Pro-Dex(PDEX) - 2023 Q1 - Quarterly Report

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].