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PRO-DEX, INC. Announces Fiscal First Quarter 2010 Profit, Update on Business Development Activities, and Renewal of Banking Agreement

IRVINE, Calif., Oct. 29 /PRNewswire-FirstCall/ -- PRO-DEX, INC. (Nasdaq: PDEX) today announced its financial results for the fiscal first quarter ending September 30, 2009. In addition, Pro-Dex announced that its existing credit agreement with Wells Fargo has been renewed, a new marketing director has been hired, a product development agreement was signed with a new customer, and initial shipments have been made of a newly developed product.

Sales for the first quarter ended September 30, 2009 remained stable at $5.6 million compared to $5.7 million for the previous year's first quarter, as increases in medical devices compensated for continued sluggish motion control sales. Net income for the fourth quarter was $183,000 or $0.02 per share compared to a net loss of $118,000 or ($0.01) per share for the previous year's first quarter.

Mark Murphy, the Company's President and Chief Executive Officer, commented, "In looking at the comparison quarters, we can see the effect of our tuning efforts last year. In the first quarter of fiscal year 2009, we shipped $5.7 million and lost $0.01 per share, and in this first quarter of fiscal year 2010, we shipped $5.6 million and made $0.02 per share. In addition to these P&L improvements, we shipped the first 50 units of a new arthroscopic surgical hand-piece during fiscal Q1 2010. We currently have purchase orders in our backlog totaling $1.4 million for this product with scheduled ship dates through July, 2010."

Commenting further on the Company's top line, Mr. Murphy continued, "We're beginning to see some signs of improvement in our motion control business as those sales have climbed back to nearly half of the sales levels we experienced during each of the five quarters ending December 31, 2008. Our total company backlog is currently at $9.3 million, up from $8.1 million at September 30, 2009. We are also pleased to announce the signing of a new development agreement. The product is for small joint surgery and will include a consumable element that Pro-Dex will provide in addition to the base capital equipment. The initial Purchase Order is for $150,000, and our annual sales of the related disposables could increase significantly if the product is successful, although there can be no assurance of the product's design success or acceptance by the customer or the market-place. The development and regulatory testing schedule, assuming successful design and customer acceptance, targets us making initial shipments in the first quarter of next fiscal year.

Gross profit for the quarter ended September 30, 2009 increased to $1.9 million, a 33% gross profit margin, compared to gross profit of $1.8 million or 31% gross profit margin in last year's first quarter.

Operating expenses for the first quarter decreased by 14% to $1.6 million, compared to $1.9 million in the first quarter 2009. The continued decrease in spending was attributable to structurally lower costs, primarily decreased labor expenses and more efficient marketing spending, resulting from our FY2009 cost-reduction efforts.

Mr. Murphy continued, "This quarter's gross profit margin is an accomplishment in light of our lower motion control sales mix, which typically enhances our margins. Increased product reliability is a major contributor to our improved medical device margins. In light of the current economic environment, we are encouraged by a second consecutive quarter of profit and cash generation. To ensure that we identify every possible opportunity for growth, we have hired a new Director of Marketing who joins us with substantial experience in strategic marketing and top line growth. We look forward to benefitting from this newly created position."

During the first quarter of fiscal year 2010, we continued to strengthen our balance sheet, generating an additional $409,000 of operating cash, improving our trailing 12 months operating cash from $1.7 million to $2.6 million. At September 30, 2009, we had cash and cash equivalents of $1,378,000 compared to cash and cash equivalents of $1,124,000 as of June 30, 2009. There continued to be nothing borrowed under the terms of the Company's revolving credit line. The Company's net debt (total debt less cash) was $1.8 million at September 30, 2009, down from $2.2 million at June 30, 2009 and down from $4.1 million at September 30, 2008.

On October 27, 2009, we renewed our financing agreement with Wells Fargo through November 1, 2010. Except for the introduction of a 1.5% unused line fee, the terms and conditions of the agreement remain the same, with the current $1.6 million tenant improvement term loan continuing to amortize over four years and up to $1 million available on our revolving line of credit.

Teleconference Information:

Investors and all others are invited to listen to a conference call discussing the first fiscal quarter 2010 results, today at 4:30 p.m. Eastern Time. The call is scheduled to be broadcast live over the Internet and may be accessed by visiting the Company's website at or directly at Mark Murphy, Chief Executive Officer and Jeff Ritchey, Chief Financial Officer, plan to host the call. If you would like to join the call, dial (877) 356-8625 U.S. and (706) 634-9779 International, conference I.D. 38163047. You may identify the call as the Pro-Dex First Quarter Earnings Call. An online archive of the broadcast will be available within two hours of the completion of the call and will be accessible on the Company's website for 365 days. Additionally, a telephone replay will be available 2 hours after the call for 48 hours by dialing (800) 642-1687 U.S. or (706) 645-9291 for international callers, conference I.D. number 38163047.

Pro-Dex, Inc., with operations in Irvine, California, Beaverton, Oregon and Carson City, Nevada, provides power and control products used in medical, aerospace, military, research and industrial applications. Experience in multi-axis motion control, fractional horsepower motors and rotary drive systems allows us to develop products that require high precision in harsh environments. Pro-Dex's products are found in hospitals, dental offices, medical engineering labs, commercial and military aircraft, scientific research facilities and high tech manufacturing operations around the world. For more information, visit the Company's website at

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. and SUBSIDIARIES

                                                     9/30/2009      6/30/2009
                                                    (Unaudited)     (Audited)
                                                     ----------     ---------
    Current assets:
         Cash and cash equivalents                   $1,378,000    $1,124,000
         Accounts receivable, net of
          allowance for doubtful
          accounts of $46,000 in 2010
          and $52,000 in 2009                         2,830,000     2,515,000
         Other Current Receivables                       49,000        16,000
         Inventories                                  3,532,000     3,365,000
         Prepaid expenses                               146,000       117,000
         Prepaid income taxes                           117,000       118,000
                                                        -------       -------
             Total current assets                     8,052,000     7,255,000
                                                      ---------     ---------

    Property, plant, equipment and
     leasehold improvements, net                      5,846,000     5,981,000
                                                      ---------     ---------
    Other assets:
         Goodwill                                     2,997,000     2,997,000
         Intangibles - Patents, net                     144,000       147,000
         Other                                           87,000        87,000
                                                         ------        ------
             Total other assets                       3,228,000     3,231,000

    Total assets                                    $17,126,000   $16,467,000
                                                    ===========   ===========

    Current liabilities:
         Accounts payable                             1,402,000       827,000
         Accrued expenses                             1,354,000     1,394,000
         Income taxes payable                            54,000        53,000
         Current Portion of T.I. Loan                   400,000       400,000
         Current portion of real estate loan             33,000        33,000
                                                         ------        ------
            Total current liabilities                 3,243,000     2,707,000

    Long-term liabilities:
        Notes Payable - T.I. Loan                     1,267,000     1,367,000
        Real estate loan                              1,519,000     1,528,000
        Deferred income taxes                           173,000       171,000
        Deferred rent                                   224,000       212,000
                                                        -------       -------
            Total long-term liabilities               3,183,000     3,278,000

    Total liabilities                                 6,426,000     5,985,000
                                                      ---------     ---------
    Commitments and contingencies
    Shareholders' equity:
         Common shares; no par value;
          50,000,000 shares authorized;
           9,668,671 shares issued and
           outstanding Sept 30, 2009
           9,668,671 shares issued and
           outstanding June 30, 2009                 16,609,000    16,574,000
         Accumulated deficit                         (5,909,000)   (6,092,000)
                                                     ----------    ----------

          Total shareholders' equity                 10,700,000    10,482,000

         Total liabilities and
          shareholders' equity                      $17,126,000   $16,467,000
                                                    ===========   ===========

               See notes to condensed consolidated financial statements.

                             PRO-DEX, INC. and SUBSIDIARIES
                      Three months ended September 30 (unaudited)

                                                     2009            2008
                                                     ----            ----

    Net sales                                     $5,633,000      $5,656,000

    Cost of sales                                  3,759,000       3,902,000
                                                   ---------       ---------
    Gross profit                                   1,874,000       1,754,000

    Operating expenses:
         Selling expenses                            289,000         344,000
         General and administrative expenses         727,000         835,000
         Research and development costs              621,000         731,000
                                                     -------         -------
    Total operating expenses                       1,637,000       1,910,000

    Income (loss) from operations                    237,000        (156,000)

    Other income (expense):
         Royalty income                                1,000           2,000
         Interest expense                            (51,000)        (61,000)
                                                     -------         -------
    Total                                            (50,000)        (59,000)
                                                     -------         -------

    Income (loss) before provision
     (benefit) for income taxes                      187,000        (215,000)

    Provision (benefit) for income taxes               4,000         (97,000)
                                                       -----         -------
    Net income (loss)                               $183,000       $(118,000)

    Net income (loss) per share:
         Basic                                         $0.02          $(0.01)
                                                       -----          ------
         Diluted                                       $0.02          $(0.01)
                                                       -----          ------

    Weighted average shares outstanding - basic    9,668,671       9,783,407
                                                   ---------       ---------
    Weighted average shares outstanding - diluted  9,675,437       9,783,407
    -------------------------------------          ---------       ---------

                             PRO-DEX, INC. and SUBSIDIARIES
                       Three months ended September 30 (unaudited)

                                                           2009        2008
                                                           ----        ----
    Cash Flows from Operating Activities:
    Net income (loss)                                    $183,000   $(118,000)
      Adjustments to reconcile net income to net
       cash provided by operating activities:
        Depreciation and amortization                     185,000     222,000
        (Recovery) of provision for doubtful
         accounts                                          (6,000)    (14,000)
        Stock based compensation                           35,000      42,000
        (Decrease) in deferred taxes                            -      (5,000)
        Changes in:
          (Increase) in accounts receivable              (343,000)   (122,000)
          (Increase) Decrease  in inventories            (167,000)    461,000
          (Increase) in prepaid expenses                  (29,000)    (50,000)
          Decrease in other assets                              -       5,000
          Increase (decrease) in accounts payable and
           accrued expenses                               547,000    (756,000)
          Increase (decrease) in income taxes payable       4,000    (124,000)
                                                            -----    --------
    Net Cash provided (used) by Operating
     Activities                                           409,000    (459,000)
                                                          -------    --------

    Cash Flows From Investing Activities:
      Purchases of equipment and leasehold
       improvements                                       (47,000)   (144,000)
                                                          -------    --------

    Net Cash used in Investing Activities                 (47,000)   (144,000)
                                                          -------    --------

    Cash Flows from Financing Activities:
      Net borrowing on line of credit                           -     600,000
      Principal payments on term note                           -     (63,000)
      Principal payments on TI Loan                      (100,000)          -
      Principal payments on mortgage                       (8,000)     (7,000)
      Stock repurchases                                         -     (60,000)
                                                          -------     -------

    Net Cash (used) provided by Financing
     Activities                                          (108,000)    470,000
                                                         --------     -------

    Net increase (decrease) in Cash and Cash
     Equivalents                                          254,000    (133,000)
    Cash and Cash Equivalents, beginning of
     period                                             1,124,000     517,000
                                                        ---------     -------

    Cash and Cash Equivalents, end of period           $1,378,000    $384,000
                                                       ==========    ========

                              Supplemental Information

    Cash payments for interest                            $52,000     $56,000

    Cash payments for income taxes                             $-          $-
                                                              ---         ---

SOURCE Pro-Dex, Inc.

SOURCE Pro-Dex, Inc.
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