities, customers and suppliers,” said the Company’s President and Chief Executive Officer Richard L. (“Rick”) Van Kirk.  “While we cannot predict the total impact caused by the pandemic, we remain committed to our strategy to continue to provide excellent service to our existing customers and leverage our adaptive torque-limiting and other proprietary capabilities to expand our product portfolio.”

R&D Projects

The amount spent on projects under development is summarized below (in thousands):

	Three and Nine Months ended March 31, 2020				Three and Nine Months ended March 31, 2019				Market Launch		Est Annual Revenue
Total Research & Development costs:	$	620	$	1,501	$	603	$	1,337
Products in development:
Arthroscopic Shaver^(1)^		—		11		160		221		06/21	$	600
ENT Shaver		136		291		—		—		01/21	$	2,000
Arthroscopic Attachment		—		—		1		17		^(2)^	$	150
CMF Driver		60		106		—		3		06/20	$	350
Sustaining & Other		424		1,093		442		1,096
Total	$	620	$	1,501	$	603	$	1,337
Customer CMF Driver ^(3)^	$	121	$	303	$	63	$	289		06/20	$	2,500

^(1)^

This project has been internally pushed back to focus on our new internal Pro-Dex branded ENT shaver.

^(2)^

Internal development of this project is now complete, but we are looking for the most attractive sales channel.

^(3)^

Costs incurred related to customer contracts are included in costs of sales and deferred costs and are not included in research and development costs.

As we previously discussed, in early fiscal 2019 we entered a development contract with a current significant customer to private-label our thoracic driver for their unique specifications. We shipped initial launch quantities of this product during the third quarter ended March 31, 2020.

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 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 also manufactures and 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 uncertainties related to the COVID-19 pandemic), 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.

CONDENSED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)

			June 30, 2019
ASSETS
Current Assets:
Cash and cash equivalents	4,378		$	7,742
Investments	2,771			2,649
Accounts receivable, net of allowance for doubtful accounts of 6 and 0 at March 31, 2020 and at June 30, 2019, respectively	4,170			4,100
Deferred costs	391			430
Inventory	8,643			6,239
Prepaid expenses and other current assets	225			623
Total current assets	20,578			21,783
Equipment and leasehold improvements, net	2,732			2,726
Right of use asset, net	3,026			—
Intangibles, net	138			129
Deferred income taxes, net	53			260
Investments	1,659			582
Other assets	42			40
Total assets	28,228		$	25,520
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	1,912		$	1,996
Accrued expenses	1,524			1,437
Deferred revenue	360			215
Note payable and capital lease obligations	642			622
Total current liabilities	4,438			4,270
Deferred rent	—			146
Lease liability, net of current portion	2,857			—
Income taxes payable	325			162
Notes and capital leases payable, net of current portion	3,449			3,934
Total non-current liabilities	6,631			4,242
Total liabilities	11,069			8,512
Shareholders’ equity:
Common shares; no par value; 50,000,000 shares authorized; 3,837,490 and 4,039,491 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively	12,970			15,815
Accumulated other comprehensive loss	(1,162	)		(549	)
Retained earnings	5,351			1,742
Total shareholders’ equity	17,159			17,008
Total liabilities and shareholders’ equity	28,228		$	25,520

All values are in US Dollars.

PRO-DEX, INC.

CONDENSED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share amounts)

	Three Months EndedMarch 31,						Nine Months EndedMarch 31,
	2020			2019			2020			2019
Net sales	$	8,508		$	6,854		$	23,710		$	20,168
Cost of sales		5,298			4,591			14,855			12,930
Gross profit		3,210			2,263			8,855			7,238
Operating (income) expenses:
Selling expenses		161			122			438			252
General and administrative expenses		725			641			2,052			1,838
Gain from disposal of equipment		—			—			—			(7	)
Research and development costs		620			603			1,501			1,337
Total operating expenses		1,506			1,366			3,991			3,420
Operating income		1,704			897			4,864			3,818
Interest expense		(58	)		(67	)		(180	)		(156	)
Interest and other income		9			93			77			261
Gain on sale of investments		—			—			—			356
Income from operations before income taxes		1,655			923			4,761			4,279
Income tax expense		(442	)		(191	)		(1,194	)		(1,019	)
Net income	$	1,213		$	732		$	3,567		$	3,260
Other comprehensive income (loss), net of tax:
Unrealized income (loss) from marketable equity investments		(1,262	)		33			(613	)		(163	)
Comprehensive income (loss)	$	(49	)	$	765		$	2,954		$	3,097
Basic net income per share:
Net income	$	0.31		$	0.18		$	0.90		$	0.77
Diluted net income per share:
Net income	$	0.30		$	0.17		$	0.88		$	0.75
Weighted average common shares outstanding:
Basic		3,871			4,143			3,944			4,224
Diluted		3,999			4,257			4,071			4,338
Common shares outstanding		3,837			4,136			3,837			4,136

PRO-DEX, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months EndedMarch 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,567		$	3,260
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		426			309
Amortization of loan fees		6			5
Gain from disposal of equipment		—			(7	)
Share-based compensation		93			28
Non-cash lease expense		31			—
Gain on sale of investments		—			(356	)
Deferred income taxes		207			1,026
Bad debt expense (recovery)		6			(14	)
Changes in operating assets and liabilities:
Accounts receivable and other current receivables		(76	)		(773	)
Deferred costs		39			(235	)
Inventory		(2,404	)		(412	)
Prepaid expenses and other assets		396			(410	)
Accounts payable and accrued expenses		(301	)		353
Deferred revenue		145			169
Income taxes payable		163			142
Net cash provided by operating activities		2,298			3,085
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments		(1,827	)		(2,562	)
Purchases of equipment and leasehold improvements		(422	)		(1,048	)
Proceeds from sale of investments		—			1,905
Proceeds from dividend reclassification as return of principal		15			23
Proceeds from collection of notes receivable		—			1,154
Proceeds from sale of equipment		—			7
Increase in intangibles		(19	)		(11	)
Net cash used in investing activities		(2,253	)		(532	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock		(2,977	)		(2,675	)
Proceeds from exercise of options and ESPP contributions		39			29
Payment of employee payroll taxes on net issuance of common stock		—			(101	)
Proceeds from Minnesota Bank & Trust long-term debt, net of fees		—			4,940
Principal payments on notes payable and capital lease		(471	)		(273	)
Net cash provided by (used in) financing activities		(3,409	)		1,920
Net increase (decrease) in cash and cash equivalents		(3,364	)		4,473
Cash and cash equivalents, beginning of period		7,742			5,188
Cash and cash equivalents, end of period	$	4,378		$	9,661