Pro Dex Inc 10-Q for FY2026 Q3
Pro Dex Inc (PDEX)
About this 10-Q
Pro Dex Inc filed this 10-Q on April 30, 2026, covering the quarter ended March 31, 2026 (FY2026 Q3).
Headline figures
Quarter ended March 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $19.95M
- up 14.6% from $17.41M a year earlier
- Net income
- $3.94M
- up 20.2% from net income of $3.28M a year earlier
- Diluted EPS
- $1.20
- up 22.4% from $0.98 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the quarterly period ended
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OR
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the transition period from __________ to __________ | |
Commission file number:
(Exact name of registrant as specified in its charter)
———————
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices and zip code)
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark 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. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the registrant’s classes of common stock outstanding as of the latest practicable date: shares of common stock, no par value, as of April 28, 2026.
PRO-DEX, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2026
TABLE OF CONTENTS
| Page | |
| PART I — FINANCIAL INFORMATION | |
| ITEM 1. FINANCIAL STATEMENTS (Unaudited) | 1 |
| Condensed Consolidated Balance Sheets as of March 31, 2026 and June 30, 2024 | 1 |
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2026 and 2025 | 2 |
| Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended March 31, 2026 and 2025 | 3 |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2026 and 2025 | 4 |
| Notes to Condensed Consolidated Financial Statements | 6 |
| ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 22 |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 29 |
| ITEM 4. CONTROLS AND PROCEDURES | 29 |
| PART II — OTHER INFORMATION | |
| ITEM 1. LEGAL PROCEEDINGS | 30 |
| ITEM 1A. RISK FACTORS | 30 |
| ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 30 |
| ITEM 5. OTHER INFORMATION | 31 |
| ITEM 6. EXHIBITS | 31 |
| SIGNATURES | 32 |
| 1 |
PART I — FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
| March
31, 2026 | June 30,
2025 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments | ||||||||
| Accounts receivable | ||||||||
| 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 | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Income taxes payable | ||||||||
| 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 shares; | ||||||||
| Retained earnings | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(In thousands, except per share amounts)
| Three
Months Ended March 31, | Nine Months
Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on equity investments, net | ||||||||||||||||
| Interest and other income | ||||||||||||||||
| Income before income taxes | ||||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic and diluted net income per share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands)
| Three
Months Ended March 31, | Nine Months
Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Common shares: | ||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | ||||||||||||
| Share-based compensation expense | ||||||||||||||||
| Share repurchases | ( | ) | ( | ) | ( | ) | ||||||||||
| Shares withheld from common stock issued to pay employee payroll taxes | ( | ) | ( | ) | ||||||||||||
| ESPP shares issued | ||||||||||||||||
| Reclassification of excess share repurchases(1) | ||||||||||||||||
| Balance, at end of period | $ | $ | $ | $ | ||||||||||||
| Retained earnings: | ||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | ||||||||||||
| Net income | ||||||||||||||||
| Shareholder distribution | ( | ) | ( | ) | ||||||||||||
| Balance, at 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.
| 4 |
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Nine Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of loan fees, net | ||||||||
| Share-based compensation | ||||||||
| Gain on equity investments | ( | ) | ( | ) | ||||
| Non-cash straight-line lease amortization | ( | ) | ( | ) | ||||
| Deferred income taxes | ||||||||
| Credit loss expense (recovery) | ||||||||
| 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 payable | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of investments | ( | ) | ||||||
| Purchase of APM, net of cash acquired | ( | ) | ||||||
| Purchases of equipment and improvements | ( | ) | ( | ) | ||||
| Proceeds from sale of investments | ||||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repurchases of common stock | ( | ) | ( | ) | ||||
| Proceeds from exercise of options and ESPP contributions | ||||||||
| Payment of employee payroll taxes on net issuance of common stock | ( | ) | ( | ) | ||||
| Proceeds from notes, net of fees | ||||||||
| Principal payments on notes payable and revolving loan | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase 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.
| 5 |
PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
(In thousands)
| Nine Months
Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
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 | $ | $ | ||||||
| Promissory note issued in conjunction with APM acquisition | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
PRO-DEX INC. AND SUBSIDIARIES
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 5.
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 (Topic 270): Narrow-scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.
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 March 31, 2026, we have identified one reportable segment, as our chief operating decision maker (“CODM”), the Company’s Chief Executive Officer, allocates resources, assesses performance, and manages our business as one segment. As our operations are managed at the consolidated level, there are no differences between the measurement of the reportable segment’s profit or loss and our condensed consolidated statement of operations.
| 7 |
PRO-DEX INC. AND SUBSIDIARIES 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, and precision machined parts and assemblies for the aerospace and defense industries through our newly acquired subsidiary Advanced Precision Machining, LLC (“APM”).
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. This subsidiary has no separate operations.
As described more fully in Note 3, in February 2026, we acquired APM, a manufacturer located in Costa Mesa, California. APM manufactures several of our machined sub-assemblies and also manufactures parts and assemblies for the aerospace and defense industries. In addition, it serves as a Prime Contractor for the U.S. Government and therefore maintains registrations under the International Traffic in Arms Regulations (“ITAR”) as well as a Joint Certification Program (“JCP”) certification. The condensed consolidated financial statements include the accounts of the Company, PDEX Franklin and APM and all significant inter-company accounts and transactions have been eliminated.
NOTE 3. BUSINESS ACQUISITION
On
February 9, 2026, we completed the acquisition of all of the issued and outstanding membership interests of APM, a manufacturer of precision
machined components and assemblies for the medical, aerospace and defense industries. The aggregate purchase price was $
| 8 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
The following table summarizes the consideration paid and the estimated fair value of the assets acquired and liabilities assumed for APM as of the acquisition date of February 9, 2026 (in thousands).
| Schedule of estimated fair value of the assets acquired and liabilities assumed | ||||
| APM Purchase Price Allocation | ||||
| Consideration: | ||||
| Cash | ||||
| Promissory note payable to seller | ||||
| Total Consideration | ||||
| Fair value of assets acquired and liabilities assumed: | ||||
| Cash | ||||
| Inventory | ||||
| Accounts receivable | ||||
| Fixed assets | ||||
| Prepaids and other assets | ||||
| Tradename | ||||
| Customer relationships | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Long-term lease liabilities | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
The acquisition of APM was completed to support expansion of our business and broaden the Company’s customer base as well as to support the increased demand resulting from the contract extension executed with our largest customer in the second quarter of this fiscal year. We have accounted for this acquisition as a business combination using the acquisition method of accounting. This method requires, among other things, that assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The purchase price allocation reflected above is based upon our preliminary valuation and is subject to future adjustment. Pro forma historical results of operations related to APM during the period prior to the acquisition date have not been presented because they are not material to our condensed consolidated income statements. The results of operations related to APM have been included in the Company’s condensed consolidated income statements since the date of acquisition. The fair value determination of assets recorded and liabilities assumed are those of management. The fair value determination of the customer relationships was based on the excess of earnings method which is based on the prospective net cash flows of the existing customers. The fair value determination of the trade name was based upon a relief from royalty approach which assesses the royalty savings an entity realizes since it owns the asset and isn’t required to pay a third-party license for its use.
| 9 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 4. 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 March 31, | Nine Months
Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| 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 or contract assets
(presented as deferred costs on our condensed consolidated balance sheets), and customer advances and deposits (presented as
deferred revenue on our condensed consolidated balance sheets), where applicable. Amounts are generally billed as work progresses in
accordance with agreed upon milestones. The over-time revenue recognition model consists of non-recurring engineering
(“NRE”) and prototype services and typically relates to NRE services related to the evaluation, design, or customization
of a medical device and is typically recognized over time utilizing an input measure of progress based on costs incurred compared to
the estimated total costs upon completion. During the three and nine months ended March 31, 2026, we recorded $
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 Nine
Months Ended | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| 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 Nine
Months Ended | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Contract liabilities beginning balance | $ | $ | $ | $ | ||||||||||||
| Payments received from customers | $ | $ | $ | |||||||||||||
| Amounts reclassified to revenue | ( | ) | ( | ) | ( | ) | ||||||||||
| Contract liabilities ending balance | $ | $ | $ | $ | ||||||||||||
| 10 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 5. 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 March 31, 2026 and June 30, 2025, we categorized our investments in 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 March 31, 2026 or June 30, 2025.
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 March 31, 2026 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 4 | |||||||||||||
| Financial Assets: | ||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | ||||||||||||
| Equity securities – short-term | ||||||||||||||||
| Equity securities – long-term | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 11 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
| Fair Value Measurement at June 30, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 4 | |||||||||||||
| Financial Assets: | ||||||||||||||||
| Cash equivalents | $ | $ | $ | |||||||||||||
| Equity securities – short-term | ||||||||||||||||
| Equity securities – long-term | ||||||||||||||||
| Total | $ | 4 | $ | |||||||||||||
Investments
at March 31, 2026 and June 30, 2025 had an aggregate cost basis of $
Of
the total equity securities at March 31, 2026 and June 30, 2025, $
In our third quarter of fiscal 2026, Monogram achieved the first of five milestones, and accordingly we earned and recorded an additional gain in the amount of $2.3 million. There is no guarantee or assurance that any additional milestones will be achieved. As disclosed previously, in conjunction with making our original investment in Monogram during fiscal 2017, we were granted the exclusive right to develop, engineer, manufacture and supply certain products on its behalf. Those rights were transferred in connection with Zimmer Biomet’s acquisition of Monogram and remain in effect post-acquisition. We made this investment in the hope that it could generate meaningful additional revenue which has yet to occur but may be more likely to occur in the future because Zimmer Biomet has more financial resources to assist with commercialization of Monogram’s products. However, there is no guarantee or assurance as to the amount of revenue, if any, that we may ultimately recognize from our exclusive right to develop, engineer, manufacture and supply certain products for Monogram.
We invest surplus cash
from time to time through our Investment Committee, which is comprised of one management director, Mr. Van Kirk, and two non-management
directors, Mr. Cabillot and Mr. Swenson, who chairs the committee. 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.
| 12 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 6. 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 | ||||||||
| March
31, 2026 | 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 | ||||||||
| March
31, 2026 | June 30,
2025 | |||||||
| Patent-related costs | $ | $ | ||||||
| Customer relationships | ||||||||
| Tradename | ||||||||
| Total Intangibles | ||||||||
| 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.
Both the customer relationships and the tradename relate to our acquisition of APM described in Note 3 and will be amortized on a straight-line basis over ten and seven years, respectively.
As of March 31, 2026, the expected future amortization expense of our intangible assets is as follows (in thousands):
| Schedule of amortization expense of our intangible assets | ||||||
| Amortization Expense | ||||||
| Fiscal Year: | ||||||
| 2026 | $ | |||||
| 2027 | ||||||
| 2028 | ||||||
| 2029 | ||||||
| 2030 | ||||||
| Thereafter | ||||||
| Total | $ | |||||
| 13 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTE 7. WARRANTY
The warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses and is included in accrued expenses in the accompanying condensed consolidated balance sheets. As of March 31, 2026 and June 30, 2025, the warranty reserve amounted to $254,000 and $357,000, respectively. Warranty expenses are included in cost of sales in the accompanying condensed consolidated income statements. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates and are included in current period warranty expense.
Information regarding the accrual for warranty costs for the three and nine months ended March 31, 2026 and 2025, are as follows (in thousands):
| Schedule of accrual warranty costs | ||||||||||||||||
As of and for the Three
Months Ended | As of and for the Nine
Months Ended | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Accruals during the period | $ | $ | $ | |||||||||||||
| Changes in estimates of prior period warranty accruals | ( | ) | ( | ) | ||||||||||||
| Warranty amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||
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.
| 14 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
The following table presents reconciliations of the numerators and denominators of the basic and diluted earnings per share computations for net income. In the tables below, income amounts represent the numerator, and share amounts represent the denominator (in thousands, except per share amounts):
| Schedule of net income per share | ||||||||||||||||
| Three
Months Ended March 31, | Nine Months
Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| 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 | $ | $ | $ | $ | ||||||||||||
NOTE 9. 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 March 31, 2026 and 2025 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 do not expect the 2025 Act will have a material impact on our financial statements for fiscal 2026.
| 15 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
Our 2016 Equity Incentive Plan provides for the award of up to shares of our common stock in the form of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, performance awards, and other stock-based awards. As of March 31, 2026, performance awards for shares of common stock, non-qualified stock options for shares of common stock, and restricted shares of common stock have been granted under the 2016 Equity Incentive Plan.
Performance Awards
During both the three months ended March 31, 2026 and 2025, we recorded share-based compensation expense of $ related to outstanding performance awards. During both the nine months ended March 31, 2026, and 2025, we recorded share-based compensation expense of $ related to outstanding performance awards. On March 31, 2026, there was approximately $ of unrecognized compensation cost related to non-vested performance awards, which is expected to be expensed over a weighted-average period of three months.
On July 1, 2024, it was determined by the Compensation Committee that the vesting of performance awards for shares of common stock had been achieved. Each participant elected a net issuance to cover their individual withholding taxes and, therefore, we issued participants shares of common stock and paid $ of participant-related payroll tax liabilities.
Non-Qualified Stock Options
In December 2020, the Compensation Committee granted non-qualified stock options for shares of common stock to our directors and certain employees under the 2016 Equity Incentive Plan. The weighted average fair value of the stock option awards granted in fiscal 2021 was $, calculated using a Monte Carlo simulation. During both the three months ended March 31, 2026 and 2025, we recorded compensation expense of $ related to these options. During both the nine months ended March 31, 2026 and 2025, we recorded compensation expense of $ related to these options. As of March 31, 2026, of these stock options have vested, have been forfeited either due to termination or our stock price not attaining the pre-determined price, and remain outstanding and unvested and there was approximately $ of unrecognized compensation cost related to the non-vested stock options.
Restricted Shares
In November 2024, the Compensation Committee awarded restricted shares of common stock to our directors and certain employees under the 2016 Equity Incentive Plan. The fair value of the restricted shares on the date of grant was $, based upon the closing price of our common stock on the date of grant. During the second quarter of fiscal 2026, shares were vested and shares were forfeited by employees to pay their individual withholding taxes and therefore we issued 2,728 shares of common stock and paid $ of participant-related payroll tax liabilities.
In November 2025, the Compensation Committee awarded restricted shares of common stock to our directors and certain employees under the 2016 Equity Incentive Plan. The fair value of the restricted shares on the date of grant was $, based upon the closing price of our common stock on the date of grant.
During the three months ended March 31, 2026 and 2025, we recorded compensation expense of $ and $, respectively, related to these restricted shares. During the nine months ended March 31, 2026 and 2025, we recorded compensation expense of $ and $, respectively, related to these restricted shares. As of March 31, 2026, there was approximately $ million of unrecognized compensation cost related to these restricted shares.
| 16 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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
March 31, 2026 and 2025, we recorded ESPP share-based compensation expense in the amount of $ and $, respectively. During the
three months ended March 31, 2026 and 2025, and shares were purchased, respectively, under the ESPP and allocated to employees
based upon their contribution prices of $
NOTE 11. 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 and the nine-month periods ended March 31, 2026 and 2025, is as follows (in thousands, except percentages):
| Schedule of sales by major customers | ||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Amount | Perfect of Total | Percent of Total | Amount | |||||||||||||
| Net sales | $ | $ | ||||||||||||||
| Customer concentration: | ||||||||||||||||
| Customer 1 | $ | $ | ||||||||||||||
| Customer 2 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
| Nine Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Amount | Perfect of Total | Percent of Total | Amount | |||||||||||||
| Net sales | $ | $ | ||||||||||||||
| Customer concentration: | ||||||||||||||||
| Customer 1 | $ | $ | ||||||||||||||
| Customer 2 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
| 17 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
Information with respect to accounts receivable from those customers who comprised more than 10% of our gross accounts receivable at either March 31, 2026 or June 30, 2025, is as follows (in thousands, except percentages):
| Schedule of gross accounts receivable | ||||||||||||||||
| March 31, 2026 | June 30, 2025 | |||||||||||||||
| Total gross accounts receivable | $ | $ | ||||||||||||||
| Customer concentration: | ||||||||||||||||
| Customer 1 | $ | $ | ||||||||||||||
| Customer 2 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
During the three and nine months ended March 31, 2026 and 2025 we had three suppliers, respectively, that accounted for 10% or more of total inventory purchases. One of our significant suppliers presented in the tables below is APM, our newly acquired subsidiary. Accordingly amounts below exclude amounts purchased from or payable to APM after the acquisition date of February 9, 2026. Information with respect to suppliers that accounted for in excess of 10% of our inventory purchases in either of the three-month or the nine-month periods ended March 31, 2026 and 2025, is as follows (in thousands, except percentages):
| Schedule of inventory purchases | ||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Amount | Percent of Total | Amount | Percent of Total | |||||||||||||
| Total Inventory purchases | $ | $ | ||||||||||||||
| Supplier concentration: | ||||||||||||||||
| Supplier 1 | $ | $ | ||||||||||||||
| Supplier 2 | ||||||||||||||||
| Supplier 3 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
| Nine Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Amount | Percent of Total | Amount | Percent of Total | |||||||||||||
| Total inventory purchases | $ | $ | ||||||||||||||
| Supplier concentration: | ||||||||||||||||
| Supplier 1 | $ | $ | ||||||||||||||
| Supplier 2 | ||||||||||||||||
| Supplier 3 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
| 18 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
Information with respect to accounts payable due to those suppliers that comprised more than 10% of our inventory purchases at either March 31, 2026 or June 30, 2025, is as follows (in thousands, except percentages):
| Schedule of accounts payable | ||||||||||||||||
| March 31, 2026 | June 30, 2025 | |||||||||||||||
| Total accounts payable | $ | $ | ||||||||||||||
| Supplier concentration: | ||||||||||||||||
| Supplier 1 | $ | $ | ||||||||||||||
| Supplier 2 | ||||||||||||||||
| Supplier 3 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
NOTE 12. 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). The Company entered into a Second Amended and Restated Credit and Security Agreement (the “Amended Credit Agreement”) with UMB Bank, N.A. on February 9, 2026, which among other things provided for financing to fund the cash portion of the purchase price of APM as described in Note 3 by issuing Term Loan D in the principal amount of $6,650,000.
The Amended Credit Agreement also extended the maturity date of the Amended Revolving Loan from December 29, 2026 to December 29, 2027, pursuant to a Third Amended and Restated Revolving Credit Note entered into by the Company and UMB on February 9, 2026. Loan origination fees in the amount of $31,625 were paid to UMB in connection with the Amended Credit Agreement.
Advanced Precision Machining (“APM”) Subordinated Promissory Note
On February 9, 2026 in connection
with the acquisition of APM as described in Note 3, we issued the seller a promissory note in the amount of $
| 19 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
The balance on our outstanding loans (in thousands) is as follows (exclusive of unamortized loan fees):
| Schedule of unamortized loan | ||||||||
| March 31, 2026 | June 30, 2025 | |||||||
| Notes Payable: | ||||||||
| Term Loan A | $ | $ | ||||||
| Term Loan B | ||||||||
| Term Loan C | ||||||||
| Term Loan D | ||||||||
| Property Loan | ||||||||
| APM Subordinated 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, Term Loan D, the Property Loan, or the Amended Revolving Loan (collectively, the “Loans”)
not made within seven days after the due date is subject to a late payment fee equal to
The Amended Credit Agreement, Security Agreement, Property Loan Security Agreement, Term Loan A, Term Loan B, Term Loan C, Term Loan D, Property Loan, and Amended Revolving Loan contain representations and warranties, affirmative, negative and financial covenants, and events of default that are customary for loans of this type. We believe that we are in compliance with all of our debt covenants as of March 31, 2026, but there can be no assurance that we will remain in compliance for the duration of the term of the Loans.
NOTE 13. 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 the three and nine months ended March 31, 2026, we repurchased and shares, respectively, at an aggregate cost, inclusive of fees under the Plan, of $ million and $ million, respectively. During both the three and nine months ended March 31, 2025, we repurchased shares at an aggregate cost, inclusive of fees under the Plan, of $ million. On a cumulative basis, since implementation of the share repurchase program in 2013, we have repurchased a total of shares under the share repurchase program at an aggregate cost, inclusive of fees, of $ million. All repurchases under the 10b5-1 Plans were administered through an independent broker.
| 20 |
PRO-DEX INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
As of March 31, 2026, our cumulative stock repurchases have exceeded our recorded value of common stock, and the excess has been reflected as a shareholder distribution, reducing our consolidated retained earnings.
NOTE 14. LEASES
Our operating lease right-of-use
asset and long-term term lease liabilities are presented separately on our condensed consolidated balance sheets. Additionally, we acquired some equipment leases in conjunction with
our acquisition of APM in the third quarter of fiscal 2026. The current portion of our operating
lease liability as of March 31, 2026, in the amount of $
As of March 31, 2026,
our operating lease related to our corporate office has a remaining lease term of one year and six months and an imputed interest
rate of
As of March 31, 2026, the maturity of our lease liabilities is as follows (in thousands):
| Operating Leases | ||||||
| Fiscal Year: | ||||||
| 2026 | ||||||
| 2027 | ||||||
| 2028 | ||||||
| 2029 | ||||||
| 2030 | ||||||
| Total lease payments | ||||||
| Less imputed interest: | ( | ) | ||||
| Total | $ | |||||
NOTE 15. 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 16. SUBSEQUENT EVENTS
We have evaluated subsequent events through the date of this filing. There were no subsequent events that require disclosure.
| 21 |
| 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 nine-month periods ended March 31, 2026 and 2025. 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 integrate and effectively operate Advanced Precision Machining, LLC (“APM”), our ability to service our debt and remain in compliance with our related covenants, consolidation within our target marketplace and among our competitors, the impact of tariffs on the cost of our raw materials and purchased components, 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 which appeal to our customers, primarily medical device distributors. We also manufacture and sell rotary air motors to a wide range of industries, and precision machined parts and assemblies for the aerospace and defense industries through our APM subsidiary.
Our principal headquarters are located at 2361 McGaw Avenue, Irvine, California 92614 and our phone number is (949) 769-3200. Our Internet addresses are www.pro-dex.com and www.advanced-precision.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 Pro-Dex, Inc. 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.govand 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.
| 22 |
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 nine months ended March 31, 2026 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. During the third quarter of fiscal 2026, we completed the acquisition of APM, one of our significant suppliers, to help meet the increased demand as a result of this contract extension. Our acquisition of APM provides us with a second machine shop located in Costa Mesa, California that not only provides machined assemblies to service our largest customer but also provides machining to other customers primarily in the defense and aerospace industries.
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, successfully integrating and operating APM, investing in research and development activities to design unique medical devices as well as Pro-Dex branded drivers to leverage our torque-limiting software, 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.
| 23 |
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 March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| % of Revenue | % of Revenue | % of Revenue | % of Revenue | |||||||||||||||||||||||||||||
| Net Sales: | ||||||||||||||||||||||||||||||||
| Medical device products | $ | 16,242 | 82 | % | $ | 11,913 | 68 | % | $ | 45,796 | 80 | % | $ | 34,057 | 69 | % | ||||||||||||||||
| Industrial and scientific | 472 | 2 | % | 265 | 2 | % | 836 | 2 | % | 576 | 1 | % | ||||||||||||||||||||
| NRE & Prototype | 531 | 3 | % | 186 | 1 | % | 1,156 | 2 | % | 274 | 1 | % | ||||||||||||||||||||
| Repairs | 2,673 | 13 | % | 5,099 | 29 | % | 9,650 | 17 | % | 15,096 | 31 | % | ||||||||||||||||||||
| Discounts and other | 31 | — | (49 | ) | — | (295 | ) | (1 | %) | (904 | ) | (2 | %) | |||||||||||||||||||
| $ | 19,949 | 100 | % | $ | 17,414 | 100 | % | $ | 57,143 | 100 | % | $ | 49,099 | 100 | % | |||||||||||||||||
Certain of our medical device products utilize proprietary designs developed by us under exclusive development and supply agreements. All of our medical device products utilize proprietary manufacturing methods and know-how, and are manufactured either in our Costa Mesa or Irvine, California facilities, and are assembled in our Tustin, California facility, along with our industrial products. Details of our medical device sales by type is as follows (in thousands, except percentages):
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| % of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||
| Medical device sales: | ||||||||||||||||||||||||||||||||
| Orthopedic | $ | 13,073 | 81 | % | $ | 8,607 | 72 | % | $ | 36,011 | 79 | % | $ | 24,631 | 72 | % | ||||||||||||||||
| CMF | 2,606 | 16 | % | 2,354 | 20 | % | 8,539 | 18 | % | 6,395 | 19 | % | ||||||||||||||||||||
| Thoracic | 563 | 3 | % | 952 | 8 | % | 1,246 | 3 | % | 3,031 | 9 | % | ||||||||||||||||||||
| Total | $ | 16,242 | 100 | % | $ | 11,913 | 100 | % | $ | 45,796 | 100 | % | $ | 34,057 | 100 | % | ||||||||||||||||
Sales of our medical device products increased $4.3 million, or 36%, and $11.7 million, or 35%, respectively, for the three and nine months ended March 31, 2026, compared to the corresponding periods of the prior fiscal year. Our medical device revenue to our largest customer, included in orthopedic sales above, increased $4.5 million and $11.4 million, respectively, for the three and nine months ended March 31, 2026, compared to the corresponding periods of the prior fiscal year. As previously discussed, our largest customer executed a contract amendment which extends the contract through 2028 and also provides for higher volumes of their newest surgical handpiece. Therefore, we expect to see similar levels of revenue reported in orthopedic sales through 2028. Additionally, recurring revenue from distributors of thoracic drivers decreased $389,000 and $1.8 million, respectively, for the three and nine months ended March 31, 2026, compared to the corresponding periods of the prior fiscal year. Our CMF sales revenue increased $252,000 and $2.1 million, for the three and nine months ended March 31, 2026, respectively, compared to the corresponding periods 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 required inventory levels.
Industrial and scientific sales increased $207,000, or 78%, and $260,000, or 45%, respectively, for the three and nine months ended March 31, 2026, compared to the corresponding periods of the prior fiscal year, primarily due to the inclusion of APM sales from the acquisition date of February 9, 2026. Our NRE and prototype revenue increased $345,000, or 186%, and $882,000, or 322%, for the three and nine months ended March 31, 2026, 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.
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Repair revenue decreased $2.4 million or 48%, and $5.4 million, or 36%, for the three and nine months ended March 31, 2026, respectively, 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 March 31, 2026, we had a backlog of approximately $39.0 million, of which $15.6 million is scheduled to be delivered in the fourth quarter of fiscal 2026 and the balance is scheduled to be delivered next 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 March 31, | Nine
Months Ended March 31, | |||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| % of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||
| Cost of sales: | ||||||||||||||||||||||||||||||||
| Product cost | $ | 12,677 | 92 | % | $ | 10,997 | 95 | % | $ | 36,896 | 92 | % | $ | 30,799 | 93 | % | ||||||||||||||||
| Under(over)-absorption of manufacturing costs | 822 | 6 | % | 424 | 3 | % | 2,316 | 6 | % | 1,983 | 6 | % | ||||||||||||||||||||
| Inventory and warranty charges | 317 | 2 | % | 195 | 2 | % | 687 | 2 | % | 298 | 1 | % | ||||||||||||||||||||
| Total cost of sales | $ | 13,816 | 100 | % | $ | 11,616 | 100 | % | $ | 39,899 | 100 | % | $ | 33,080 | 100 | % | ||||||||||||||||
| Three
Months Ended March 31, | Nine
Months Ended March 31, | Year
over Year ppt Change | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | Three Months | Nine Months | |||||||||||||||||||
| Gross margin | 31 | % | 33 | % | 30 | % | 33 | % | (2 | ) | (3 | ) | ||||||||||||
Cost of sales for the three months ended March 31, 2026, increased $2.2 million, or 19%, compared to the corresponding period of the prior fiscal year. The increase in total costs of sales is consistent with the 15% increase in revenue for the same period. Under-absorption of manufacturing costs increased by $398,000 for the three months ended March 31, 2026, compared to the corresponding period of the prior fiscal year. Costs relating to inventory and warranty charges increased $122,000 for the three months ended March 31, 2026, compared to the corresponding period of the prior fiscal year, due to an increase in inventory reserves, offset by a decrease in warranty accruals.
Gross profit increased by approximately $335,000, or 6%, for the three months ended March 31, 2026, compared to the corresponding period of the prior fiscal year, primarily as a result of the increase in medical device revenue for the same periods as described above. Gross margin as a percentage of sales decreased by approximately 2 percentage points compared to the corresponding period of the prior fiscal year due primarily to unfavorable product mix.
Cost of sales for the nine months ended March 31, 2026, increased by $6.8 million, or 21%, compared to the corresponding period of the prior fiscal year. The increase in total costs of sales is consistent with the 16% increase in revenue for the same period. Under-absorption of manufacturing costs increased by $333,000 for the nine months ended March 31, 2026, compared to the corresponding period of the prior fiscal year. Inventory and warranty charges increased by $389,000, or 131%, for the nine months ended March 31, 2026, compared to the corresponding period of the prior fiscal year. A significant portion of the current fiscal year inventory charges relates to reserves established related to a complex machined component in the next generation hand piece we sell to our largest customer.
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Gross profit increased by $1.2 million, or 8%, for the nine months ended March 31, 2026, compared to the corresponding period of the prior fiscal year, primarily as a result of the increase in medical device revenue for the same periods as described above. Gross margin as a percentage of sales decreased by 3 percentage points compared to the corresponding period of the prior fiscal year primarily related to unfavorable product mix.
Operating Expenses
Operating Costs and Expenses
(in thousands except percentages)
| Three
Months Ended March 31, | Nine
Months Ended March 31, | Year over Year % Change | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | Three Months | Nine Months | |||||||||||||||||||||||||||||||||||
| % of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | |||||||||||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
| Selling expenses | $ | 40 | — | $ | 113 | 1 | % | $ | 153 | — | $ | 211 | — | (65 | %) | (28 | %) | |||||||||||||||||||||||
| General and administrative expenses | 2,172 | 11 | % | 1,098 | 6 | % | 5,301 | 9 | % | 3,732 | 8 | % | 98 | % | 42 | % | ||||||||||||||||||||||||
| Research and development costs | 827 | 4 | % | 947 | 5 | % | 2,328 | 4 | % | 2,731 | 6 | % | (13 | %) | (15 | %) | ||||||||||||||||||||||||
| $ | 3,039 | 15 | % | $ | 2,158 | 12 | % | $ | 7,782 | 13 | % | $ | 6,674 | 14 | % | 41 | % | 17 | % | |||||||||||||||||||||
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 and nine months ended March 31, 2026, decreased $73,000, or 65%, and $58,000, or 28%, respectively, compared to the corresponding periods of fiscal 2025. The decrease in selling expenses relates to a reduction in personnel costs as currently we have no employees in the department.
General and administrative expenses (“G&A”) consist of salaries and other personnel-related expenses of our accounting, finance, facilities, business systems, 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 increased $1.1 million and $1.6 million, respectively, during the three and nine months ended March 31, 2026, when compared to the corresponding periods of the prior fiscal year. The increase relates to increased personnel costs of approximately $200,000 and $500,000 for the three and nine months ended March 31, 2026, respectively, as well as G&A expenses of our newly acquired subsidiary APM, which accounted for $233,000 of the increase during the three and nine months ended March 31, 2026. Additionally, consulting fees paid to the seller of APM contributed to an increase of $250,000 for the three and nine months ended March 31, 2026. In the current fiscal year, we have increased bonus accruals including the second quarter bonus accrual earned and paid to our CEO in the amount of $225,000. Additionally, we incurred increased legal and professional services fees related to the APM acquisition along with our new debt agreements.
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 nine months ended March 31, 2026, decreased $120,000, or 13%, and $403,000, or 15%, compared to the corresponding periods of the prior fiscal year. The decrease relates to an increase in billable project expenses in the current fiscal year versus the prior fiscal year, which costs get reclassified to cost of sales, as well as a reduction in legal costs related to intellectual property matters. The nine-month period ended March 31, 2025 also included recruiting fees in the amount of $78,000 which did not recur during the current fiscal year.
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The majority of our research and development costs relate to sustaining activities related to products we currently manufacture and sell, but we also have created a product roadmap to develop future products. Many of our product development efforts are undertaken only upon completion of an analysis of the size of the market, our ability to differentiate our product from our competitors’, as well as an analysis of our specific sales prospects with new and/or existing customers. The research and development costs represent between 27% and 44% of total operating expenses for all periods presented.
Interest & Other Income
Interest income for the three and nine months ended March 31, 2026 and 2025, includes interest and dividends from our money market accounts and investment portfolio.
Interest Expense
Interest expense consists primarily of interest expense related to the notes payable described more fully in Note 12 to the condensed consolidated financial statements contained elsewhere in this report.
Gain on Equity Investments
As described in Note 5 to the consolidated financial statements contained elsewhere in this report, during the second quarter of fiscal 2026, Zimmer Biomet acquired Monogram and upon consummation of the acquisition we received proceeds of $8.9 million and realized a gain on our investment of $6.8 million. Additionally, during the third quarter ended March 31, 2026, Monogram successfully completed the first of five milestones such that we earned and recorded an additional gain in the amount of $2.3 million. During the third quarter ended March 31, 2025, we sold some of the stocks in our portfolio of equity investments receiving proceeds of $1.9 million and recording a gain on the sale in the amount of $595,000. In addition to these realized gains, during the three and nine months ended March 31, 2026 and 2025, we also recorded unrealized gains and losses to adjust our investment holdings to estimated fair value as well as eliminating the previously recorded unrealized gains on our Monogram investment during the second quarter of fiscal 2026 in conjunction with recording the realized gain.
Income Tax Expense
The effective tax rate for each of the three months ended March 31, 2026 and 2025 was 26% and 28%, respectively. These tax rates are consistent with our combined expected federal and applicable state corporate income tax rates, and the current year decrease is attributable to the expanded state tax nexus into Florida and Indiana which have lower tax rates than California. The effective tax rate for the nine months ended March 31, 2026 and 2025 was 25% and 26%, respectively. The prior year rate was slightly less than our combined expected federal and applicable state corporate income tax rates due to a tax benefit recognized as a result of common stock awarded to employees under previously granted performance awards in the first quarter of fiscal 2025 as described more fully in Note 10 to the condensed consolidated financial statements contained elsewhere in this report.
Liquidity and Capital Resources
Cash and cash equivalents at March 31, 2026, increased $9.6 million to $10.0 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 Nine Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (in thousands) | ||||||||
| Cash provided by (used in): | ||||||||
| Operating activities | $ | 7,515 | $ | (1,509 | ) | |||
| Investing activities | $ | 3,715 | $ | 754 | ||||
| Financing activities | $ | (1,656 | ) | $ | 2,597 | |||
| Cash and Working Capital: | ||||||||
| Cash and cash equivalents | $ | 9,993 | $ | 4,473 | ||||
| Working capital | $ | 39,074 | $ | 31,626 | ||||
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Operating Activities
Net cash provided by operating activities was $7.5 million for the nine months ended March 31, 2026, primarily due to net income of $10.8 million including gains on the investments in the amount of $5.4 million, non-cash depreciation and amortization of $988,000 and non-cash share-based compensation expense of $511,000 offset by a $2.2 million increase in receivables. Additionally, accounts payable and accrued expenses increased by $936,000, and income taxes payable increased by $1.3 million. The increases in these balance sheet accounts reflect our continued and expected future revenue growth.
Net cash used in operating activities was $1.5 million for the nine months ended March 31, 2025, primarily due to net income of $7.8 million including gains on investments in the amount of $1.7 million and non-cash depreciation and amortization of $925,000 offset by an $8.2 million increase in inventory and a $2.0 million increase in receivables. Offsetting these uses of cash, accounts payable and accrued expenses increased by $1.6 million.
Investing Activities
Net cash provided by investing activities for the nine months ended March 31, 2026, was $3.7 million and relates primarily to the proceeds received from the Zimmer Biomet acquisition of Monogram previously described in the amount of $10.8 million offset by our acquisition of APM in the amount of $6.5 million described further in Note 3 to the condensed consolidated financial statements contained elsewhere in this report. Additionally, we spent $280,000 during the nine months ended March 31, 2026, on the purchase of capital equipment and $350,000 related to Series A Preferred Stock of a privately held technology company.
Net cash provided by investing activities for the nine months ended March 31, 2025, was $754,000 and relates to the sale of some of our marketable securities for $1.9 million offset by purchases of capital equipment and improvements of $1.2 million.
Financing Activities
Net cash used in financing activities for the nine months ended March 31, 2026, totaled $1.7 million and relates primarily to $2.8 million attributable to the repurchase of 69,422 shares of our common stock pursuant to our share repurchase program offset by $1.1 million in net borrowings from UMB Bank more fully described in Note 12 to the condensed consolidated financial statements contained elsewhere in this report.
Net cash provided by financing activities for the nine months ended March 31, 2025, totaled $2.6 million and related primarily to the net increase in borrowings of $6.4 million from UMB Bank more fully described in Note 12 to the condensed consolidated financial statements contained elsewhere in this report offset by $3.5 million attributable to the repurchase of 130,148 shares of our common stock pursuant to our share repurchase program.
Financing Facilities & Liquidity Requirements for the Next Twelve Months
As of March 31, 2026, our working capital was $39.1 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 March 31, 2026.
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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 March 31, 2026, 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 March 31, 2026, 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 March 31, 2026, 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.
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.
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PART II — OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
See Note 15 to the 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 March 31, 2026. 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 March 31, 2026 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 | ||||||||||||||
| January 1, 2026 to January 31, 2026 | 5,048 | $ | 39.62 | 5,048 | 253,834 | |||||||||||||
| February 1, 2026 to February 28, 2026 | 5,094 | $ | 39.26 | 5,094 | 248,740 | |||||||||||||
| March 1, 2026 to March 31, 2026 | 4,280 | $ | 46.72 | 4,280 | 244,460 | |||||||||||||
All 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 13 to the condensed consolidated financial statements included elsewhere in this report.
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| ITEM 5. | OTHER INFORMATION |
Insider Trading Arrangements and Policies
On February 11, 2026, our Chief Executive Officer, Richard Van Kirk, cancelled the 10b5-1 trading arrangement that he created on November 12, 2025. On February 19, 2026, he adopted a new “Rule 10b5-1 trading arrangement” as such term is defined in Item 408(a) of Regulations S-K. This trading arrangement is intended to satisfy the Rule 10b5-1 affirmative defense. This trading arrangement commences on May 21, 2026, terminates on February 15, 2028, unless earlier terminated in accordance with its terms, and covers the disposition of up to 10,000 shares of our common stock. The remaining terms of the trading arrangement are confidential. The plan was adopted for diversification of the individual’s portfolio and not for any other purpose.
On March 24, 2026, our Chairman of the Board of Directors, Nicholas Swenson, in his capacity as general manager of AO Partners adopted a “Rule 10b5-1 trading arrangement” as such term is defined in Item 408(a) of Regulations S-K. This trading arrangement commences on June 22, 2026, terminates on June 22, 2027, unless earlier terminated in accordance with its terms, and covers the disposition of up to $3.0 million of our common stock. The remaining terms of the trading arrangement are confidential.
No additional directors or officers informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K during the three months ended March 31, 2026.
| ITEM 6. | EXHIBITS |
| Exhibit | Description |
| 10.3 | Term Note D dated February 9, 2026 made by Pro-Dex, Inc. in favor of UMB Bank, N.A. (incorporated herein by reference to the Exhibit 10.3 to the Company’s Form 8-K filed February 12, 2026). |
| 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 |
| 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) |
* Pursuant to Item 601(a)(5) of Regulation S-K promulgated by the Securities and Exchange Commission, certain schedules and attachments to this exhibit have been omitted because they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit.
± Certain portions of this Exhibit have been redacted pursuant to Item 601(a)(6) or Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.
| 31 |
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: April 30, 2026 | /s/ Richard L. Van Kirk | |
Richard L. Van Kirk (principal executive officer) |
| Date: April 30, 2026 | /s/ Alisha K. Charlton | |
Alisha K. Charlton (principal financial officer and principal accounting officer) |
| 32 |
EXHIBIT INDEX
| Exhibit | Description |
| 10.3 | Term Note D dated February 9, 2026 made by Pro-Dex, Inc. in favor of UMB Bank, N.A. (incorporated herein by reference to the Exhibit 10.3 to the Company’s Form 8-K filed February 12, 2026). |
| 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 |
| 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) |
* Pursuant to Item 601(a)(5) of Regulation S-K promulgated by the Securities and Exchange Commission, certain schedules and attachments to this exhibit have been omitted because they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit.
± Certain portions of this Exhibit have been redacted pursuant to Item 601(a)(6) or Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.
| 33 |
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Richard L. Van Kirk certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Pro-Dex, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 30, 2026 | /s/ Richard L. Van Kirk | |
Richard L. Van Kirk (principal executive officer) |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Alisha K. Charlton certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Pro-Dex, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 30, 2026 | /s/ Alisha K. Charlton | |
Alisha K. Charlton (principal financial officer and principal accounting officer) |
Exhibit 32
Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with this quarterly report on Form 10-Q of Pro-Dex, Inc., the undersigned hereby certifies in their capacities as Chief Executive Officer and Chief Financial Officer of Pro-Dex, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge:
| 1. | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Pro-Dex, Inc. |
| Date: April 30, 2026 | /s/ Richard L. Van Kirk | |
Richard L. Van Kirk (principal executive officer) |
| Date: April 30, 2026 | /s/ Alisha K. Charlton | |
Alisha K. Charlton (principal financial officer and principal accounting officer) |
This certification accompanies this quarterly report on Form 10-Q pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section. This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.