Pro-Dex(PDEX) - 2022 Q1 - Quarterly Report

Financial Performance - Net sales for the three months ended September 30, 2021, were $9,988,000, a 16% increase from $8,590,000 in the same period of 2020[92] - Gross profit decreased to $3,428,000 (34% of net sales) in Q1 2022 from $3,475,000 (40% of net sales) in Q1 2021[92] - Medical device sales increased by $1,544,000 (23%) to $8,284,000 in Q1 2022 compared to $6,740,000 in Q1 2021[94] - Orthopedic sales rose by $2,017,000 (55%) to $5,706,000, while CMF sales increased by $862,000 (57%) to $2,387,000[94] - For the three months ended September 30, 2021, total cost of sales increased by $1.4 million, or 28%, compared to the same period in the prior fiscal year, while gross profit decreased by approximately $47,000, or 1%[99][100] Research and Development - Research and development costs were $980,000 (10% of net sales) in Q1 2022, down from $1,091,000 (13% of net sales) in Q1 2021[92] - Research and development costs for the quarter ended September 30, 2021, totaled $980,000, a decrease of $111,000, or 10%, compared to the prior year[104][107] - The company expects to launch the ENT Shaver and VITAL Ventilator in Q4 2021 and Q1 2022, respectively, with estimated annual revenues of $1 million and $1.5 million[107] Customer and Revenue Agreements - The largest customer has extended the supply agreement for surgical handpieces through calendar 2025, ensuring continued revenue[84] - Non-recurring engineering and prototype revenue surged by 1,860% to $196,000 in Q1 2022, compared to $10,000 in Q1 2021[94] - Repair revenue decreased by $168,000 due to fewer repairs of the orthopedic handpiece sold to the largest customer[96] - Discounts and other increased by $216,000 due to volume rebates negotiated with the largest customer[97] Operational Capacity and Backlog - The company expects to begin operations in a new facility in Tustin, California, during the second quarter, aimed at expanding manufacturing capacity[86] - As of September 30, 2021, the company had a backlog of approximately $12.8 million, with $12.6 million scheduled for delivery during the remainder of fiscal 2022[98] Cash Flow and Financial Position - Cash and cash equivalents increased by $1.5 million to $5.2 million as of September 30, 2021, compared to $3.7 million at June 30, 2021[113] - Net cash provided by operating activities for the three months ended September 30, 2021, totaled $2.7 million, primarily driven by a net income of $1.1 million[115] - The company’s working capital as of September 30, 2021, was $19.8 million, indicating sufficient funds to meet cash requirements for at least the next 12 months[120] Expenses - Selling expenses decreased by $93,000, or 72%, for the three months ended September 30, 2021, primarily due to reduced personnel-related expenses[102] - General and administrative expenses increased by $388,000, or 55%, for the three months ended September 30, 2021, mainly due to non-cash compensation expenses[103] Taxation - The effective tax rate for the three months ended September 30, 2021, was 22%, compared to 20% for the same period in 2020[111]