Patrick Johnson, President & CEO (714) 241-4411 For Immediate Release Jim White, Investor Relations Kehoe, White & Co., Inc. (562) 437-0655 PRO-DEX, INC. ANNOUNCES CONTINUED STRONG SALES AND PROFIT GROWTH IN FIS

PRO-DEX, INC. ANNOUNCES CONTINUED STRONG SALES

AND PROFIT GROWTH IN FISCAL 2004 FOURTH QUARTER

AND YEAR END OPERATING RESULTS

YEAR END SALES INCREASE 18% FROM PRIOR YEAR

YEAR END EARNINGS INCREASE NEARLY 750% FROM PRIOR YEAR AND 67% FROM

September 8, 2004 - PRO-DEX, INC. (NASDAQ: PDEX) today announced financial

results for the fourth quarter and fiscal year ended June 30, 2004. The

Company reported net income for the three months ended June 30, 2004 of

$437,000 or $0.05 per share on a basic and diluted basis, as compared to a net

income of $113,000 or $0.01 per share on a basic and diluted basis, for the

three months ended June 30, 2003. This represents an increase of $324,000 or

286% over the same quarter of the previous year and a sequential increase of

$176,000 or 67% over the third quarter, producing the eighth consecutive

increase in quarterly net profit. The Company

also reported net income for the year ended June 30, 2004 of $1,120,000 or $0.13

per share on a basic and $0.12 per share on a diluted basis, as compared to a

net income of $133,000 or $0.02 per share on a basic and $0.01 per share on a

diluted basis, for the year June 30, 2003. This represents an increase of

$987,000 or 743% over the previous year.

Commenting on the Company's financial results,

Pro-Dex's President and CEO, Patrick Johnson said, "The Company's performance

in the fourth quarter was a fitting conclusion to a very successful year. We

grew sales at a purposeful rate throughout the year, concentrating on improving

the product mix, the efficiency of our operations and the pace of our

expenses. As a direct result of that approach to growing the business, we

drove nearly 75% of our incremental sales growth or $1,684,000 to the pre-tax

profit line. We are very proud of this accomplishment and believe that is

proof positive that the strategy we are using to grow the business is both

effective and differentiating."

Consolidated net sales increased $352,000 or 11% to $3,666,000 for the

three months ended June 30, 2004, compared to the three months ended June 30,

2003. On a sequential basis, consolidated sales increased $364,000 or 11% for

the three months ended June 30, 2004 compared to the previous three month

period. This produced the Company's tenth sequential

increase in sales out of the past eleven quarters. For the year ended June 30,

2004, consolidated net sales increased $2,210,000 or 18% to $14,200,000

compared to fiscal 2003.

consolidated gross profit for the three months ended June 30, 2004 increased

$626,000 or 47% compared to the same three months in the previous year. For

the year ended June 30, 2004, consolidated gross profit increased $1,890,000 or

38% compared to the same period in the prior year. Gross profit as a

percentage of sales increased significantly to 53% for the three months ended

June 30, 2004 compared to 40% for the three months ended June 30, 2003 and

compared favorably to a gross margin percentage of 48% for the previous quarter.

For the year, gross margin as a percent of sales increased to 48% compared to

41% at the year ended June 30, 2003.

fiscal year 2004, we indicated that increasing the gross profitability of the

Company was going to be a priority," stated Mr. Johnson. "We attacked this

priority from several different approaches. For example, we increased top line

sales, which helped us spread our fixed cost over a bigger revenue base. We

increased sales 72% to the medical device market and 11% to the semi-conductor

market, markets where channels of distribution are more efficient and pricing

is therefore more favorable. We also invested in improving the efficiency of

our operations, which produced immediate improvements in productivity. All of

these efforts resulted in a significant improvement in gross profitability."

Total operating expenses increased 12%

to $1,247,000 for the three months ended June 30, 2004 from $1,118,000 for the

three months ended June 30, 2003. This increase is attributed to increased

sales, marketing and product development activities aimed at all of the

Company's major market segments. On a sequential basis, operating expenses

increased by only $43,000 or 3.6% compared to the previous quarter, an increase

reasonably expected given the increase in sales for the quarter. For the year

ended June 30, 2004, operating expenses increased $361,000 or 7.8% compared to

prior year, primarily driven by a $333,000 increase in research and development

expenses related to the development of new products.

Addressing the Company's on-going operations,

Mr. Johnson noted, "As a small-cap company, Pro-Dex differentiates itself by

not relying on a single invention, a single product, a single technology or a

single market. We are a company that understands its fundamental core

competencies and have successfully identified the best applications of those

core competencies given current market conditions. More importantly, we don't

take current market conditions for granted and are constantly evaluating how we

can create new opportunities given changes in market conditions. Accordingly,

and in a further effort to improve the Company's performance, on June 28, 2004,

we merged our Micro Motors and Oregon Micro Systems subsidiaries into Pro-Dex,

Inc., thereby creating a unified company and eliminating the cost,

inefficiencies and complexities related to the "holding company" business

structure. We believe that this further consolidation of the Company will

strengthen our approach to the market, optimize our use of valuable resources

and maximize the opportunities we see before us."

Commenting on the Company's near term

prospects, Mr. Johnson said, "Our on-going efforts to develop new products and

new customer relationships continue to bear fruit. We have proven that we can

increase top line sales and effectively drive the benefit of those additional

sales to the bottom line. By focusing on the fundamentals of the business, we

have strengthened our balance sheet and positioned the Company well to take

advantage of opportunities that will broaden our technical capabilities and our

ability to create real value for our strategic partners. Based on the

continued success of this business model, we believe that it's reasonable to

expect sales between $3.3 to $3.6 million for the first quarter of fiscal year

2005, and sales between $15 to $17 million for the full fiscal year, excluding

any sales from potential acquisitions. This translates into $0.05 to $0.06

earnings per share in the first quarter compared to $0.02 per share in the

first quarter of fiscal 2003 and between $0.18 to $0.22 earnings per share for

the fiscal year. We are proud of what we accomplished in fiscal 2004 and are

confident it will serve as a foundation for future successes."

all others are invited to listen to a conference call discussing the fourth

quarter and year-end financial results and the outlook for fiscal 2005, today

at 4:30 p.m. Eastern Time. The call will be broadcast over the Internet and can