UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K

 

CURRENT REPORT


Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported): August 27, 2020


PRO-DEX, INC.

(Exact name of registrant as specified in its charter)


COLORADO

0-14942

84-1261240

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification Number)


2361 McGaw Avenue

Irvine, California 92614

(Address of principal executive offices)


(949) 769-3200

(Registrant’s telephone number including area code)

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Securities registered pursuant to Section 12(b) of the Act:


Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

PDEX

NASDAQ Capital Market


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).


Emerging growth company  ¨

 


If an emerging growth company, indicate by checkmark 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. ¨

 

 

 

 




 



Item 2.02.

Results of Operations and Financial Condition.


The information in this Item 2.02 of this Form 8-K, as well as Exhibit 99.1 attached hereto, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.


On August 27, 2020, Pro-Dex, Inc. (the “Company”) is issuing a press release announcing its financial performance for the fourth fiscal quarter and fiscal year ended June 30, 2020. A copy of the press release is attached to this Form 8-K as Exhibit 99.1, which is incorporated herein by this reference.


Item 9.01

Financial Statements and Exhibits.

(d) Exhibits


Exhibit Number

 

Description

99.1

 

Press Release dated August 27, 2020.





 



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 hereunto duly authorized.


Date:  August 27, 2020

Pro-Dex, Inc.

 

 

 

 

 

 

By:

/s/ Alisha K. Charlton

 

 

Alisha K. Charlton

 

 

Chief Financial Officer









 


INDEX TO EXHIBITS


Exhibit Number

 

Description

99.1

 

Press Release dated August 27, 2020.






Press Release

 


EXHIBIT 99.1

[pdex_ex99z1001.jpg]


Contact:  Richard L. Van Kirk, Chief Executive Officer

(949) 769-3200


For Immediate Release


PRO-DEX, INC. ANNOUNCES FISCAL 2020

FOURTH QUARTER AND FULL-YEAR RESULTS


IRVINE, CA, August 27, 2020 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2020 fourth quarter and full-year ended June 30, 2020.


Quarter Ended June 30, 2020


Net sales for the three months ended June 30, 2020 increased $4.1 million, or 59%, to $11.1 million from $7.0 million for the three months ended June 30, 2019, due primarily to increased medical device sales related to two new product launches as well as increased revenue generated from our largest customer.  Revenue to our largest customer increased by $1.7 million for the quarter ended June 30, 2020 compared to the fourth quarter of the prior year. In the third quarter of fiscal 2020 we began shipping a thoracic driver to one of our existing craniomaxillofacial (“CMF”) customers and sales generated in the fourth quarter of fiscal 2020 related to this new product totaled $1.0 million. In the fourth quarter of fiscal 2020 we completed the development of a next generation CMF driver for an existing customer and same quarter sales related to this new product totaled $600,000. Gross profit for the three months ended June 30, 2020 increased $1.7 million or 69%, to $4.3 million from $2.5 million for the same period in 2019.  The increase in gross margin is due to better absorption of our fixed costs resulting from higher sales volumes.


Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended June 30, 2020 increased 53% to $2.1 million from $1.4 million in the prior year’s corresponding quarter, due primarily to increased expenditures of $483,000 in general and administrative expenses due to increased equity compensation expense and increased bonus accruals and $270,000 in research and development costs to support our continued efforts to further grow our business.


Net income for the quarter ended June 30, 2020 increased by $1.7 million to $2.5 million, or $0.64 per diluted share, compared to $888,000, or $0.21 per diluted share, in the corresponding quarter in 2019.


Year Ended June 30, 2020


Net sales for the fiscal year ended June 30, 2020 increased $7.7 million, or 28%, to $34.8 million from $27.2 million for the fiscal year ended June 30, 2019, due primarily to increases in medical device revenues. Specifically, our largest customer accounted for an increase of $5.6 million in revenue during fiscal 2020 and we generated sales of $3.1 million in fiscal 2020 due to the new thoracic driver and next generation CMF driver described above.





 


Gross profit for the fiscal year ended June 30, 2020 increased $3.4 million, or 34%, to $13.1 million compared to $9.8 million for fiscal 2019, due to increased revenues and manufacturing efficiencies.


Operating expenses (which include selling, general and administrative, and research and development expenses) for the fiscal year ended June 30, 2020 increased 27% to $6.1 million from $4.8 million in the prior fiscal year, due to increased personnel expenses across all departments and increased equity compensation expense, bonus accruals and professional services.


Net income for the fiscal year ended June 30, 2020 was $6.1 million, or $1.50 per diluted share, compared to $4.2 million, or $0.97 per diluted share, for fiscal 2019.

  

Although the Company has released its earnings prior to the filing of its annual Form 10-K with the Securities and Exchange Commission, we are able to do this because we are a non-accelerated filer and as a result have more time to do so at fiscal year-end.  During our quarterly reporting periods we anticipate that our earnings releases will continue to be released at the same time as our Form 10-Q’s are filed with the Securities and Exchange Commission.  We anticipate filing our Form 10-K with the Securities and Exchange Commission on September 10, 2020.


Guidance


Pro-Dex typically provides neither sales nor earnings guidance, and while the COVID-19 pandemic did not materially adversely affect our financial results in our fiscal year ended June 30, 2020, we cannot predict the longer-term impact of the pandemic on our business.  Additionally, as described above, we released two new products in the second half of fiscal 2020 and while we expect to have future orders for these new products, often the launch or initial quantities are such that our customer can comfortably fill its distribution network and follow on orders may not occur for many months. As a result, fiscal 2020 sales of these products may not be indicative of what sales of these products may be in the future.


CEO Comments


“We are very pleased with our fourth quarter and fiscal year results, and the shipment of the thoracic driver and newly developed next-generation CMF driver. These two product releases occurred in quick succession and demonstrate the culmination of long periods of research and development as well as verification and validation. The timing of these product releases led to a record quarter.  While we do not expect every quarter to have two launches and meet such record levels, we still plan to build our business year over year. Pro-Dex’s priorities, in response to COVID-19, remain the health and safety of our employees, our communities, customers, and suppliers,” said the Company’s President and Chief Executive Officer Richard L. (“Rick”) Van Kirk.  “While we cannot predict the total impact caused by the pandemic, we remain committed to our strategy to continue to provide a safe workplace for our employees, excellent service to our existing customers, and new product introductions to continue to grow our business.”





 


R&D Projects


The amount spent on projects under development is summarized below (in thousands):


 

 

Years Ended June 30,

 

 

 

Expected

 

 

Estimated

 

 

 

2020

 

 

2019

 

 

 

Market

 

 

Annual

 

 

 

Dollars in thousands

 

 

 

Launch

 

 

Revenue

 

Total Research and development costs:

 

$

2,315

 

 

$

1,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products in development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thoracic Driver

 

$

41

 

 

$

339

 

 

 

*

 

 

$

4,000

 

Arthroscopic Shaver(1)

 

 

6

 

 

 

297

 

 

 

06/21

 

 

$

600

 

ENT Shaver

 

 

475

 

 

 

11

 

 

 

01/21

 

 

$

1,000

 

Arthroscopic Attachment

 

 

 

 

 

17

 

 

 

(2)

 

 

$

150

 

CMF Driver

 

 

194

 

 

 

9

 

 

 

12/20

 

 

$

1,000

 

Sustaining & Other

 

 

1,599

 

 

 

1,209

 

 

 

 

 

 

 

 

 

Total

 

$

2,315

 

 

$

1,882

 

 

 

 

 

 

 

 

 


*

We substantially completed this product and began initial shipments of a private-labeled version to an existing CMF customer during the third quarter of fiscal 2020, generating $3.1 million in revenue during fiscal 2020.

(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 complete, but we are looking for the most attractive sales channel and have yet to sell this product.


As we previously discussed, in early fiscal 2019 we entered a development contract with a current significant customer to private-label our thoracic driver for their unique specifications. We shipped initial launch quantities of this product during the third quarter ended March 31, 2020. Additionally, the customer CMF driver listed in the prior year was completed during fiscal 2020 and we began shipping initial quantities to this customer during the fourth quarter of fiscal 2020 and generated $556,000 in revenue related to this new product.


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, thoracic, 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. 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, 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.

BALANCE SHEETS

(In thousands, except share data)


 

 

June 30,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,421

 

 

$

7,742

 

Investments

 

 

2,560

 

 

 

1,711

 

Accounts receivable, net of allowance for doubtful accounts of $6 and $0 at June 30, 2020 and 2019, respectively

 

 

5,155

 

 

 

4,100

 

Deferred costs

 

 

155

 

 

 

430

 

Inventory

 

 

8,238

 

 

 

6,239

 

Prepaid expenses and other current assets

 

 

145

 

 

 

623

 

Total current assets

 

 

22,674

 

 

 

20,845

 

Plant, equipment and leasehold improvements, net

 

 

2,686

 

 

 

2,726

 

Right of use asset, net

 

 

2,943

 

 

 

 

Intangibles, net

 

 

162

 

 

 

129

 

Deferred income taxes, net

 

 

259

 

 

 

260

 

Investments

 

 

2,360

 

 

 

1,520

 

Other assets

 

 

42

 

 

 

40

 

Total assets

 

$

31,126

 

 

$

25,520

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,965

 

 

$

1,996

 

Accrued liabilities

 

 

2,411

 

 

 

1,437

 

Deferred revenue

 

 

200

 

 

 

215

 

Note payable and capital lease obligations

 

 

651

 

 

 

622

 

Total current liabilities

 

 

5,227

 

 

 

4,270

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Deferred rent

 

 

 

 

 

146

 

Lease liability, net of current portion

 

 

2,750

 

 

 

 

Income taxes payable

 

 

804

 

 

 

162

 

Notes and capital lease payable, net of current portion

 

 

3,283

 

 

 

3,934

 

Total non-current liabilities

 

 

6,837

 

 

 

4,242

 

Total liabilities

 

 

12,064

 

 

 

8,512

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock, no par value, 50,000,000 shares authorized; 3,811,137 and 4,039,491 shares issued and outstanding at June 30, 2020 and 2019, respectively

 

 

12,752

 

 

 

15,815

 

Accumulated other comprehensive loss

 

 

(1,586

)

 

 

(549

)

Retained earnings

 

 

7,896

 

 

 

1,742

 

Total shareholders’ equity

 

 

19,062

 

 

 

17,008

 

Total liabilities and shareholders’ equity

 

$

31,126

 

 

$

25,520

 









 


PRO-DEX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


 

 

Three Months Ended
June 30,
(Unaudited)

 

 

Years Ended
June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

11,125

 

 

$

7,003

 

 

$

34,834

 

 

$

27,172

 

Cost of sales

 

 

6,837

 

 

 

4,461

 

 

 

21,692

 

 

 

17,392

 

Gross profit

 

 

4,288

 

 

 

2,542

 

 

 

13,142

 

 

 

9,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (income) expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

138

 

 

 

162

 

 

 

577

 

 

 

415

 

General and administrative expenses

 

 

1,137

 

 

 

654

 

 

 

3,189

 

 

 

2,492

 

Gain from disposal of equipment

 

 

(5

)

 

 

 

 

 

(5

)

 

 

(7

)

Research and development costs

 

 

815

 

 

 

545

 

 

 

2,315

 

 

 

1,882

 

Total operating expenses

 

 

2,085

 

 

 

1,361

 

 

 

6,076

 

 

 

4,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

2,203

 

 

 

1,181

 

 

 

7,066

 

 

 

4,998

 

Interest expense

 

 

(56

)

 

 

(65

)

 

 

(236

)

 

 

(220

)

Other income

 

 

935

 

 

 

10

 

 

 

952

 

 

 

45

 

Gain on sale of investments

 

 

25

 

 

 

 

 

 

25

 

 

 

356

 

Interest and dividend income

 

 

35

 

 

 

42

 

 

 

95

 

 

 

268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

3,142

 

 

 

1,168

 

 

 

7,902

 

 

 

5,447

 

Income tax expense

 

 

596

 

 

 

280

 

 

 

1,790

 

 

 

1,299

 

Net income

 

$

2,546

 

 

$

888

 

 

$

6,112

 

 

$

4,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic & Diluted income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.67

 

 

$

0.22

 

 

$

1.56

 

 

$

0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share

 

$

0.64

 

 

$

0.21

 

 

$

1.50

 

 

$

0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,812,145

 

 

 

4,098,450

 

 

 

3,910,940

 

 

 

4,192,365

 

Diluted

 

 

3,979,944

 

 

 

4,204,365

 

 

 

4,078,087

 

 

 

4,298,332

 





 


PRO-DEX, INC.

STATEMENTS OF CASH FLOWS

(In thousands)


 

 

Years Ended June 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

6,112

 

 

$

4,148

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

573

 

 

 

438

 

Gain on sale of investments

 

 

(25

)

 

 

(356

)

Non-cash lease expense

 

 

41

 

 

 

 

Gain on sale or disposal of equipment

 

 

(5

)

 

 

(7

)

Amortization of loan fees

 

 

9

 

 

 

7

 

Share-based compensation

 

 

286

 

 

 

37

 

Deferred income taxes

 

 

(22

)

 

 

1,418

 

Bad debt expense (recovery)

 

 

6

 

 

 

(14

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,061

)

 

 

(1,131

)

Deferred costs

 

 

275

 

 

 

(398

)

Inventory

 

 

(1,999

)

 

 

(1,846

)

Prepaid expenses and other assets

 

 

476

 

 

 

(326

)

Accounts payable, accrued expenses and deferred rent

 

 

604

 

 

 

1,133

 

Deferred revenue

 

 

(15

)

 

 

184

 

Income taxes payable

 

 

642

 

 

 

39

 

Net cash provided by operating activities

 

 

5,897

 

 

 

3,326

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of equipment and leasehold improvements

 

 

(519

)

 

 

(1,387

)

Proceeds from dividend reclassified as return of principal

 

 

15

 

 

 

23

 

Proceeds from sale of equipment

 

 

5

 

 

 

7

 

Proceeds from collection of notes receivable

 

 

 

 

 

1,219

 

Proceeds from sale of investments

 

 

128

 

 

 

1,905

 

Increase in intangibles

 

 

(46

)

 

 

(11

)

Purchase of investments

 

 

(2,822

)

 

 

(2,978

)

Net cash used in investing activities

 

 

(3,239

)

 

 

(1,222

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Principal payments on capital lease and note payable

 

 

(630

)

 

 

(433

)

Borrowing from Minnesota Bank & Trust, net of loan origination fees

 

 

 

 

 

4,940

 

Repurchases of common stock

 

 

(3,388

)

 

 

(3,984

)

Payments of employee taxes on net issuance of common stock

 

 

 

 

 

(101

)

Proceeds from exercise of stock options and ESPP contributions

 

 

39

 

 

 

28

 

Net cash provided by (used in) financing activities

 

 

(3,979

)

 

 

450

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(1,321

)

 

 

2,554

 

Cash and cash equivalents, beginning of year

 

 

7,742

 

 

 

5,188

 

Cash and cash equivalents, end of year

 

$

6,421

 

 

$

7,742