EX-99.1 2 pdex_ex99z1.htm PRESS RELEASE 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 2019 SECOND QUARTER

AND SIX-MONTH RESULTS


IRVINE, CA, February 7, 2019 - PRO-DEX, INC. (NasdaqCM: PDEX) today announced financial results for its fiscal 2019 second quarter ended December 31, 2018. The Company also filed its Quarterly Report on Form 10-Q for the second quarter of fiscal year 2019 with the Securities and Exchange Commission today.


Quarter Ended December 31, 2018


Net sales for the three months ended December 31, 2018 increased $839,000, or 15%, to $6.4 million from $5.6 million for the three months ended December 31, 2017, due to increased sales of our medical device products to our largest customer.


Gross profit for the three months ended December 31, 2018 increased $532,000, or 31%, to $2.2 million from $1.7 million for the same period in fiscal 2018, 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, 2018 decreased $311,000, or 23%, to $1.1 million compared to the prior fiscal year’s corresponding quarter, due to the prior year impairment of our Fineline goodwill and intangible assets in the amount of $229,000.


Net income for the quarter ended December 31, 2018 was $1.2 million, or $0.28 per share, compared to $345,000, or $0.08 per share, for the corresponding quarter in fiscal 2018.


Six Months Ended December 31, 2018


Net sales for the six months ended December 31, 2018 increased $2.6 million, or 24%, to $13.3 million from $10.7 million for the six months ended December 31, 2017, due primarily to increases in medical device product revenues.  We are continuing to focus both our research and development efforts and our business development efforts on our medical device product offerings and sales related to other ancillary products have decreased.


Gross profit for the six months ended December 31, 2018 increased $1.4 million, or 39%, compared to the same period in fiscal 2018.  The gross profit increase is due to increased net sales of 24%, as well as improved margins due to better absorption of our fixed manufacturing costs.


Operating expenses (which include selling, general and administrative, and research and development expenses) for the six months ended December 31, 2018 decreased 13% to $2.1 million from $2.4 million in the prior fiscal year’s corresponding period, reflecting primarily the prior year goodwill and intangible asset impairment charge as described above.


Net income for the six months ended December 31, 2018 was $2.5 million, or $0.59 per share, compared to $973,000, or $0.23 per share, for the corresponding period in fiscal 2018.




 


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 to share our current product development plans as detailed below.” Mr. Van Kirk continued, “We are looking forward to reinvesting our profits in both research and development and business development to continue to grow our core medical device business. Finally,” concluded Mr. Van Kirk, “we are pleased to announce that on February 4, 2019, the customer with whom we entered into a development contract in early fiscal 2019, executed a material procurement authorization in the amount of $3.4 million to support production orders for the private-labeled thoracic driver and related accessories, which we expect to ship in calendar 2019.”


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


 

 

Three and Six Months ended December 31, 2018

 

 

Three and Six Months ended December 31, 2017

 

 

Market Launch

 

 

Est. Annual Revenue

 

Total Research & Development costs:

 

$

326

 

 

$

735

 

 

$

478

 

 

$

885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products in development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thoracic Driver

 

$

33

 

 

$

107

 

 

$

178

 

 

$

318

 

 

 

03/19

 

 

$

4,000

 

Arthroscopic Shaver

 

 

38

 

 

 

60

 

 

 

—

 

 

 

—

 

 

 

08/19

 

 

$

600

 

Arthroscopic Attachment

 

 

9

 

 

 

16

 

 

 

—

 

 

 

—

 

 

 

03/19

 

 

$

150

 

CMF Driver

 

 

2

 

 

 

3

 

 

 

—

 

 

 

—

 

 

 

11/19

 

 

$

350

 

Sustaining & Other

 

 

244

 

 

 

549

 

 

 

300

 

 

 

567

 

 

 

 

 

 

 

 

 

Total

 

$

326

 

 

$

735

 

 

$

478

 

 

$

885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer CMF Driver (1)

 

$

152

 

 

$

217

 

 

$

—

 

 

$

—

 

 

 

09/19

 

 

$

2,500

 


(1)

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, 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 CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)


 

 

December 31,
2018

 

 

June 30,

2018

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,871

 

 

$

5,188

 

Investments

 

 

1,842

 

 

 

2,220

 

Accounts receivable, net of allowance for doubtful accounts of $1 and $14 at December 31, 2018 and at June 30, 2018, respectively

 

 

3,807

 

 

 

2,955

 

Deferred costs

 

 

175

 

 

 

32

 

Inventory

 

 

4,540

 

 

 

4,393

 

Notes receivable

 

 

1,197

 

 

 

1,176

 

Prepaid expenses and other current assets

 

 

343

 

 

 

269

 

Total current assets

 

 

20,775

 

 

 

16,233

 

Equipment and leasehold improvements, net

 

 

2,115

 

 

 

1,755

 

Intangibles, net

 

 

139

 

 

 

140

 

Deferred income taxes, net

 

 

936

 

 

 

1,678

 

Notes receivable, net of current portion

 

 

21

 

 

 

43

 

Other assets

 

 

40

 

 

 

68

 

Total assets

 

$

24,026

 

 

$

19,917

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

970

 

 

$

1,083

 

Accrued expenses

 

 

1,052

 

 

 

1,266

 

Deferred revenue

 

 

30

 

 

 

31

 

Note payable and capital lease obligations

 

 

623

 

 

 

35

 

Income taxes payable

 

 

—

 

 

 

123

 

Total current liabilities

 

 

2,675

 

 

 

2,538

 

Deferred rent

 

 

123

 

 

 

97

 

Notes and capital leases payable, net of current portion

 

 

4,246

 

 

 

6

 

Total non-current liabilities

 

 

4,369

 

 

 

103

 

Total liabilities

 

 

7,044

 

 

 

2,641

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common shares; no par value; 50,000,000 shares authorized; 4,143,182 and 4,331,089 shares issued and outstanding at December 31, 2018 and June 30, 2018, respectively

 

 

17,209

 

 

 

19,835

 

Accumulated other comprehensive loss

 

 

(349

)

 

 

(153

)

Retained earnings (accumulated deficit)

 

 

122

 

 

 

(2,406

)

Total shareholders’ equity

 

 

16,982

 

 

 

17,276

 

Total liabilities and shareholders’ equity

 

$

24,026

 

 

$

19,917

 




 


PRO-DEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except per share amounts)


 

 

Three Months Ended
December 31,

 

 

Six Months Ended
December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales 

 

$

6,399

 

 

$

5,560

 

 

$

13,314

 

 

$

10,723

 

Cost of sales 

 

 

4,150

 

 

 

3,843

 

 

 

8,339

 

 

 

7,145

 

Gross profit 

 

 

2,249

 

 

 

1,717

 

 

 

4,975

 

 

 

3,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (income) expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses 

 

 

97

 

 

 

87

 

 

 

130

 

 

 

174

 

General and administrative expenses 

 

 

633

 

 

 

576

 

 

 

1,197

 

 

 

1,080

 

Impairment of goodwill and intangible assets

 

 

—

 

 

 

229

 

 

 

—

 

 

 

229

 

Gain from disposal of equipment

 

 

—

 

 

 

(3

)

 

 

(7

)

 

 

(15

)

Research and development costs 

 

 

326

 

 

 

478

 

 

 

735

 

 

 

885

 

Total operating expenses 

 

 

1,056

 

 

 

1,367

 

 

 

2,055

 

 

 

2,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income 

 

 

1,193

 

 

 

350

 

 

 

2,920

 

 

 

1,225

 

Interest expense 

 

 

(69

)

 

 

(2

)

 

 

(89

)

 

 

(4

)

Interest income 

 

 

93

 

 

 

75

 

 

 

168

 

 

 

93

 

Gain on sale of investments 

 

 

356

 

 

 

—

 

 

 

356

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations before income taxes

 

 

1,573

 

 

 

423

 

 

 

3,355

 

 

 

1,314

 

Income tax expense 

 

 

(394

)

 

 

(78

)

 

 

(827

)

 

 

(341

)

Net income 

 

$

1,179

 

 

$

345

 

 

$

2,528

 

 

$

973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss from marketable equity investments

 

 

(494

)

 

 

(15

)

 

 

(349

)

 

 

(124

)

Comprehensive income 

 

$

685

 

 

$

330

 

 

$

2,179

 

 

$

849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic & diluted net income per share: 

 

$

0.28

 

 

$

0.08

 

 

$

0.59

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic 

 

 

4,195

 

 

 

4,359

 

 

 

4,263

 

 

 

4,255

 

Diluted 

 

 

4,242

 

 

 

4,400

 

 

 

4,303

 

 

 

4,295

 

Common shares outstanding 

 

 

4,143

 

 

 

4,360

 

 

 

4,143

 

 

 

4,360

 




 


PRO-DEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


 

 

Six Months Ended
December 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

2,528

 

 

$

973

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

195

 

 

 

310

 

Gain from disposal of equipment

 

 

(7

)

 

 

(15

)

Share-based compensation

 

 

18

 

 

 

49

 

Impairment of goodwill and intangible assets

 

 

—

 

 

 

229

 

Gain on sale of investments

 

 

(356

)

 

 

—

 

Deferred income tax expense

 

 

742

 

 

 

98

 

Bad debt recovery

 

 

(13

)

 

 

—

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable and other current receivables

 

 

(838

)

 

 

388

 

Deferred costs

 

 

(143

)

 

 

3

 

Inventory

 

 

(147

)

 

 

(112

)

Prepaid expenses and other assets

 

 

(46

)

 

 

(76

)

Accounts payable, accrued expenses and deferred rent

 

 

(301

)

 

 

(526

)

Deferred revenue

 

 

(1

)

 

 

(18

)

Income taxes payable

 

 

(123

)

 

 

—

 

Net cash provided by operating activities

 

 

1,508

 

 

 

1,303

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(1,365

)

 

 

(297

)

Purchases of equipment and leasehold improvements

 

 

(540

)

 

 

(713

)

Increase in notes receivable

 

 

—

 

 

 

(1,500

)

Proceeds from sale of investments

 

 

1,905

 

 

 

—

 

Proceeds from sale of equipment

 

 

7

 

 

 

30

 

Increase in intangibles

 

 

(14

)

 

 

(15

)

Net cash used in investing activities

 

 

(7

)

 

 

(2,495

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Repurchases of common stock

 

 

(2,560

)

 

 

—

 

Proceeds from shares issued under ATM, net of commissions and fees

 

 

—

 

 

 

2,262

 

Proceeds from exercise of options and ESPP contributions

 

 

17

 

 

 

16

 

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

 

 

(116

)

 

 

(29

)

Net cash provided by financing activities

 

 

2,182

 

 

 

2,249

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

3,683

 

 

 

1,057

 

Cash and cash equivalents, beginning of period

 

 

5,188

 

 

 

4,205

 

Cash and cash equivalents, end of period

 

$

8,871

 

 

$

5,262