Financial Performance - Net sales for fiscal 2024 increased by $7.8 million, or 17%, to $53.8 million compared to $46.1 million in fiscal 2023[119] - Gross profit for fiscal 2024 was $14.6 million, representing 27% of net sales, compared to $12.7 million or 28% in fiscal 2023[117] - Operating income for fiscal 2024 was $7.2 million, maintaining 13% of net sales, consistent with fiscal 2023[117] - Income before income taxes decreased to $2.6 million, or 5% of net sales, down from $9.4 million, or 20%, in fiscal 2023[117] - Net income for fiscal 2024 was $2.1 million, or 4% of net sales, compared to $7.1 million, or 15%, in fiscal 2023[117] Revenue Breakdown - Medical device revenue rose by $6.2 million, or 20%, to $37.0 million, driven by increased sales in orthopedic and CMF products[120] - Repair revenue increased by approximately $3.9 million, or 31%, to $16.5 million, attributed to refurbishments requested by the largest customer[124] - NRE and prototype services revenue decreased by $1.9 million, or 71%, due to a reduction in billable engagements[121] Expenses and Costs - Total operating expenses increased to $7.4 million, or 14% of net sales, from $7.0 million, or 15%, in fiscal 2023[117] - Total cost of sales increased by $6.0 million, or 18%, in fiscal 2024, primarily due to a 17% increase in net sales, with product costs accounting for $38.1 million, or 71% of net sales[126] - Operating expenses totaled $7.4 million in fiscal 2024, representing 14% of net sales, with selling expenses decreasing by 25% to $117,000[128] - Research and development costs rose by 14% to $3.2 million, accounting for 6% of net sales, driven by increased spending on internal product development[130] Cash Flow and Liquidity - Cash provided by operating activities was $6.2 million in fiscal 2024, with a net income of $2.1 million, despite $4.1 million in unrealized losses on equity investments[138] - As of June 30, 2024, working capital was $23.7 million, with cash and cash equivalents at $2.6 million, indicating sufficient liquidity for the next 12 months[143] Share Repurchase and Tax Rate - The company repurchased 184,901 shares at a total cost of $3.5 million during fiscal 2024, increasing total repurchases since 2013 to 1,381,349 shares at a cost of $20.7 million[147] - The effective tax rate decreased to 19% in fiscal 2024 from 25% in fiscal 2023, attributed to federal and state research credits[136] Manufacturing Costs and Backlog - The company experienced $74,000 of over-absorption of manufacturing costs in fiscal 2024, compared to $1.7 million of under-absorption in fiscal 2023[126] - The backlog as of June 30, 2024, was $19.8 million, down from $41.6 million on June 30, 2023, indicating a decline in firm purchase orders[125] Future Outlook - The company expects continued demand for enhanced repairs in fiscal 2025, although no assurances can be made regarding the volume[124] - Cash used in investing activities was $2.2 million in fiscal 2024, primarily for the exercise of the Monogram Warrant and equipment purchases[141]

Zacks Investment Research has recently initiated coverage of Pro-Dex, Inc. (PDEX) with an Outperform recommendation, signaling confidence in the company's growth prospects and financial health. Pro-Dex, a specialized manufacturer of surgical drivers and shavers primarily used in orthopedic procedures, has shown strong financial performance and strategic expansion, positioning it favorably within the competitive medical device market. Pro-Dex has reported a 10% increase in net sales year over year, reaching ...

Exhibit 99.1 Contact: Richard L. Van Kirk, Chief Executive Officer (949) 769-3200 For Immediate Release PRO-DEX, INC. ANNOUNCES FISCAL 2024 THIRD QUARTER AND NINE-MONTH RESULTS IRVINE, CA, May 2, 2024 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2024 third quarter ended March 31, 2024. The Company also filed its Quarterly Report on Form 10-Q for the third quarter of fiscal year 2024 with the Securities and Exchange Commission today. Quarter Ended March 31, 2024 Gross pro ...

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) Unaudited condensed consolidated financial statements for Q3 and 9M FY2024 are presented, detailing financial position and performance, with notes on restatement and the company's surgical device business - The financial statements for the three and nine months ended March 31, 2023, were restated to correct the estimated fair value of the Monogram Warrant, which impacted unrealized gains, income tax expense, and net income[25](index=25&type=chunk) - The company specializes in the design, development, and manufacture of autoclavable, battery-powered, and electric multi-function surgical drivers and shavers, primarily for the orthopedic, thoracic, and maxocranial facial markets[32](index=32&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets were $50.5 million, a slight decrease from $51.8 million at June 30, 2023, primarily due to reduced long-term investments, while total liabilities and shareholders' equity also saw minor decreases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $3,219 | $2,936 | | Accounts receivable, net | $12,516 | $9,952 | | Inventory | $14,242 | $16,167 | | Total current assets | $35,957 | $30,979 | | Total assets | $50,548 | $51,823 | | **Liabilities & Equity** | | | | Total current liabilities | $10,419 | $9,676 | | Total liabilities | $19,610 | $20,233 | | Total shareholders' equity | $30,938 | $31,590 | [Condensed Consolidated Income Statements](index=5&type=section&id=Condensed%20Consolidated%20Income%20Statements) For Q3 2024, net sales increased to $14.3 million, but net income fell to $0.7 million due to an unrealized loss on investments, while for the nine-month period, net sales grew to $38.8 million, but net income significantly decreased to $0.5 million due to a $3.8 million unrealized loss Income Statement Summary (in thousands, except per share amounts) | Metric | Q3 2024 | Q3 2023 (restated) | 9M 2024 | 9M 2023 (restated) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $14,293 | $13,079 | $38,819 | $35,448 | | Gross profit | $4,002 | $3,811 | $10,462 | $9,390 | | Operating income | $2,213 | $2,065 | $4,822 | $4,152 | | Net income | $655 | $1,617 | $540 | $5,572 | | Diluted EPS | $0.19 | $0.45 | $0.15 | $1.52 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended March 31, 2024, net cash provided by operating activities increased to $5.2 million, while net cash used in investing and financing activities also increased, resulting in an overall cash and cash equivalents increase of $283,000 Cash Flow Summary for Nine Months Ended March 31 (in thousands) | Activity | 2024 | 2023 (restated) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,179 | $4,835 | | Net cash used in investing activities | ($2,126) | ($733) | | Net cash used in financing activities | ($2,770) | ($2,863) | | **Net increase in cash and cash equivalents** | **$283** | **$1,239** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the financial statements, including the basis of presentation, a significant restatement due to the Monogram Warrant valuation, customer concentration, share repurchase activities, and a material weakness in internal controls related to investment valuation - On October 6, 2023, the company exercised its Monogram Warrant in full for **$1,250,000**, receiving **1,828,551 shares** of Monogram common stock. The fair value is now reflected in marketable equity securities[40](index=40&type=chunk) Major Customer Concentration (Nine Months Ended March 31, 2024) | Metric | Customer 1 | Customer 2 | Total | | :--- | :--- | :--- | :--- | | % of Net Sales | 71% | 10% | 81% | | % of Accounts Receivable | 81% | 13% | 94% | - During the nine months ended March 31, 2024, the company repurchased **96,890 shares** of its common stock for an aggregate cost of **$1.83 million** under its share repurchase program[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q3 and 9M FY2024 financial results, highlighting revenue growth, gross margin improvement, increased expenses, investment loss impact on net income, and sufficient liquidity for strategic initiatives - The company's business strategy is focused on maintaining relationships with current medical device customers, expanding manufacturing capacity with the Franklin Property, and investing in R&D for new products like orthopedic shavers and screwdrivers[90](index=90&type=chunk) - As of March 31, 2024, the company had a sales backlog of approximately **$25.2 million**, with **$9.9 million** scheduled for delivery in the fourth quarter of fiscal 2024[96](index=96&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) For the nine months ended March 31, 2024, net sales increased 9.6% to $38.8 million, driven by medical device sales, with gross profit up 11% to $10.5 million and operating income growing 16% to $4.8 million, despite a $3.8 million unrealized investment loss impacting pre-tax income Net Sales by Type (Nine Months Ended March 31, in thousands) | Sales Type | 2024 | 2023 | | :--- | :--- | :--- | | Medical device products | $26,536 | $23,631 | | NRE & Proto-type | $762 | $2,361 | | Repairs | $11,749 | $9,410 | | **Total Net Sales** | **$38,819** | **$35,448** | Medical Device Sales by Type (Nine Months Ended March 31, in thousands) | Device Type | 2024 | 2023 | | :--- | :--- | :--- | | Orthopedic | $17,136 | $15,271 | | CMF | $6,641 | $7,208 | | Thoracic | $2,759 | $1,152 | | **Total Medical Device Sales** | **$26,536** | **$23,631** | - Gross margin for the nine months ended March 31, 2024, increased by **1 percentage point** to **27%** compared to the prior year period[97](index=97&type=chunk)[101](index=101&type=chunk) - Research and development costs for the nine months ended March 31, 2024, increased by **12%** to **$2.4 million**, reflecting continued investment in product development efforts[104](index=104&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2024, the company had $3.2 million in cash and cash equivalents and working capital of $25.5 million, with management confident in sufficient liquidity from existing cash, operations, and available credit facilities for the next 12 months, managed by an Investment Committee Liquidity Summary (as of March 31, 2024, in thousands) | Metric | Amount | | :--- | :--- | | Cash and cash equivalents | $3,219 | | Working capital | $25,538 | - The company believes its existing cash, operational cash flows, and available credit will be sufficient to fund its requirements for at least the next **12 months**[123](index=123&type=chunk) - The company has an Investment Committee, chaired by Nicholas Swenson, to manage surplus operating capital or borrowed funds, investing in a portfolio of marketable public equity securities valued at **$6.1 million** as of March 31, 2024[125](index=125&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section is not applicable for the reporting period - The company has indicated that Quantitative and Qualitative Disclosures About Market Risk are not applicable[127](index=127&type=chunk) [Controls and Procedures](index=32&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that as of March 31, 2024, the company's disclosure controls and procedures were not effective due to an ongoing material weakness related to the valuation and disclosure of Level 2 and Level 3 investments - A material weakness was identified in internal control over financial reporting concerning the valuation and disclosure of level 3 investments during fiscal 2023 and level 2 investments for the quarter ended December 31, 2023. Remediation is ongoing[129](index=129&type=chunk) - Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2024, the company's disclosure controls and procedures were not effective[130](index=130&type=chunk) [PART II — OTHER INFORMATION](index=33&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=33&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company may be involved in various legal proceedings from time to time in the ordinary course of business, with further details referenced in Note 13 of the financial statements - Information regarding legal proceedings is referenced in Note 13 to the condensed consolidated financial statements[136](index=136&type=chunk) [Risk Factors](index=33&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2023 - No material changes have occurred in the risk factors as disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2023[138](index=138&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the quarter ended March 31, 2024, the company repurchased a total of 90,605 shares of its common stock at an average price of $19.01 per share under its publicly announced repurchase program Common Stock Repurchases for the Quarter Ended March 31, 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 23,838 | $20.84 | | February 2024 | 34,565 | $19.10 | | March 2024 | 32,202 | $17.56 | | **Total** | **90,605** | **$19.01** | [Other Information](index=34&type=section&id=ITEM%205.%20OTHER%20INFORMATION) During the quarter ended March 31, 2024, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the third quarter of fiscal 2024[142](index=142&type=chunk) [Exhibits](index=34&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files

Sales Performance - For the three months ended December 31, 2023, medical device product sales increased by $0.2 million, or 2%, compared to the same period in 2022, while for the six months, the increase was $113,000, or 1%[99] - Repair revenue surged by $1.2 million, or 58%, for the three months ended December 31, 2023, and by $3.0 million, or 68%, for the six months, primarily due to upgrades for the largest customer[101] - The company reported a backlog of approximately $29.1 million as of December 31, 2023, with $18.9 million scheduled for delivery in fiscal 2024[102] Cost and Profitability - Cost of sales increased by $1.1 million, or 13%, for the three months ended December 31, 2023, and by $1.3 million, or 8%, for the six months, consistent with a 12% and 10% increase in revenue, respectively[104] - Gross profit increased by $179,000, or 7%, for the three months ended December 31, 2023, and by $882,000, or 16%, for the six months, primarily due to increased repair revenue[105] - The gross margin for the three months ended December 31, 2023, was 22%, down from 23% in the prior year, while for the six months, it was 26%, up from 25%[104] Operating Expenses - Operating expenses for the three months ended December 31, 2023, totaled $2,025,000, a 36% increase year-over-year, while for the six months, they reached $3,851,000, a 10% increase[107] - Selling expenses decreased by 46% to $37,000 for the three months ended December 31, 2023, and by 48% to $63,000 for the six months, primarily due to reduced sales commissions[107] - General and administrative expenses increased by 26% to $1,200,000 for the three months and by 11% to $2,195,000 for the six months, driven by higher professional fees and personnel costs[108] - Research and development costs rose by 69% to $788,000 for the three months and by 14% to $1,593,000 for the six months, attributed to a reduction in billable customer projects[109] Cash Flow and Financial Position - Cash and cash equivalents decreased by $1.6 million to $1.3 million as of December 31, 2023, compared to $2.9 million at June 30, 2023[118] - Net cash provided by operating activities was $1.1 million for the six months ended December 31, 2023, despite a net loss of $115,000[120] - Net cash used in investing activities was $2.0 million for the six months ended December 31, 2023, primarily for the exercise of a warrant and equipment purchases[122] - Net cash used in financing activities totaled $740,000 for the six months ended December 31, 2023, mainly due to principal payments on loans and stock repurchases[124] - Working capital as of December 31, 2023, was $26.6 million, indicating sufficient funds to meet cash requirements for at least the next 12 months[126] Strategic Initiatives - The company continues to focus on maintaining relationships with current medical device customers and investing in research and development for new products[97] - The Franklin Property, a 25,000 square foot facility, began operations in the fourth quarter of fiscal 2023 to support anticipated growth and manufacturing capacity[96] - The company has patented adaptive torque-limiting software that has been well received in the CMF and thoracic markets, contributing to product development efforts[95] - The company plans to continue investing in development programs that are expected to contribute to profitability while monitoring expenses and cash balances[127] Revenue Decline - Non-recurring and prototype revenue decreased by $145,000, or 30%, for the three months ended December 31, 2023, and by $863,000, or 62%, for the six months, due to fewer billable contracts[100]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended PRO-DEX, INC. September 30, 2023 (Exact name of registrant as specified in its charter) ——————— COLORADO 84-1261240 OR (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ...

[Explanatory Note](index=4&type=section&id=Explanatory%20Note) This section explains the restatement of the company's financial statements for fiscal years 2022 and 2021, and interim periods from Q1 2021 through Q3 2023, due to an understatement in the fair value of the Monogram Warrant - The company restated its consolidated financial statements for fiscal years **2022 and 2021**, and all interim periods from September 30, 2020, through March 31, 2023[14](index=14&type=chunk) - The restatement was caused by a material understatement of the estimated fair value of a warrant to purchase up to **5% of Monogram Orthopaedics Inc.'s outstanding stock**[15](index=15&type=chunk) - As a result of the error, management and the Audit Committee concluded that the previously issued financial statements should no longer be relied upon[16](index=16&type=chunk) - Management identified a material weakness in internal control over financial reporting related to its application of ASC 815, Derivatives and Hedging, concerning the Monogram Warrant[17](index=17&type=chunk) [Part I](index=5&type=section&id=Part%20I) This section outlines the company's core business, key operational risks, and property holdings [Business](index=5&type=section&id=ITEM%201.%20Business) Pro-Dex, Inc. specializes in designing and manufacturing powered surgical drivers and shavers for orthopedic, thoracic, and craniomaxillofacial (CMF) markets, with most revenue from medical devices sold to OEMs - The company specializes in designing, developing, and manufacturing autoclavable, battery-powered, and electric multi-function surgical drivers and shavers for orthopedic, thoracic, and CMF markets[23](index=23&type=chunk) Sales by Type (Fiscal Years 2023 vs. 2022) | Product/Service Type | FY 2023 Sales (in thousands) | % of Revenue | FY 2022 Sales (in thousands) | % of Revenue | | :--- | :--- | :--- | :--- | :--- | | Medical devices | $30,740 | 66% | $34,004 | 81% | | Repairs | $12,617 | 27% | $6,610 | 16% | | NRE & Prototypes | $2,695 | 6% | $1,014 | 2% | | Industrial and scientific | $865 | 2% | $919 | 2% | | Dental and component | $257 | 1% | $465 | 1% | - Customer concentration is high, with the top three customers accounting for **92% of sales in fiscal 2023**, up from 88% in fiscal 2022, and the largest single customer accounted for **67% of sales in FY2023**[30](index=30&type=chunk) - The company's backlog increased significantly to **$41.6 million at June 30, 2023**, from $16.5 million at June 30, 2022, with **$31.4 million** expected to be delivered in fiscal 2024[35](index=35&type=chunk) - Research and development expenses were **$2.8 million in fiscal 2023** and $3.0 million in fiscal 2022[41](index=41&type=chunk) [Risk Factors](index=10&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces significant risks, primarily stemming from its heavy reliance on a few major customers, intense competition, potential product obsolescence, cybersecurity threats, and debt obligations - A substantial portion of revenue is derived from a few customers, with the top three accounting for **92% of sales in fiscal 2023**, and the largest customer representing **67%**[56](index=56&type=chunk) - The medical device market is characterized by rapid technological change, which could render existing products obsolete if the company fails to innovate in a timely manner[65](index=65&type=chunk) - The company's ability to service its debt obligations depends on its ability to generate cash, which is subject to many factors beyond its control[73](index=73&type=chunk) - The company's operations are subject to complex government regulations, particularly from the FDA, and non-compliance could have a material adverse effect on the business[88](index=88&type=chunk) - A material weakness was discovered in internal control over financial reporting during the preparation of the FY2023 financial statements, which has been time-consuming and costly[98](index=98&type=chunk) [Properties](index=17&type=section&id=ITEM%202.%20Properties) Pro-Dex operates from two main facilities in California, including a leased manufacturing site in Irvine and an owned assembly and repairs facility in Tustin - The company leases a **28,000 sq. ft. facility in Irvine, CA** for its executive offices and manufacturing, with the lease expiring in September 2027[103](index=103&type=chunk) - The company owns a **25,000 sq. ft. facility in Tustin, CA** (the "Franklin Property"), purchased in November 2020, which is used for assembly and repairs[104](index=104&type=chunk) [Part II](index=18&type=section&id=Part%20II) This section details the company's stock market information, financial performance analysis, and audited financial statements [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=ITEM%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the Nasdaq Capital Market under "PDEX", has never paid a cash dividend, and did not repurchase shares in Q4 FY2023 - The company's common stock is traded on the Nasdaq Capital Market under the symbol **"PDEX"**[110](index=110&type=chunk) - The company has never paid a cash dividend and its current policy is to retain earnings for business operations and expansion[113](index=113&type=chunk) - In Q4 FY2023, the company did not repurchase any shares of its common stock, whereas in Q4 FY2022, it repurchased **22,532 shares for $350,000**[114](index=114&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=ITEM%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal 2023, Pro-Dex saw a 10% increase in net sales to $46.1 million, driven by a surge in repair and NRE revenue, despite a decline in medical device sales, leading to a significant increase in net income [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Comparing fiscal 2023 to 2022, net sales increased 10% to $46.1 million, primarily due to a 91% increase in repair revenue and a 166% increase in NRE services, partially offset by a 10% decrease in medical device sales Financial Performance Summary (FY2023 vs. FY2022 Restated) | Metric | FY 2023 (in thousands) | FY 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $46,087 | $42,041 | 10% | | Gross Profit | $12,749 | $13,132 | (3%) | | Operating Income | $5,762 | $5,123 | 12% | | Net Income | $7,074 | $4,572 | 55% | Net Sales Breakdown (FY2023 vs. FY2022) | Sales Type | FY 2023 (in thousands) | FY 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Medical devices | $30,740 | $34,004 | (10%) | | Repairs | $12,617 | $6,610 | 91% | | NRE & Prototype services | $2,695 | $1,014 | 166% | | Industrial and scientific | $865 | $919 | (6%) | | Dental and component | $257 | $465 | (45%) | - The decrease in medical device sales was driven by a **$2.2 million decline in orthopedic sales** and a **$1.8 million decline in CMF sales**, while thoracic sales increased by $0.7 million[141](index=141&type=chunk) - Gross margin fell from **31% in FY2022 to 28% in FY2023**, as cost of sales increased 15% to $33.3 million, outpacing the 10% sales growth, due to higher material costs and **$1.7 million in under-absorption of manufacturing costs**[138](index=138&type=chunk)[147](index=147&type=chunk) - General and administrative (G&A) expenses decreased by **$875,000**, primarily due to reduced legal/settlement expenses and lower non-cash stock compensation[149](index=149&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company's financial position strengthened in fiscal 2023, with working capital increasing to $21.3 million and cash provided by operating activities significantly improving to $5.5 million Summary of Cash Flows (in thousands) | Activity | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Cash from Operating Activities | $5,462 | $(847) | | Cash used in Investing Activities | $(885) | $(1,235) | | Cash used in Financing Activities | $(2,490) | $(790) | | **Cash and cash equivalents, end of year** | **$2,936** | **$849** | - Working capital increased to **$21.3 million as of June 30, 2023**, from $19.8 million at the end of fiscal 2022[158](index=158&type=chunk) - During fiscal 2023, the company repurchased **86,422 shares of its common stock** for an aggregate cost of **$1.5 million**[170](index=170&type=chunk) - The company has a **$7.0 million Amended Revolving Loan with MBT**, with an availability of **$4.5 million as of June 30, 2023**, to supplement liquidity if needed[166](index=166&type=chunk) [Financial Statements and Supplementary Data](index=29&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for fiscal years ended June 30, 2023 and 2022, and the accompanying notes, highlighting the restatement due to the Monogram Warrant valuation error [Report of Independent Registered Public Accounting Firm](index=30&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Moss Adams LLP issued an opinion that the consolidated financial statements are fairly presented, noting the restatement of prior periods and identifying the Monogram Warrant valuation as a Critical Audit Matter - The auditor, Moss Adams LLP, issued an opinion that the financial statements are fairly presented in conformity with U.S. GAAP[176](index=176&type=chunk) - The report highlights the restatement of previously issued financial statements for fiscal years **2022 and 2021** due to the correction of errors[177](index=177&type=chunk) - The valuation of the Monogram Warrant was identified as a **Critical Audit Matter**, requiring a high degree of auditor judgment and the use of specialists to evaluate the Black-Scholes Option Pricing model and its assumptions[183](index=183&type=chunk)[184](index=184&type=chunk) [Consolidated Financial Statements](index=32&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets grew to $51.8 million in FY2023, total liabilities decreased, and shareholders' equity increased, with net income rising to $7.1 million for FY2023 Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | June 30, 2022 (Restated) | | :--- | :--- | :--- | | Total Current Assets | $30,979 | $31,166 | | Total Assets | $51,823 | $49,089 | | Total Current Liabilities | $9,676 | $11,354 | | Total Liabilities | $20,233 | $23,658 | | Total Shareholders' Equity | $31,590 | $25,431 | Consolidated Income Statement Highlights (in thousands) | Account | FY 2023 | FY 2022 (Restated) | FY 2021 (Restated) | | :--- | :--- | :--- | :--- | | Net Sales | $46,087 | $42,041 | $38,029 | | Gross Profit | $12,749 | $13,132 | $13,575 | | Operating Income | $5,762 | $5,123 | $4,525 | | Net Income | $7,074 | $4,572 | $6,170 | [Notes to Consolidated Financial Statements](index=37&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the basis of the financial statements, including the restatement's impact, investment valuations, debt agreements, and significant customer concentration - Note 2 explains that the financial statements for **FY2022 and FY2021 were restated** to correct an error in the fair value of the Monogram Warrant, which had been understated[205](index=205&type=chunk) - Note 5 details the company's investments, valued at **$8.7 million at June 30, 2023**, including the Monogram Warrant, valued at **$6.16 million** using a Black-Scholes model[306](index=306&type=chunk)[311](index=311&type=chunk) - Note 8 describes multiple loans with Minnesota Bank & Trust (MBT) secured by company assets, with total scheduled principal payments of **$12.8 million**[332](index=332&type=chunk)[345](index=345&type=chunk) - Note 12 reveals high customer concentration, with Customer 1 accounting for **67% of sales and 73% of accounts receivable** in FY2023, while Customer 2 accounted for **16% of sales and 19% of receivables**[367](index=367&type=chunk) - Note 15 (Subsequent Events) discloses that on October 6, 2023, the company exercised its Monogram Warrant in full for **$1.25 million in cash**, receiving **1,828,551 shares of Monogram common stock**[372](index=372&type=chunk) [Controls and Procedures](index=64&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were not effective as of June 30, 2023, due to a material weakness in valuing level 3 financial instruments - The CEO and CFO concluded that disclosure controls and procedures were **not effective as of June 30, 2023**[374](index=374&type=chunk) - Management concluded that internal control over financial reporting was **not effective as of June 30, 2023**, due to a material weakness[375](index=375&type=chunk) - The material weakness relates to a deficiency in the design of internal controls for the valuation and disclosure of **level 3 financial instruments**, specifically the Monogram Warrant[380](index=380&type=chunk) - The company is implementing remediation measures to improve the design of its control related to the valuation and disclosure of level 3 financial instruments[381](index=381&type=chunk) [Part III](index=66&type=section&id=Part%20III) Part III of the report incorporates information by reference from the company's definitive Proxy Statement for its 2023 Annual Meeting of Shareholders, covering directors, executive compensation, security ownership, and related party transactions - Information for Items 10 (Directors, Executive Officers and Corporate Governance), 11 (Executive Compensation), 12 (Security Ownership), 13 (Certain Relationships and Related Transactions), and 14 (Principal Accountant Fees and Services) is incorporated by reference from the company's definitive Proxy Statement[388](index=388&type=chunk)[389](index=389&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk) [Part IV](index=67&type=section&id=Part%20IV) This section lists all financial statements, schedules, and exhibits filed as part of the annual report, including required certifications [Exhibits, Financial Statement Schedules](index=67&type=section&id=ITEM%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the annual report, including corporate governance documents, material contracts, and required certifications from the CEO and CFO - Lists all financial statements, schedules, and exhibits filed as part of the Form 10-K[395](index=395&type=chunk) - Includes required certifications by the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act[399](index=399&type=chunk)

PART I — FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) For the nine months ended March 31, 2023, Pro-Dex, Inc. reported a 20.5% increase in net sales to $35.4 million and a 33.4% increase in net income to $3.3 million compared to the prior year period [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets were $47.0 million, a slight decrease from $47.3 million at June 30, 2022, primarily due to a reduction in accounts receivable offset by increases in cash and inventory Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $31,145 | $31,166 | ($21) | | Cash and cash equivalents | $2,088 | $849 | $1,239 | | Accounts receivable, net | $10,565 | $15,384 | ($4,819) | | Inventory | $15,145 | $12,678 | $2,467 | | **Total Assets** | **$46,975** | **$47,326** | **($351)** | | **Total Current Liabilities** | $10,144 | $11,354 | ($1,210) | | **Total Liabilities** | **$21,136** | **$23,658** | **($2,522)** | | **Total Shareholders' Equity** | **$25,839** | **$23,668** | **$2,171** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the third quarter of fiscal 2023, net sales grew 41.2% year-over-year to $13.1 million, driving net income up 184.2% to $1.3 million, while nine-month net sales increased 20.5% to $35.4 million and net income rose 33.4% to $3.3 million Financial Performance (in thousands, except per share amounts) | Metric | Q3 2023 | Q3 2022 | YoY Change | Nine Months 2023 | Nine Months 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $13,079 | $9,265 | +41.2% | $35,448 | $29,426 | +20.5% | | **Gross Profit** | $3,811 | $2,858 | +33.3% | $9,390 | $9,689 | -3.1% | | **Operating Income** | $2,065 | $1,021 | +102.3% | $4,152 | $3,940 | +5.4% | | **Net Income** | $1,313 | $462 | +184.2% | $3,268 | $2,450 | +33.4% | | **Diluted EPS** | $0.36 | $0.12 | +200.0% | $0.89 | $0.65 | +36.9% | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended March 31, 2023, net cash provided by operating activities was $4.8 million, a slight increase from $4.4 million in the prior year period, primarily driven by net income and strong accounts receivable collections Cash Flow Summary for the Nine Months Ended March 31 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,835 | $4,432 | | Net cash used in investing activities | ($733) | ($1,636) | | Net cash used in financing activities | ($2,863) | ($1,756) | | **Net increase in cash and cash equivalents** | **$1,239** | **$1,040** | | **Cash and cash equivalents, end of period** | **$2,088** | **$4,761** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business, which specializes in surgical drivers and shavers, highlighting high customer concentration, ongoing share repurchases, and significant debt with Minnesota Bank & Trust, with the company in compliance with all covenants - The company specializes in the design, development, and manufacture of autoclavable, battery-powered, and electric multi-function surgical drivers and shavers for various medical markets[24](index=24&type=chunk) Customer Concentration (Nine Months Ended March 31, 2023) | Metric | Customer 1 | Customer 2 | Total | | :--- | :--- | :--- | :--- | | **Net Sales** | $23,578 (66%) | $5,912 (17%) | $29,490 (83%) | | **Accounts Receivable** | $7,861 (74%) | $2,100 (20%) | $9,961 (94%) | - During the nine months ended March 31, 2023, the company repurchased **86,422 shares** of its common stock for an aggregate cost of **$1.5 million** under its share repurchase program[77](index=77&type=chunk) - As of March 31, 2023, the company had several loans outstanding with **Minnesota Bank & Trust (MBT)**, including a **Property Loan**, **Term Loan A**, **Term Loan B**, and an **Amended Revolving Loan**, and believes it is in compliance with all debt covenants[66](index=66&type=chunk)[68](index=68&type=chunk)[76](index=76&type=chunk) [Management's Discussion and Analysis (MD&A)](index=21&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes the 41% Q3 revenue growth primarily to a 189% increase in repair revenue from its largest customer, related to a handpiece upgrade program, while gross margin for the nine-month period decreased by 7 percentage points to 26% [Business Strategy and Future Plans](index=22&type=section&id=Business%20Strategy%20and%20Future%20Plans) The company's strategy centers on its medical device business, focusing on maintaining customer relationships, expanding manufacturing capacity via the new Franklin Property, investing in R&D for new Pro-Dex branded drivers, and pursuing new product development proposals - The company's largest customer executed an amendment to their supply agreement, extending the supply of surgical handpieces through **calendar 2025**[93](index=93&type=chunk) - The company acquired the 'Franklin Property' to expand manufacturing capacity and expects to begin operations in the new facility during the **fourth quarter of the current fiscal year**[94](index=94&type=chunk) - Strategic objectives include investing in R&D for branded drivers leveraging proprietary torque-limiting software and promoting development proposals for new medical devices to new and existing customers[95](index=95&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) For Q3 2023, revenue increased 41% YoY, driven by a $3.2 million (189%) surge in repair revenue and a 7% rise in medical device product sales, while gross margin declined from 33% to 26% for the nine-month period due to higher costs and under-absorbed manufacturing expenses Revenue Breakdown (in thousands) | Revenue Type | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Medical device products | $6,990 | $6,527 | $23,631 | $23,199 | | NRE & Proto-type | $970 | $549 | $2,361 | $859 | | Repairs and other | $4,816 | $1,665 | $8,583 | $4,245 | | **Total Net Sales** | **$13,079** | **$9,265** | **$35,448** | **$29,426** | - Repair revenue increased by **$3.2 million (189%)** for the third quarter and **$4.3 million (102%)** for the nine months, driven by an upgrade and enhanced repair program for the orthopedic handpiece sold to its largest customer[103](index=103&type=chunk) Gross Margin Performance | Period | 2023 | 2022 | YoY Change (ppt) | | :--- | :--- | :--- | :--- | | **Three Months Ended March 31** | 29% | 31% | (2) | | **Nine Months Ended March 31** | 26% | 33% | (7) | - General and administrative (G&A) expenses decreased by **$419,000** for the nine months ended March 31, 2023, primarily due to reduced legal/settlement expenses and lower non-cash stock compensation[112](index=112&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company had $2.1 million in cash and $21.0 million in working capital, with operating activities generating $4.8 million in cash for the nine-month period, and believes existing cash, cash flows, and available credit are sufficient to fund operations for the next 12 months Key Liquidity Metrics (as of March 31, 2023, in thousands) | Metric | Amount | | :--- | :--- | | Cash and cash equivalents | $2,088 | | Working capital | $21,001 | - Net cash used in financing activities for the nine months ended March 31, 2023, was **$2.9 million**, primarily for **$1.5 million** in common stock repurchases and **$4.8 million** in debt payments, offset by **$3.6 million** in new borrowings[131](index=131&type=chunk) - The company has an Amended Revolving Loan with MBT, with an availability of **$5.2 million** as of March 31, 2023, which can be used for liquidity needs[133](index=133&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company has indicated that this section is not applicable - The company states that this item is not applicable[136](index=136&type=chunk) [Controls and Procedures](index=30&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Based on an evaluation as of March 31, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective, with no material changes in internal controls over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[139](index=139&type=chunk) - No changes in internal controls over financial reporting occurred during the three months ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[140](index=140&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=31&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company states that it may be involved in various legal proceedings from time to time in the ordinary course of business, but does not disclose any specific material proceedings - The company may be involved in various legal proceedings arising in the ordinary course of business, but there is no certainty of material adverse liability[82](index=82&type=chunk)[144](index=144&type=chunk) [Risk Factors](index=31&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022 - No material changes have been made to the risk factors as disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2022[146](index=146&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the third quarter ended March 31, 2023, the company repurchased a total of 11,576 shares of its common stock at an average price of $17.13 per share under its publicly announced repurchase program Common Stock Repurchases (Quarter Ended March 31, 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2023 | 6,047 | $17.17 | | February 2023 | 5,529 | $17.09 | | March 2023 | 0 | $0.00 | | **Total** | **11,576** | **$17.13** | [Exhibits](index=32&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report includes a list of filed exhibits, such as CEO/CFO certifications (Exhibits 31.1, 31.2, 32) and XBRL interactive data files (Exhibit 101 series)[149](index=149&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 0-14942 PRO-DEX, INC. (Exact name of registrant as specified in its charter) ——————— (State or other jurisdic ...

Financial Performance - Net sales for the three months ended September 30, 2022, were $11,087,000, an increase of 11% from $9,988,000 in the same period of 2021[89]. - Gross profit decreased to $2,956,000 (27% of net sales) in Q1 FY2023 from $3,428,000 (34% of net sales) in Q1 FY2022[89]. - Medical device sales accounted for 71% of total net sales in Q1 FY2023, down from 83% in Q1 FY2022, reflecting a 5% decrease in revenue[90]. - Cost of sales increased by $1.6 million, or 24%, for the three months ended September 30, 2022, compared to the same period in the prior fiscal year, driven by a 15% increase in product costs[95]. - Gross profit decreased by approximately $472,000, or 14%, for the three months ended September 30, 2022, with gross margin declining by seven percentage points due to higher component and repair costs[96]. - Operating expenses totaled $2.006 million, representing 18% of net sales, a decrease of 5% compared to the prior year[98]. Research and Development - Research and development costs were $929,000 (8% of net sales) in Q1 FY2023, compared to $980,000 (10% of net sales) in Q1 FY2022[89]. - Research and development costs decreased by $51,000, or 5%, for the quarter ended September 30, 2022, with a focus on sustaining activities and customer-funded projects[100]. Cash Flow and Working Capital - Cash and cash equivalents increased by $1.9 million to $2.8 million as of September 30, 2022, compared to $0.9 million at June 30, 2022[111]. - Net cash provided by operating activities was $2.9 million for the three months ended September 30, 2022, primarily due to a decrease in accounts receivable[113]. - Net cash used in investing activities was $90,000, primarily for equipment purchases at the Franklin Property[115]. - Net cash used in financing activities included $318,000 in principal payments on loans and $354,000 for common stock repurchase[118]. - Working capital as of September 30, 2022, was $20.2 million, with sufficient funds expected to meet cash requirements for at least the next 12 months[120]. Sales and Marketing - Selling expenses rose to $53,000 in Q1 FY2023 from $37,000 in Q1 FY2022[89]. - Selling expenses increased by $16,000, or 43%, primarily due to higher sales commissions[98]. - The company continues to focus on maintaining relationships with existing customers while actively proposing new medical device products[84]. Backlog and Future Operations - The backlog at September 30, 2022, was approximately $26.6 million, with $18.6 million scheduled for delivery during the remainder of FY2023[94]. - The company expects to begin operations in a new facility in Tustin, California, during the third quarter of FY2023, enhancing manufacturing capacity[83]. Revenue Streams - Repair revenue increased by $793,000 in Q1 FY2023, attributed to an increased number of repairs for orthopedic handpieces[92]. - Non-recurring engineering (NRE) and prototype revenue surged by 363% to $907,000 in Q1 FY2023, driven by an increase in billable contracts[90].