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What changed in PRO DEX INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PRO DEX INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+116 added−129 removedSource: 10-K (2025-09-04) vs 10-K (2024-09-05)

Top changes in PRO DEX INC's 2025 10-K

116 paragraphs added · 129 removed · 98 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe do not intend to terminate any such relationship at this time, nor does management have knowledge that any supplier or manufacturer intends to terminate its relationship with us. Our commitment to product design, manufacturing, and quality systems are supported by our compliance with several regulatory agency requirements and standards. We hold a U.S.
Biggest changeWhile we intend to pass on these charges to our customers, we do not know if we will be successful in these endeavors. We do not intend to terminate any such relationship at this time, nor does management have knowledge that any supplier or manufacturer intends to terminate its relationship with us.
We consider our relationships with our employees to be good. Government Regulations The manufacture and distribution of medical devices are subject to state and federal requirements set forth by various agencies, including the FDA, and state medical boards. The statutes, regulations, administrative orders, and advisories that affect our businesses are complex and subject to diverse, often conflicting, interpretations.
We consider our relationships with our employees to be good. 4 Government Regulations The manufacture and distribution of medical devices are subject to state and federal requirements set forth by various agencies, including the FDA, and state medical boards. The statutes, regulations, administrative orders, and advisories that affect our businesses are complex and subject to diverse, often conflicting, interpretations.
The near-term expiration of the patents, if any, is not expected to cause any change in our revenue-generating operations as changing the legal manufacturer of medical devices is a significant undertaking and the expiration of a patent would offer minimal inducement to make such a change.
The near-term expiration of the patents, if any, is not expected to cause any change in our revenue-generating operations as changing the legal manufacturer of medical devices is a significant undertaking and we believe the expiration of a patent would offer minimal inducement to make such a change.
In certain instances, we may share research and development costs with our customers by billing for non-recurring engineering (“NRE”) services often provided for under development portions of certain contracts. Revenue recognized for NRE services represented 1% of our revenue in fiscal 2024 and 6% of our revenue in fiscal 2023.
In certain instances, we may share research and development costs with our customers by billing for non-recurring engineering (“NRE”) services often provided for under development portions of certain contracts. Revenue recognized for NRE services represented 1% of our revenue in both fiscal 2025 and 2024.
Our medical device products are sold primarily to original equipment manufacturers and our air motors are sold primarily to a wide range of distributors and end users. In fiscal 2024, our top three customers accounted for 88% of our sales compared to 92% in fiscal 2023.
Our medical device products are sold primarily to original equipment manufacturers and our air motors are sold to a wide range of distributors and end users. In fiscal 2025, our top three customers accounted for 94% of our sales compared to 88% in fiscal 2024.
In fiscal 2024, we had one customer, included in both medical device and repairs revenue above, that accounted for 71% of sales with our next largest customer accounting for 12% of sales. This compares to fiscal 2023, when these same two customers accounted for 67% and 16%, respectively, of our total sales.
In fiscal 2025, we had one customer, included in both medical device and repairs revenue above, that accounted for 75% of sales with our next largest customer accounting for 12% of sales. This compares to fiscal 2024, when these same two customers accounted for 71% and 12%, respectively, of our total sales.
During the fiscal years ended June 30, 2024 and 2023, we incurred research and development expenses amounting to $3.2 million and $2.8 million, respectively, which costs exclude labor and related expenses of approximately $224,000 and $724,000 in fiscal 2024 and 2023, respectively, that were reimbursed by our customers through billings for NRE services.
During the fiscal years ended June 30, 2025 and 2024, we incurred research and development expenses amounting to $3.6 million and $3.2 million, respectively, which costs exclude labor and related expenses of approximately $73,000 and $224,000 in fiscal 2025 and 2024, respectively, that were reimbursed by our customers through billings for NRE services.
We provide medical devices, NRE and proto-type services, as well as repairs to all our customers and we utilize one machine shop and purchasing team to procure and manufacture all the products that we sell.
We primarily design, sell, and repair handheld medical devices and accessories. We provide medical devices, NRE and proto-type services, as well as repairs to all our customers and we utilize one machine shop and purchasing team to procure and manufacture all the products that we sell.
We have experienced, and may continue to experience, variability in our new order bookings due to, among other reasons, the launch of new products, the timing of customer orders based on end-user demand, and customer inventory levels.
We have experienced, and may continue to experience, variability in our new order bookings due to, among other reasons, the launch of new products, the timing of customer orders based on end-user demand, and customer inventory levels. We do not typically experience seasonal fluctuations in our shipments and revenues.
We consider our relationships with our suppliers and manufacturers to be good, however, since fiscal 2022 and continuing through fiscal 2024, many of our suppliers have increased lead times, experienced delays in shipments and raised prices or temporarily added surcharges.
We consider our relationships with our suppliers and manufacturers to be good, however, since fiscal 2022 and continuing through fiscal 2025, many of our suppliers have increased lead times, experienced delays in shipments and raised prices or temporarily added surcharges. Additionally, beginning in fiscal 2025, some of our suppliers have begun passing along tariff charges.
The proportion of total sales by type is as follows (in thousands, except percentages): Years Ended June 30, 2024 2023 (In thousands) % of Revenue % of Revenue Medical devices $ 36,979 69 % $ 30,740 66 % Industrial and scientific 765 1 % 865 2 % NRE & Prototypes 786 1 % 2,695 6 % Dental and component 201 — 257 1 % Repairs 16,505 31 % 12,617 27 % Discounts & Other (1,392 ) (2 %) (1,087 ) (2 %) Total Sales $ 53,844 100 % $ 46,087 100 % Our medical device products utilize proprietary designs developed by us primarily under exclusive development and supply agreements and are currently machined in our Irvine, California facility, and assembled in our Tustin, California facility, as are our rotary air motors.
The proportion of total sales by type is as follows (in thousands, except percentages): Years Ended June 30, 2025 2024 (In thousands) % of Revenue % of Revenue Medical devices $ 47,747 72 % $ 36,979 69 % Industrial and scientific 861 1 % 765 1 % NRE & Prototypes 698 1 % 786 1 % Dental and component 194 — 201 — Repairs 18,586 28 % 16,505 31 % Discounts & Other (1,493 ) (2 %) (1,392 ) (2 %) Total Sales $ 66,593 100 % $ 53,844 100 % Our medical device products utilize proprietary designs developed by us primarily under exclusive development and supply agreements and are currently machined in our Irvine, California facility, and assembled in our Tustin, California facility, as are our rotary air motors.
We have reached this conclusion because the our Chief Executive Officer (“CEO”) allocates resources, assesses performance, and manages our business as one segment. Additionally, 99% of our business relates to designing, manufacturing, and repairing medical devices. We primarily design, sell, and repair handheld medical devices and accessories.
Segments We have only one operating segment as our business is currently operated. We have reached this conclusion because our Chief Executive Officer (“CEO”) allocates resources, assesses performance, and manages our business as one segment. Additionally, 99% of our business in fiscal 2025 relates to designing, manufacturing, and repairing medical devices.
We substantially completed the build-out of the property during fiscal 2022 and concluded various verification and validation activities during fiscal 2023. We moved our entire assembly and repairs operations to the new facility in the fourth quarter of fiscal 2023 and we are now fully operational in the new facility.
We moved our entire assembly and repairs operations to the new facility in the fourth quarter of fiscal 2023 and we are now fully operational in the new facility.
Substantially all of our backlog at June 30, 2024, as well as certain purchase orders received subsequent to June 30, 2024, are expected to be delivered during fiscal 2025.
Our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts. Substantially all of our backlog at June 30, 2025, as well as certain purchase orders received subsequent to June 30, 2025, are expected to be delivered during fiscal 2026.
At June 30, 2023, we had 146 employees, one of whom was part-time, and all were working at either our Irvine, California facility or our Tustin, California facility, except for one employee who worked remotely out of state. None of our employees are a party to any collective bargaining agreements with us.
Employees At June 30, 2025 and 2024, we had 181 and 148 employees, respectively, two of whom were part time, and all were working at one or both of our facilities in Irvine, California and Tustin, California. None of our employees are a party to any collective bargaining agreements with us.
We also manufacture and sell rotary air motors to a wide range of industries. Our patented adaptive torque-limiting software has been very well received in the CMF and thoracic markets and we have continued investment in this area with research and development focused on applying this technology to other surgical applications.
Our patented adaptive torque-limiting software has been very well received in the CMF and thoracic markets and we have continued investment in this area with research and development focused on applying this technology to other surgical applications. In November 2020, we purchased an approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”).
Our employee turnover for the fiscal years ended June 30, 2024 and 2023 was 21% and 16%, respectively.
Our employee turnover for the fiscal years ended June 30, 2025 and 2024 was 16% and 21%, respectively. We consider the turnover rate a valuable metric to measure the effectiveness of our programs and to assist in developing new programs.
In November 2020, we purchased an approximate 25,000 square foot industrial building in Tustin, California (the “Franklin Property”). This building is located approximately four miles from our Irvine, California headquarters and was acquired to provide us additional capacity for our expected continued future growth.
This building is located approximately four miles from our Irvine, California headquarters and was acquired to provide us additional capacity for our expected continued future growth. We substantially completed the build-out of the property during fiscal 2022 and concluded various verification and validation activities during fiscal 2023.
Food and Drug Administration (“FDA”) Establishment Registration and a State of California Device Manufacturing License (Department of Public Health Food and Drug Branch) with respect to our Irvine and Tustin, California facilities. In addition, both facilities produce products that are certified to ISO 13485:2016, Medical Device Directive 93/42/EEC – Annex II.
Our commitment to product design, manufacturing, and quality systems are supported by our compliance with several regulatory agency requirements and standards. We hold a U.S. Food and Drug Administration (“FDA”) Establishment Registration and a State of California Device Manufacturing License (Department of Public Health Food and Drug Branch) with respect to our Irvine and Tustin, California facilities.
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At June 30, 2024, we had a backlog of $19.8 million compared with a backlog of $41.6 million at June 30, 2023. Our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts.
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We also manufacture and sell rotary air motors to a wide range of industries; however, these motors comprise a de minimis portion of our business.
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We do not expect a reduction in fiscal 2025 revenue as compared to fiscal 2024 revenue and believe that the decline in backlog at June 30, 2024 compared to June 30, 2023 is related to timing of customer orders, although there can be no assurance that there will not be a decline in future revenue.
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During fiscal 2025, they launched their next generation handpiece. During the fourth quarter of fiscal 2025, the customer released the hold that it had placed on shipments of the next generation handpiece in the third quarter of fiscal 2025, and we resumed production and shipments of the next generation handpiece late in the fourth quarter of fiscal 2025.
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Additionally, $10.2 million of our backlog at June 30, 2023 related to orders expected to be delivered in fiscal 2025. We do not typically experience seasonal fluctuations in our shipments and revenues. Segments We have only one operating segment as our business is currently operated.
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In addition, both facilities produce products that are certified to ISO 13485:2016, Medical Device Directive 93/42/EEC – Annex II. At June 30, 2025, we had a backlog of $50.4 million compared with a backlog of $19.8 million at June 30, 2024.
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We consider the turnover rate a valuable metric to measure the effectiveness of our programs and to assist in developing new programs. 4 Employees At June 30, 2024, we had 148 employees, two of whom were part time, and all of our employees were working at one or both of our facilities in Irvine, California and Tustin, California.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe manufacture and distribution of medical devices are subject to state and federal requirements set forth by various government agencies including the FDA and EPA. The statutes, regulations, administrative orders, and advisories that affect our businesses are complex and subject to diverse, often conflicting, interpretations.
Biggest changeRegulatory & Compliance Risks Our operations are subject to a number of complex government regulations, the violation of which could have a material adverse effect on our business. The manufacture and distribution of medical devices are subject to state and federal requirements set forth by various government agencies including the FDA and EPA.
Also, there can be no assurance that our products and services will achieve broad market acceptance or will successfully compete with other products. The industry in which we operate is subject to significant technological change and any failure or delay in addressing such change could adversely affect our competitive position or could make our current products obsolete.
Also, there can be no assurance that our products and services will achieve or maintain broad market acceptance or will successfully compete with other products. The industry in which we operate is subject to significant technological change and any failure or delay in addressing such change could adversely affect our competitive position or could make our current products obsolete.
Management can give no assurance that material weaknesses in internal controls will not be discovered (see above, “ We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could materially and adversely affect our business, results of operations, financial condition, and stock price. ”).
Management can give no assurance that material weaknesses in internal controls will not be discovered (see above, “ We have previously identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could materially and adversely affect our business, results of operations, financial condition, and stock price. ”).
Future interpretations or changes by the regulators of existing accounting standards or changes in our business practices may result in future changes in our accounting policies and practices that could have a material adverse effect on our business, financial condition, cash flows, revenue, and results of operations. We have identified material weaknesses in our internal control over financial reporting.
Future interpretations or changes by the regulators of existing accounting standards or changes in our business practices may result in future changes in our accounting policies and practices that could have a material adverse effect on our business, financial condition, cash flows, revenue, and results of operations. We have previously identified material weaknesses in our internal control over financial reporting.
The disclosure of a material weakness, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price, especially if a restatement of financial statements for past periods is required. 12 General Risks The global economic environment may impact our business, financial condition, and results of operations.
The disclosure of a material weakness, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price, especially if a restatement of financial statements for past periods is required. General Risks The global economic environment may impact our business, financial condition, and results of operations.
In addition, our failure to maintain effective controls over financial reporting could subject us to sanctions or investigations by The Nasdaq Stock Market, the SEC, or other regulatory authorities. Our evaluation of internal controls and remediation of potential problems is costly and time-consuming and could expose weaknesses in financial reporting.
In addition, our failure to maintain effective controls over financial reporting could subject us to sanctions or investigations by The Nasdaq Stock Market, the SEC, or other regulatory authorities. 11 Our evaluation of internal controls and remediation of potential problems is costly and time-consuming and could expose weaknesses in financial reporting.
Further, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States and are often not enforced as vigorously as those in the United States. 7 We do not believe that our operations or products infringe on the intellectual property rights of others.
Further, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States and are often not enforced as vigorously as those in the United States. We do not believe that our operations or products infringe on the intellectual property rights of others.
The loss of, or a material reduction in purchases from, this customer or any of our significant customers would severely impact us, including having a material adverse effect on our business, financial condition, cash flows, revenue, and results of operations.
The loss of, or a material reduction in purchases from, this customer or any of our other significant customers would severely impact us, including having a material adverse effect on our business, financial condition, cash flows, revenue, and results of operations.
There can be no assurance that litigation would not result in liability in excess of our insurance coverage, that our insurance will cover such claims, or that appropriate insurance will continue to be available to us in the future at commercially reasonable rates. 11 The agreements governing our various debt obligations impose restrictions on our business and could adversely affect our ability to undertake certain corporate actions.
There can be no assurance that litigation would not result in liability in excess of our insurance coverage, that our insurance will cover such claims, or that appropriate insurance will continue to be available to us in the future at commercially reasonable rates. 10 The agreements governing our various debt obligations impose restrictions on our business and could adversely affect our ability to undertake certain corporate actions.
We cannot be certain that a future material weakness will not occur and that it will not be time consuming and costly to remediate and could further divert the attention of management.
We cannot be certain that a future material weakness will not occur and that it will not be time consuming and costly to remediate and further divert the attention of management.
The material weaknesses as of June 30, 2024, related to our inventory accounting and the valuation of one of our Level 2 investments. The material weakness as of June 30, 2023, related to the valuation of our Level 3 investment.
The material weaknesses as of June 30, 2024, related to our inventory accounting and the valuation of one of our Level 2 investments. The material weakness as of June 30, 2023, related to the valuation of our Level 3 investments.
While we intend to hold our investments, including our investment in Monogram, until such time as we believe it is appropriate to sell them in accordance with our overall investment policy, we may have unexpected cash requirements that could necessitate the sale of some or all of these investments for a loss.
While we intend to hold our investments until such time as we believe it is appropriate to sell them in accordance with our overall investment policy, we may have unexpected cash requirements that could necessitate the sale of some or all of these investments for a loss.
A substantial portion of our business is derived from our core business area that, if not serviced properly, may result in a material adverse impact upon our business, financial condition, and results of operations. In fiscal 2024, we derived 99% of our revenue from sales of our medical device products and related services.
A substantial portion of our business is derived from our core business area that, if not serviced properly, may result in a material adverse impact upon our business, financial condition, and results of operations. In fiscal 2025, we derived 99% of our revenue from sales of our medical device products and related services.
In addition, we may not be able to sell assets quickly enough or for sufficient amounts to enable us to meet our obligations. 8 Our cash and cash equivalents may be exposed to banking institution risk.
In addition, we may not be able to sell assets quickly enough or for sufficient amounts to enable us to meet our obligations. 7 Our cash and cash equivalents may be exposed to banking institution risk.
In addition, if our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.
In addition, if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.
If we were to lose a key customer, it would have a material adverse effect on our business, financial condition, and results of operations. In fiscal 2024, our top three customers accounted for 88% of our sales, with our current largest customer accounting for 71% of our sales.
If we were to lose a key customer, it would have a material adverse effect on our business, financial condition, and results of operations. In fiscal 2025, our top three customers accounted for 94% of our sales, with our current largest customer accounting for 75% of our sales.
As of August 20, 2024, two of our directors, Nicholas J. Swenson and Raymond E. Cabillot, directly or indirectly, controlled voting power over approximately 42% (31% and 11%, respectively) of the outstanding shares of our common stock.
As of August 20, 2025, two of our directors, Nicholas J. Swenson and Raymond E. Cabillot, directly or indirectly, controlled voting power over approximately 39% (31% and 8%, respectively) of the outstanding shares of our common stock.
This customer has made purchase commitments to us through a supply agreement to purchase surgical handpieces through calendar 2025, but there can be no assurance that this customer will extend purchase commitments to us beyond that date.
This customer has made purchase commitments to us through a supply agreement to purchase surgical handpieces through calendar 2025, and has placed purchase orders for deliveries in 2026, but there can be no assurance that this customer will extend purchase commitments to us beyond that date.
As a result, we believe that interim period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of future performance. Further, our historical operating results are not necessarily indicative of future performance for any particular period.
As a result, we believe that interim period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of future performance.
Even if the June 30, 2024 material weaknesses are quickly remedied, or if we or our auditors discover one or more additional material weaknesses in our internal controls, the market’s confidence in our financial statements could decline and our stock price may be harmed.
If we or our auditors discover one or more additional material weaknesses in our internal controls in the future, the market’s confidence in our financial statements could decline and our stock price may be harmed.
For example, in March 2023, Silicon Valley Bank (“SVB”) was unable to continue their operations and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver for SVB. However, if similar failures in financial institutions occur where we hold deposits, we could experience additional risk.
For example, in March 2023, Silicon Valley Bank (“SVB”) was unable to continue their operations and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver for SVB. If similar failures in financial institutions occur where we hold deposits, we could experience additional risk. Any such loss or limitation on our cash and cash equivalents would adversely affect our business.
Depending on the size and complexity of an acquisition, our successful integration of the acquisition could depend on several factors, including: • Difficulties in assimilating and integrating the operations, products, and workforce of an acquired business; • The retention of key employees; • Management of facilities and employees in separate geographic areas; • The integration or coordination of different research and development and product manufacturing facilities; • Successfully converting information and accounting systems; and • Diversion of resources and management attention from our other operations. 9 If market conditions or other factors require us to change our strategic direction, we may fail to realize the expected value from one or more of our acquisitions.
Depending on the size and complexity of an acquisition, our successful integration of the acquisition could depend on several factors, including: • Difficulties in assimilating and integrating the operations, products, and workforce of an acquired business; • The retention of key employees; • Management of facilities and employees in separate geographic areas; 8 • The integration or coordination of different research and development and product manufacturing facilities; • Successfully converting information and accounting systems; and • Diversion of resources and management attention from our other operations.
Any such loss or limitation on our cash and cash equivalents would adversely affect our business. In addition, in such circumstances we might not be able to receive timely payment from customers. We and they may maintain cash balances that are not insured or are in excess of the FDIC’s insurance limit.
In addition, if similar failures affect institutions relied on by our customers, we might not be able to receive timely payment from customers. We and they may maintain cash balances that are not insured or are in excess of the FDIC’s insurance limit.
Additional economic risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Additional economic risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, and results of operations. Tariffs could have a negative effect on our business, results of operations, financial condition, and liquidity.
In fiscal 2024, we implemented a remediation plan designed to address our June 30, 2023 material weakness, which was both time consuming and costly. We are actively engaged in implementing a remediation plan designed to address the June 30, 2024 material weaknesses.
In fiscal 2025 and 2024, we implemented remediation plans designed to address our June 30, 2024 and 2023, material weaknesses, which were both time consuming and costly.
While we make every effort to maintain full compliance with all applicable laws and regulations, we are unable to eliminate the ongoing risk that one or more of our activities may at some point be determined to be non-compliant. The penalties for non-compliance could range from an administrative warning to termination of a portion of our business.
The statutes, regulations, administrative orders, and advisories that affect our businesses are complex and subject to diverse, often conflicting, interpretations. While we make every effort to maintain full compliance with all applicable laws and regulations, we are unable to eliminate the ongoing risk that one or more of our activities may at some point be determined to be non-compliant.
Our failure to successfully integrate any future acquisitions or realize the expected value from past or future acquisitions could harm our business, financial condition, and results of operations.
If market conditions or other factors require us to change our strategic direction, we may fail to realize the expected value from one or more of our acquisitions. Our failure to successfully integrate any future acquisitions or realize the expected value from past or future acquisitions could harm our business, financial condition, and results of operations.
We invest a significant portion of our excess capital in marketable securities, including equity securities of publicly traded companies. At June 30, 2024, the fair value of our investments was approximately $5.8 million. Of that amount $3.2 million relates to an investment in Monogram Technologies, Inc., formerly Monogram Orthopaedics Inc.
We invest a significant portion of our excess capital in marketable securities, including equity securities of publicly traded companies. At June 30, 2025, the fair value of our investments was approximately $6.9 million.
In addition, it is possible that our operating results in future quarters may be below the expectations of public market analysts and investors.
Further, our historical operating results are not necessarily indicative of future performance for any particular period. 9 In addition, it is possible that our operating results in future quarters may be below the expectations of public market analysts and investors. In such an event, the price of our common stock could be materially adversely affected.
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(“Monogram”), described more fully in Note 4 to the consolidated financial statements contained elsewhere in this report.
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The penalties for non-compliance could range from an administrative warning to termination of a portion of our business.
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In such an event, the price of our common stock could be materially adversely affected. 10 Regulatory & Compliance Risks Our operations are subject to a number of complex government regulations, the violation of which could have a material adverse effect on our business.
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Starting in the first calendar quarter of 2025, the United States government announced its intention and/or actively took action to increase tariffs at various rates, including on certain products imported from many countries and individualized higher tariffs on certain other countries. Other countries have announced reciprocal tariffs or other similar actions.
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However, as with the June 30, 2023 material weakness, our remediation efforts could be both time consuming and costly.
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In some cases, these tariffs have since been followed by announcements of limited exemptions and temporary pauses. We are subject to risks relating to increased tariffs on U.S. imports, and other changes affecting imports, as we purchase raw materials and components from a complex supply chain which includes both direct and indirect purchases from foreign countries.
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The recent enactment of these tariffs, along with the unpredictability of the rates, poses a risk to our business operations and may materially increase our costs and reduce our margins. There continues to be significant uncertainty about the future relationship between the U.S. and other countries regarding such trade policies, treaties and tariffs.
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As such, we can make no assurances about the eventual impact on our operating results and business. However, some of our suppliers have begun passing along tariff charges.
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Our inability to minimize the impact of tariffs on our raw material and components costs, pass through price increases to customers, or find alternative sources for our raw materials and components, may have a material adverse impact on our business, financial condition, and results of operations. 12

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe currently engage third party information technology partners to design and manage our information security processes and system. Working with our outsourced security team, our Chief Financial Officer manages the risk assessment and mitigation process. We have budgeted to add information technology staff to our organization to increase our in-house expertise in this area.
Biggest changeWe currently engage third party information technology partners to design and manage our information security processes and system. Working with our outsourced security team, our Chief Financial Officer manages the risk assessment and mitigation process. We hired a business systems and information technology manager in fiscal 2025 to increase our in-house expertise in this area.
For more information about the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part 1 Item 1A Risk Factors contained elsewhere in this report. 13
For more information about the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part 1 Item 1A Risk Factors contained elsewhere in this report.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe purchased this 25,000 square foot facility in November 2020 from an unrelated third party, with the majority of the purchase price financed by a property loan (See Notes 4 and 7 of to the consolidated financial statements contained elsewhere in this report).
Biggest changeWe purchased this 25,000 square foot facility in November 2020 from an unrelated third party, with the majority of the purchase price financed by a property loan (See Notes 5 and 8 of the consolidated financial statements contained elsewhere in this report).
ITEM 2. PROPERTIES Our executive offices and manufacturing facility are located at 2361 McGaw Avenue, Irvine, California 92614. We lease the 28,000 square foot facility from an unrelated third party at a current base monthly lease rate of approximately $44,000 with 3% annual escalations through the expiration of the lease in September 2027.
ITEM 2. PROPERTIES Our executive offices and manufacturing facility are located at 2361 McGaw Avenue, Irvine, California 92614. We lease the 28,000 square foot facility from an unrelated third party at a current base monthly lease rate of approximately $45,000 with 3% annual escalations through the expiration of the lease in September 2027.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, our current credit facilities contain covenants that prohibit us from paying dividends. 15 Repurchases During the fourth quarter of fiscal 2024 and 2023, we repurchased 88,011 and 0 shares of our common stock, respectively, at an aggregate cost of $1.7 million and $0, respectively, through Board approved prearranged share repurchase plans intended to qualify for the safe harbor under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Biggest changeRepurchases During the fourth quarter of fiscal 2025 and 2024, we repurchased 0 and 88,011 shares of our common stock, respectively, at an aggregate cost of $0 and $1.7 million, respectively, through Board approved prearranged share repurchase plans intended to qualify for the safe harbor under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted under the symbol “PDEX” on the Nasdaq Capital Market (“NASDAQ”). The following table sets forth for the quarters indicated the high and low sales prices of our common stock as reported by NASDAQ.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted under the symbol “PDEX” on the Nasdaq Capital Market (“NASDAQ”). Holders As of September 2, 2025, there were 131 holders of record of our common stock.
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The quotations reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not necessarily represent actual transactions. On September 3, 2024, the last sale price of our common stock as reported by NASDAQ was $22.33 per share.
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In addition, our current credit facilities contain covenants that prohibit us from paying dividends.
Removed
High Low Year ended June 30, 2024: First Quarter $ 18.94 $ 15.52 Second Quarter 18.63 14.63 Third Quarter 22.50 16.50 Fourth Quarter 19.95 17.55 Year ended June 30, 2023: First Quarter $ 20.25 $ 14.94 Second Quarter 19.93 15.80 Third Quarter 17.71 15.29 Fourth Quarter 19.24 15.50 Holders As of September 3, 2024, there were 122 holders of record of our common stock.
Removed
Period Total Number of Shares Purchased (1) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) April 1, 2024 to April 30, 2024 32,334 $ 18.47 32,334 499,707 May 1, 2024 to May 31, 2024 38,162 $ 19.17 38,162 461,545 June 1, 2024 to June 30, 2024 17,515 $ 19.79 17,515 444,030 Total 88,011 $ 19.04 88,011 (1) In December 2019, we announced that our Board of Directors authorized the repurchase of up to one million shares of our outstanding common stock.
Removed
The extent to which we repurchase our shares, and the timing of such repurchases is at our discretion and will depend upon a variety of factors, including working capital requirements, market conditions, legal requirements, business condition, and other factors. Our repurchase program has no stated expiration and may be discontinued at any time

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

44 edited+8 added−20 removed17 unchanged
Biggest changeResults of Operations for the Fiscal Year Ended June 30, 2024 Compared to the Fiscal Year Ended June 30, 2023 The following tables set forth results from operations for the fiscal years ended June 30, 2024 and 2023: Years Ended June 30, 2024 2023 Dollars in thousands % of Net Sales % of Net Sales Net sales $ 53,844 100 % $ 46,087 100 % Cost of sales 39,293 73 % 33,338 72 % Gross profit 14,551 27 % 12,749 28 % Selling expenses 117 — 155 — General and administrative expenses 4,072 8 % 4,028 9 % Research and development costs 3,189 6 % 2,804 6 % Total operating expenses 7,378 14 % 6,987 15 % Operating income 7,173 13 % 5,762 13 % Other income (expense), net (4,539 ) (8 %) 3,666 7 % Income before income taxes 2,634 5 % 9,428 20 % Income tax expense 507 1 % 2,354 5 % Net income $ 2,127 4 % $ 7,074 15 % 19 Net Sales The majority of our revenue is derived from designing, developing, manufacturing and\ repairing powered surgical instruments for medical device original equipment manufacturers.
Biggest changeIn evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). 16 Results of Operations for the Fiscal Year Ended June 30, 2025 Compared to the Fiscal Year Ended June 30, 2024 The following tables set forth results from operations for the fiscal years ended June 30, 2025 and 2024: Years Ended June 30, 2025 2024 Dollars in thousands % of Net Sales % of Net Sales Net sales $ 66,593 100 % $ 53,844 100 % Cost of sales 47,083 71 % 39,293 73 % Gross profit 19,510 29 % 14,551 27 % Selling expenses 344 — 117 — General and administrative expenses 4,841 7 % 4,072 8 % Research and development costs 3,636 6 % 3,189 6 % Total operating expenses 8,821 13 % 7,378 14 % Operating income 10,689 16 % 7,173 13 % Other income (expense), net 1,369 2 % (4,539 ) (8 %) Income before income taxes 12,058 18 % 2,634 5 % Income tax expense 3,080 5 % 507 1 % Net income $ 8,978 13 % $ 2,127 4 % Net Sales The majority of our revenue is derived from designing, developing, manufacturing and repairing powered surgical instruments for medical device original equipment manufacturers.
As we execute our current strategy, however, we may require debt and/or equity capital to fund our working capital needs and requirements for capital equipment to support our manufacturing and inspection processes.
As we execute our current strategy, however, we may require additional debt and/or equity capital to fund our working capital needs and requirements for capital equipment to support our manufacturing and inspection processes.
The following discussion contains forward-looking statements. (See “Cautionary Note Regarding Forward-Looking Statements” included in Part I of this report.) Overview The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition for the fiscal years ended June 30, 2024 and 2023.
The following discussion contains forward-looking statements. (See “Cautionary Note Regarding Forward-Looking Statements” included in Part I of this report.) Overview The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition for the fiscal years ended June 30, 2025 and 2024.
Deferred tax assets and liabilities at June 30, 2024 and 2023 consisted primarily of basis differences related to unrealized gain/loss related to investments, stock-based compensation, fixed assets, accrued expenses and inventories. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Deferred tax assets and liabilities at June 30, 2025 and 2024 consisted primarily of basis differences related to unrealized gain/loss related to investments, stock-based compensation, fixed assets, accrued expenses and inventories. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The majority of our research and development expenditures incurred in fiscal 2024 and 2023 relates to our sustaining activities related to products we currently manufacture and sell. As we introduce new products into the market, we expect to see an increase in sustaining and other engineering expenses.
The majority of our research and development expenditures incurred in fiscal 2025 and 2024 relates to our sustaining activities related to products we currently manufacture and sell. As we introduce new products into the market, we expect to see an increase in sustaining and other engineering expenses.
Cash Flows from Financing Activities Net cash used in financing activities for fiscal 2024 totaled $4.3 million and related primarily to the $3.5 million repurchase of 184,901 shares of our common stock pursuant to our share repurchase program, as well as $816,000 of net principal payments related to our various loans from MBT more fully described in Note 7 to the consolidated financial statements contained elsewhere in this report.
Net cash used in financing activities for fiscal 2024 totaled $4.3 million and related primarily to the $3.5 million repurchase of 184,901 shares of our common stock pursuant to our share repurchase program, as well as $841,000 of net principal payments related to our various loans from MBT more fully described in Note 8 to the consolidated financial statements contained elsewhere in this report.
Interest Expense Interest expense incurred in fiscal 2024 and 2023 consists primarily of interest expense related to our debt with Minnesota Bank & Trust (“MBT”) described more fully in Note 7 to the consolidated financial statements contained elsewhere in this report.
Interest Expense Interest expense incurred in fiscal 2025 and 2024 consists primarily of interest expense related to our debt with Minnesota Bank & Trust (“MBT”) described more fully in Note 8 to the consolidated financial statements contained elsewhere in this report.
We specialize 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 CMF markets. Additionally, we provide engineering, quality, and regulatory consulting services to our customers. We also sell rotary air motors.
We specialize 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 CMF markets. Additionally, we provide engineering, quality, and regulatory consulting services to our customers.
Fiscal 2024 research and development costs increased $385,000 from fiscal 2023 due to increased spending on internal product development projects of $82,000 as well as reduced billable project expenditures which get reclassified to cost of sales.
Fiscal 2025 research and development costs increased $447,000 from fiscal 2024 due to increased spending on internal product development projects of $378,000 as well as reduced billable project expenditures which get reclassified to cost of sales.
On a cumulative basis, since 2013 we have repurchased a total of 1,381,349 shares under the share repurchase programs at an aggregate cost, inclusive of fees under the Plan, of $20.7 million. All repurchases under the 10b5-1 Plans were administered through an independent broker.
On a cumulative basis, since 2013 we have repurchased a total of 1,511,497 shares under the share repurchase programs at an aggregate cost, inclusive of fees under the Plan, of $24.2 million. All repurchases under the 10b5-1 Plans were administered through an independent broker.
Liquidity Requirements for the Next 12 Months As of June 30, 2024, our working capital was $23.7 million.
Liquidity Requirements for the Next 12 Months As of June 30, 2025, our working capital was $32.7 million.
During the fiscal year ended June 30, 2024, we repurchased 184,901 shares at an aggregate cost, inclusive of fees under the Plan, of $3.5 million. During the fiscal year ended June 30, 2023, we repurchased 86,422 shares at an aggregate cost, inclusive of fees under the Plan, of $1.5 million.
During the fiscal year ended June 30, 2025, we repurchased 130,148 shares at an aggregate cost, inclusive of fees under the Plan, of $3.5 million. During the fiscal year ended June 30, 2024, we repurchased 184,901 shares at an aggregate cost, inclusive of fees under the Plan, of $3.5 million.
Income Taxes The effective tax rate for the fiscal years ended June 30, 2024 and 2023 was 19% and 25%, respectively, slightly less than our combined expected federal and applicable state corporate income tax rates due primarily to federal and state research credits.
Income Taxes The effective tax rate for the fiscal years ended June 30, 2025 and 2024 was 26% and 19%, respectively, slightly less than our combined expected federal and applicable state corporate income tax rates due primarily to federal and state research credits. Our pre-tax income in fiscal 2025 was $12.0 million compared to $2.6 million in fiscal 2024.
Typical examples of sustaining engineering activities include, but are not limited to, end-of-life component replacement, especially in electronic components found in our printed circuit board assemblies, analysis of customer complaint data to improve process and design, replacement and enhancement of tooling and fixtures used in the machine shop, assembly operations, and inspection areas to improve efficiency and through-put.
Typical examples of sustaining engineering activities include, but are not limited to, end-of-life component replacement, especially in electronic components found in our printed circuit board assemblies, analysis of customer complaint data to improve process and design, and replacement and enhancement of tooling and fixtures used in the machine shop, assembly operations, and inspection areas to improve efficiency and through-put. 19 Other Income (Expense) Interest and Dividend Income Our interest and dividend income earned in fiscal 2025 and 2024 includes income earned from our interest-bearing money market accounts and portfolio of equity investments.
Certain of these investments are classified as long-term in nature, as we may not be able to liquidate the investments in a timely manner even if we wish to sell them. All of our investments were subject to a valuation analysis as of June 30, 2024 and 2023.
Certain of these investments are classified as long-term in nature, as we may not be able to liquidate the investments in a timely manner even if we wish to sell them.
In fiscal 2024, the revenue from NRE and prototype services represents approximately 1% of total revenue. Returns of our product for credit are not material; accordingly, we do not establish a reserve for product returns at the time of sale.
In fiscal 2025, the revenue from NRE and prototype services represents approximately 1% of total revenue. Returns of our product for credit are not material; accordingly, we do not establish a reserve for product returns at the time of sale. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value.
Additional information related to the nature of our investments is more fully described in Note 4 to the consolidated financial statements contained elsewhere in this report. 22 Gain on Sale of Investments During fiscal 2024, our investment sales were immaterial.
Unrealized gain (loss) on investments The unrealized gain (loss) on investments relates to our investment portfolio. Additional information related to the nature of our investments is more fully described in Note 4 to the consolidated financial statements contained elsewhere in this report.
Our net income was $7.1 million, which includes $3.9 million of unrealized gains on certain equity investments, as well as $857,000 of depreciation and amortization and $766,000 of non-cash stock compensation.
Our net income was $9.0 million, which includes $1.5 million of unrealized gains on certain equity investments, $595,000 of realized gains on the sale of certain equity investments as well as $1.2 million of depreciation and amortization and $555,000 of non-cash stock compensation.
The proportion of total sales by product/service type is as follows: Years Ended June 30, Increase (Decrease) From 2023 2024 2023 To 2024 Dollars in thousands % of Net Sales % of Net Sales Net sales: Medical devices $ 36,979 69 % $ 30,740 66 % 20 % Industrial and scientific 765 1 % 865 2 % (12 %) NRE & Prototype services 786 1 % 2,695 6 % (71 %) Dental and component 201 — 257 1 % (22 %) Repairs 16,505 31 % 12,617 27 % 31 % Discounts & Other (1,392 ) (2 %) (1,087 ) (2 %) 28 % $ 53,844 100 % $ 46,087 100 % 17 % Net sales in fiscal 2024 increased by $7.8 million, or 17%, as compared to fiscal 2023, due primarily to an increase in repair revenue of $3.9 million and an increase in medical device revenue of $6.2 million offset by a decrease in NRE and prototype services of $1.9 million.
The proportion of total sales by product/service type is as follows: Years Ended June 30, Increase (Decrease) From 2024 To 2025 2024 2025 Dollars in thousands % of Net Sales % of Net Sales Net sales: Medical devices $ 47,747 72 % $ 36,979 69 % 29 % Industrial and scientific 861 1 % 765 1 % 13 % NRE & Prototype services 698 1 % 786 1 % (11 %) Dental and component 194 — 201 — (4 %) Repairs 18,586 28 % 16,505 31 % 13 % Discounts & Other (1,493 ) (2 %) (1,392 ) (2 %) 7 % $ 66,593 100 % $ 53,844 100 % 24 % 17 Net sales in fiscal 2025 increased by $12.7 million, or 24%, as compared to fiscal 2024, due primarily to an increase in medical device revenue of $10.8 million and an increase in repair revenue of $2.1 million.
Liquidity and Capital Resources The following table is a summary of our Statements of Cash Flows and Cash and Working Capital as of and for the fiscal years ended June 30, 2024 and 2023: As of and for the Years Ended June 30, 2024 2023 (In thousands) Cash provided by (used in): Operating activities $ 6,199 $ 5,462 Investing activities $ (2,233 ) $ (885 ) Financing activities $ (4,271 ) $ (2,490 ) Cash, cash equivalents and working capital: Cash and cash equivalents $ 2,631 $ 2,936 Working capital $ 23,719 $ 21,303 Cash Flows from Operating Activities Cash provided by operating activities totaled $6.2 million during fiscal 2024.
Liquidity and Capital Resources The following table is a summary of our Statements of Cash Flows and Cash and Working Capital as of and for the fiscal years ended June 30, 2025 and 2024: As of and for the Years Ended June 30, 2025 2024 (In thousands) Cash provided by (used in): Operating activities $ (1,682 ) $ 6,224 Investing activities $ (238 ) $ (2,233 ) Financing activities $ (292 ) $ (4,296 ) Cash, cash equivalents and working capital: Cash and cash equivalents $ 419 $ 2,631 Working capital $ 32,666 $ 23,719 20 Cash Flows from Operating Activities Cash used in operating activities during fiscal 2025 totaled $1.7 million.
Our net income was $2.1 million, which includes $4.1 million of unrealized losses on certain equity investments, as well as non-cash stock compensation expense and depreciation and amortization expense in the amount of $605,000 and $1.2 million, respectively. Additionally, our accounts payable and accrued expenses increased by $2.4 million and our inventory decreased by $898,000.
Cash provided by operating activities totaled $6.2 million during fiscal 2024. Our fiscal 2024 net income was $2.1 million, which includes $4.1 million of unrealized losses on certain equity investments, as well as non-cash stock compensation expense and depreciation and amortization expense in the amount of $605,000 and $1.2 million, respectively.
In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials to satisfy our backlog, which can be subject to extensive variability. We believe that if we need additional capital to fund our operations, we can borrow against our revolving loan with MBT.
In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials to satisfy our backlog, which can be subject to extensive variability.
The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures.
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures.
Long-lived Assets We review the recoverability of long-lived assets, consisting of building, equipment, and improvements, when events or changes in circumstances occur that indicate carrying values may not be recoverable.
All of our investments were subject to a valuation analysis as of June 30, 2025 and 2024. 15 Long-lived Assets We review the recoverability of long-lived assets, consisting of building, equipment, and improvements, when events or changes in circumstances occur that indicate carrying values may not be recoverable.
Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Reductions to estimated net realizable value are recorded, and charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand from the measurement date.
Reductions to estimated net realizable value are recorded, and charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand from the measurement date. Investments Investments consist of marketable equity securities of publicly held companies.
Costs related to inventory and warranty charges increased $154,000 in fiscal 2024 compared to fiscal 2023, primarily due to increased inventory reserves . 21 Operating Expenses Years Ended June 30, Increase (Decrease) From 2023 2024 2023 To 2024 Dollars in thousands % of Net Sales % of Net Sales Operating expenses: Selling expenses $ 117 — $ 155 — (25 %) General and administrative expenses 4,072 8 % 4,028 9 % 1 % Research and development costs 3,189 6 % 2,804 6 % 14 % $ 7,378 14 % $ 6,987 15 % 6 % Selling expenses consist of salaries and other personnel-related expenses related to our business development department, as well as trade show attendance, advertising and marketing expenses, and travel and related costs incurred in generating and maintaining customer relationships.
Operating Expenses Years Ended June 30, Increase (Decrease) From 2024 To 2025 2024 2025 Dollars in thousands % of Net Sales % of Net Sales Operating expenses: Selling expenses $ 344 — $ 117 — 194 % General and administrative expenses 4,841 7 % 4,072 8 % 19 % Research and development costs 3,636 6 % 3,189 6 % 14 % $ 8,821 13 % $ 7,378 14 % 20 % Selling expenses consist of salaries and other personnel-related expenses related to our business development department, as well as trade show attendance, advertising and marketing expenses, and travel and related costs incurred in generating and maintaining customer relationships.
Details of our medical device sales by type is as follows: Years Ended June 30, Increase (Decrease) From 2023 2024 2023 To 2024 Dollars in thousands % of Total % of Total Medical device sales: Orthopedic 23,630 64 % 19,688 64 % 20 % CMF 10,334 28 % 8,497 28 % 22 % Thoracic 3,015 8 % 2,555 8 % 18 % Total 36,979 100 % 30,740 100 % 20 % Sales of our medical device products increased $6.2 million, or 20%, during fiscal 2024 as compared to fiscal 2023.
Details of our medical device sales by type is as follows: Years Ended June 30, Increase (Decrease) From 2024 To 2025 2024 2025 Dollars in thousands % of Net Sales % of Net Sales Medical device sales: Orthopedic $ 33,542 70 % $ 23,630 64 % 42 % CMF 9,943 21 % 10,334 28 % (4 %) Thoracic 4,262 9 % 3,015 8 % 41 % Total $ 47,747 100 % $ 36,979 100 % 29 % Sales of our medical device products increased $10.8 million, or 29%, during fiscal 2025 as compared to fiscal 2024.
Offsetting this net inflow of cash, inventory increased by $3.5 million and our accounts payable and accrued expenses and deferred revenue decreased by $1.1 million and $1.0 million, respectively. 23 Cash Flows from Investing Activities Net cash used in investing activities in fiscal 2024 was $2.2 million and related to the exercise of the Monogram Warrant for cash in the amount of $1,250,000 (See Note 4 to the consolidated financial statements contained elsewhere in this report) as well as equipment and improvements purchases in the amount of $983,000.
Net cash used in investing activities in fiscal 2024 was $2.2 million and related to the exercise of the warrant to purchase Monogram common stock for cash in the amount of $1,250,000 (See Note 4 to the consolidated financial statements contained elsewhere in this report) as well as equipment and improvements purchases in the amount of $983,000.
Sales of our NRE & prototype services decreased $1.9 million or 71% compared to fiscal 2023 and relates to a reduction in the number of billable engagements during fiscal 2024 compared to fiscal 2023. 20 Sales of our dental products and components in fiscal 2024 decreased $56,000, or 22%, as compared to fiscal 2023.
Sales of our NRE & prototype services decreased $88,000, or 11%, during fiscal 2025 as compared to fiscal 2024 and relates to a reduction in the number of billable engagements for various NRE projects undertaken for our customers. Sales of our dental products and components in fiscal 2025 decreased $7,000, or 4%, as compared to fiscal 2024.
Substantially all of our backlog at June 30, 2024, as well as certain purchase orders received subsequent to June 30, 2024, are expected to be delivered during fiscal 2025.
Our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts. Substantially all of our backlog at June 30, 2025, as well as certain purchase orders received subsequent to June 30, 2025, are expected to be delivered during fiscal 2026.
The Investment Committee approved each of the investments comprising the $5.8 million of investments in marketable public equity securities held at June 30, 2024, which amount includes unrealized holding gains in the amount of $3.1 million at June 30, 2024. 24 In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock, as the prior repurchase plan, authorized by our Board in 2013, authorizing the repurchase of 750,000 shares of common stock was nearing completion.
In December 2019, our Board approved a new share repurchase program authorizing us to repurchase up to one million shares of our common stock, as the prior repurchase plan, authorized by our Board in 2013, authorizing the repurchase of 750,000 shares of common stock was nearing completion.
During fiscal 2023, we liquidated some of the investments in our portfolio of equity investments receiving proceeds of $89,000 and recording a gain of $6,000.
Gain on Sale of Investments During fiscal 2025, we liquidated some of the investments in our portfolio of equity investments receiving proceeds of $1.9 million and recording a gain of $595,000. During fiscal 2024, our investment sales were immaterial.
Cost of Sales and Gross Margin Years Ended June 30, Increase (Decrease) From 2023 2024 2023 To 2024 Dollars in thousands Cost of sales: % of Net Sales % of Net Sales Product costs $ 38,121 71 % $ 29,600 64 % 29 % NRE and Prototype services costs 802 1 % 1,724 4 % (54 %) Under (over)-absorption of manufacturing overhead (74 ) — 1,724 4 % (104 %) Inventory and warranty charges 444 1 % 290 — 53 % Total cost of sales $ 39,293 73 % $ 33,338 72 % 18 % Cost of sales in fiscal 2024 increased $6.0 million, or 18%, from fiscal 2023, primarily due to the increase in product costs, consistent with the 17% increase in net sales.
We do not typically experience seasonal fluctuations in our shipments and revenues. 18 Cost of Sales and Gross Margin Years Ended June 30, Increase (Decrease) From 2024 To 2025 2024 2025 Dollars in thousands % of Net Sales % of Net Sales Costs of sales Product costs $ 43,833 66 % $ 38,121 71 % 15 % NRE and Prototype services costs 469 1 % 802 1 % (42 %) Under (over)-absorption of manufacturing overhead 2,517 4 % (74 ) — 3,501 % Inventory and warranty charges 264 — 444 1 % (41 %) Total cost of sales $ 47,083 71 % $ 39,293 73 % 20 % Cost of sales in fiscal 2025 increased $7.8 million, or 20%, from fiscal 2024, primarily due to the increase in product costs, consistent with the 24% increase in net sales.
Net cash used in financing activities for fiscal 2023 totaled $2.5 million and included $809,000 in net principal payments of various notes payable to MBT, and $1.5 million related to the repurchase of 86,422 shares of our common stock pursuant to our share repurchase program, as well as payment of $223,000 of employee payroll taxes related to the award of 37,500 shares of common stock to employees under previously granted performance awards.
Cash Flows from Financing Activities Net cash used in financing activities for fiscal 2025 totaled $292,000 and included $3.5 million in net borrowings on various notes payable to MBT, more fully described in Note 8 to the consolidated financial statements contained elsewhere in this report, offset by $3.5 million related to the repurchase of 130,148 shares of our common stock pursuant to our share repurchase program, as well as payment of $305,000 of employee payroll taxes related to the award of 40,000 shares of common stock to employees under previously granted performance awards.
Building, equipment, and improvements are recorded at historical cost and depreciation is provided using the straight-line method over the following periods: Building Thirty years Equipment Three to ten years Improvements Shorter of the remaining life of the underlying building, lease term, or the asset’s estimated useful life 18 Intangibles Other intangibles consist of legal fees incurred in connection with patent applications.
Building, equipment, and improvements are recorded at historical cost and depreciation is provided using the straight-line method over the following periods: Building Thirty years Equipment Three to ten years Improvements Shorter of the remaining life of the underlying building, lease term, or the asset’s estimated useful life Income Taxes We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities, along with net operating loss and tax credit carryovers.
Sales of our industrial and scientific products, which consist primarily of our compact pneumatic air motors, decreased $100,000, or 12%, for fiscal 2024 compared to fiscal 2023. The revenue decrease is expected as these are legacy products with no substantive marketing or sales efforts.
We do not have much visibility into our customers’ distribution networks, but these fluctuations are within expected levels. Sales of our industrial and scientific products, which consist primarily of our compact pneumatic air motors, increased $96,000, or 13%, for fiscal 2025 compared to fiscal 2024. These are legacy products with no substantive marketing or sales efforts.
We may also liquidate some or all of our investment portfolio or borrow against our revolving loan with MBT (See Notes 7 and 14 to consolidated financial statements contained elsewhere in this report), under which we had availability of $4.0 million as of June 30, 2024.
We may also liquidate some or all of our investment portfolio or borrow against our revolving loan with MBT (See Note 8 to consolidated financial statements contained elsewhere in this report), under which we had availability of $7.3 million as of June 30, 2025. 21 We are focused on preserving our cash balances by monitoring expenses, identifying cost savings, and investing only in those development programs and products that we believe will most likely contribute to our profitability.
During fiscal 2024, we experienced $74,000 of over-absorption of manufacturing costs compared to $1.7 million of under-absorption in fiscal 2023, due primarily to an increase in our standard labor and overhead rate recorded in the fourth quarter of fiscal 2024 .
During fiscal 2025, we experienced $2.5 million of under-absorption of manufacturing costs compared to $74,000 of over-absorption in fiscal 2024, due primarily to an increase in our indirect manufacturing costs in fiscal 2025. Costs related to inventory and warranty charges decreased $180,000 in fiscal 2025 compared to fiscal 2024, primarily due to decreased inventory reserves .
Offsetting these inflows of cash, our accounts receivable and deferred tax assets grew by $3.9 million and $1.6 million, respectively. Cash provided by operating activities during fiscal 2023 totaled $5.5 million.
Additionally, our accounts payable and accrued expenses at June 30, 2024 increased by $2.4 million and our inventory decreased by $898,000 as compared to June 30, 2023. Offsetting these inflows of cash, our accounts receivable and deferred tax assets at June 30, 2024 grew by $3.9 million and $1.6 million, respectively, compared to June 30, 2023.
Our products are found in hospitals, medical engineering labs, scientific research facilities, and high-tech manufacturing operations around the world. We are headquartered in Irvine, California. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
We also sell rotary air motors to a wide range of industries; however, these motors comprise a de minimis portion of our business. Our products are found in hospitals, medical engineering labs, scientific research facilities, and high-tech manufacturing operations around the world. We are headquartered in Irvine, California.
During fiscal 2024, thoracic sales increased by $460,000 to $3.0 million, up from $2.6 million in fiscal 2023, due to a product launch for a second distributor in the first quarter of fiscal 2024. Recurring revenue from distributors of CMF drivers increased $1.8 million in fiscal 2024 compared to fiscal 2023.
While this pause negatively impacted our fourth quarter results, we do not anticipate any additional delays in shipment of the next generation handpiece. During fiscal 2025, thoracic sales increased by $1.3 million to $4.3 million, up from $3.0 million in fiscal 2024. Recurring revenue from distributors of CMF drivers decreased $391,000 in fiscal 2025 compared to fiscal 2024.
Net cash used in investing activities in fiscal 2023 was $885,000. During the 2023 fiscal year, we made capital expenditures in the amount of $974,000 primarily for the Franklin Property and we received proceeds of $89,000 from the sales of marketable equity securities.
Cash Flows from Investing Activities Net cash used in investing activities in fiscal 2025 was $238,000. During the 2025 fiscal year, we made capital expenditures in the amount of $1.2 million and exercised warrants to purchase common stock and preferred stock of Monogram Technologies, Inc., formerly Monogram Orthopaedics Inc.
Our fiscal 2024 repair revenue increased approximately $3.9 million, or 31%, to $16.5 million, as compared to fiscal 2023, due to increased repairs of the orthopedic handpiece we sell to our largest customer. We expected repair revenue to increase based upon the customer’s requested refurbishments to upgrade previously purchased handpieces to the next generation, which we collectively term “enhanced repairs”.
Our fiscal 2025 repair revenue increased approximately $2.1 million, or 13%, to $18.6 million, as compared to fiscal 2024, due to increased repairs of the legacy orthopedic handpiece we sold to our largest customer. This increase relates to the continuation of the previously disclosed enhanced repair program.
The $44,000 increase in G&A expenses from fiscal 2023 to 2024 is due primarily to increased audit and consulting fees in the amount of $323,000 and increased recruiting fees of $100,000 offset by reduced patent related legal fees of $233,000 and non-cash compensation expense related to stock compensation in the amount of $161,000 due primarily to forfeitures caused by employee turnover.
The $769,000 increase in G&A expenses from fiscal 2024 to 2025 is due primarily to $441,000 in increased bonus accruals, $249,000 in increased personnel costs, and $270,000 in increased legal and information technology expenses, offset by $157,000 in decreased audit fees.
Removed
Estimated Losses on Product Development Services Cost and revenue estimates related to the product development service portions of development and supply contracts are reviewed and updated quarterly. An expected loss on development service contracts is recognized immediately in cost of sales. Losses recorded in fiscal 2024 and 2023 related to these services totaled $118,000 and $108,000, respectively.
Added
Our medical device revenue to our largest customer, included in orthopedic sales above, increased $10.1 million, compared to the prior fiscal year due primarily to the launch of that customer’s next generation handpiece.
Removed
Due to the complexity of many of the contracts we have undertaken, the cost estimation process requires significant judgment. It is based upon the knowledge and experience of our project managers, engineers, and finance professionals.
Added
As previously disclosed, late in the third quarter of fiscal 2025 the customer requested we hold off on next generation handpiece shipments in favor of continued shipments and enhanced repair of the legacy handpieces. During the fourth quarter of fiscal 2025, the customer requested that we resume production and shipments of the next generation handpiece.
Removed
Factors that are considered in estimating the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts include the nature and complexity of the work to be performed, availability and productivity of labor, the effect of change orders, the availability of materials, performance of subcontractors, and expected costs for specific regulatory approvals. 17 Warranties Most of our products are sold with a warranty that provides for repairs or replacement of any defective parts for a period, generally one to two years, after the sale.
Added
We anticipate that repair revenue may decline in future periods as this customer transitions to the next generation handpiece in lieu of enhancements of the legacy handpiece. At June 30, 2025, we had a backlog of $50.4 million compared with a backlog of $19.8 million at June 30, 2024.
Removed
At the time of the sale, we accrue an estimate of the cost of providing the warranty based on prior experience with such factors as return rates and repair costs, which factors are reviewed quarterly. Warranty expenses, including changes of estimates, are included in cost of sales in our statements of operations.
Added
Selling expenses increased $227,000, or 194%, compared to fiscal 2024, primarily due to recruiting fees and personnel costs related to our new Director of Business Development who we hired in December 2024 as well as increased advertising and related expenses.
Removed
Accounts Receivable Trade receivables are stated at their original invoice amounts, less an allowance for credit losses. Management determines the allowance for credit losses based on facts and circumstances related to specific accounts, and on historical experience related to the age of accounts. Trade receivables are written off when deemed uncollectible.
Added
The impact of our tax credits is more significant when pre-tax income is lower.
Removed
Recoveries of trade receivables previously reserved are offset against the allowance when received. Deferred Costs Deferred costs reflect costs incurred related to NRE services under the terms of the related development and supply contracts. These costs get recorded to cost of sales in the period that the revenue is recognized.
Added
Additionally, at June 30, 2025 compared to June 30, 2024, our accounts receivable increased by $2.5 million corresponding with our increased revenue, our income tax accounts reflect a $1.5 million outlay of cash mostly related to higher estimated income tax payments, and our inventory increased by $6.9 million in anticipation of increased sales to support our largest customer’s release of their next generation orthopedic handpiece.
Removed
Investments Investments consist of marketable equity securities of publicly held companies and, as of June 30, 2023, a warrant (the “Monogram Warrant”) to purchase common stock of a publicly held company (which we exercised in the second quarter of fiscal 2024).
Added
(“Monogram”) for cash in the amount of $899,000 (See Note 4 to the consolidated financial statements contained elsewhere in this report) offset by proceeds of $1.9 million from the sales of marketable equity securities.
Removed
The legal fees will be amortized over the estimated life of the product(s) that will be utilizing the technology or expensed immediately in the event the patent office denies the issuance of the patent. The expense associated with the amortization of the patent costs is recognized in research and development costs.
Added
The Investment Committee approved each of the investments comprising the $6.9 million of investments in marketable public equity securities held at June 30, 2025, which amount includes unrealized holding gains in the amount of $3.3 million at June 30, 2025.
Removed
Income Taxes We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities, along with net operating loss and tax credit carryovers.
Removed
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).
Removed
We do not have much visibility into our customers’ distribution networks, but we surmise the increase relates to a replenishment of customer inventory. Our orthopedic sales increased $3.9 million in fiscal 2024 compared to fiscal 2023, due to continued demand from our largest customer.
Removed
We are rapidly refurbishing these handpieces and we believe that our largest customer will request enhanced repairs for a similar volume or number of handpieces in fiscal 2025; however, there are no assurances as to the number of enhanced repairs that will ultimately be requested from this client in fiscal 2025 or thereafter.
Removed
At June 30, 2024, we had a backlog of $19.8 million compared with a backlog of $41.6 million at June 30, 2023. Our backlog represents firm purchase orders received and acknowledged from our customers and does not include all revenue expected to be generated from existing customer contracts.
Removed
We do not expect a reduction in fiscal 2025 revenue as compared to fiscal 2024 revenue and believe that the decline in backlog at June 30, 2024 compared to June 30, 2023 is related to timing of customer orders, although there can be no assurance that there will not be a decline in future revenue.
Removed
Additionally, $10.2 million of our backlog at June 30, 2023 related to orders expected to be delivered in fiscal 2025. We do not typically experience seasonal fluctuations in our shipments and revenues.
Removed
Selling expenses decreased $38,000, or 25%, compared to fiscal 2023, primarily due to decreased sales commissions in the amount of $74,000 offset by increased recruiting and advertising of $20,000 and $10,000, respectively.
Removed
Other Income (Expense) Interest and Dividend Income Our interest and dividend income earned in fiscal 2024 and 2023 includes income earned from our interest-bearing money market accounts and portfolio of equity investments. Unrealized gain (loss) on investments The unrealized gain (loss) on investments relates to our investment portfolio.
Removed
Additionally, our accounts receivable decreased by $5.4 million due to the variability in the timing of shipments and our prepaid expenses and deferred income taxes decreased by $494,000 and $264,000, respectively.
Removed
In addition to our cash and cash equivalent balances, we expect to derive a portion of our liquidity from our cash flows from operations.
Removed
We are focused on preserving our cash balances by monitoring expenses, identifying cost savings, and investing only in those development programs and products that we believe will most likely contribute to our profitability.

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