SCHEDULE 14A INFORMATION
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PRO-DEX, INC.
(Name of Registrant as Specified In Its Charter)
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than the Registrant)
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To Our Shareholders,
As always, we thank you for your interest in Pro-Dex.
I have been fortunate enough to meet or speak with many of you now and we appreciate your support. Fiscal 2022 was another very good year,
setting another record for annual sales and producing our first $12M sales quarter. We have a healthy development pipeline, have doubled
our capacity and we look forward to growing the business further.
I am very thankful for the team we have here at Pro-Dex.
Their work ethic, resilience, and tenacity through a busy and challenging year are second to none. Because of this group’s commitment,
Pro-Dex can continue to push itself in terms of growth. By growth I mean not only revenue, but also our systems, technology, workplace,
commitment to the community, as well as, striving to be industry leaders in as many areas as possible. We will challenge ourselves, and
remind ourselves to-
Be proud of our company but not yet satisfied with our performance.
Be excellent but constantly seek to improve.
Focus on short term results and work towards a long-term plan.
Become even more sophisticated as a medical device company but also speak
plainly to each other.
Dream, but also be pragmatic.
Ask “why?” when gathering data and “why not?” when
making plans.
Be out in front of developments and stand behind our values.
Take individual responsibility but recognize our successes collectively.
We are excited about the future and what is to come. Many of you have enjoyed
the ride with Pro-Dex for a while now, and we aim to keep things going.
I look forward to hearing from you and answering any questions you have.
You can reach the Board or myself at (949) 769-3200 or investor.relations@pro-dex.com.
Sincerely,
/s/ Rick Van Kirk
Rick Van Kirk
President and Chief Executive Officer
2361 McGaw Avenue
Irvine, California 92614
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER
17, 2022
To the Shareholders of Pro-Dex, Inc.:
The Annual Meeting of Shareholders
(“Annual Meeting”) of Pro-Dex, Inc. (“Pro-Dex”, the “Company”, “we”, “us”
or “our”) will be held at our headquarters, 2361 McGaw Avenue, Irvine, California on November 17, 2022, at 9:30 a.m. Pacific
Standard Time, for the following purposes:
| 1. | To elect seven directors to serve until our 2023 annual meeting of shareholders
or until their successors are duly elected and qualified. The nominees for election to our Board of Directors are named in the attached
Proxy Statement, which is part of this Notice. |
| 2. | To ratify the appointment of Moss Adams, LLP as our independent registered public
accounting firm for the fiscal year ending June 30, 2023. |
| 3. | To hold an advisory vote to approve the compensation of our Named Executive Officers. |
| 4. | To transact such other business as may properly come before the Annual Meeting or
any adjournments or postponements thereof. |
Only shareholders of record
at the close of business on September 20, 2022, are entitled to notice of and to vote at the Annual Meeting and at any adjournments or
postponements of the Annual Meeting.
All shareholders are cordially
invited to attend the Annual Meeting in person. Whether or not you plan to attend the Annual Meeting, your vote is important. In an effort
to facilitate the voting process, we are pleased to avail ourselves of Securities and Exchange Commission, or SEC, rules that allow proxy
materials to be furnished to shareholders on the Internet. You can vote by proxy over the Internet by following the instructions provided
in the Notice of Internet Availability of Proxy Materials that was mailed to you on or about October 5, 2022, or, if you request
printed copies of the proxy materials by mail, you can also vote by mail or by telephone. Your promptness in voting by proxy will assist
in its expeditious and orderly processing and will assure that you are represented at the Annual Meeting. If you vote by proxy, you may
nevertheless attend the Annual Meeting and vote your shares in person.
TO ENSURE YOUR REPRESENTATION
AT THE ANNUAL MEETING, YOU ARE URGED TO READ THIS PROXY STATEMENT AND SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE BY
FOLLOWING THE INSTRUCTIONS IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, WHICH WAS MAILED TO YOU ON OR ABOUT OCTOBER 5, 2022,
OR, IF YOU REQUEST PRINTED COPIES OF THE PROXY MATERIALS BY MAIL, YOU CAN ALSO VOTE BY MAIL OR BY TELEPHONE.
OUR BOARD OF DIRECTORS
RECOMMENDS: A VOTE “FOR” EACH OF THE SEVEN DIRECTOR NOMINEES NAMED IN THE PROXY STATEMENT; A VOTE “FOR” EACH OF
PROPOSALS 2 AND 3.
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By Order of the Board of Directors, |
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PRO-DEX, INC. |
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/s/ Alisha K. Charlton |
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Corporate Secretary |
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2361 McGaw Avenue
Irvine, California 92614
_____
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 17, 2022
_____
PROXY STATEMENT
_____
SOLICITATION OF PROXIES
The Board of Directors
(“Board”) of Pro-Dex, Inc. (“Pro-Dex”, the “Company”, “we”, “us” or “our”)
has made these materials available to you on the Internet, or, upon your request, has delivered printed versions of these materials to
you by mail, in connection with the Board’s solicitation of proxies for use at our Annual Meeting of Shareholders (“Annual
Meeting”) to be held at Pro-Dex’s headquarters, 2361 McGaw Avenue, Irvine, California, on Thursday, November 17, 2022, at
9:30 a.m. Pacific Standard Time, and at any and all adjournments or postponements thereof. Shareholders are requested to promptly vote
by proxy over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials, which was
mailed to you on or about October 5, 2022. If you request printed copies of the proxy materials by mail, you can also vote by mail
or by telephone. All shares represented by each properly submitted and unrevoked proxy received on the Internet or by telephone prior
to 11:59 p.m. Eastern Standard Time on Wednesday, November 16, 2022, or by proxy card prior to or at the Annual Meeting, will be voted
in the manner specified therein, and if no direction is indicated (except in the case of broker non-votes), “for” each of
the seven director nominees named under Proposal No. 1 and “for” each of Proposal Nos. 2 and 3.
Any shareholder has
the power to revoke his or her proxy at any time before it is voted. A proxy may be revoked by delivering a written notice of revocation
to our Secretary prior to or at the Annual Meeting, by voting again on the Internet or by telephone (only your latest Internet or telephone
proxy submitted prior to 11:59 p.m. Eastern Standard Time on Wednesday, November 16, 2022, will be counted), by submitting prior to or
at the Annual Meeting a later dated proxy card executed by the person executing the prior proxy, or by attendance at the Annual Meeting
and voting in person by the person submitting the prior proxy.
Any shareholder who
owns shares in street name and would like to vote in person at the Annual Meeting should inform his or her broker of such plans and request
a legal proxy from the broker. Such shareholders will need to bring the legal proxy with them to the Annual Meeting and valid picture
identification, such as a driver’s license or passport, in addition to documentation indicating share ownership. Such shareholders
who do not receive the legal proxy in time should bring with them to the Annual Meeting their most recent brokerage account statement
showing that they owned our stock as of the record date. Upon submission of proper identification and ownership documentation, we will
be able to admit the shareholder to the Annual Meeting; however, such shareholder will not be able to vote his or her shares at the Annual
Meeting without a legal proxy. Shareholders are advised that if they own shares in street name and request a legal proxy, any previously
executed proxy will be revoked, and such shareholder’s vote will not be counted unless he or she appears at the Annual Meeting and
votes in person.
Our Board does not presently
intend to bring any business before the Annual Meeting other than the proposals referred to in this proxy statement and specified in the
accompanying Notice of Annual Meeting. So far as is known to our Board, no other matters are to be brought before the Annual Meeting.
However, if any other matters are presented properly for action at the Annual Meeting or at any adjournments or postponements thereof,
it is intended that the proxies will be voted with respect thereto by the proxy holders in accordance with the instructions and at the
discretion of our Board or a properly authorized committee thereof.
This proxy statement,
the accompanying shareholder letter, the accompanying proxy card, and our Annual Report on Form 10-K are being made available to our shareholders
on the Internet at www.proxyvote.com through the notice and access process on or about October 5, 2022. We will bear the cost of soliciting
proxies pursuant to this proxy statement. The solicitation will be made through the Internet and expenses will include reimbursement paid
to brokerage firms and others for their expenses in forwarding solicitation material regarding the Annual Meeting to beneficial owners
of our common stock, no par value per share (“Common Stock”). Further solicitation of proxies may be made by mail upon request,
and by telephone or oral communications with some shareholders. Our regular employees, who will not receive additional compensation for
the solicitation, or a compensated proxy solicitation firm, will make such further solicitations.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record
of the 3,616,548 shares of our Common Stock outstanding at the close of business on September 20, 2022, are entitled to notice of and
to vote at the Annual Meeting or any adjournment or postponement thereof. Under Colorado law, our Articles of Incorporation, and our Bylaws,
the holders of a majority of the total shares entitled to vote at the Annual Meeting, as of the record date, represented in person or
by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. If a quorum is not present, the Annual Meeting
may be postponed or adjourned to allow additional time for obtaining additional proxies or votes. At any subsequent reconvening of the
Annual Meeting, all proxies will be voted in the same manner as the proxies would have been voted at the original convening of the Annual
Meeting, except for any proxies that have been effectively revoked or withdrawn prior to the reconvening of the Annual Meeting. Shares
of our Common Stock represented in person or by proxy (regardless of whether the proxy has authority to vote on all matters), as well
as abstentions and broker non-votes, will be counted for purposes of determining whether a quorum is present at the Annual Meeting.
An “abstention”
is the voluntary act of not voting by a shareholder who is represented in person or by proxy at a meeting and entitled to vote. “Broker
non-votes” are shares of voting stock held in record name by brokers and nominees concerning which: (i) the
broker or nominee does not have discretionary voting power under applicable rules or the instruments under which it serves in such capacity
and instructions have not been received from the beneficial owners or persons entitled to vote; or (ii) the record holder has indicated
on the proxy or has executed a proxy and otherwise notified us that it does not have authority to vote such shares on that matter.
For Proposal No. 1 (the
election of directors), assuming that a quorum is present, the seven nominees for director receiving the highest number of affirmative
votes will be elected; votes withheld and broker non-votes have no practical effect.
For Proposal No. 2 (to
ratify the appointment of Moss Adams, LLP as our independent registered public accounting firm for the fiscal year ending June 30,
2023) and Proposal No. 3 (advisory vote to approve the compensation of our Named Executive Officers), assuming that a quorum is present,
the matter will be approved if the votes cast in favor of the matter exceed the votes cast opposing the matter. In such matters, abstentions
and broker non-votes will not be included in the vote totals and, therefore, will have no effect on the vote.
Each shareholder will be
entitled to one vote, in person or by proxy, for each share of Common Stock held of record on the record date. Votes cast at the Annual
Meeting will be tabulated by the person or persons appointed by us to act as inspectors of election for the Annual Meeting.
Recommendations of our Board
Our Board recommends that
our shareholders vote “for” each of the seven director nominees named under Proposal No. 1; and “for” each of
Proposal Nos. 2 and 3.
THE PROPOSALS TO BE
VOTED UPON AT THE ANNUAL MEETING ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT. YOU ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY
THIS PROXY STATEMENT IN ITS ENTIRETY.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth
information concerning the beneficial ownership of our Common Stock as of September 20, 2022 by:
| · | each member of the Board; |
| · | each of our Named Executive Officers listed in the “Summary Compensation Table” included in the “Executive Compensation”
section of this proxy statement; |
| · | all of our directors and Named Executive Officers as a group; and |
| · | each person or entity known to us that beneficially owns more than five percent of our Common Stock. |
Beneficial ownership is determined
in accordance with the rules of the SEC. Unless otherwise indicated below, the address of each beneficial owner is c/o Pro-Dex, Inc.,
2361 McGaw Avenue, Irvine, California, 92614. Unless otherwise indicated below, we believe that each of the persons listed in the table
(subject to applicable community property laws) has the sole power to vote and to dispose of the shares listed opposite the shareholder’s
name.
The percentages of Common Stock
beneficially owned are based on 3,616,548 shares of Common Stock outstanding at September 20, 2022.
| |
Number of | | |
| |
| |
Shares of
Common | | |
Percent of
Common | |
| |
Stock
Beneficially | | |
Stock
Beneficially | |
Name and Address of Beneficial Owner | |
Owned | | |
Owned(1) | |
Nicholas J. Swenson, AO Partners I, L.P.; and AO Partners, LLC; Groveland DST LLC(2), (4) 5000 West 36th Street, Suite 130 | |
| | | |
| | |
Minneapolis, MN 55416 | |
| 1,026,343 | | |
| 28.3 | % |
Raymond E. Cabillot; Farnam Street Partners, L.P.; | |
| | | |
| | |
Farnam Street Capital, Inc.; and Peter O. Haeg(3), (4) 3033 Excelsior Blvd., Suite 560 | |
| | | |
| | |
Minneapolis, MN 55416 | |
| 364,846 | | |
| 10.1 | % |
Richard L. Van Kirk(4) | |
| 106,196 | | |
| 2.9 | % |
Katrina M.K. Philp(4), (5) | |
| 18,696 | | |
| * | |
Angelita R. Domingo(4) | |
| 14,889 | | |
| * | |
Alisha K. Charlton(4) | |
| 13,727 | | |
| * | |
William J. Farrell III(4) | |
| 9,100 | | |
| * | |
David C. Hovda(4) | |
| 6,300 | | |
| * | |
All Directors, Director Nominees and Named Executive Officers as a group (7 persons)(4) | |
| 1,560,097 | | |
| 42.6 | % |
____________
| * | Indicates less than 1 percent of outstanding shares of Common Stock. |
| (1) | Applicable percentage ownership is based on 3,616,548 shares of Common Stock outstanding as of September 20,
2022. Any securities not outstanding but subject to options exercisable as of September 20, 2022, or exercisable within 60 days after
such date, are deemed to be outstanding for the purpose of computing the percentage of outstanding Common Stock beneficially owned by
the person holding such options, but are not deemed to be outstanding for the purpose of computing the percentage of Common Stock beneficially
owned by any other person. |
| (2) | AO Partners, LLC is the General Partner of AO Partners I, L.P. Mr. Swenson is the Managing Member
of AO Partners, LLC, and, in such capacity, has the power to direct the affairs of AO Partners, LLC, including the voting and disposition
of shares of our Common Stock held by AO Partners I, L.P. As such, AO Partners I, L.P., AO Partners, LLC and Mr. Swenson may be deemed
to share voting and dispositive power with regard to the 926,730 shares of our Common Stock held by AO Partners I, L.P. Mr. Swenson is
the sole Manager of Groveland DST LLC (“Groveland”) and, in such capacity, has the power to direct the affairs of Groveland
including the voting and disposition of shares of our Common Stock held by Groveland. As such Groveland and Mr. Swenson may be deemed
to share voting and dispositive power with regard to the 34,316 shares of our Common Stock held by Groveland. The remaining 61,297 shares
are owned by Nicholas J. Swenson directly. AO Partners I, L.P.’s holdings of 926,730 shares of our Common Stock, plus additional
securities and collateral owned by AO Partners I, L.P., are pledged to secure a bank loan to AO Partners I, L.P. |
| (3) | Farnam Street Partners, L.P., Farnam Street Capital, Inc., Raymond E. Cabillot,
and Peter O. Haeg claim shared voting power and shared dispositive power of 360,846 shares of our Common Stock held by Farnam Street Partners,
L.P. |
| (4) | Includes shares of Common Stock issuable upon the exercise of options that were
exercisable as of September 20, 2022, or exercisable within 60 days after September 20, 2022, as follows: Mr. Swenson 4,000 shares;
Mr. Cabillot 4,000 shares; Mr. Van Kirk, 18,000 shares; Ms. Philp, 4,000 shares; Ms. Domingo, 4,250 shares; Ms. Charlton, 4,250 shares;
Mr. Farrell, 4,000 shares; Mr. Hovda, 5,500 shares; and all directors, director nominees and Named Executive Officers as a group, 48,000
shares. |
| (5) | Of these shares, 14,696 are owned by Ms. Philp’s spouse and both she and her
spouse claim shared voting power and shared dispositive power with regard to such shares. Of these shares, 7,496 are pledged as collateral
for a loan. |
Proposal No. 1
ELECTION OF DIRECTORS
Current Board Structure and Director Terms
Our Board is currently
composed of seven members. All directors or their successor nominees stand for election each year at our annual meeting of shareholders.
Certain information with
respect to each of the nominees who will be presented at the Annual Meeting by our Board for election as a director is set forth below.
Although it is anticipated that each nominee will be available to serve as a director, should a nominee become unavailable to serve, proxies
will be voted for such other person as may be designated by our Board.
Unless
the authority to vote for directors has been withheld in the proxy, the person named in the accompanying proxy intends to vote at the
Annual Meeting for the election of each of the nominees presented below. In the election of directors, assuming a quorum is present, the
seven nominees for director receiving the highest number of votes cast at the Annual Meeting will be elected as our directors.
DIRECTORS
Set forth below is certain
information with respect to our directors.
Name |
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Age |
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Position With Company |
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Audit |
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Compensation |
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Nominating and Governance |
Raymond E. Cabillot |
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59 |
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Director |
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X |
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X |
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C |
Angelita R. Domingo |
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50 |
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Director |
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William J. Farrell III |
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49 |
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Director |
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X |
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X |
David C. Hovda |
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60 |
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Director |
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C |
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Katrina M.K. Philp |
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37 |
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Director |
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Nicholas J. Swenson |
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54 |
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Director, Chairman of the Board |
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X |
|
C |
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X |
Richard L. Van Kirk |
|
62 |
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Director, Chief Executive Officer, and President |
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__________
(X) |
Member of the Committee |
(C) |
Chairman of the Committee |
Messrs. Cabillot, Farrell,
Hovda and Swenson and Ms. Philp currently each qualify as an “independent director” as such term is defined in Rule 5605(a)(2)
of the Nasdaq Listing Rules and we expect that each will continue to qualify as an “independent director” if elected.
Our Board is of the opinion
that the election to our Board of the director nominees identified herein, each of whom has consented to serve if elected, would be in
our shareholders’ best interests.
OUR BOARD RECOMMENDS THAT YOU VOTE “FOR”
THE ELECTION OF THE
NOMINEES NAMED BELOW.
Raymond
E. Cabillot (59), current director and nominee, has, from January 1998 until the present, served as Chief Executive Officer and a director
of Farnam Street Capital, Inc., the general partner of Farnam Street Partners L.P., a private investment partnership located in Minneapolis,
MN. He was a Senior Research Analyst at Piper Jaffray, Inc. from 1990 to 1998. Prior to that, he worked for Prudential
Capital Corporation from 1987 to 1990 as an Associate Investment Manager and as an Investment Manager. Mr. Cabillot has served
on the board of directors of Oxbridge Re Holdings Limited, a specialty and casualty reinsurer, since 2013 and Air T, Inc. (Nasdaq: AIRT),
a provider of air cargo services and ground equipment sales and support services, since November 2016. He was a director of O.I. Corporation,
a former Nasdaq listed company, from 2006 to 2010. He served as chairman of the board of O.I. Corporation from 2007 through 2010 and during
2010 served as co-chairman of the board of O.I. Corporation. Mr. Cabillot has a B.A. degree with a double major in Economics and Chemistry
from Saint Olaf College and an M.B.A. from the University of Minnesota. Mr. Cabillot has been a director of ours since January 2013.
Mr. Cabillot brings the following experience, qualifications,
attributes, and skills to our Board:
| · | More than 25 years of experience as a financial analyst and investment manager; |
| · | Years of public company board experience, including three years as chairman and one year as co-chairman;
and |
| · | Independent of our management. |
Angelita
R. Domingo (50), current director and nominee, has served as our Director of Quality Systems and Regulatory Affairs since 2014. Ms. Domingo
joined the Company in February 2005. Her responsibilities include ensuring that the Company’s Quality Management System and products
consistently meet industry and regulatory standards and customer requirements. This encompasses compliance requirements of local, state,
federal and OUS authorities. Ms. Domingo holds a B.S. in Biology/Human Physiology and Chemistry minor from California State University,
Long Beach. Ms. Domingo has been a director of ours since December 2021.
Ms. Domingo brings the
following experience, qualifications, attributes, and skills to our Board:
| · | Multidisciplinary business experience within scientific industries; |
| · | Senior-level management experience in Regulatory Affairs and Quality Management
Systems; |
| · | Operational and customer project management including customer strategic
alliance; and |
| · | Over 15 years of management in the areas of product design, production and
quality controls, risk assessment and risk mitigation, quality management and regulatory compliance. |
William
J. Farrell III (49), current director and nominee, has from October 2017 until the present, served as SVP of Business Services at Gundersen
Health System, an integrated healthcare organization serving counties in Wisconsin, Iowa, and Minnesota. Mr. Farrell is co-founder of
FreshRealm, LLC, a developer of new technologies to streamline fresh food distribution, and served as its Chief Operating Officer from
January 2013 through September 2017. In addition, from January 2011 until the present, he has served as Chief Executive Officer of Viszy
Inc., a company developing software and services for the consumer market. Mr. Farrell is also Chief Executive Officer of B ō biam,
LLC, a company that turns youth art into apparel and other products, which it merchandises through its retail store and wholesale channels.
From April 1998 to January 2011, Mr. Farrell held various senior management roles at Medtronic, Inc. (NYSE: MDT), a multi-national medical
technology company. His engineering career began with eight years in production support, process development and operations. He then worked
10 years in product development for Medtronic, during which time he led management teams in program, product and process development.
At the end of his tenure with Medtronic, he was Senior Director of Product Development and led corporate-wide initiatives to improve design,
reliability and manufacturability practices. Mr. Farrell has a B.S. degree in Mechanical Engineering from the University of Minnesota
(1996). Mr. Farrell has been a director of ours since January 2013.
Mr. Farrell brings the following
experience, qualifications, attributes, and skills to our Board:
| · | Current senior-level management, operating and board experience; |
| · | More than 12 years of experience in engineering and management roles in
the medical device industry, our primary target market; and |
| · | Independent of our management. |
David
C. Hovda (60), current director and nominee, is CEO of Innovein, Inc., a vascular company focused on treating deep venous reflux disease,
a position he has held since January 2022. The company has developed the ElevateTM Endovenous Valve replacement. Previously,
he served as President of MedTechAdvisors LLC, a medical device consulting company, and a member of the Board of Directors of Curvafix,
Inc., a privately held medical device company that has developed a pelvic fracture fixation device, since April 2021. From 2013 to 2020,
he served as Chief Executive Officer and a member of the Board of Directors of Simplify Medical, Inc., a privately held medical device
company that has developed a cervical artificial disc replacement optimized for MRI imaging. Simplify Medical was acquired by Nuvasive
in February 2021, the largest spine-focused company in the world. Prior to his tenure with Simplify Medical, he was President, Chief Executive
Officer and a member of the Board of Directors of SpinalMotion, Inc., a privately held medical device company that designed, developed
and marketed artificial discs for use in the spine, from 2004 to 2013. Prior to joining SpinalMotion, he held leadership positions with
Arthrocare, Inc. (Nasdaq: ARTC), a developer and manufacturer of surgical devices, instruments, and implants focused on enhancing surgical
techniques and patient outcomes, serving as the Vice President/General Manager of its Spine Division from 1999 to 2004, and as the Managing
Director of its ENT Division from 1997 to 1999. From 1992 to 1997, Mr. Hovda served in financial analysis and product management positions
with Medtronic, Inc. (NYSE: MDT), a multi-national medical technology company, which culminated in his service as the European Business
Manager of its Upper Airway Venture from 1995 to 1997. He holds more than 40 patents related to radio frequency ablation technology, specific
clinical applications, and artificial disc replacement designs and implantation methods. Mr. Hovda served for five years with the United
States Navy, achieving the rank of Lieutenant. He received a Bachelor of Science degree in Civil Engineering from Northwestern University
and an M.B.A. from the Harvard Graduate School of Business Administration. Mr. Hovda has been a director of ours since January 2013.
Mr. Hovda brings the following
experience, qualifications, attributes, and skills to our Board:
| · | Current senior-level management, operating and board experience based on more than 20 years of participation
in the medical device industry, our primary target market, twelve years of which are specifically with medical devices to treat disorders
of the spine, a sector within the medical device industry that we believe represents potential for future revenue growth; |
| · | Core management and leadership skills gained through experience overseeing and managing operations at
the manager and chief executive officer levels, including experience in medical device intellectual property, product development, clinical
testing and marketing; |
| · | Experience in financial analysis, including operational restructuring, acquisition opportunities, raising
capital, budgeting and forecasting, and market entry feasibility; and |
| · | Independent of our management. |
Katrina
Philp (37), current director and nominee, has, from January 2014 until the present, served in various capacities at Air T, Inc. (Nasdaq:
AIRT), and most recently as its Chief of Staff from October 2017 to present. Ms. Philp is co-founder of Fox Lake Capital, LLC, where she
worked full time from November 2012 until January 2014, a consulting firm offering financial analysis and investment expertise. Ms. Philp
was a Senior Investment Analyst at Whitebox Advisors, LLC, a multi-strategy hedge fund, from 2007 to 2012. Ms. Philp has a B.A. degree
in Business Administration, Finance and Management from Northwestern College. Ms. Philp has been a director of ours since December 2019.
Ms. Philp brings the
following experience, qualifications, attributes, and skills to our Board:
| · | Current senior-level management and operating experience; |
| · | Experience as a financial analyst, and |
| · | Independent of our management. |
Nicholas
J. Swenson (54), current Chairman of the Board, director and nominee, is an executive, investor and research analyst. Since January 2012,
he has served as the managing partner of AO Partners, LLC, the general partner of AO Partners I,
L.P., a private investment partnership located in Minneapolis, MN. He has served as President and Chief Executive Officer of Air
T, Inc. (Nasdaq: AIRT), since October 2013, as chairman of AIRT’s board since August 2013, and as a member of AIRT’s board
of directors since August 2012. Mr. Swenson serves as a director of several private companies as well. Mr. Swenson was active as a Portfolio
Manager of Groveland Capital, LLC, a hedge fund founded by Mr. Swenson, from 2009 to 2011. Mr. Swenson was a Portfolio Manager and Partner
at Whitebox Advisors, LLC, a multi-strategy hedge fund, from 2001 to 2009. From 1999 to 2001, he was a research analyst at Varde Partners,
LLC, a partnership that specializes in distressed debt investing. He was an Associate in Corporate Finance at Piper Jaffray, Inc. from
1996 to 1999. Mr. Swenson has a B.A. degree in History from Middlebury College and an M.B.A. from the University of Chicago. Mr. Swenson
has been a director of ours since January 2013.
Mr. Swenson brings the following
experience, qualifications, attributes and skills to our Board:
| · | 25 years of experience as a financial analyst and investment manager; |
| · | Public company C-suite roles, including operating and board experience;
and |
| · | Independent of our management. |
Richard
L. Van Kirk (62), current director and nominee, has served as our Chief Executive Officer and President since January 2015, in addition
to his position as Chief Operating Officer, which he has held since April 2013. Mr. Van Kirk joined the Company as Director of Manufacturing
in 2006, and was our Vice President of Operations from 2007 to 2013. Prior to joining the Company, Mr. Van Kirk served as Manufacturing
Manager and Manager of Product Development for the ChargeSource division of Comarco, Inc., a provider of power and charging functionality
for popular electronic devices and wireless accessories, and as General Manager at Dynacast, a leader in precision die casting. Mr. Van
Kirk holds a B.A. in Business Administration from California State University, Fullerton and an M.B.A. from Claremont Graduate School.
Mr. Van Kirk has been a director of ours since January 2015.
Mr. Van Kirk brings
the following experience, qualifications, attributes, and skills to our Board:
| · | Current senior-level management experience as our Chief Executive Officer;
and |
| · | Over 15 years of senior-level management in the areas of manufacturing,
operations, supply chain, distribution and logistics including over 10 years of experience in our operations management. |
BUSINESS EXPERIENCE OF KEY MANAGEMENT
Set forth below is information
concerning our other non-director key management personnel.
Alisha
Charlton (53) was appointed our Chief Financial Officer in January 2015. She joined the Company in January 2014 as Senior Director of
Finance. Prior to joining the Company, Ms. Charlton held various accounting positions at Comarco, Inc., a provider of wireless test solutions
for the cellular industry, emergency call boxes and power adapters for rechargeable consumer electronic devices, from October 2000 to
January 2014, culminating in her appointment as Chief Accounting Officer in April 2011. Prior to her 13-year tenure at Comarco, Ms. Charlton
held various accounting and finance positions with CKE Restaurants, Inc., an owner, operator, and franchisor of quick-service restaurants,
from February 1995 to October 2000. Ms. Charlton began her career in July 1991 with KPMG Peat Marwick (now KPMG LLP) and was formerly
a certified public accountant. Ms. Charlton holds a B.A. in Business Economics from the University of California, Santa Barbara with high
honors and a CPA license (inactive) from the California State Board of Accountancy.
BOARD MEETINGS AND RELATED MATTERS
During the fiscal year
ended June 30, 2022, our Board held four meetings and acted twice by unanimous written consent. The independent directors did not
hold any executive sessions during the fiscal year ended June 30, 2022. The independent directors consist of all non-employee, “independent
directors” (as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules). No director attended less than 75% of the aggregate of all
meetings of our Board and all meetings of committees of our Board upon which he or she served.
Audit Committee
Our Board has an Audit
Committee that consists of three Board members, Messrs. Hovda (Chairman), Cabillot and Swenson. The Audit Committee is comprised entirely
of non-employee, “independent directors” (as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules) that satisfy the additional
requirements of Rule 5605(c)(2) of the Nasdaq Listing Rules and operates under a written charter adopted by our Board. The duties of the
Audit Committee include meeting with our independent registered public accounting firm to review the scope of the annual audit and to
review our quarterly and annual financial statements before the statements are released to our shareholders. The Audit Committee also
evaluates the independent public accounting firm’s performance and appoints or replaces the independent public accounting firm subject,
if applicable, to the consideration of shareholder ratification for the ensuing fiscal year. A copy of the Audit Committee’s current
charter may be found at http://www.pro-dex.com/wp-content/uploads/2019/06/Audit-Committee-Charter-Approved-2019.pdf. The Audit
Committee and Board have confirmed that the Audit Committee does and will continue to include at least three independent directors and
has confirmed that Messrs. Hovda, Cabillot and Swenson each meet applicable SEC regulations for designation as an “Audit Committee
Financial Expert” based upon their respective experience noted elsewhere in this proxy statement. The Audit Committee held six meetings
during the fiscal year ended June 30, 2022 and acted once by unanimous written consent.
Nominating/Corporate
Governance Committee
Our
Board has a Nominating/Corporate Governance Committee (“Nominating Committee”) that consists of three Board members, Messrs.
Cabillot (Chairman), Farrell and Swenson. The Nominating Committee is comprised entirely of non-employee, “independent directors”
(as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules) and operates under a written charter adopted by our Board, a copy of which
may be found at http://www.pro-dex.com/media/23113/prodex_gov_committee_charter.pdf. In such
capacity, the Nominating Committee identifies and reviews the qualifications of candidate nominees to our Board. During the fiscal year
ended June 30, 2022, the Nominating Committee acted once by unanimous written consent.
The Nominating Committee
works with our Board to determine the appropriate characteristics, skills and experiences for our Board as a whole and its individual
members with the objective of having a Board with diverse experience. The Nominating Committee believes that it is desirable that directors
possess an understanding of our business environment and have the requisite ethical standards, knowledge, skills, expertise and diversity
of experience such that our Board’s ability to manage and direct our affairs and business is enhanced. Additional considerations
may include an individual’s capacity to enhance the ability of committees of our Board to fulfill their duties and/or satisfy any
independence requirements imposed by law, regulation or listing requirements. The Nominating Committee may receive candidate nomination
suggestions from current Board members, our executive officers, our shareholders or other sources, which may be either unsolicited or
in response to requests from our Board for such candidates. The Nominating Committee may also, from time to time, engage firms that specialize
in identifying director candidates. Once a person has been identified by the Nominating Committee as a potential candidate, the Nominating
Committee may collect and review publicly available information regarding the person to assess whether the person should be considered
further. If the Nominating Committee determines that the candidate warrants further consideration, a member of the Nominating Committee
may contact the person. Generally, if the person expresses a willingness to be considered and to serve on our Board, the Nominating Committee
may request information from the candidate, review the person’s accomplishments and qualifications and may conduct one or more interviews
with the candidate. The Nominating Committee may consider all such information in light of information regarding any other candidates
that it might be evaluating for nomination to our Board. The Nominating Committee or other Board members may also contact one or more
references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand
knowledge of the candidate’s qualifications and accomplishments. With the candidate’s consent, the Nominating Committee may
also engage an outside firm to conduct background checks on the candidate as part of the evaluation process. The Nominating Committee’s
evaluation process does not vary based on the source of the recommendation.
Shareholder nominations
for director should be sent to our Secretary and should include the candidate’s name and qualifications and a statement from the
candidate that he or she consents to being named in the proxy statement and will serve as a director if elected. In order for any such
candidate to be considered for nomination and, if nominated, to be included in our proxy statement, such recommendation must satisfy the
requirements discussed later in this proxy statement under the heading “Proposals of Shareholders.”
In compiling the list of
our Board nominees appearing in this proxy statement, nominee referrals as well as nominee recommendations were received from existing
directors and members of management—both solicited and unsolicited. No paid consultants were engaged by us, our Board or any of
our Board’s committees for the purposes of identifying qualified, interested Board candidates.
Compensation Committee
Our Board has a Compensation
Committee that consists of three Board members, Messrs. Swenson (Chairman), Cabillot and Farrell. The Compensation Committee is comprised
entirely of non-employee, “independent directors” (as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules) and operates
under a written charter adopted by our Board. A copy of the Compensation Committee’s current charter may be found at http://www.pro-dex.com/media/23092/compensation_committee_charter.pdf.
The Compensation Committee establishes compensation policies applicable to our executive officers and directors. During the fiscal year
ended June 30, 2022, the Compensation Committee held no meetings and acted three times by unanimous written consent.
From time to time, various
members of management and other employees, as well as outside advisors or consultants, may be invited by the Compensation Committee to
make presentations, provide financial or other background information or advice, or otherwise participate in Compensation Committee meetings
or executive sessions of the Board. Among other things, the charter of the Compensation Committee grants the Compensation Committee authority
to obtain, at our expense, advice and assistance from internal and external legal, accounting or other advisors
and consultants and other external resources that the Compensation Committee considers necessary or appropriate in the performance of
its duties. In particular, the Compensation Committee has the sole authority to retain compensation consultants to assist in its evaluation
of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention
terms.
Investment Committee
The Investment Committee was formed
in April 2013 and is currently comprised of one management director, Mr. Van Kirk, and two non-management directors, Mr. Cabillot and
Mr. Swenson, who chairs the committee. The purpose of the Investment Committee is to administer and invest surplus capital from time to
time, in such amounts as approved by our Board, in authorized investments. During the fiscal year ended June 30, 2022, the Investment
Committee acted once by unanimous written consent.
FAMILY RELATIONSHIPS
There are no family relationships
among our executive officers and directors.
BOARD LEADERSHIP STRUCTURE
Our Board has separated
the roles of Chairman of the Board and Chief Executive Officer. Mr. Swenson, an independent director, serves as Chairman of our Board
and presides at all Board and shareholder meetings. Mr. Van Kirk, our Chief Executive Officer, serves as our primary spokesperson
and supervises our business, subject to the direction of our Board. The independent Board members annually assess Mr. Van Kirk’s
performance as Chief Executive Officer. We believe that an independent Chairman of the Board is better able to provide oversight and guidance
to management, especially in relation to the Board’s essential role in risk management oversight, and to ensure the efficient use
and accountability of resources. Furthermore, this separation provides for focused engagement between these two roles in their respective
areas of responsibility, while still providing for collaborative participation. The separation of the Chairman of the Board and Chief
Executive Officer roles, together with our other comprehensive corporate governance practices, are designed to establish and preserve
management accountability, provide a structure that allows the Board to set objectives and monitor performance, and enhance shareholder
value.
BOARD’S ROLE IN RISK OVERSIGHT
Our Board has an active
role, as a whole and also at the committee level, in overseeing management of our risks. Our Board regularly reviews information regarding
our credit, liquidity and operations, as well as the risks associated with each. The Compensation Committee is responsible for overseeing
the management of risks relating to our executive compensation plans and arrangements. The Audit Committee oversees management of financial
risks. The Nominating Committee manages risks associated with the independence of our Board and potential conflicts of interest. While
each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly
informed through committee and management reports about such risks and their mitigation. Our Board believes the division of risk management
responsibilities described above is an effective approach for evaluating and addressing the risks we face and that the structure allows
our Board to exercise effective oversight of the actions of management.
BOARD DIVERSITY
The Nominating Committee
believes that diversity is one of many factors to be considered when selecting candidates for nomination to serve as one of our directors.
While the Nominating Committee carefully considers diversity, among other factors, when evaluating nominees for director, the Nominating
Committee has not established a formal policy regarding diversity in identifying director nominees.
The table below summarizes the composition of our Board
pursuant to a confidential survey:
Board Diversity Matrix (as of September 20, 2022) |
Total Number of Directors |
7 |
|
Female |
Male |
Gender: |
|
|
Directors |
3 |
4 |
Number of Directors who identify in any of the Categories below: |
Did Not Disclose Demographic Background |
7 |
COMPENSATION OF EXECUTIVE OFFICERS AND MANAGEMENT
Compensation Committee Procedures
The Compensation Committee
makes its most significant determinations with respect to annual compensation, bonus awards, and new financial and other corporate performance
objectives for executive compensation purposes, at one or more meetings held during the fiscal year for which the targets and compensation
levels are applicable. At various meetings throughout the year, the Compensation Committee also considers matters related to individual
compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of, and any risks
relating to, our compensation strategies, policies and practices, potential modifications to those strategies, policies and practices,
and new trends, plans or approaches to compensation.
Generally, the Compensation
Committee’s process consists of three related elements: (i) the determination of compensation levels, (ii) the approval
of discretionary cash bonus awards based upon company and personal performance, and (iii) the review and determination of equity incentive
awards. For executive officers other than our CEO, the Compensation Committee solicits and considers evaluations and recommendations submitted
to the Compensation Committee by our CEO. In the case of our CEO, the evaluation of his performance is conducted by the Compensation Committee,
which determines any adjustments to his compensation. Our CEO may not participate in, or be present during, any deliberations or determinations
of the Compensation Committee regarding his compensation. For all executive officers and directors, as part of its deliberations, the
Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data,
tax and accounting information, tally sheets that set forth the total compensation that may become payable to executive officers in various
hypothetical scenarios, our stock performance data, and analyses of historical executive compensation levels and
our current compensation levels. Periodically, the Compensation Committee reviews all of our incentive compensation plans in order to
evaluate the level of risk that such plans may encourage and, along with management’s report concerning such matters and their mitigation,
to ensure that each plan is properly monitored and evaluated.
Compensation Committee Philosophy
Our compensation philosophy
is predicated upon the following concepts:
| · | We pay competitively. We are committed to providing a pay program that helps
attract and retain highly qualified people in the industry. To ensure that pay is competitive, we compare our pay practices with those
of other leading companies of similar size and location(s) and set our pay parameters based on this review. |
| · | We pay for sustained performance. Executive officers are rewarded based
upon corporate performance and individual performance. Corporate performance is evaluated by the Compensation Committee by reviewing the
extent to which strategic and business plan goals are met, including such factors as revenues, operating profit, cash flow, and stock
price. |
| · | We strive for fairness in the administration of pay and to achieve a balance
of the compensation paid to a particular individual as compared to the compensation paid to both our executives and executives at comparable
companies. |
| · | We believe that employees should understand the performance evaluation and
pay administration process. |
The Compensation Committee
believes that it is important that our executives be compensated in a manner that closely links compensation with performance and yet
does not incent excessive risk-taking. To that end, the Compensation Committee has developed a comprehensive and balanced compensation
plan that includes a base salary; discretionary bonuses upon evaluation of Company and personal performance; performance awards generally
payable in shares of Common Stock upon the satisfaction of various service periods and the market price of our Common Stock achieving
certain pre-determined prices; stock options; and, a package of benefits similar in scope and nature to those offered to all our other
employees. Additionally, all employees, including the Named Executive Officers, are eligible to participate in our 2014 Employee Stock
Purchase Plan (the “ESPP”), which allows employees to purchase shares of Common Stock from us at 15% discount from the applicable
market price as calculated under the terms of the ESPP.
The Compensation Committee
believes that there are no risks related to our compensation plans that would result in a material adverse impact on us. This conclusion
is based upon management’s risk analysis and the Compensation Committee’s belief that the following mitigating factors also
serve to reduce such risks:
| · | Incentives are capped at a maximum amount regardless of the degree to which
objectives may be exceeded. |
| · | Bonus payments are based upon audited year end results. |
| · | Multiple objectives are used as performance targets. |
| · | Computations are reviewed at regular intervals during the year and are subject
to multiple levels of review at the management, committee, and full Board level. |
Compensation of Executive Officers
The following table sets
forth certain compensation information for the fiscal years ended June 30, 2022 and 2021, for our Chief Executive Officer and our
Chief Financial Officer, who were the only executive officers during the fiscal year ended June 30, 2022 (collectively, the “Named
Executive Officers”).
Summary Compensation Table
Name and | |
| | |
Salary | | |
Bonus(1) | | |
Stock Awards(2) | | |
All Other Compensation(3) | | |
Total | |
Principal Position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
Richard L. Van Kirk | |
2022 | | |
$ | 305,000 | | |
$ | 70,362 | | |
$ | — | | |
$ | 41,020 | | |
$ | 416,382 | |
Director, CEO, President and COO | |
2021 | | |
$ | 305,000 | | |
$ | 70,667 | | |
$ | 1,561,860 | | |
$ | 40,480 | | |
$ | 1,978,007 | |
Alisha K. Charlton | |
2022 | | |
$ | 232,500 | | |
$ | 60,362 | | |
$ | 132,670 | | |
$ | 7,357 | | |
$ | 432,889 | |
Chief Financial Officer | |
2021 | | |
$ | 215,769 | | |
$ | 20,667 | | |
$ | 368,773 | | |
$ | 6,091 | | |
$ | 611,300 | |
(1) The
Bonus amount for fiscal 2022 includes bonuses awarded to Mr. Van Kirk and Ms. Charlton in the amount of $70,000 and $60,000, respectively,
which were accrued for during fiscal 2022 but paid during fiscal 2023. The Bonus amount for fiscal 2021 includes bonuses awarded to Mr.
Van Kirk and Ms. Charlton in the amount of $70,000 and $20,000, respectively, which were accrued for during fiscal 2021 but paid during
fiscal 2022.
(2) The amounts reported above
under the heading “Stock Awards” represent the aggregate grant date value of awards under Accounting Standards Codification
Topic 718, Compensation - Stock Compensation. The assumptions used in calculating the fair value of these stock awards can be found
under Note 11 to the Financial Statements in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022 and
have no relation to amounts or periods in which earnings may be reported in the Named Executive Officer’s W-2.
(3) The amounts reported above
under the heading “All Other Compensation” consist of the following:
| |
| | |
All Other Compensation ($) | |
| |
| | |
| | |
| | |
| | |
| | |
| |
| |
| | |
Insurance | | |
Car | | |
401K Matching | | |
Imputed | | |
| |
Name and | |
| | |
Premiums | | |
Allowance | | |
Contributions | | |
Earnings | | |
Total | |
Principal Position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
Richard L. Van Kirk | |
2022 | | |
$ | 23,531 | | |
$ | 10,000 | | |
$ | 3,788 | | |
$ | 3,701 | | |
$ | 41,020 | |
Director, CEO, President, and COO | |
2021 | | |
$ | 23,260 | | |
$ | 10,000 | | |
$ | 3,416 | | |
$ | 3,804 | | |
$ | 40,480 | |
Alisha K. Charlton | |
2022 | | |
$ | 2,901 | | |
$ | — | | |
$ | 3,274 | | |
$ | 1,182 | | |
$ | 7,357 | |
Chief Financial Officer | |
2021 | | |
$ | 1,849 | | |
$ | — | | |
$ | 3,103 | | |
$ | 1,139 | | |
$ | 6,091 | |
Employment
Agreements with Named Executive Officers
Employment Arrangement with Richard L. Van Kirk
On January 12, 2015, Mr.
Van Kirk began service as our Chief Executive Officer, President and Director, in addition to continuing to serve as our Chief Operating
Officer, a position he has held since April 23, 2013. In connection with that appointment, Mr. Van Kirk continues his at-will employment
arrangement with the Company. Mr. Van Kirk’s compensation consists of the following:
| · | A base annual salary of $305,000. |
| · | An annual car allowance of $10,000. |
| · | Mr. Van Kirk is eligible to participate in any program of stock options or other equity grants that we provide key employees from
time to time, including our 2016 Equity Incentive Plan and ESPP. |
| · | Health, dental, disability and life insurance, qualified retirement plans, and optional employee benefits
on the same terms as other employees. |
Employment Arrangement with Alisha K. Charlton
On January 12, 2015, Ms.
Charlton began service as our Chief Financial Officer. In connection with that appointment, Ms. Charlton continued her at-will employment
arrangement with the Company. Ms. Charlton’s compensation consists of the following:
| · | A base annual salary of $240,000 (previously $225,000 through December 13, 2021). |
| · | Ms. Charlton is eligible to participate in any program of stock options or other equity grants that we provide key employees from
time to time, including our 2016 Equity Incentive Plan and ESPP. |
| · | Health, dental, disability and life insurance, qualified retirement plans, and optional employee benefits
on the same terms as other employees. |
Outstanding Equity Awards at Fiscal Year End
The following table sets
forth information about outstanding equity awards held by our Named Executive Officers as of June 30, 2022.
| |
Option Awards | |
| |
Number of Securities Underlying Unexercised
Options | | |
Option | | |
Option |
Name | |
Exercisable (#) | | |
Unexercisable (#)(1) | | |
Exercise Price ($) | | |
Expiration Date |
Richard L. Van Kirk | |
| 18,000 | | |
| — | | |
$ | 27.50 | | |
07/01/2031 |
| |
| | | |
| 9,000 | | |
$ | 39.00 | | |
07/01/2032 |
| |
| | | |
| 18,000 | | |
$ | 42.00 | | |
07/01/2034 |
| |
| | | |
| 18,000 | | |
$ | 45.00 | | |
07/01/2036 |
| |
| | | |
| 18,000 | | |
$ | 47.50 | | |
07/01/2038 |
| |
| | | |
| 18,000 | | |
$ | 50.00 | | |
07/01/2040 |
Alisha K. Charlton | |
| 4,250 | | |
| — | | |
$ | 27.50 | | |
07/01/2031 |
| |
| | | |
| 2,625 | | |
$ | 39.00 | | |
07/01/2032 |
| |
| | | |
| 5,250 | | |
$ | 42.00 | | |
07/01/2034 |
| |
| | | |
| 5,250 | | |
$ | 45.00 | | |
07/01/2036 |
| |
| | | |
| 5,250 | | |
$ | 47.50 | | |
07/01/2038 |
| |
| | | |
| 5,250 | | |
$ | 50.00 | | |
07/01/2040 |
| (1) | Whether any of the unexercisable options vest, and the amount that does
vest, is tied to various service periods corresponding to future testing dates and the achievement of our Common Stock trading at or above
the exercise price. In the event that the market price of our Common Stock does not reach or exceed the exercise price during the 60 days
immediately preceding the three testing dates of the unexercisable options, a fraction, either 50%, 75% or 100% of the above mentioned
unexercisable stock options will expire. |
| |
Stock Awards | |
Name | |
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares That
Have Not Vested (#)(1) | | |
Equity
Incentive
Plan Awards:
Market Value
of Unearned
Shares That
Have Not
Vested ($)(2) | |
Richard L. Van Kirk | |
| 29,600 | | |
$ | 472,120 | |
Alisha K. Charlton | |
| 19,600 | | |
$ | 312,620 | |
| (1) | Represents performance awards which, upon vesting, will generally be paid
in shares of our Common Stock. Whether any performance awards vest, and the amount that does vest, is tied to the completion of various
service periods that range from July 1, 2024 to July 1, 2027 and the achievement of our Common Stock trading at certain pre-determined
prices. |
| (2) | The payout value of unearned shares is based upon the closing market price of our Common Stock on June
30, 2022, on the Nasdaq Capital Market of $15.95 per share. |
Compensation of Directors
In May 2016, our Board
approved the following compensation plan for our non-employee directors:
| · | A cash fee of $18,000 per fiscal year, paid quarterly in arrears; and |
| · | An additional cash fee of $7,000 per fiscal year for the Audit Committee Chair, paid quarterly in arrears. |
The following table details the fees earned by our non-employee
directors during fiscal 2022.
Name | |
Fees Earned or Paid in Cash(1) ($) | | |
Total ($) | |
David C. Hovda | |
$ | 25,000 | | |
$ | 25,000 | |
Raymond E. Cabillot | |
$ | 18,000 | | |
$ | 18,000 | |
William J. Farrell III | |
$ | 18,000 | | |
$ | 18,000 | |
Katrina M.K. Philp | |
$ | 18,000 | | |
$ | 18,000 | |
Nicholas J. Swenson | |
$ | 18,000 | | |
$ | 18,000 | |
| (1) | The cash amount reported in this column represents amounts earned during fiscal 2022. All amounts were
paid in fiscal 2022 except for the 4th quarter accrual, which was paid in fiscal 2023. |
EQUITY COMPENSATION PLAN INFORMATION
The following table
provides information as of June 30, 2022 with respect to shares of Common Stock that may be issued under the Company’s equity compensation
plans.
Plan Category | |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | |
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column) | |
Equity compensation
plans approved by Stockholders: | |
| | | |
| | | |
| | |
2016
Equity Incentive Plan | |
| 464,000 | (1) | |
$ | 41.83 | (2) | |
| 956,000 | |
Second Amended
and Restated 2004 Stock option Plan(3) | |
| 5,000 | | |
$ | 1.73 | | |
| — | |
Amended and
Restated 2004 Directors’ Stock Option Plan(3) | |
| 1,500 | | |
$ | 2.14 | | |
| — | |
2014 Employee
Stock Purchase Plan | |
| — | | |
| — | | |
| 677,676 | |
| (1) | Represents both performance awards issued to employees (including the Named
Executive Officers) as well as nonqualified stock options issued to employees (including the Named Executive Officers) and directors which,
upon vesting, will generally be paid in shares of our Common Stock. Whether any performance awards or options vest, and the amount that
does vest, is tied to the completion of various service periods that range from January 1, 2023 to July 1, 2031 and the achievement
of our Common Stock trading at certain pre-determined prices. |
| (2) | Represents the weighted average exercise price of the 346,500 non-qualified
stock options included in the “Number of Securities to be Issued Upon Exercise of Outstanding Options Warrants and Rights”
column. |
| (3) | The Second Amended and Restated 2004 Stock Option Plan and the Amended and
Restated 2004 Directors’ Stock Option Plan were terminated in 2014 and, as a result, no further options may be granted under such
plans. |
Options and Equity Awards Generally
2004 Stock Option Plans
All 6,500 options outstanding
as of June 30, 2022 under the 2004 plans were fully vested. As described above, both of the 2004 plans have been terminated and no further
options may be granted under such plans.
2016 Equity Incentive Plan
Our Compensation Committee,
as the administrator of the 2016 Equity Incentive Plan listed above, has the discretion to accelerate the vesting of any outstanding options
or Stock Appreciation Rights (“SARs”) held by the employees, consultants and directors in the event of an acquisition of us
by a merger or asset sale in which the outstanding options and SARs under the plan are not to be assumed by the successor corporation
or substituted with options to purchase shares of such corporation.
In the event of a change
of control (as such term is defined in the 2016 Equity Incentive Plan, which definition includes, among other items, (a) conditions
under which a person or group becomes a beneficial owner of 50% or more of the voting power of our outstanding stock, or (b) a majority
change in the composition of our Board occurring within a one-year period, or (c) a change in the ownership of more than 40% of the Company’s
assets, or (d) a complete liquidation or dissolution of the Company), the Board has the discretion to accelerate the vesting of any outstanding
options or SARs. The number of shares subject to Restricted Shares and RSU awards would be immediately delivered as a result of a change
of control. All performance awards shall immediately become vested and payable to participants within 30 days after a change of control.
AUDIT COMMITTEE REPORT
The Audit Committee reports
to and acts on behalf of our Board in providing oversight to our financial management, independent registered public accounting firm,
and financial reporting procedures. Our management is responsible for preparing our financial statements and the independent registered
public accounting firm is responsible for auditing those statements. In this context, the Audit Committee has reviewed and discussed the
audited financial statements contained in our 2022 Annual Report on Form 10-K with management and Moss Adams, LLP, the independent registered
public accounting firm engaged to audit such financial statements.
The Audit Committee has
discussed with Moss Adams, LLP the matters required to be discussed by Auditing Standard No. 16 (“Communications with Audit
Committees”). The Audit Committee has received the written disclosures and the letter from Moss Adams, LLP required by applicable
requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications
with the audit committee concerning independence and has discussed with Moss Adams, LLP its independence. In concluding that Moss Adams,
LLP is independent, the Audit Committee considered, among other factors, whether any non-audit services provided by Moss Adams, LLP were
compatible with maintaining its independence.
In reliance on the reviews
and discussions referred to above, the Audit Committee recommended to our Board that the audited financial statements be included in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2022, and be filed with the SEC.
The Audit Committee has
appointed Moss Adams, LLP to serve as our independent auditors for the fiscal year ending June 30, 2023.
AUDIT COMMITTEE
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David C. Hovda |
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Raymond E. Cabillot |
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Nicholas J. Swenson |
CODE OF BUSINESS CONDUCT AND ETHICS
Our code of business
conduct and ethics, as approved by our Board, can be obtained from http://www.pro-dex.com/media/23086/prodex_code_of_conduct.pdf.
We intend to satisfy the
disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from provisions of the code that relate to
one of more of the items set forth in Item 406(b) of Regulation S-K and its successor regulation, by describing on our Internet website,
within four business days following the date of a waiver or a substantive amendment, the date of the waiver or amendment, the nature of
the amendment or waiver, and the name of the person to whom the waiver was granted. There have been no waivers of the ethics policy granted
during the fiscal year ended June 30, 2022, and through the date of this proxy statement, nor have there been any requests for such waivers
during that period.
Information on our Internet
site is not, and shall not be deemed to be, a part of this proxy statement or incorporated into any other filings we make with the SEC.
DELINQUENT SECTION 16(a) REPORTS
Under Section 16(a)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our directors and officers and any person who owns
more than ten percent of our Common Stock are required to report their initial ownership of our Common Stock and any subsequent changes
in that ownership to the SEC and the Nasdaq Capital Market. Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish us with copies of all forms they file in accordance with Section 16(a). To our knowledge, based solely on
our review of the copies of such reports furnished to us or filed with the SEC and written representations that no other reports were
required, for the fiscal year ended June 30, 2022, all Section 16(a) reports required to be filed by our officers, directors
and greater than 10% shareholders were properly and timely filed, other than one late filing on Form 3 by Ms. Angel Domingo reporting
her initial ownership of Common Stock, and one late filing on Form 4 by Ms. Katrina Philp disclosing the purchase of 532 shares of Common
Stock..
POLICY ON HEDGING, SHORT-SELLING AND PLEDGING
Under our Policy on Insider
Trading, unless advance approval is obtained from our Chief Financial Officer (who has been appointed as the compliance officer under
our Policy on Insider Trading), our directors, executive officers, including our Named Executive Officers, and certain other employees
are prohibited from: (i) purchasing financial instruments that are designed to hedge our securities or offset any fluctuations in the
market value of our Common Stock; (ii) purchasing shares of our Common Stock on margin; (iii) short-selling shares of our Common Stock;
and (iv) pledging, whether directly or indirectly, shares of our Common Stock as collateral for a loan, unless the aggregate fair market
value of all collateral for the loan (inclusive of the fair market value of our Common Stock pledged as collateral for the loan) equals
or exceeds 200% of the total obligations under the loan from time to time outstanding.
POLICIES AND PROCEDURES FOR APPROVAL OF
RELATED PARTY TRANSACTIONS
Our Board has the responsibility
to review and discuss with management and approve, and has adopted written policies and procedures relating to approval or ratification
of, interested transactions with related parties. During this process, the material facts as to the related party’s interest
in a transaction are disclosed to all Board members or an applicable committee. Under the policies and procedures, the Board is to
review each interested transaction with a related party that requires approval and either approve or disapprove of the entry into the
interested transaction. An “interested transaction” is any transaction in which we are a participant and any related
party has or will have a direct or indirect interest. Transactions that are in the ordinary course of business and would not require
either disclosure pursuant to Item 404(a) of Regulation S-K under the Securities Act or approval of the Board or an independent committee
of the Board pursuant to applicable Nasdaq rules would not be deemed interested transactions. No director may participate in any
approval of an interested transaction with respect to which he or she is a related party. Our Board intends to approve only those
related party transactions that are in the best interests of the Company and our shareholders.
We invest surplus cash
from time to time through our Investment Committee, which is comprised of one management director, Mr. Van Kirk, and two non-management
directors, Mr. Cabillot and Mr. Swenson, who chairs the committee. Both Mr. Cabillot and Mr. Swenson are active investors with extensive
portfolio management expertise. We leverage the experience of these committee members to make investment decisions for the investment
of our surplus operating capital or borrowed funds. Additionally, many of our securities holdings include stocks of public companies
that either Messrs. Swenson or Cabillot or both may own from time to time either individually or through the investment funds that they
manage, or other companies whose boards they sit on, such as Air T, Inc. (described below).
Certain Relationships and Related Transactions
We have invested
in marketable equity securities at June 30, 2022 in the amount of $755,000 in the common stock of Air T, Inc. Two of our Board members
are also board members of Air T, Inc. and both either individually or through affiliates own an equity interest in Air T, Inc. Our Chairman,
one of the two Board members aforementioned, also serves as the Chief Executive Officer and Chairman of Air T, Inc. Another of our Board
members is employed by Air T, Inc. as its Chief of Staff. The shares have been purchased through 10b5-1 Plans, which in accordance with
our internal policies regarding the approval of related party transactions, was approved by our then three Board members that are not
affiliated with Air T, Inc.
We have entered into indemnification
agreements with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation
and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Colorado law.
Director Independence
Our corporate governance
guidelines provide that a majority of the Board and all members of the Audit, Compensation and Nominating Committees of the Board will
be independent. On an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire
that requires disclosure of any transactions with us in which a director or executive officer, or any member of his or her immediate family,
have a direct or indirect material interest. Following completion of these questionnaires, the Board, with the assistance of the Nominating
Committee, makes an annual determination as to the independence of each director using the current standards for “independence”
established by the SEC and Nasdaq, additional criteria set forth in our corporate governance guidelines and consideration of any other
material relationship a director may have with us.
The Board has determined
that all of its directors are independent under these standards, except for Mr. Van Kirk, our Chief Executive Officer and President,
and Ms. Domingo, our Director of Quality Systems and Regulatory Affairs.
COMMUNICATIONS WITH DIRECTORS
Our Board has established
a process to receive communications from shareholders. Shareholders and other interested parties may contact any member (or all members)
of our Board, or the independent directors as a group, any Board committee or any Chair of any such committee by mail or electronically.
To communicate with our Board, any individual directors or any group or committee of directors, correspondence should be addressed to
our Board or any such individual directors or group or committee of directors by either name or title. All such correspondence should
be sent “c/o Corporate Secretary” at 2361 McGaw Avenue, Irvine, California 92614. To communicate with any of our directors
electronically, a shareholder should send an email to our Secretary: alisha.charlton@pro-dex.com.
All communications received
as set forth in the preceding paragraph will be opened by the Company’s Secretary for the sole purpose of determining whether the
contents represent a message to one or more of the directors. Any contents that are not in the nature of advertising, promotions of a
product or service or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board
or any group or committee of directors, the Company’s Secretary will make sufficient copies (or forward such information in the
case of e-mail) of the contents to send to each director who is a member of the group or committee to which the envelope or e-mail is
addressed.
It
is our policy that our directors are invited and encouraged to attend all of our annual meetings of shareholders either in person or telephonically.
All of our directors were in attendance at the 2021 Annual Meeting either in person or telephonically.
Proposal No. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Audit Committee has
appointed the firm of Moss Adams, LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2023,
and requests our shareholders to ratify this appointment. In the event that our shareholders do not ratify the selection of Moss Adams,
LLP as our independent public accountants, our Board will consider the selection of another independent public accounting firm. Even if
the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public
accounting firm at any time during the year if it determines that such a change would be in our best interest and the best interest of
our shareholders.
A representative of Moss
Adams, LLP is expected to be present at the Annual Meeting. He or she will have the opportunity to make a statement if such representative
desires to do so and will be available to respond to appropriate questions.
ACCOUNTING FEES
The Audit Committee’s
policy is to pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed
for us by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in
Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit. The Audit
Committee considers whether the performance of any service by our independent registered public accounting firm is compatible with maintaining
such firm’s independence.
The following table sets forth
the aggregate fees paid during the fiscal years ended June 30, 2022 and 2021 to our independent registered public accounting firm, Moss
Adams, LLP, all of which were preapproved by the Audit Committee.
| |
Years Ended June 30, | |
| |
2022 | | |
2021 | |
Audit Fees(1) | |
$ | 230,475 | | |
$ | 229,425 | |
Audit-Related Fees(2) | |
| — | | |
| 21,875 | |
Total | |
$ | 230,475 | | |
$ | 251,300 | |
| (1) | Audit Fees consist of fees billed for professional services rendered for the audit of our consolidated
annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services that
are normally provided in connection with statutory and regulatory filings or engagements. The amounts above reflect amounts paid during
the fiscal year which may include a combination of pre-billings and billings in arrears. |
| (2) | Audit-Related Fees consist of fees billed for assurance and related services that are reasonably
related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.”
For fiscal 2021 these audit-related fees related to services provided in conjunction with our Form S-3 filing. |
Required
Vote and Board Recommendation
Although shareholder ratification
is not required for the appointment of Moss Adams, LLP as our independent registered public accounting firm for the fiscal year ending
June 30, 2023, our Board has directed that this appointment be submitted to our shareholders for ratification at the Annual Meeting.
Assuming a quorum is present at the Annual Meeting, this proposal will be ratified and approved if the votes cast in favor of this proposal
exceed the votes cast opposing this proposal.
OUR BOARD RECOMMENDS
THAT OUR SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS, LLP TO SERVE AS OUR INDEPENDENT PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JUNE 30, 2023.
Proposal No. 3
ADVISORY VOTE TO APPROVE THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS
Pursuant to Section 14A
of the Exchange Act, we are asking our shareholders to vote to approve, on a nonbinding, advisory basis, the compensation of our Named
Executive Officers, commonly referred to as the “say-on-pay” vote. In accordance with the Exchange Act requirements, we are
providing our shareholders with an opportunity to express their views on our Named Executive Officers’ compensation. Although this
advisory vote is nonbinding, our Board and the Compensation Committee will review and consider the voting results when making future decisions
regarding our Named Executive Officer compensation and related executive compensation programs.
We encourage shareholders
to read the “Compensation of Executive Officers and Management” section in this proxy statement, including the compensation
tables and the related narrative disclosure, which describes the structure and amounts of the compensation of our Named Executive Officers
for the fiscal year ended June 30, 2022. The compensation of our Named Executive Officers is designed to enable us to attract and
retain talented and experienced executives to lead us successfully in a competitive environment. The Compensation Committee and our Board
believe that our executive compensation strikes the appropriate balance between utilizing responsible, measured pay practices and effectively
incentivizing our Named Executive Officers to dedicate themselves fully to value creation for our shareholders.
Accordingly, we ask our shareholders to vote
“FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the shareholders
approve, on an advisory basis, the compensation of our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K,
including the compensation tables and any other related disclosure in the proxy statement.”
Required Vote and Board Recommendation
Assuming a quorum is present
at the Annual Meeting, this proposal to approve, on an advisory basis, the compensation of our Named Executive Officers will be approved
if the votes cast in favor of this proposal exceed the votes cast opposing this proposal.
OUR BOARD RECOMMENDS
THAT OUR SHAREHOLDERS VOTE “FOR”, ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
ANNUAL REPORT
Our Annual Report on Form
10-K containing audited financial statements for the fiscal year ended June 30, 2022 accompanies this proxy statement. Such report
is not incorporated herein and is not deemed to be a part of this proxy solicitation material.
PROPOSALS OF SHAREHOLDERS
Pursuant to Rule 14a-8
of the SEC, proposals by shareholders and submissions by shareholders of director nominees that are intended for inclusion in our proxy
statement and proxy card and to be presented at our next annual meeting must be received by us by June 7, 2023, in order to be considered
for inclusion in our proxy materials. Such proposals should be addressed to our Secretary and may be included in next year’s proxy
materials if they comply with certain rules and regulations of the SEC governing shareholder proposals. Proposals by shareholders, as
well as shareholder nominees for director, for possible consideration at our next annual meeting that are not intended for inclusion in
our proxy materials must also be received by our Secretary no later than June 7, 2023. Every shareholder notice must also comply
with certain other requirements set forth in our Bylaws, a copy of which may be obtained by written request delivered to our Secretary.
OTHER MATTERS
Our Board knows of no
other matters which will be acted upon at the Annual Meeting. If any other matters are presented properly for action at the Annual Meeting
or at any adjournment or postponement thereof, it is intended that the proxy will be voted with respect thereto in accordance with the
best judgment and in the discretion of the proxy holder.
OUR SHAREHOLDERS ARE
URGED TO PROMPTLY SUBMIT THEIR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE BY FOLLOWING THE INSTRUCTIONS IN THE NOTICE OF INTERNET
AVAILABILITY OF PROXY MATERIALS, WHICH WAS MAILED TO YOU ON OR ABOUT OCTOBER 5, 2022. IF YOU REQUEST PRINTED COPIES OF THE PROXY MATERIALS
BY MAIL, YOU CAN ALSO VOTE BY MAIL OR BY TELEPHONE.
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By Order of the Board of Directors, |
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PRO-DEX, INC. |
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/s/ Alisha K. Charlton |
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Corporate Secretary |
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Irvine, California |
SHAREHOLDERS MAY OBTAIN, FREE OF CHARGE,
A PAPER COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2022, (WITHOUT EXHIBITS) AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION BY WRITING TO: INVESTOR RELATIONS, PRO-DEX, INC., 2361 MCGAW AVENUE, IRVINE, CALIFORNIA 92614 OR CALLING (949) 769-3200.
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