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Pro-Dex, Inc. Announces Fiscal 2020 Second Quarter and Six-Month Results

IRVINE, CA / ACCESSWIRE / February 6, 2020 / PRO-DEX, INC. (PDEX) today announced financial results for its fiscal 2020 second quarter ended December 31, 2019. The Company also filed its Quarterly Report on Form 10-Q for the second quarter of fiscal year 2020 with the Securities and Exchange Commission today.

Quarter Ended December 31, 2019

Net sales for the three months ended December 31, 2019, increased $1.6 million, or 24%, to $8.0 million from $6.4 million for the three months ended December 31, 2018, due primarily to increased repair revenue generated from our largest customer.

Gross profit for the three months ended December 31, 2019, increased $615,000, or 27%, to $2.9 million from $2.2 million for the same period in fiscal 2019, due to the increase in sales described above and our ability to better absorb and maintain the level of our fixed manufacturing costs.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended December 31, 2019, increased $140,000, or 13%, to $1.2 million compared to the prior fiscal year's corresponding quarter, reflecting our planned investments in research and development, selling, and general and administrative expenses in an effort to release new products and garner new customer relationships.

Net income for the quarter ended December 31, 2019, was $1.2 million, or $0.31 per diluted share, compared to $1.2 million, or $0.28 per diluted share, for the corresponding quarter in fiscal 2019.

Six Months Ended December 31, 2019

Net sales for the six months ended December 31, 2019, increased $1.9 million, or 14%, to $15.2 million from $13.3 million for the six months ended December 31, 2018, due primarily to increases in repair revenue generated from our largest customer.

Gross profit for the six months ended December 31, 2019, increased $669,000, or 13%, compared to the same period in fiscal 2019 due to the increase in sales described above.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the six months ended December 31, 2019, increased 21% to $2.5 million from $2.1 million in the prior fiscal year's corresponding period, reflecting our planned investments in research and development, selling, and general and administrative expenses in an effort to release new products and garner new customer relationships.

Net income for the six months ended December 31, 2019 was $2.4 million, or $0.58 per diluted share, compared to $2.5 million, or $0.59 per diluted share, for the corresponding period in fiscal 2019.

CEO Comments

Richard L. ("Rick") Van Kirk, the Company's President and Chief Executive Officer, commented, "We are pleased with our second quarter and year-to-date results and our net sales growth." Mr. Van Kirk continued, "We expect the momentum to continue. Additionally, we are pleased that the private-labeled thoracic driver and related accessories are on track to ship in our third quarter of this fiscal year."

The amount spent on projects under development as well as the estimated market launch date and estimated future annual revenue is summarized below (in thousands):

Three and Six Months ended December 31, 2019 Three and Six Months ended December 31, 2018 Market Launch Est Annual Revenue
Total Research & Development costs:
$ 397 $ 881 $ 326 $ 735
Products in development:
Thoracic Driver
$ 17 $ 37 $ 33 $ 107 03/20 $ 4,000
Arthroscopic Shaver (1)
3 11 38 60 06/21 $ 600
ENT Shaver
66 155 - - 01/21 $ 2,000
Arthroscopic Attachment
- - 9 16 (2) $ 150
CMF Driver
29 46 2 3 06/20 $ 350
Sustaining & Other
282 632 244 549
Total
$ 397 $ 881 $ 326 $ 735
Customer CMF Driver (3)
$ 81 $ 181 $ 152 $ 217 06/20 $ 2,500

(1)This project has been internally pushed back to focus on our new internal Pro-Dex branded ENT shaver.
(2)Internal development of this project is now complete, but we are looking for the most attractive sales channel.
(3)Costs incurred related to customer contracts are included in costs of sales and deferred costs and are not included in research and development costs.

About Pro-Dex, Inc.:

Pro-Dex, Inc. specializes in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic and maxocranial facial markets. We have patented adoptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. Pro-Dex also sells rotary air motors to a wide range of industries. Pro-Dex's products are found in hospitals and medical engineering labs around the world. For more information, visit the Company's website at www.pro-dex.com.

Statements herein concerning the Company's plans, growth, and strategies may include 'forward-looking statements' within the context of the federal securities laws. Statements regarding the Company's future events, developments, and future performance, (including, but not limited to, estimated product launch dates and estimated future revenue), as well as management's expectations, beliefs, plans, estimates, or projections relating to the future, are forward-looking statements within the meaning of these laws. The Company's actual results may differ materially from those suggested as a result of various factors. Interested parties should refer to the disclosure concerning the operational and business concerns of the Company set forth in the Company's filings with the Securities and Exchange Commission.

(tables follow)

PRO-DEX, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)

December 31,
2019
June 30,
2019
ASSETS
Current Assets:
Cash and cash equivalents
$ 6,175 $ 7,742
Investments
3,540 2,649
Accounts receivable, net of allowance for doubtful accounts of $17 and $0 at December 31, 2019 and at June 30, 2019, respectively
2,683 4,100
Deferred costs
492 430
Inventory
7,808 6,239
Prepaid expenses and other current assets
193 623
Total current assets
20,891 21,783
Equipment and leasehold improvements, net
2,768 2,726
Right of use asset, net
3,107 -
Intangibles, net
145 129
Deferred income taxes, net
163 260
Investments
1,610 582
Other assets
42 40
Total assets
$ 28,726 $ 25,520
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$ 1,672 $ 1,996
Accrued expenses
1,287 1,437
Deferred revenue
360 215
Note payable and capital lease obligations
633 622
Total current liabilities
3,952 4,270
Deferred rent
- 146
Lease liability, net of current portion
2,937 -
Income taxes payable
352 162
Notes and capital leases payable, net of current portion
3,613 3,934
Total non-current liabilities
6,902 4,242
Total liabilities
10,854 8,512
Shareholders' equity:
Common shares; no par value; 50,000,000 shares authorized; 3,884,098 and 4,039,491 shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively
13,634 15,815
Accumulated other comprehensive income (loss)
100 (549 )
Retained earnings
4,138 1,742
Total shareholders' equity
17,872 17,008
Total liabilities and shareholders' equity
$ 28,726 $ 25,520

PRO-DEX, INC.
CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share amounts)

Three Months Ended
December 31,
Six Months Ended
December 31,
2019 2018 2019 2018
Net sales
$ 7,961 $ 6,399 $ 15,201 $ 13,314
Cost of sales
5,097 4,150 9,557 8,339
Gross profit
2,864 2,249 5,644 4,975
Operating (income) expenses:
Selling expenses
135 97 277 130
General and administrative expenses
664 633 1,327 1,197
Gain from disposal of equipment
- - - (7 )
Research and development costs
397 326 881 735
Total operating expenses
1,196 1,056 2,485 2,055
Operating income
1,668 1,193 3,159 2,920
Interest expense
(63 ) (69 ) (122 ) (89 )
Interest and other income
33 93 68 168
Gain on sale of investments
- 356 - 356
Income from operations before income taxes
1,638 1,573 3,105 3,355
Income tax expense
(389 ) (394 ) (751 ) (827 )
Net income
$ 1,249 $ 1,179 $ 2,354 $ 2,528
Other comprehensive income (loss), net of tax:
Unrealized income (loss) from marketable equity investments
705 (494 ) 649 (349 )
Comprehensive income
$ 1,954 $ 685 $ 3,003 $ 2,179
Basic net income per share:
Net income
$ 0.32 $ 0.28 $ 0.59 $ 0.59
Diluted net income per share:
Net income
$ 0.31 $ 0.28 $ 0.58 $ 0.59
Weighted average common shares outstanding:
Basic
3,950 4,195 3,979 4,263
Diluted
4,053 4,242 4,082 4,303
Common shares outstanding
3,884 4,143 3,884 4,143

PRO-DEX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Six Months Ended
December 31,
2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$ 2,354 $ 2,528
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
282 195
Gain from disposal of equipment
- (7 )
Share-based compensation
19 18
Non-cash lease expense
22 -
Amortization of loan fees
4 -
Gain on sale of investments
- (356 )
Deferred income taxes
97 742
Bad debt expense (recovery)
17 (13 )
Changes in operating assets and liabilities:
Accounts receivable and other current receivables
1,400 (838 )
Deferred costs
(62 ) (143 )
Inventory
(1,569 ) (147 )
Prepaid expenses and other assets
430 (46 )
Accounts payable and accrued expenses
(771 ) (301 )
Deferred revenue
145 (1 )
Income taxes payable
190 (123 )
Net cash provided by operating activities
2,558 1,508
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments
(1,271 ) (1,365 )
Purchases of equipment and leasehold improvements
(317 ) (540 )
Proceeds from sale of investments
- 1,905
Proceeds from sale of equipment
- 7
Increase in intangibles
(23 ) (14 )
Net cash used in investing activities
(1,611 ) (7 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock
(2,215 ) (2,560 )
Proceeds from exercise of options and ESPP contributions
15 17
Payment of employee payroll taxes on net issuance of common stock
- (101 )
Proceeds from Minnesota Bank & Trust long-term debt, net of fees
- 4,942
Principal payments on notes payable and capital lease
(314 ) (116 )
Net cash provided by (used in) financing activities
(2,514 ) 2,182
Net increase (decrease) in cash and cash equivalents
(1,567 ) 3,683
Cash and cash equivalents, beginning of period
7,742 5,188
Cash and cash equivalents, end of period
$ 6,175 $ 8,871

Contact:

Richard L. Van Kirk, Chief Executive Officer
(949) 769-3200

SOURCE: Pro-Dex, Inc.



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