Company: PDEX
Filing Date: 2025-01-30
Form Type: 10-Q
Source: 0001079973-25-000164
Chunk: 26

Company: PRO DEX INC
Filing Date: 2025-01-30
Form: 10-Q
Item: Item 2
Chunk 26
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, 2024, compared to the comparable prior year period is primarily due
to an increase in internal project expenditures of $136,000 and legal fees related to our intellectual property of $46,000. The increase
for the six months ended December 31, 2024, compared to the comparable period of the prior year is primarily related to an increase in
recruiting fees of $73,000, billable project expense decreases of $72,000 and legal fees related to our intellectual property of $37,000.
When our engineers are engaged in billable projects as opposed to internal projects, costs get shifted to cost of sales instead of research
and development. While we are currently in development on two internal projects, project expenses for the periods presented in this report
are not material.

The majority of our research
and development costs relate to 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. 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.

20 

Other Income (Expense), Net

Interest and Other Income

Interest income for the three
and six months ended December 31, 2024, and 2023 includes interest and dividends from our money market accounts and investment portfolio.

Unrealized Gain (Loss)
on Investments

The unrealized gain (loss) on
investments consists of our investment portfolio described more fully in Note 4 to the condensed consolidated financial statements contained
elsewhere in this report. All of these investments are recorded at estimated fair value as of December 31, 2024, and relate to common
stock of publicly traded companies whose stock price is subject to significant volatility.

Interest Expense

Interest expense consists primarily
of interest expense related to our Minnesota Bank and Trust (“MBT”) loans described more fully in Note 10 to the condensed
consolidated financial statements contained elsewhere in this report.

Income Tax Expense

The effective tax rate
for the three months ended December 31, 2024, and 2023 was 21% and 19%, respectively. The fiscal 2024 effective tax rate was lower due