Company: PDEX
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001079973-25-001655
Chunk: 25

Company: PRO DEX INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Item 8
Chunk 25
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. Product costs increased by $3.1 million,
or 33%, during the three months ended September 30, 2025, compared to the corresponding period of the prior fiscal year, which is consistent
with higher revenue generated in the first quarter of fiscal 2026, but is higher than expected based partly on product mix and partly
on negative fluctuations in repair service revenue margin. In the first quarter of fiscal 2026 our repair revenue margin is significantly
lower than in prior year and this is caused by more expensive component replacement as well as an assembled workforce which normally repairs
a higher volume of devices. During the three months ended September 30, 2025, we experienced under-absorption of $619,000 in manufacturing
costs compared to $325,000 during the corresponding period of the prior fiscal year. We anticipate growth in our direct labor costs this
fiscal year such that our absorption will stabilize without the need to increase our labor and overhead rates. Costs related to inventory
and warranty charges increased $66,000, or 94%, for the three months ended September 30, 2025 compared to the corresponding period of
the prior fiscal year, due an increase in both inventory and warranty reserves.

Gross
profit increased by approximately $217,000, or 4%, for the three months ended September 30, 2025 compared to the corresponding period
of the prior fiscal year, and gross margin as a percentage of sales decreased by six percentage points between such periods, primarily
as a result of higher costs, including tariffs, which have not fully been passed on to our customers.

Operating Costs and Expenses

    Three
    Months Ended September 30,  
    Increase
    (Decrease) From 

    2025  
    2024  
    2024 to 2025 

    Dollars
    in thousands  

    % of Net Sales  
       
    % of Net Sales  

    Operating expenses: 

    Selling expenses	 
    $73  
     —  
    $48  
     —  
     52%
  
    General and administrative expenses	 
     1,417  
     8% 
     1,246  
     8% 
     14%
  
    Research and development costs	 
     768  
     4% 
     843  
     6% 
     (9%)

    $