Pro-Dex Inc. Reports Fiscal 1999 First-Quarter Operating Results.

BOULDER, Colo.--(BUSINESS WIRE)--Nov. 13, 1998--Kent Searl, chairman and chief executive officer of Pro-Dex Inc. (Nasdaq:PDEX), Friday announced operating results for the first quarter ended Sept. 30, 1998.

Revenues for the first quarter of fiscal 1999 were $4,571,000, compared with fiscal 1998 first-quarter revenues of $5,818,000. During the first quarter of fiscal 1999 the company incurred an operating loss before unusual charges of $213,000, or $.02 loss per share, compared with net income of $352,000, or $.04 per share, from operations in the first quarter of fiscal 1998.

In addition, the company incurred an unusual charge related to the buyout of two executive employment agreements in the amount of $839,000, or an additional $.06 loss per share. Incurring the unusual charge during the first quarter will contribute $.03 per share to fiscal 1999 annual earnings.

In addition, taking the unusual charge in the first quarter assists the company, which is currently in very active M&A activity in eliminating expenses that are not related to continuing operations.

In reviewing operations, Searl stated: "The continued weakness in the semiconductor business had a significant impact on our revenues and profit at our OMS subsidiary in the first quarter and was the primary reason for realizing an operating loss. Operating income declined at that business unit by $681,000 for the quarter. We continue to incur R&D expenses that have resulted in new product development in both our high-tech and dental-related business which should bring positive results to the bottom line in early 1999."

Searl concluded: "We are very positive about the prospects for the months ahead as benefits from last year's major restructuring activities take effect. Recent signs of improvement in the semiconductor industry along with major new product introductions scheduled for the next two quarters give us renewed optimism for the remainder of the year. We expect our previously announced engagement of the investment banking firm, Cleary/Gull, will also bring positive results to our M&A activities in the very near future."

Pro-Dex is a Colorado-based holding company with the following wholly owned subsidiaries: Micro Motors Inc., located in Santa Ana, Calif., is the manufacturer of miniature pneumatic (air) motors and handpieces used in dental, medical and industrial applications; Oregon Micro Systems Inc., located in Beaverton, Ore., manufactures motion control circuit boards; Biotrol International Inc., located in Louisville, Colo., is a manufacturer and marketer of a full line of infection control and preventive products specifically designed for the dental care provider; Challenge Products Inc. manufactures preventive care products including a complete line of fluoride gels and polishing pastes that are marketed through Biotrol and other private-label distributors.

Except for the historical information contained herein, the matters discussed in this release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These include the timely development and acceptance of new products, the impact of competitive products and pricing, and other risks detailed frequently in Pro-Dex's SEC reports, including the report on Form 10-KSB for the year ended June 30, 1998.

For further information about Pro-Dex, visit the company's Web site, http://www.PDEX.com. -0-

                     PRO-DEX INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (unaudited)

                                         Quarter Ended Sept. 30,
                                          1998            1997

Net sales                            $ 4,570,770     $ 5,817,919
Cost of sales (Includes rent
 paid to a director of $85,000
 for 1998 and 1997)                    2,072,511       2,254,531
Gross profits                          2,498,259       3,563,388
Operating expenses:
 Selling                               1,101,285         981,463
 General and administrative            1,016,099       1,181,003
 Research and development                343,366         352,095
 Amortization                            195,837         225,246
 Unusual charges                         838,833              --
   Total operating expenses            3,495,420       2,739,807
Income (loss) from operations           (997,161)        823,581
Other income (expense):
 Interest (expense)                     (211,674)       (257,555)
 Other income, net                        13,757           2,077
   Total                                (197,917)       (255,478)
Income (loss) before
 income taxes (credits)               (1,195,078)        568,103
Income taxes (credits)                  (477,647)        215,812
Net income (loss)                    $  (717,431)    $   352,291
Basic and diluted net earnings
 (loss) per common and
 common equivalent share             $     (0.08)    $      0.04
Weighted average number of
 common and common equivalent
 shares outstanding                    8,787,300       8,842,000