U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________________

FORM 10-QSB

(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2000.

Commission File Number 0-14942

PRO-DEX, INC.
(Name of small business issuer in its charter)

650 S. Taylor Avenue, Suite 20A, Louisville, CO 80027
(Address of principal executive offices)

Issuer's telephone number: (303) 443-6136

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, no par value
(Title of class)

     The Company had a $10,000,000 credit facility with Harris Trust and Savings Bank (the "Bank") secured by all assets of the Company, and guaranteed by each of the Company's subsidiaries. The Company was required to meet certain financial covenants including minimum tangible net worth, debt to total capitalization, interest coverage, fixed charge coverage, and cash flow. At June 30, 1999 the Company did not meet certain of the financial covenants. On July 24, 1999 the Bank provided the Company an amendment to the credit agreement waiving violations of certain covenants as of June 30, 1999, amending the covenants going forward, and setting a termination date for the facility of December 31, 1999. The amendment also required the payment of fees of up to $420,000 in the event the Company defaults on conditions contained in the amendment. The Company was unable to pay off the outstanding balance of the credit facility on December 31, 1999. The Bank is aware of the Company's efforts to secure alternative funding, and has extended its forbearance agreement until July 31, 2000 to enable the Company to secure alternative financing. The Company has paid the bank $180,000 in fees as consideration for extension of the forbearance agreement.

     The amount owed to the Bank as of March 31, 2000 is $3,300,000 on the term loan, and $4,000,000 on a revolving line of credit, subject to a borrowing base equal to the sum of 80% of eligible accounts receivable, 50% of eligible inventory, 60% of eligible fixed assets, and an intangible advance amount of $800,000. At March 31, 2000, no amounts were available under the revolver/term loan.

     The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

     There are four reportable segments: infection control products, preventive dentistry products, medical/dental equipment, and electronic motion controllers. The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Interest expense is allocated based upon the specific identification of debt incurred by the individual segment. Corporate overhead and the provision for income taxes are not allocated to the individual reported segments. Inter-segment sales and transfers are accounted for at amounts that management believes provides the transferring segment with fair compensation for the products transferred, considering their condition, market demand, and, where appropriate, a reasonable profit that recognized which segment will be responsible for marketing costs. Management evaluates the performance of each segment based on income (loss) before income taxes.

Financial information with respect to the reportable segments follows (in thousands):

The following schedules are presented to reconcile amounts in the foregoing segment information to the amounts reported in the Company's consolidated financial statements (in thousands):

The following schedules are presented to reconcile amounts in the foregoing segment information to the amounts reported in the Company's consolidated financial statements (in thousands):

Net sales by subsidiary follows:

     Consolidated sales increased 63.9% for the quarter ended March 31, 2000 compared to the quarter ended March 31, 1999 mainly due to an increase in quantity of units sold at all locations. At Biotrol, sales for the quarter increased 52.1% compared to the same quarter of the previous year. Biotrol has recovered from the negative affect of the consolidation of three of its top four customers. In the third quarter of the previous year Biotrol lost revenue resulting from sales of its products originally sold as export being resold by the exporters to Biotrol's domestic customers. It is impossible to calculate how much revenue was lost in the third quarter of fiscal 1999 due to gray market sales. Management estimates that approximately $600K of revenue was lost to gray market in all of fiscal 1999. At Challenge, sales increased by 33% for the quarter. Sales to private label customers increased 23%, and inter-company sales to Biotrol increased 54.9%. Challenge's private label business has expanded due to an increase in the number of private label customers, as well as additional market penetration of existing customers. Overall sales at Micro Motors increased by 23.1% compared to the same quarter of the previous year. External sales increased by 53.8% for the quarter compared to the same quarter in the previous year. Revenue at OMS increased by 101% for the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999. An increase in the demand for computer chips has increased the demand for semiconductor fabrication equipment manufactured by several OMS customers contributing mainly to the increase in revenue at OMS.

Gross profits by subsidiary follows:

     Consolidated gross profit dollars increased by 76.7% for the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999, due primarily to an increase in revenue. Gross profit percentage for the quarter ended March 31, 2000, was 50.9% compared to 47.2% for the quarter ended March 31, 1999. Gross profit percentages increased at Biotrol and OMS due to the increase in revenue. Gross profit margin at Challenge Products remained the same. At Micro Motors, larger revenue from lower margin products as well increased manufacturing costs required to reduce the backlog of overdue shipments were the principle reasons for a lower gross profit percentage. The backlog has been eliminated at Micro Motors, and steps to improve gross profits on all low margin products have been implemented.

     Operating expenses for the quarter ended March 31, 2000, were $2,656,000 compared to $2,945,000 for the quarter ended March 31, 1999, a decrease of 9.8%. Many cost reductions established during the fourth quarter of the previous fiscal year are fully implemented, and have resulted in reduced operating expenses in the current year. Another factor contributing to lower operating expenses was the write-off of goodwill at the end of the previous fiscal year. The write-off lowered the quarter's operating expense by $74,000.

     Income from operations for the quarter ended March 31, 2000 was $830,000 compared to (loss) from operations of ($972,000) for the quarter ended March 31, 1999, an increase of $1,802,000. Increased revenue and reduced operating expenses are the main reasons for the improvement in operating income.

     Interest expense increased to $290,000 for the quarter ended March 31, 2000, compared to $211,000 for the same quarter in the previous year in spite of a decrease in the Company's bank debt. The Company's lender increased the borrowing rate in March 2000 by 2% due to prior loan covenant defaults, and charged an $80,000 fee to extend its forbearance agreement to the Company. (See "Notes to Consolidated Financial Statements" - Long Term Debt.)

     The Company's effective income tax rate is 45% for the quarter ended March 31, 2000 compared to 40% for the quarter ended March 31, 1999. The Company includes as an operating expense a charge-off for goodwill that is not tax deductible, effectively increasing its corporate income tax above the approximate combined federal and state statutory rate of 38%.

     Net income for the quarter ended March 31, 2000 was $311,000, or $.04 per share compared to a net (loss) of ($702,000), or ($.08) per share for the same quarter in the previous year.

Net sales by subsidiary follows:

Consolidated sales from continuing operations increased 45.9% for the nine months ended March 31, 2000, compared to the nine months ended March 31, 1999. At Biotrol, sales for the nine months increased by 13.2%. The revenue increase at Biotrol is related to increased market penetration of key products, and the elimination of the negative affects of customer consolidation and the adverse affects of gray market sales of key products. Sales for the nine months at Challenge increased 4.3%. Sales at Micro Motors increased 18.2% for the nine months ended March 31, 2000 over the nine months ended March 31, 1999, primarily due to increased revenue from private label sales to its endodontic customers. Revenue at Oregon Micro Systems increased 154.3% for the nine months ended March 31, 2000 compared to the same nine months of the previous year. An increase in demand for semiconductor fabrication equipment contributed to the increase in revenue. Sixty-seven percent of OMS sales is derived from the semiconductor fabrication equipment industry.

Gross profits by subsidiary follows:

     Consolidated gross profit dollars from continuing operations for the nine months ended March 31, 2000 increased 62.5% primarily due to an increase in sales. The Company's consolidated gross profit percentage increased to 54.4% for the nine months ended March 31, 2000 compared to 48.9% for the nine months ended March 31, 1999. Gross profit at Biotrol increased due to higher revenue and increased sales of higher margin products. Gross profit at Challenge decreased due to product mix. At Micro Motors, the gross profit percentage declined due to higher manufacturing costs. Higher costs were attributed to efforts to decrease the backlog of past due sales orders. Higher sales of lower margin products also contributed to the lower gross profit at Micro. The backlog of past due orders has been cleared up, and steps have been taken to increase gross profit on low margin products. Gross profit at OMS increased due to higher sales volume.

     Operating expenses decreased to $7,688,000 for the nine months ended March 31, 2000 compared to $9,406,000 for the nine months ended March 31, 1999. Included in operating expenses for the prior nine months were unusual charges of $839,000. Operating expense as a percentage of revenue was 40.4% for the nine months ended March 31, 2000 compared to 72.1% for the nine months ended March 31, 1999. The Company implemented cost reductions primarily in the sales and marketing area that has contributed to lower operating expense. A write-off of $4.8 million in goodwill in the previous year caused the current nine-month's operating expense to be lower by $221,000.

     Income from operations for the nine months ended March 31, 2000 was $2,677,000 compared to a (loss) from operations for the nine months ended March 31, 1999 of ($3,027,000), an increase of $5,704,000. Increased revenue and reduced operating expense were the main reasons for the improvement in income from operations.

     Interest expense for the nine months ended March 31, 2000 was $808,000 compared to $646,000 for the nine months ended March 31, 1999. The Company lowered its debt during the period, but incurred fees of $180,000 as consideration for the bank's forbearance agreement not to terminate the credit facility. The bank also increased the Company's borrowing rate by 2% during the quarter ended March 31, 2000.

     The Company's effective tax rate is 40.5% for the nine months ended March 31, 2000, compared to 40% for the prior year's nine-month period. The Company has deductions for goodwill that are not tax deductible, and are offset by the availability of a research and development credit.

     Net income for the nine months ended March 31, 2000 was $1,116,000 compared to a net (loss) of ($2,180,000) for the same nine months of the previous year.

     The operations of the Company are conducted primarily through its four wholly owned subsidiaries. The Company's financial position at March 31, 2000 is improving but continues to be weak. Working capital on that date is approximately negative $2,465,000 compared to negative $4,017,000 at June 30, 1999. The negative working capital situation is caused by the status of the Company's debt with Harris Trust and Savings Bank. The Company had a $10,000,000 credit facility with Harris. The agreement was amended on July 24, 1999, and a new termination date for the facility was set at December 31, 1999. The Company was unable to payoff the credit facility on the termination date. Consequently the entire balance owed on the credit facility of $7,300,000 is included in current liabilities, and reduces the Company's working capital accordingly. At March 31, 2000 there continues to be no availability of funds under the credit facility. As of March 31, 2000 the Bank agreed to forbear the terms of the amendment agreement, and extended the termination date until July 31, 2000.

     Management has engaged an outside investment-banking firm to assist in locating alternative sources of working capital. The Company has received a term sheet from a financial institution expressing an interest in providing the necessary working capital to payoff the existing credit facility and additional working capital. The term sheet is subject to normal due diligence requirements. The due diligence process has commenced. There can be no guarantee that management will be successful in obtaining the necessary financing to meet its current and future working capital needs.

     The Company is continuing to work toward completing the merger of Natural White.

     The industries in which the Company competes are labor intensive, often involving personnel with high level technical or sales skills. Wages and other expenses increase during periods of inflation and when shortages in the marketplace occur. The Company expects its subsidiaries to face somewhat higher labor costs, as the market for personnel with the skills sought by the Company becomes tighter in a period of full employment. In addition, suppliers pass along rising costs to the Company's subsidiaries in the form of higher prices. Further, the Company's credit facility with Harris Bank involves increased costs if domestic interest rates rise or there are other adverse changes in the international interest rates, exchange rates, and/or Eurocredit availability. To some extent, the Company's subsidiaries have been able to offset increases in operating costs by increasing charges, expanding services and implementing cost control measures. Nevertheless, each of the Company's subsidiaries' ability to increase prices is limited by market conditions, including international competition in many of the Company's markets.

     We experienced no significant issues during the transition to Year 2000. All operations continued without incident as our information technology systems and externally provided utilities functioned normally. To date, we have not been adversely affected by Year 2000 failures of any customer or vendor. While no material anomalies are expected at this time, we continue to monitor internal and external systems for potential risk.

     The nature of the foregoing discussion requires the use of forward looking statements that involve assumptions, risks, and uncertainties that could cause outcomes to be substantially different from those projected.

     In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Item 6. Exhibits and Reports on Form 8-K

     On March 9, 2000, the Registrant filed a Form 8-K announcing the signing of a binding letter of intent to merge with Natural White, Inc. ("Natural White"), a privately-held New York corporation based in Tonawanda, New York.