Exhibit 99.1
![[pdex_ex99z1001.jpg]](https://capedge.com/proxy/8-K/0001553350-19-000117/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 atwww.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.
PRO-DEX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
|
| December 31, |
|
| 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 |
|
| Six Months Ended |
| ||||||||||
|
| 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 |
| |||||
|
| 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 |
|