PRO DEX INC

Previous wording

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the results of operations and financial condition of Pro-Dex, Inc. (“Company,” “Pro-Dex,” “we,” “our,” or “us”) for the three-month and nine-month periods ended March 31, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this report. This report contains certain forward-looking statements and information. The cautionary statements included herein should be read as being applicable to all related forward-looking statements wherever they may appear. Our actual future results could differ materially from those discussed herein.

Current wording

The following discussion and analysis provides information that management believes is relevant to an assessment and understandingofthe results of operations and financial condition of Pro-Dex, Inc. (“Company,” “Pro-Dex,” “we,” “our,” or “us”) for the three-month periods ended September 30, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewherein this report. This report contains certain forward-looking statements and information. The cautionary statements included herein should be read as being applicable to all related forward-looking statements wherever they may appear. Our actual future results could differ materially from those discussed herein.

Previous wording

Except for the historical information contained herein, the matters discussed in this report, including, but not limited to, discussions of our product development plans, business strategies, strategic opportunities, and market factors influencing our results, are forward-looking statements that involve certain risks and uncertainties. Actual results may differ from those anticipated by us as a result of various factors, both foreseen and unforeseen, including, but not limited to, our ability to continue to develop new products and increase sales in markets characterized by rapid technological evolution, our ability to optimize our operations at our Franklin facility, consolidation within our target marketplace and among our competitors, the impact of tariffs on the cost of our raw materials and purchased components, employee turnover, competition from larger, better capitalized competitors, and our ability to realize returns on opportunities. Many other economic, competitive, governmental, and technological factors could impact our ability to achieve our goals. You are urged to review the risks, uncertainties, and other cautionary language described in this report, as well as in our other public disclosures and reports filed with the Securities and Exchange Commission (“SEC”) from time to time, including, but not limited to, the risks, uncertainties, and other cautionary language discussed in our Annual Report on Form 10-K for our fiscal year ended June 30, 2024.

Current wording

Except for the historical information contained herein, the matters discussed in this report, including, but not limited to, discussions ofour product development plans, business strategies, strategic opportunities, contract negotiations, and market factors influencing our results, areforward-looking statements that involve certain risks and uncertainties. Actual results may differ from those anticipated by us as aresultof various factors, both foreseen and unforeseen, including, but not limited to, our abilityto continueto develop new products and increase salesin markets characterized by rapid technological evolution, consolidation within our target marketplace and among our competitors, employee turnover, competition from larger, better capitalized competitors, and our ability to realize returns on opportunities. Many other economic, competitive, governmental, and technological factors could impact our ability to achieve our goals. You are urged to review the risks, uncertainties, and other cautionary language described in this report, as well as inour other public disclosures and reports filed with the Securities and Exchange Commission (“SEC”) from time to time, including, but not limited to, the risks, uncertainties, and other cautionary language discussed in our Annual Report on Form 10-K for our fiscal year ended June 30, 2025.

Previous wording

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 maxocranial facial (“CMF”) markets. We have patented adaptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. We also manufacture and sell rotary air motors to a wide range of industries.

Current wording

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 maxocranial facial (“CMF”) markets. We have patented adaptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. Additionally, we provide engineering, quality, and regulatory consulting services to our customers. 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.

Previous wording

Our principal headquarters are located at 2361 McGaw Avenue, Irvine, California 92614 and our phone number is (949) 769-3200. Our Internet address is www.pro-dex.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, and other SEC filings are available free of charge through our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. In addition, our Code of Ethics and other corporate governance documents may be found on our website at the Internet address set forth above. Our filings with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov and company specific information at www.sec.gov/edgar/searchedgar/companysearch.html.

Current wording

Our principal headquartersare located at 2361 McGaw Avenue, Irvine, California 92614 and our phone number is (949) 769-3200. Our Internet address iswww.pro-dex.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments tothose reports, and other SEC filings are available free of charge through our website as soon as reasonably practicable after such reportsare electronically filed with, or furnished to, the SEC. Inaddition, our Code of Ethics and other corporate governance documents may be found on our website at the Internet address set forth above. Our filings with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 FStreet, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room bycalling the SEC at 1-800-SEC-0330. The SEC maintainsan Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC atwww.sec.gov and company specific information atwww.sec.gov/edgar/searchedgar/companysearch.html.

Previous wording

The condensed consolidated results of operations presented in this report are not audited and those results are not necessarily indicative of the results to be expected for the entirety of the fiscal year ending June 30, 2025. Our fiscal year ends on June 30 and our fiscal quarters end on September 30, December 31, and March 31. Unless otherwise stated, all dates refer to our fiscal year and those fiscal quarters.

Current wording

The condensed consolidated results of operations presented in this report are not audited and those results are not necessarily indicative of the results to be expected for the entirety of our fiscal year ending June 30, 2026, or any other interim period during such fiscal year. Our fiscal year ends on June 30 and our fiscal quarters end on September 30, December 31, and March 31. Unless otherwise stated, all dates refer to our fiscal year and those fiscal quarters.

Previous wording

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. 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. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Current wording

Our 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. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Previous wording

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements. Management believes that there have been no significant changes during the three and nine months ended March 31, 2025 to the items that we disclosed as our critical accounting policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Current wording

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements. Management believes that there have been no significant changes during the three months ended September 30, 2025, to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for our fiscal year ended June 30, 2025.

Previous wording

Our business today is almost entirely driven by sales of our medical devices. Many of our significant customers place purchase orders for specific products that were developed under various development and/or supply agreements. Our customers may request that we design and manufacture a custom surgical device or they may hire us as a contract manufacturer to manufacture a product of their own design. In either case, we have extensive experience with autoclavable, battery-powered, and electric, multi-function surgical drivers and shavers. We continue to focus a significant percentage of our time and resources on providing outstanding products and service to our valued principal customers. During the first quarter of fiscal 2021, our largest customer executed an amendment to our existing supply agreement such that we shall continue to supply their surgical handpieces to them through calendar 2025 and we are currently in discussions with them to renew the agreement.

Current wording

Our business today is almost entirely driven by sales of our medical devices. Many of our significant customers place purchase orders for specific products that were developed by us under various development and/or supply agreements. Our customers may request that we design and manufacture a custom surgical device or they may hire us as a contract manufacturer to manufacture a product of their own design. In either case, we have extensive experience with autoclavable, battery-powered and electric, multi-function surgical drivers, and shavers. We continue to focus a significant percentage of our time and resources on providing outstanding products and service to our valued principal customers. During the first quarter of fiscal 2021, our largest customer executed an amendment to our existing supply agreement for us to supply their surgical handpieces to them through calendar 2025. Currently, we are in negotiations with our largest customer to extend the contract through calendar 2028. While we are still negotiating some of the specific commercial terms, we have no reason to believe that the contract amendment will not be executed and further, the customer has placed purchase orders to us through the end of calendar 2026. Additionally, based on the planned volumes of the next generation handpiece that we supply to our largest customer, we are simultaneously pursuing negotiations with one of our existing suppliers to acquire their business to help meet the expected increased demand currently being contemplated by our largest customer. In the event we do not acquire this business we will be obligated to reimburse the supplier for legal fees incurred in relation to the acquisition due diligence. This amount, not to exceed $62,500, is not accrued for, but is expected to be paid at the end of the current exclusivity period of October 31,2025, if not extended by mutual agreement of the parties, and will be credited towards the purchase price upon an acquisition.

Previous wording

Simultaneously, we are working to build top-line sales through active proposals of new medical device products with new and existing customers. Our patented adaptive torque-limiting software has been very well received in the CMF and thoracic markets.

Current wording

We are also working to build top-line sales through active proposals of new medical device products with new and existing customers. Our patented adaptive torque-limiting software has been very well received in the CMF and thoracic markets. Additionally, our latest Pro-Dex branded product, the Helios driver for CMF applications, featuring our adaptive torque-limiting software, is expected to be released for production in the second quarter of this fiscal year. Although we anticipate this product will be released in the second quarter of this fiscal year, and we have had interest in this product, there is no guarantee that our existing customers or new customers will purchase this new driver.

Previous wording

Our current objectives are focused primarily on maintaining our relationships with our current medical device customers, investing in research and development activities to design unique medical devices as well as Pro-Dex branded drivers to leverage our torque-limiting software, expanding our manufacturing capacity through the continuation of operations at the Franklin Property, and promoting active product development proposals to new and existing customers for both orthopedic shavers and screw drivers for a multitude of surgical applications, while monitoring closely the progress of all these individual endeavors. While we expect revenue growth in the future, it may not be a consistent trajectory but rather periods of incremental growth that current expenditures are helping to create. However, there can be no assurance that we will be successful in any of these objectives.

Current wording

In summary, our current objectives are focused primarily on maintaining our relationships with our current medical device customers, investing in research and development activities to design unique medical devices as well as Pro-Dex branded drivers to leverage our torque-limiting software, expanding our manufacturing capacity through the commencement of operations at the Franklin Property, and promoting active product development proposals to new and existing customers for both orthopedic shavers and screw drivers for a multitude of surgical applications, while monitoring closely the progress of all these individual endeavors. While we expect revenue growth in the future, it may not be a consistent trajectory but rather periods of incremental growth that current expenditures are helping to create. However, there can be no assurance that we will be successful in any of these objectives.

Previous wording

The majority of our revenue isderived from designing, developing, and manufacturing surgical devices for the medical device industry. The proportion of total salesby type is as follows (in thousands, except percentages):

Current wording

The majority of our revenue isderived from designing, developing, manufacturing, and repairing surgical devices. We continue to sell our rotary air motors for industrial and scientific applications, but our focus remains in medical devices. The proportion of total sales by type is as follows (in thousands, except percentages):

Previous wording

Certain of our medical device products utilize proprietary designs developed by us under exclusive development and supply agreements. All of our medical device products utilize proprietary manufacturing methods and know-how, and are manufactured in our Irvine, California facility, and are assembled in our Tustin, California facility, along with our industrial products. Details of our medical device sales by type is as follows (in thousands, except percentages):

Current wording

Certain of our medical device products utilize proprietary designs developed byus under exclusive development and supply agreements. All of our medical device products utilize proprietary manufacturing methods and know-how, and are manufactured in our Irvine, California facility and assembled in our Tustin, California facility. Details of our medical device sales by type is as follows (in thousands, except percentages):

Previous wording

Sales of our medical device products increased $2.1 million, or 22%, and $7.5 million, or 28%, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year. Our medical device revenue to our largest customer, included in orthopedic sales above, increased $1.8 million and $7.5 million, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year due primarily to the launch of that customer’s next generation handpiece. As can be common with new product launches in the industry, the customer’s internal design of the next generation handpiece continues to evolve, and the customer has recently informed us that it is holding off on next generation handpiece shipments in favor of continued shipments and enhanced repair of the legacy handpieces as the customer continues to refine the next generation handpiece’s design. Although we cannot predict the timing of the customer’s further transition to the next generation handpiece at this time, we fully anticipate a resumption of shipments of the next generation handpiece once the design enhancements are finalized, coupled with larger orders of the legacy handpiece during the interim. Additionally, recurring revenue from distributors of thoracic drivers increased $182,000 and $272,000, respectively, for the three and nine months ended March 31, 2025, compared to the corresponding periods of the prior fiscal year. Our CMF sales revenue increased $107,000 and decreased $246,000, for the three and nine months ended March 31, 2025, respectively, compared to the corresponding periods of the prior fiscal year. While we do not have much visibility into our customers’ distribution networks, this level of change in thoracic and CMF sales (whether an increase or decrease) is not uncommon and fluctuations occur based upon required inventory levels.

Current wording

Our medical device revenue increased $4.5 million, or 45%, for the three months ended September 30, 2025, compared to the corresponding period of the prior fiscal year. Our orthopedic sales increased $4.4 million, or 65%, for the three months ended September 30, 2025, compared to the corresponding period of the prior fiscal year, due primarily to the launch of our largest customer’s next generation handpiece. 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, at the customer’s request, we resumed production and shipments of the next generation handpiece. Because certain of the sub-assemblies included in the handpiece take several weeks of internal machining, the process to resume shipments at the requested levels has taken several months. By September 2025, our shipments reached the recurring level that the customer has requested. Recurring revenue from distributors of CMF drivers increased $627,000, or 29%, for the three months ended September 30, 2025, compared to the corresponding period of the prior fiscal year. Our thoracic sales decreased by $515,000, or 51% for the three months ended September 30, 2025, compared to thecorresponding period of the prior fiscal year. While we do not have much visibility into our customers’ distribution networks, this level of change (whether an increase or decrease) is not uncommon and fluctuations occur based upon required inventory levels.

Previous wording

At March 31, 2025, we had a backlog of approximately $49.5 million, of which $12.8 million is scheduled to be delivered in the fourth quarter of fiscal 2025 and the balance is scheduled to be delivered next fiscal year. 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. We may experience variability in our new order bookings due to various reasons, including, but not limited to, the timing of major new product launches and customer planned inventory builds. However, we do not typically experience seasonal fluctuations in our shipments and revenues.

Current wording

At September 30, 2025, we hada backlogof approximately $46.8 million, of which $43.6 million is scheduled for delivery during the remainder of fiscal 2026. 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. We may experience variability in our new order bookings due to various reasons, including, but not limited to, the timing of major new product launches and customer planned inventory builds. However, we donot typically experience seasonal fluctuations inour shipments and revenues.

Previous wording

Cost of sales for the three months ended March 31, 2025, increased $1.3 million, or 13%, compared to the corresponding period of the prior fiscal year. The increase in total costs of sales is consistent with the 22% increase in revenue for the same period. Under-absorption of manufacturing costs increased by $254,000 for the three months ended March 31, 2025, compared to the corresponding period of the prior fiscal year. During the third quarter of fiscal 2025 we increased our assembly department labor and overhead rates to reduce the under absorption of our indirect costs. Costs relating to inventory and warranty charges decreased $111,000 for the three months ended March 31, 2025, compared to the corresponding period of the prior fiscal year, due to a slight decrease in both inventory reserves and warranty accruals.

Current wording

Cost of sales for the three months ended September 30, 2025, increased by $3.4 million, or 35%, compared to the corresponding period of the prior fiscal year. The increase in cost of sales is consistent with the 24% increase in revenue for the same period. 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.

Previous wording

Gross profit increased by approximately $1.8 million, or 45%, for the three months ended March 31, 2025, compared to the corresponding period of the prior fiscal year, primarily as a result of the increase in medical device and repair revenue for the same periods as described above. Gross margin as a percentage of sales increased by approximately 5 percentage points compared to the corresponding period of the prior fiscal year due primarily to favorable product mix.

Current wording

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.

Previous wording

Selling expenses consist of salaries and other personnel-related expenses for our business development department, as well as advertising and marketing expenses, and travel and related costs incurred in generating and maintaining our customer relationships. Selling expenses for the three and nine months ended March 31, 2025, increased $96,000, or 565%, and $132,000, or 167%, respectively, compared to the corresponding periods of fiscal 2024. The increase relates primarily to recruiting fees and personnel costs related to our new Director of Business Development who we hired in December, 2024.

Current wording

Selling expenses consist of salaries and other personnel-related expenses in support of business development, as well as trade show attendance, advertising and marketing expenses, and travel and related costs incurred in generating and maintaining our customer relationships. Selling expenses for the three months ended September 30, 2025, increased $25,000, or 52%, compared to the corresponding period of the prior fiscal year. The increase relates to personnel costs related to our former Director of Business Development hired in the second quarter of the prior fiscal year whose employment with us ended in the second quarter of fiscal 2026.

Previous wording

General and administrative expenses (“G&A”) consist of salaries and other personnel-related expenses of our accounting, finance, facilities, business systems, and human resource personnel, as well as costs for outsourced information technology services, professional fees, directors’ fees, and other costs and expenses attributable to being a public company. G&A increased $86,000 and $524,000, respectively, during the three and nine months ended March 31, 2025, when compared to the corresponding periods of the prior fiscal year. The increases relate primarily to increased bonus accruals, personnel costs, and legal expenses, offset by decreased audit fees and stock compensation expense.

Current wording

General and administrative expenses (“G&A”) consist of salaries and other personnel-related expenses of our accounting, finance, facilities, information technology and human resources personnel, as well as costs for outsourced information technology services, professional fees, directors’ fees, and other costs and expenses attributable to being a public company. G&A expenses increased by $171,000, or 14%, for the three months ended September 30, 2025, when compared to the corresponding period of the prior fiscal year. The increase in total G&A expenses relates to higher payroll and personnel expenses due to new hires in human resources, information technology and facilities.

Previous wording

Interest income for the three and nine months ended March 31, 2025 and 2024, includes interest and dividends from our money market accounts and investment portfolio.

Current wording

The interest and dividend income recorded during the three months ended September 30, 2025 and 2024, consists primarily of interest and dividends from our investments and money market accounts.

Previous wording

Interest expense consists primarily of interest expense related to the notes payable described more fully in Note 11 to the condensed consolidated financial statements contained elsewhere in this report.

Current wording

The interest expense recorded during the three months ended September 30, 2025 and 2024, relates to our UMB Bank (“UMB”) loans described more fully in Note 11 to the condensed consolidated financial statements contained elsewhere in this report.

Previous wording

The effective tax rate for each of the three months ended March 31, 2025 and 2024 was 28%. These tax rates are consistent with our combined expected federal and applicable state corporate income tax rates. The effective tax rate for the nine months ended March 31, 2025 and 2024 was 26% and 23%, respectively, and is less than our combined expected federal and applicable state corporate income tax rates due to a tax benefit recognized as a result of common stock awarded to employees under previously granted performance awards in the first quarter of fiscal 2025 as described more fully in Note 9 to the condensed consolidated financial statements contained elsewhere in this report, and to the release of a valuation allowance in the prior fiscal year related to previously recognized unrealized losses on investments.

Current wording

The effective tax rate for the three months ended September 30, 2025 and 2024, was 25% and 26%, respectively, and is slightly less than our combined expected federal and applicable state corporate income tax rates due primarily to federal and state research credits.

Previous wording

Cash and cash equivalents at March 31, 2025, increased $1.9 million to $4.5 million as compared to $2.6 million at June 30, 2024. The following table includes a summary of our condensed statements of cash flows contained elsewhere in this report.

Current wording

Cash and cash equivalents at September 30, 2025, increased $95,000 to $514,000 as compared to $419,000 million at June 30, 2025. The following table includes a summary of our condensed consolidated statements of cash flows contained elsewhere in this report.

Previous wording

As of March 31, 2025, our working capital was $31.6 million. We currently believe that our existing cash and cash equivalent balances together with our accounts receivable balances will provide us sufficient funds to satisfy our cash requirements as our business is currently conducted for at least the next 12 months. In addition to our cash and cash equivalent balances, we expect to derive a portion of our liquidity from our cash flows from operations. We may also liquidate some or all of our investment portfolio or borrow further against our $11.0 million Amended Revolving Loan with MBT (see Note 11 to condensed consolidated financial statements contained elsewhere in this report), which we amended in April 2025 in order to provide us additional borrowing capacity.

Current wording

As of September 30, 2025, our working capital was $37.1 million. We currently believe that our existing cash and cash equivalent balances together with our accounts receivable balances will provide us sufficient funds to satisfy our cash requirements as our business is currently conducted for at least the next 12 months. In addition, we expect to derive a portion of our liquidity from our cash flows from operations and, as described in Note 4 to the condensed consolidated financial statements contained elsewhere in this report, we received $8.9 million in cash in October 2025 upon the consummation of Zimmer Biomet’s acquisition of Monogram.

Previous wording

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. 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. 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.

Current wording

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. As we execute on 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. 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 UMB which has an available balance of $8.8 million as of September 30, 2025.