Hal Hurwitz - Chief Executive Officer.

.

Greetings, and welcome to the Pro-Dex Fiscal 2014 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Hal Hurwitz, CEO of Pro-Dex. Thank you. Please begin. .

We endured a nearly complete suspension of product delivery orders from our largest customer for the first five months of the year, we experienced unanticipated delays in completing two large product development projects involving new designs and technological applications for the markets to be served, and a major contract manufacturing customer encountered delays of its own in completing its product development.

As a result, revenue recognition was deferred, fixed manufacturing overhead costs were not fully absorbed and losses on the development projects were incurred.

Even with these challenges, the right-sizing of our cost footprint over the past 18 months contributed to improved financial results during each quarter of fiscal 2014, relative to the corresponding quarters of fiscal 2013, and we finished fiscal 2014 with an essentially break-even, albeit profitable, fourth quarter.

This focus on cost control, as well as on inventory and other balance sheet expenditure controls, contributed to positive cash flow from operating activities for both the third and fourth quarters of fiscal 2014. For these results, I thank the Pro-Dex employees for their continued hard work and commitment.

In addition, I am pleased to report that, in July 2014, our largest customer issued us purchase orders for the manufacture and delivery of $3.5 million of product through December 2015, which will commence upon our fulfillment of the customer's current purchase orders that call for shipments between now and December 2014.

In addition, the two product development projects that I have described are nearing completion, which we believe will occur during our second fiscal quarter ending December 31, 2014, and which we believe will be followed in subsequent quarters during fiscal 2015 by the aforementioned contract manufacturing project.

Finally, I will comment briefly on the Form 8-K we filed with the Securities and Exchange Commission this past July regarding our potential $225,000 acquisition of a Northern California-based manufacturing company. We have been, and continue to be, open to considering transactions that make financial sense for Pro-Dex.

Regarding the potential acquisition described in July's Form 8-K, I can report only that our due diligence procedures are underway, but that no assurance can be given as to the successful completion of the transaction.

I am now happy to invite any questions you might have with regard to the quarter and full year results, or on our business operation, and to that end, I will turn the call back over to Luria for Q&A. .

(Operator Instructions) Our first question comes from the line of Matthew Mcclane [ph], a private investor..

Hi, thanks for taking my question. Congratulations on finishing the year strong. I am just wondering I have a few questions.

First one about, can we consider this quarter to be as somewhat of a run rate to the operations now, is it kind of stabilized revenue [inaudible] similar without the production contract coming through and is the cost base about where you want it to be?.

Matt, first, thanks for your comments on this quarter. Because we are very much still a project based entity, and if I mention, we don’t look for manufacturing to start on our two large development projects until later in the calendar year I don’t know that I can say that we can yet call this a run rate for future quarters.

But we’re definitely getting there. .

All right, thanks.

And then just quickly on the purchase order from the largest customer, are you happy with the volume that’s going through in that contract and how does it look compared to prior year?.

We are happy with it. Our customer has actually now run short of project -- products, that’s what we have been told, so that’s a good news. And we are very pleased with the PO. .

And then just lastly a bit, could you speak any more about how the product development projects are going and what are you looking at for the quarter, is there going to be hopefully some sort of the tooth [ph] on this by the end of the quarter, will revenue then follow in the following quarters, so how should we approach it as investors?.

The product development projects are going nicely. We emerged substantially through the development phase. We are into a testing phase now. So we are not completely through the development phase. But it is an accomplishment to say that we are into the test phase now. And the answer to the latter part of your question is yes.

We expect that we will be through the development phase of those projects late in this calendar year which would be our second fiscal quarter, so that our expectation is that meaningful manufacturing revenues likely would be on the other side of New Year.

There is some chance that some manufacturing revenues would occur in December but I think that is a more realistic and reasonable expectation to say that it would occur in the quarter beginning January 1. .

All right. I appreciate that.

And then I just have one last question about the 8-K filing and [inaudible] considering a possible manufacturing company acquisition, just wondering how potentially [inaudible] make sense with Pro-Dex, will it provide additional manufacturing capacity, does it align well with new product development contracts, just if you could provide any color, I understand that you are doing due diligence now, it may not be anything you can see through but if you could provide some additional information..

Sure. I will be happy to. The particular transaction that we are looking at as well as some others provides us with near term and shorter sales cycle revenues. As I have commented on and as my predecessors just commented on for many years now, the sale cycle in a medical device space is a very long one.

Until we have a two-tiered approach with respect to business development, as we go after the larger tickets, higher margin revenues represented by the medical device projects, those need to be supported by a solid foundation of shorter sale cycle recurring on a regular basis revenues, which I think will make my answer to your first question about run rate an easier one in future quarters.

That’s really our objective with this small acquisition..

That’s good to hear.

So this isn’t just simply buying [inaudible] assets, you’re actually looking to have reasonable operational revenue coming out of this as well?.

That’s correct. I would remind you that this particular acquisition, as an example, is a small one, at $225,000 of purchase price, you can appreciate that it’s a small entity. But it does have a good run rate, a good positive cash flow and a good customer list which is our primary interest. .

(Operator Instructions) Thank you. We have no further questions in queue at this time. I would like to hand the floor back to our host for closing remarks..

Thank you, Luria and thank you everyone for joining us today. All of us at Pro-Dex appreciate your interest, your time and your support of the company. And we look forward to speaking with you in November when we report our fiscal year 2015 first quarter financial results. Have a good day. .

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation..