UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
  
☒       
ANNUALREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 20172020
  
☐ 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______ For the transition period from  to________
 
Commission file number 0-6658
 
SCIENTIFIC INDUSTRIES, INC.
(Exact Name of Registrant in Its Charter)
 
Delaware04-2217279
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
  
80 Orville Drive, Suite 102, Bohemia, New York11716
(Address of principal executive offices)(Zip Code)
 
(631) 567-4700
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each className of each exchange on which registered
NoneNone
 
Securities registered pursuant to Section 12(g) of the Exchange Act:
 
Title of Class
Common stock, $0.5$.05 par value
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.☐ Yes  ☒ No
Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports Yesreports ☐Yes ☒ No No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
  
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.☒ Yes☐ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)Smaller reporting company ☒
Emerging Growth☐

Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act) ☐ Yes ☒ No
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) ☐ Yes ☒ No
 
The aggregate market value of the voting stock held by non-affiliates computed by reference to the average bid and asked prices of such stock, as of September 1, 2017October 2, 2020 is $3,049,200.$7,436,000.
 
The number of shares outstanding of the registrant’s common stock, par value $.05 per share (“Common Stock”) as of  September 1, 2017October 2, 2020 is 1,494,1122,861,263 shares.
 
 
DOCUMENTS INCORPORATED BY REFERENCE
 
None.
 
 
 
 
SCIENTIFIC INDUSTRIES, INC.
 
Table of Contents
 
PART I - Financial Information
  
Item 1.
BUSINESS4
  
Item 1A.
RISK FACTORS8
  
Item 2.
PROPERTIES12
  
Item 3.
3.		LEGAL PROCEEDINGS  12
  
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS12
  
PART II


  
Item 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES13
  
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  14
  
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA17
  
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE17
  
Item 9A.
CONTROLS AND PROCEDURES 17
  
Item 9B.
OTHER INFORMATION17
  
PART III
 
  
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE18
  
Item 11.
EXECUTIVE COMPENSATION19
  
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS24
  
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE26
  
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES26
  
PART IV
 
  
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES26
  
SIGNATURES
 35
  
EXHIBIT 31.0
CERTIFICATION36
  
EXHIBIT 32.0
CERTIFICATION
37

 
 
 
 
Forward Looking Statements. The Company and its representatives may from time to time make written or oral forward-looking statements with respect to the Company’s annual or long-term goals, including statements contained in its filings with the Securities and Exchange Commission and in its reports to stockholders.
 
The words or phrases "will likely result,"result", “will be,” “will,”be”, “will”, "are expected to,"to", "will continue to,"to", "is anticipated," "estimate,"anticipated", "estimate", "project" or similar expressions identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
PART I
 
PART I
Item
Item 1. Business.
General.General. Incorporated in 1954, Scientific Industries, Inc., a Delaware corporation (which along with its subsidiaries, the “Company”) is engaged in the design, manufacture, and marketing of standard benchtop laboratory equipment (“Benchtop Laboratory Equipment”), customized catalyst research instruments (“Catalyst Research Instruments”), under its wholly-owned subsidiary, Altamira Instruments, Inc., (“Altamira”) and through its wholly-owned subsidiary Scientific Bioprocessing, Inc., (“SBI”), the licensing and development of bioprocessing systems and products (“Bioprocessing Systems”). The Company’s products are used primarily for research purposes by universities, pharmaceutical companies, pharmacies, national laboratories, medical device manufacturers, petrochemical companies and other industries performing laboratory-scale research.
   
Operating Segments. The Company views its operations as three segments: the manufacture and marketing of standard Benchtop Laboratory Equipment for research and sample preparation in university, pharmacy and industrial laboratories sold primarily through laboratory equipment distributors and online; the manufacture and marketing of custom-made Catalyst Research Instruments for universities, government laboratories, and chemical and petrochemical companies; and the development and sublicensing of bioprocessing systems and products for research in university and industrial laboratories.products. For certain financial information regarding the Company’s operating segments, see Note 2 to the consolidated financial statements included under Item 8.
 
Products.
   
Benchtop Laboratory Equipment. The Company’s Benchtop Laboratory Equipment products consist of mixers and shakers, rotators/rockers, refrigerated and shaking incubators, and magnetic stirrers sold under the “Genie ™” brand, and pharmacy and laboratory balances and scales, force gauges, and moisture analyzers under the “Torbal®” brand. Sales of the Company’s principal product, the Vortex-Genie® 2 Mixer, excluding accessories, represented approximately 38%36% and 28%32% of the Company’s total net revenues for each of the fiscal years ended June 30, 20172020 (“fiscal 2017”2020”) and June 30, 20162019 (“fiscal 2016”2019”), 53% and 50%45% and 46% of the segment’s sales for fiscal 20172020 and fiscal 2016,2019, respectively.
   
The Company’s vortex mixer is used to mix the contents of test tubes, beakers, and other various containers by placing such containers on a rotating cup or other attachments which cause the contents to be mixed at varying speeds.
   
The Company’s additional mixers and shakers include a high speedhigh-speed touch mixer;mixer, a mixer with an integral timer, a patented cell disruptor;disruptor, microplate mixers, two vortex mixers incorporating digital control and display;display, a large capacity multi-vessel vortex mixer and a line of various orbital shakers.
  

The Company also offers various benchtop multi-purpose rotators and rockers, designed to rotate and rock a wide variety of containers, and a refrigerated incubator and an incubator shaker, both ofincubated shakers, which are multi-functional benchtop environmental chambers designed to perform various shaking and stirring functions under controlled environmental conditions.
   
Its line of magnetic stirrers includeincludes a patented high/low programmable magnetic stirrer;stirrer, a four-place high/low programmable magnetic stirrer;stirrer, a large volume magnetic stirrer, available in analog and digital versions; and a four-place general purpose stirrer also available in analog and digital versions.stirrer.
 
The Company’s Torbal brand line of products includeincludes pharmacy, laboratory, and industrial digital scales, mechanical balances, moisture analyzers, pill counters, and force gauges.
   
Catalyst Research Instruments. The Catalyst Research Instrument products are offered through the Company’s subsidiary, Altamira. Its flagship product is the AMI-300™, which is used to perform traditional catalyst characterization experiments on an unattended basis. The product also features a stand-alone personal computer to control the instrument and incorporates proprietary LabVIEW®-based software. The Company’s AMI-300AMI-300™ Catalyst Characterization Instrument incorporates a sophisticated data handling package and is designed to perform dynamic temperature-programmed catalyst characterization experiments. All AMI model instruments are designed or adapted to a customer’s individual requirements.
 
ItsAltamira’s other Catalyst Research Instrument products include reactor systems, high throughput systems and micro-activity reactors, including the Company’s BenchCAT™ custom reactor systems. They are available with single and multiple reactor paths and with reactor temperatures up to 12001,200 degrees Celsius. The systems feature multiple gas flows, are available in gas and gas/liquid configurations, and feature one or more stand-alone personal computers with the LabVIEW®-based control software.
 
 
Bioprocessing Systems. The Company, through SBI, sublicenses the patents and technology it holds relating to bioprocessing systemsproducts exclusively under a license with the University of Maryland, Baltimore County (“UMBC”), for which it receives royalties.royalties for patents expiring through December 2023. The Company is also engaged in the design and development of bioprocessing products, principally products incorporating disposable sensors which includes coaster systems and other shaking products using disposable sensors for vessels with volumes ranging from 250 milliliter to five liters.such as T-Flasks and shake flasks.
 
Product Development. The Company designs and develops substantially all of its products. Company personnel formulate plans and concepts for new products and improvements or modifications of existing products. The Company engages outside consultants to augment its internal engineering capabilities in areas such as industrial and electronics design.
 
Major Customers. Sales to three customers, principally of the Vortex-Genie 2 Mixer, to two customers, represented for fiscal 201717% and fiscal 2016, 11% and 9%15% of total net revenues for fiscal 2020 and fiscal 2019, respectively, and 15%21% of Benchtop Laboratory Equipment product sales, for both fiscal years.2020 and fiscal 2019. Sales of Catalyst Research Instrument products are generally pursuant to a few large orders amounting on average to over $50,000 to a limited number of customers. In fiscal 2017,2020, sales to two customers accounted for 74%25% of the segment’s sales (19%(2% of total net revenues) and in fiscal 20162019 sales to a different single customertwo other customers accounted for 61%27% of the segment’s sales (26%(5% of total net revenues).
 
Marketing.
 
Benchtop Laboratory Equipment. The Company’s Benchtop Laboratory Equipment products sold under the “Genie” brand are generally distributed and marketed through an established network of domestic and overseas laboratory equipment distributors who sell the Company’s products through printed catalogs, websites and sales force.
 

The Company’s “Torbal” brand products are primarily marketed and sold online, and primarily on a direct basis, with only a few distributors. The Company also markets products through attendance at industry trade shows, trade publication advertising, brochures and catalogs, the Company’s websites, one sales manager and one director of marketing in the U.S., and a consultant in Europe.
 
In general, due to the reliance on sales through the catalog distribution, system, it takes two to three years for a new benchtop laboratory equipmentGenie brand Benchtop Laboratory Equipment product to begin generating meaningful sales.
 
Catalyst Research Instruments. The Company’s Catalyst Research Instrument products are sold directly worldwide to universities, government laboratories, and chemical and petrochemical companies through its sales personnel and independent representatives engaged on a commission basis. Its marketing efforts include attendance at various trade shows, Altamira’s website, outside sales representatives and printed materials.
 
Bioprocessing Systems. The Company’s Bioprocessing Systems products are currently under development as well as its sales and marketing activities for these products. The Company recently hired a Chief Commercial Officer as well as several application scientists and a sales and marketing consultant to implement a sales and marketing strategy for the Bioprocessing Systems products that the Company plans to offer for sale in the near future. Its marketing efforts include a new website, trade shows, online marketing campaigns, and membership in various organizations. The products, once available, will be offered for sale both directly and through distribution worldwide to university, industrial, and government laboratories.worldwide.
 
Assembly and Production. The Company has an operating facility in Bohemia, New York and a small facility in Orangeburg, New York at which its Benchtop Laboratory Equipment operations are conducted and one in Pittsburgh, Pennsylvania at which its Catalyst Research Instruments operations are conducted. The Company also has a small salesfacility in Pittsburgh where it conducts product development and marketing office in Oradell, New Jersey relatedplans to its Torbal division.operate future small-scale production for the Bioprocessing Systems operations. The Company‘sCompany’s production operations principally involve assembly of components supplied by various domestic and international independent suppliers. The Company has not commenced production of bioprocessing products, but anticipates that its current facilities will be adequate for such purpose.purpose, although no assurances can be provided.
 

Patents, Trademarks and Licenses.
 
The Company holds several United States patents relating to its benchtop laboratory products includingwhich include a United States patent which expires in February 2018 on the Roto-Shake Genie®; a patent which expiresexpiring in November 2022 on the MagStir Genie® and on the MultiMagStir Genie®, MultiMagStir Genie®, and Enviro-Genie®,another patent that relates to its Vortex-Genie Pulse expiring in January 2036, and a newly issued patent relating to Torbal’s VIVID® automated pill counter which expires in March 2039. Two additional patents held by the Company relating to Bioprocessing Systems expire in January 2029 onfor a biocompatible bag with integral sensors.sensors and another patent expiring in 2036 on an apparatus for detecting PH and dissolved oxygen. The Company has several patent applications pending.pending, related primarily to bioprocessing technology. The Company does not anticipate any material adverse effect on its operations following the expiration of the patents.
 
The Company has various proprietary trademarks, including AMI™, BenchCAT™, Biocoaster™, BioGenie®, Cellphase®, Cellstation®, Disruptor Beads™, Disruptor Genie®, Enviro-Genie®, Genie™, Genie Temp-Shaker™, ID.Developer’s Kit™, ID.Rocker™, ID.Shaker™, Incubator Genie™, MagStir Genie®, MegaMag Genie®, MicroPlate Genie®, MultiMagStir Genie®, Multi-MicroPlate Genie®, Orbital-Genie®Orbital Genie®, QuadMag Genie®, Rotator Genie®, SBI®, Roto-Shake Genie®, Torbal®, TurboMix™, VIVID®, and Vortex-Genie®, each of which it considers important to the success of the related product. The Company also has several trademark applications pending. No representation can be made that any application will be granted or as to the protection that any existing or future trademark may provide.


 
The Company has several licensing agreements for technology and patents used in the Company’s business, including an exclusive license from UMBC with respect to rights and know-how under a patent held by UMBC related to disposable sensor technology, on a United States patent through December 2023 and a European Union patent that terminated in December 2019 which the Company further sublicenses on an exclusive basis to a German company, and non-exclusive rights held by the Company as it relates to the use of the technology with vessels of sizes ranging from 250 milliliters to 5 liters. The Company also holds a license to certain technology related to its patent for the Roto-Shake Genie. TotalNet total license fees paid byor owed to the Company under all its licensesthis license for fiscal 20172020 and fiscal 20162019 amounted to $242,100$1,286,800 and $106,600,$1,035,400, respectively.
 
Foreign Sales. The Company’s sales to overseas customers, principally in Asia and Europe, accounted for approximately 32%49% and 53%50% of the Company’s net revenues for fiscal 20172020 and fiscal 2016,2019, respectively. Payments are in United States dollars and are therefore not subject to risks of currency fluctuation, foreign duties and customs.
 
Seasonality. The Company does not consider its business to be seasonal.
   
Backlog. Backlog for Benchtop Laboratory Equipment products is not a significant factor because this line of products is comprised of standard catalog items requiring lead times which usually are not longer than two weeks. There is no backlog for Bioprocessing Systems. The backlog for Catalyst Research Instrument products as of June 30, 20172020 was $89,300,$176,500, all of which is expected to be filled by June 30, 2018,2021, as compared to a backlog of $995,000$124,200 as of June 30, 2016,2019, all of which was filled in fiscal 2017.2020.
 
Competition. Most of the Company's principal competitors are substantially larger and have greater financial, production and marketing resources than the Company. Competition is generally based upon technical specifications, price, and product recognition and acceptance. The Company’s main competition for its Benchtop Laboratory Equipment products derives from private label brand mixers offered by laboratory equipment distributors in the United States and Europe and products exported from China. However, the Company believes that despite its small size, it is a major market participant in the global vortex mixer market.
 
The Company's major competitors for its Genie brand Benchtop Laboratory Equipment are Henry Troemner, Inc. (a private label supplier to the two largest laboratory equipment distributors in the U.S. and Europe), IKA-Werke GmbH & Co. KG, a German company, Benchmark Scientific, Inc., (a United States importer of China-produced products), and Heidolph Instruments GmbH, a German company. The Company’s main competitors for its Torbal brand products are Ohaus Corporation, an American company, A&D Company Ltd., a Japanese company, and Adam Equipment Co., Ltd., a British company.
 
The primary competition for the Company’s Catalyst Research Instrument products is in the form of instruments produced internally by research laboratory staffsstaff of potential customers. Major competitors in the United States include Anton Paar (formerly Quantachrome Instruments (which is also a customer)Instruments) and Micromeritics Instrument Corporation, each a privately-heldprivately held company. The Company sells instruments to Quantachrome under an OEM agreement.Anton Paar.
 
        The potential major competitors for the Company’s Bioprocessing Systems are Applikon Biotechnology, B.V. (Netherlands), PreSens GmbH (Germany)., DASGIP Technology GmbH (Germany), and Sartorius AG (Germany).
 
Research and Development. The Company incurred research and development expenses, the majority of which related to its Benchtop Laboratory Equipment products,Bioprocessing Systems of $437,500$1,140,000 during fiscal 20172020 compared to $349,000$530,500 during fiscal 2016.2019. The Company expects that research and development expenditures in the fiscal year ending June 30, 20182021 will be slightly higher than fiscal 2017.continue to increase due to increased product development efforts for the Bioprocessing Systems.
 

Government and Environmental Regulation. The Company’s products and claims with respect thereto have not required approval of the Food and Drug Administration or any other government approval. The Company's manufacturing operations, like those of the industry in general, are subject to numerous existing and proposed, if adopted, federal, state, and localregulations to protect the environment, establish occupational safety and health standards and cover other matters. The Company believes that its operations are in compliance with existing laws and regulations and the cost to comply is not significant to the Company.
 

Employees. As of September 1, 2017,4, 2020, the Company employed 3344 persons (24(27 for the Benchtop Laboratory Equipment Operations and 9operations, 8 for the Catalyst Research Instruments operations, and 9 for the Bioprocessing Systems operations) of whom 2939 were full-time, including its fourfive executive officers. AllIn addition, certain activities of the Bioprocessing Systems operations are being performed by employees of the Company’s other operations and consultants. None of the Company's employees are represented by any union.
 
Available Information. The Company’s Annual Report to Stockholders for fiscal 2017,2020, includes its Annual Report on Form 10-K. The Annual Report will be mailed to security holders together with the Company’s proxy material and solicitation as it relates to the Company’s 20172020 Annual Meeting of Stockholders. All the Company’s reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other information filed with, or furnished to, the Securities and Exchange Commission (the “SEC” or the “Commission”), including amendments to such reports, are available on the SEC’s website that contains such reports, proxy and information statements, and other information regarding companies that file electronically with the Commission. This information is available at www.sec.gov. In addition, all the Company’s public filings can be accessed through the Company’s website at https://scientificindustries.com/www.scientificindustries.com/sec-filings.
 
ItemItem 1A. Risk Factors.
 
In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, important risk factors are identified below that could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to such future periods in any current statements. The Company undertakes no obligation to publicly revise any forward-looking announcements to reflect future events or circumstances.
 
Dependence on Major Customers
 
Although the Company does not depend on any one single major customer, sales to twothe top three Benchtop Laboratory Equipment Operationsoperations customers accounted for a combined aggregate of 15%21% of the segment’s total sales for each of fiscal 20172020 and fiscal 2016 (11%2019 (17% and 9%15% of its total net revenues for fiscal 20172020 and fiscal 2016,2019, respectively). During fiscal 2017, orders from two customers for catalyst instruments accounted for 74% of the segment’s sales (19% of total net revenues) and during fiscal 2016 one order from a different customer for catalyst research instruments accounted for 61% of the segment’s sales (26% of total net revenues).
   
No representation can be made that the Company will be successful in continuing to retainretaining any of these customers, or not suffer a material reduction in sales, either of which could have an adverse effect on future operating results of the Company.
 
One Benchtop Laboratory Equipment Product Accounts for a Substantial Portion of Revenues
 
The Company has a limited number of Benchtop Laboratory Equipment products with one product, the Vortex-Genie 2 Mixer, accounting for approximately 53%45% and 50%46% of Benchtop Laboratory Equipment sales, for fiscal 20172020 and fiscal 2016, respectively (38%2019, (36% and 28%32% of total net revenues for fiscal 20172020 and fiscal 2016,2019, respectively).
   
The Company is a Small Participant in Each of the Industries in Which It Operates
 
The Benchtop Laboratory Equipment industry is a highly competitive mature industry. Although the Vortex-Genie 2 Mixer has been widely accepted, the annual sales of the Benchtop Laboratory Equipment products ($5,784,4006,783,600 for fiscal 20172020 and $5,449,700$7,078,800 for fiscal 2016)2019) are significantly lower than the annual sales of many of its competitors in the industry. The principal competitors are substantially larger with much greater financial, production and marketing resources than the Company. There are constant new entrants into the vortex mixer market, including those offering products imported from China, which the Company is unable to compete with on price. The Torbal line of products is also a small market participant in its industry with significant competition from well knownwell-known brands.
 

The production and sale of Catalyst Research Instruments products is highly competitive. Altamira’s competitors include several companies with greater resources and many laboratories which produce their own instruments.
 

 
The Company’s Bioprocessing Systems operation is a participant in the fast-growing laboratory-scale sector of the larger bioprocessing products industry, which is dominated by several large companies with much greater resourcesthat are many times larger than the Company.SBI, which is still in its start-up phase of operations.
 
The Company’s Ability to Grow and Compete Effectively Depends In Part on Its Ability to Develop and Effectively Market New Products
 
The Company continuously invests in development and marketing of new Benchtop Laboratory Equipment products with a view to increasingincrease revenues and reducingreduce the Company’s dependence on the Vortex-Genie 2 Mixer, including the acquisition of the Torbal line of products in fiscal 2014. However, gross revenues derived from such othernon Vortex-Genie Benchtop Laboratory Equipment products including Torbal products only amounted to $2,705,800$3,712,800 (55% of the segment’s sales and 43% of total revenues) for fiscal 20172020; and $2,718,300,$3,843,500, (54% of the segment’s sales and 38% of total revenues) for fiscal 2016.2019. The segment’s ability to compete will depend upon the Company’s success in continuing to develop and market new laboratory equipment as to which no assurance can be given.
 
The Company relies heavily on distributors and their catalogs to market the majority of its Benchtop Laboratory Equipment products, as is customary in the industry. Accordingly, sales of new products are heavily dependent on the distributors’ decision to include and retain a new product in the distributors’their catalogs and on their websites. It may be at least 24 to 36 months between the completion of development of a product and the distribution of the catalog in which it is first offered; furthermore, not all distributors feature the Company’s products in their catalogs.
 
The Company’s line of Catalyst Research Instruments consists of only a few products. The ability of the Company to compete in this segment and expand the line will depend on its ability to make engineering improvements to existing products and develop and add new products incorporating more current technology. Over the last few years the Company has introduced two new catalyst research products to increase its product offerings and has continuously sought to expandrecently expanded its outside sales force.
 
The success of the Company’s Bioprocessing Systems operation will be heavily dependent on its ability to successfully develop, produce, and producemarket new products. Commencing in the last quarter of fiscal 2019, the Company began to commit substantial resources to its Bioprocessing Systems operations in the form of employees, materials, supplies, marketing, and facilities to accelerate its new product development efforts and marketing activities. Such products are of a complex nature in an industry that the Company doeshas not operatetraditionally operated in and are takinghave taken much longer to develop than previously anticipated. In addition, they will be subject to beta testing by end users, which could result in design and/or production changes which could further delay development time. The Company expects the sale and marketing of thethese new products, at least initially, willto be through the Company’s attendance at trade shows, website, online marketing, direct selling efforts, and a few selectsome distributors. The Company is incurring substantial product development and marketing expenditures for its bioprocessing products.
 
No assurance can be given that the Company will be successful with its new product development andor that its sales and marketing programs will be sufficient to develop additional commercially feasible products which will be accepted by the marketplace, or that any distributor will include or retain any such products in its catalogs and websites.
 


The Company May Be Subject to General Economic, Political and Social Factors
 
Orders for the Company’s products, particularly its Catalyst Research Instruments products, depend in part, on the customer’s ability to secure funds to finance purchases, especially government funding. Availability of funds can be affected by budgetary constraints. Factors including a general economic recession, thea European crisis, slowdown in Asian economies, or a major terrorist attack may have a negative impact on the availability of funding including government or academic grants to potential customers. Please also see the separate COVID-19 pandemic related discussion in this “Risk Factors” section below.
 
As discussed in Item 1, the Company has significant sales to overseas customers.customers, including sales in China, account for approximately 49% of the Company’s net revenues. The risinghigh value of the U.S. dollar againstrelative to foreign currencies has a negative impact on sales because the Company’s products, which are paid in U.S. dollars, become more expensive.expensive to overseas customers.

The current political situation as it pertains to tariffs has not had a material impact on the Company, other than higher component costs which affects gross margins and somewhat lower sales to China due to tariffs on the Company’s products. Continuation of tariffs and/or increased trade tensions could have a negative effect on the Company’s gross margins and level of future exports, because the Company is unable to pass such cost increases to its customers, and may not be able to replace lost revenues to customers in China.
 
The Company’s ability to secure new Catalyst Research Instruments orders can also be affected by changes in domestic and international policies pertaining to energy and the environment, which could affect funding of potential customerscustomers.

The Company Has Been Adversely Affected and Could Be Materially Adversely Impacted in the Future by the COVID-19 pandemic
 
The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impact the Company’s operations at the end of the third quarter of the year ended June 30, 2020.  At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from  home, social distancing in the workplace, requiring self quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. However, if an employee becomes infected in the future, and the Company is forced to shut down for a period of time, it could have a short-term negative impact on operations. At the beginning of the pandemic, the Catalyst Research Instruments and Bioprocessing Systems Operations were shut down due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of $563,800 loan under the Federal Government’s Paycheck Protection Program. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies that have the ability to pay. However, there were some delays in receiving some accounts receivable due for catalyst research instruments due to customer shutdowns, and there was a material negative impact on the revenues of the Catalyst Research Instruments. The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, supply chain, or delivery and distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.


As further discussed in Item 7 below, in April 2020, the Company received loan proceeds of $563,800 under the Paycheck Protection Program (“PPP”). The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support its ongoing operations at the time without need to furlough its employees, especially for the Catalyst Research Instruments, which was negatively impacted by customer shutdowns and its own temporary shutdown. This certification further required the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these loan proceeds, and the forgiveness of the related note payable, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

             Under the terms of the CARES Act, the use of the proceeds of the loan is restricted to payroll costs (as defined in the CARES Act), covered rent, covered utility payments and certain other expenditures that, while permitted, would not result in forgiveness of a corresponding portion of the loan. Following recent amendments to the PPP, after an eight- or twenty-four-week period starting with the disbursement of the respective loan proceeds, the Company may, and intends to, apply for forgiveness of some or all of the loan, with the amount which may be forgiven equal to the sum of eligible payroll costs, covered rent, and covered utility payments, in each case incurred during the eight- or twenty-four-week period following the date of first disbursement. Certain reductions in the Company’s payroll costs or full-time equivalent employees (when compared against the applicable measurement period) could reduce the amount of the loan eligible for forgiveness, although it is not anticipated. Further, any future amendment to the CARES Act or rules by The U.S. Department of the Treasury or the Small Business Administration (“SBA”) as it pertains to the PPP could have an impact on the loan’s forgiveness with no guarantee that the Company will receive forgiveness for any amount, and forgiveness will be subject to the Company’s submission to its lender of information and documentation as required by SBA and the lender.
The Company is Heavily Dependent on Outside Suppliers for the Components of Its Products
 
The Company purchases all its components from outside suppliers and relies on a few suppliers for some components, mostly due to cost considerations. Most of the Company’s suppliers, including United States vendors, produce the components directly or indirectly in overseas factories, and orders are subject to long lead times and potential other risks related to production in a foreign country.country, such as current and potential future tariffs, and the COVID-19 pandemic. To minimize the risk of supply shortages, the Company keeps more than normal quantities on hand of the critical components that cannot easily be procured or, where feasible and cost effective, purchases are made from more than one supplier.
However, a The Company seeks to mitigate the effect of the tariffs on its component costs through supplier negotiations, however, alternate suppliers are not always feasible for various reasons including complexity and cost of toolings. A shortage of such components could halt production and have a material negative effect on the Company’s operations.
 

The Company’s Ability to Compete Depends in Part on Its Ability To Secure and Maintain Proprietary Rights to its Products
 
The Company has no patent protection for its principal Benchtop Laboratory Equipment product, the Vortex-Genie 2 Mixer, the Torbal balances other than the VIVID pill counter, or for its Catalyst Research Instruments products, and limited patent protection on a few other Benchtop Laboratory Equipment products. There are several competitive products available in the marketplace possessing similar technical specifications and design.


As part of the asset purchase by SBI during fiscal 2012, the Company acquired the rights to various patents for bioprocessing products which it licenses from UMBC, andhowever these United States patents expire in December 2023, and it lost European patent protection as of end of December 2019, which was originally due to expire in August 2021.  Hence, the Company will not receive any further license fees on the European Union patent for calendar 2023.year 2020 or thereafter and will receive license fees on the United States patent through December 2023
 
There can be no assurance that any patent issued, licensed or sublicensed to the Company provides or will provide the Company with competitive advantages or will not be challenged by third parties. Furthermore, there can be no assurance that others will not independently develop similar products or design around the patents. Any of the foregoing activities could have a material adverse effect on the Company. Moreover, the enforcement by the Company of its patent or license rights may require substantial litigation costs.
 
The Company Has Limited Management Resources
 
 The loss of the services of anyfrom either of Ms. Helena Santos, the Company’s President, Chief Executive, and Financial Officer and President,Treasurer, Mr. Robert Nichols, the President of the Company’s Genie Products Division President, Mr. Brookman March, Vice President of Corporate Development and Strategy and Vice President of Sales of Altamira, andthe Benchtop Laboratory operations, Mr. Karl Nowosielski, the President of the Torbal Products Division of the Benchtop Laboratory operations, Mr. Anthony Mitri, the President of Altamira, or Mr. John A. Moore, President of SBI, or any material expansion of the Company’s operations could place a significant additional strain on the Company’s limited management resources and could be materially adverse to the Company’s operating results and financial condition.
 
The Common Stock of the Company is Thinly Traded and is Subject to Volatility

As of September 1, 2017,October 2, 2020, there were 1,494,1122,861,263 shares of Common Stock of the Company outstanding, of which 443,888 shares (30%1,856,378 (65%) were held by the directorsaffiliates or Directors and officersOfficers of the Company. The Common Stock of the Company is traded on the Over-the-Counter Bulletin Board and, historically, has been thinly traded. There have been a number of trading days during fiscal 20172020 on which no trades of the Company’s Common Stock were reported. Accordingly, the market price for the Common Stock is subject to great volatility.
   
Item  Item 2. Properties.
 
The Company’s executive office and principal manufacturing facility for its Benchtop Laboratory Equipment operations comprises approximately 19,000 square feet,feet. This facility is located in Bohemia, New York and is held pursuant tounder a lease which expires in February 2025. The Company’s Catalyst Research Instruments operations are conducted from an approximately 9,000 square foot facility in Pittsburgh, Pennsylvania under a lease expiringwhich expires in November 2017.2020. The Bioprocessing Systems Operations subleasesoperations are conducted from an approximately a portion of a 7001,400 square foot laboratory facility in Pittsburgh through October 2017.Pennsylvania under a lease which expires in May 2021. The Company has a 1,200 square foot facility in Oradell,Orangeburg, New JerseyYork from where it conducts its sales and marketing functions, primarily for the Torbal Products Division of the Benchtop Laboratory Equipment Operations.operations expiring in October 2022. See Note 1011 to the consolidated Financial Statements in Item 8. The leased facilities are suitable and adequate for each of the Company’s operations. In the opinion of management, all properties are adequately covered by insurance.
   
ItemItem 3. Legal Proceedings.
   
The Company is not a party to any pending legal proceedings.
  
ItemItem 4. Submission of Matters to a Vote of Security Holders.
 
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2017.2020.
 

 
PART
PART II
 
ItemItem 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
   
The Company's Common Stock is traded in the over-the-counter market. The following table sets forth the low and high bid quotations forat the end of each quarter of fiscal 20162019 and fiscal 2017,2020, as reported by the National Association of Securities Dealers, Inc. Electronic Bulletin Board. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:
 
 
For Fiscal Quarter EndedLow BidHigh Bid
09/30/152.433.00
12/31/152.513.25
03/31/162.512.90
06/30/162.662.98
09/30/162.983.07
12/31/162.553.05
03/31/172.783.00
06/30/172.853.06
For Fiscal Quarter Ended
 
Low Bid 
 
 
High Bid 
09/30/18
  2.82 
  3.24 
12/31/18
  2.99 
  4.00 
03/31/19
  3.50 
  4.50 
06/30/19
  3.88 
  4.75 
09/30/19
  4.00 
  6.88 
12/31/19
  6.01 
  9.10 
03/31/20
  6.56 
  10.20 
06/30/20
  5.55 
  10.61 
 
 
As of September 1, 2017,6, 2020, there were 295261 record holders of the Company's Common Stock.
 

 

ItemItem 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
  
Forward-Looking statements. Certain statements contained in this report are not based on historical facts, but are forward-looking statements that are based upon various assumptions about future conditions. Actual events in the future could differ materially from those described in the forward-looking information. Numerous unknown factors and future events could cause such differences, including but not limited to, product demand, market acceptance, success of marketing strategy, success of expansion efforts, impact of competition, adverse economic conditions, and other factors affecting the Company’s business that are beyond the Company’s control, which are discussed elsewhere in this report. Consequently, no forward-looking statement can be guaranteed. The Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s financial statements and the related notes included elsewhere in this report.
  
Overview. The Company reflected a loss before income tax benefit of $146,800$1,139,900 for fiscal 20172020 compared to income before income tax expense of $218,900$770,200 for fiscal 2016,2019, primarily due to increased operating expenses as a result of the lowerCompany’s investment in its Bioprocessing Systems operations, decreased sales of catalyst research products, a non-recurring charge for the termination of a management employee, and other corporate expenses. Commencing in the last quarter of the Company’s fiscal year 2019, the Company began to invest heavily in its bioprocessing business by hiring a new President of SBI, engineering staff, application scientists, sales and low margins generated bymarketing personnel, which is expected to continue at increased levels into fiscal 2021. In June 2020 the Company raised approximately $6 million through the sale of its Common Stock and warrants to purchase Common Stock to finance these efforts. The Company’s results also suffered from a material decrease in sales of Catalyst Research Instruments operations as discussed below, whiledue mostly to the Company reflected higherCOVID-19 pandemic, and to a lesser extent, decreased sales and profits from theof Benchtop Laboratory Equipment operations. The Bioprocessing operations reflected a decreased lossin the last quarter of fiscal 2020, also due to higher royalty revenues, partially offset by non-cash items for adjustment in future contingent consideration payments and intangible asset write-offs.the pandemic. The results reflectedreflect total non-cash amounts for depreciation, amortization, and adjustments to contingent consideration liabilities of approximately $273,500 for fiscal 2020 and approximately $778,500 for fiscal 2019.



 The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impact the Company’s operations at the end of the third quarter of the year ended June 30, 2020.  At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from home, social distancing in the workplace, requiring self quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. However, if an employee becomes infected in the future, and the Company is forced to shut down for a period of time, it could have a short-term negative impact on operations. At the beginning of the pandemic, the Catalyst Research Instruments and Bioprocessing Systems Operations were shut down due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of $563,800 loan under the Federal Government’s Paycheck Protection Program. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies that have the ability to pay. However, there were some delays in receiving some accounts receivable due for catalyst research instruments due to customer shutdowns, and there was a material negative impact on the revenues of the Catalyst Research Instruments. The Company has not experienced and does not anticipate any material impairment ofto its tangible and intangible assets, system of $403,900 for fiscal 2017internal controls, supply chain, or delivery and $641,600 for fiscal 2016.distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.
  
Results of Operations. Net revenues for fiscal 20172020 decreased $1,448,300 (15.1%$1,629,500 (15.9%) to $8,149,300$8,570,300 from $9,597,600$10,199,800 for fiscal 2016,2019, reflecting a decrease of $1,962,600 (48.7%)$1,029,000 in net sales of catalyst research instruments,Catalyst Research Instruments, due mostly to COVID-19; a lower numberdecrease of orders for large custom reactor systems and an unusually large single order to an overseas customer in fiscal 2016, partially offset by increases of $334,700 (6.1%) in sales of benchtop laboratory equipment and $179,600 (156.0%)$305,300 in royalties earned by the Bioprocessing Systems Operations. The benchtop laboratory equipmentoperations due to lack of royalties under a previous European patent, and a decrease of $295,200 in sales reflected $1,300,000 of Torbal brand product sales for fiscal 2017, comparedBenchtop Laboratory Equipment due to $1,175,800 in fiscal 2016.COVID-19.
 
Sales of catalyst research instrumentsCatalyst Research Instruments are comprised of a small number of large orders, while the sales of benchtop laboratory equipment compriseBenchtop Laboratory Equipment are comprised of a large number of small orders. As of June 30, 2017,2020, the order backlog for catalyst research instrumentsCatalyst Research Instruments was $89,300,$176,500, all of which is expected to be shipped during the fiscal year ending June 30, 2018,2021, compared to $995,000$124,200 as of June 30, 2016.2019.
   
Revenues derived from the Bioprocessing Systems Operations comprise primarily of net royalties received from sublicensees, while it continues with its product development efforts.
       
The gross profit percentage for fiscal 20172020 was 35.3%44.9% compared to 40.8%42.8% for fiscal 2017.2019. The current year reflected materiallyhigher gross profit margin percentage for the Bioprocessing Systems operations, a slightly lower margins on sales of catalyst research instruments resulting from sales mix consisting primarily of OEM products which have significantly lower margins. The gross profitmargin percentage for the Benchtop Laboratory Equipment Operations was slightlydue in part to higher material costs including tariffs and fixed overhead, and a negative gross profit margin percentage for the Catalyst Research Instruments due to materially lower fixed overhead costs.sales.
  
General and administrative expenses for fiscal 2017 amounted2020 increased by approximately $489,500 (25.4%) to $1,665,400$2,413,900 compared to $1,695,200$1,924,400 for fiscal 2016.2019 due primarily to non-recurring termination costs for a management employee, director fees, and increased administrative costs incurred by the Bioprocessing Systems operations.
 
Selling expenses for fiscal 2017 decreased $526,600 (37.2%2020 increased approximately $300,300 (26.4%) to $888,800$1,436,400 from $1,415,400$1,136,100 for fiscal 2016, because fiscal 2016 included a significant amount of2019, primarily due to increased sales commissionand marketing expenses forincurred by the large catalyst research instrument order.Bioprocessing Systems operations.
 
Research and development expenses increased by $88,500 (25.4%)amounted to $437,500$1,140,000 for fiscal 20172020 compared to $349,000$530,500 for fiscal 2016, primarily2019, due to increased new product development costs incurredexpenditures of both labor and materials by the Benchtop Laboratory Equipment Operations and the Bioprocessing Systems Operations.operations. During the last quarter of fiscal 2019, the Company's Bioprocessing Systems operations began to expand its product development efforts with the hiring of several engineers.

 
Total other income (loss), net was $13,600$(3,600) for fiscal 20172020 compared to $26,100 expense$(5,900) in fiscal 2016, due primarily to the much lower interest expense during fiscal 2017.2019.
The Company reflected an income tax benefit of $74,200$436,600 for fiscal 20172020 compared to income tax expense of $53,300$124,600 for fiscal 2016,2019, primarily due to the loss incurred in fiscal 2017.incurred.
As a result of the foregoing, the Company recorded a net loss of $72,600$703,300 for fiscal 20172020 compared to net income of $165,600$645,600 for fiscal 2016.2019.
 
Liquidity and Capital Resources. Cash and cash equivalents decreasedincreased by $219,900$5,957,200 to $1,025,100$7,559,700 as of June 30, 20172020 from $1,245,000$1,602,500 as of June 30, 2016.2019.
 
Net cash used in operating activities was 168,100 for fiscal 2020 compared to net cash provided by operating activities was $46,100of $1,159,500 for fiscal 2017 compared2019, primarily due to $880,400the net loss for fiscal 2016. Thethe current year reflected a loss, lower accrued expenses and accounts payable balances, and lower inventories.year. Net cash used in investing activities was $41,100$84,100 for fiscal 20172020 compared to net$218,400 for fiscal 2019 due mainly to decreased capital expenditures in the current year. Net cash provided by investingfinancing activities was $6,209,400 for fiscal 2020 compared to $391,700 used by the Company during fiscal 2016 of $194,400. The prior year included a decrease in the restricted cash as a result of revised terms for the Company’s line of credit. The Company used $224,900 in financing activities in fiscal 2017 compared to $311,800 in fiscal 2016. The Company had lower principal payments on debt, offset by payment of a dividend and higher contingent consideration payments related2019 due mainly to the Bioprocessing Systems Operations. The Company borrowed $970,000 underequity financing and the export-import line of credit during fiscal 2016 to finance a large order of catalyst research instruments and repaidproceeds from the debt at the end of fiscal 2016.Payroll Protection Program loan.
 
The Company's working capital increased by $71,000$5,003,300 to $4,102,900$10,099,100 as of June 30, 20172020 compared to $4,031,900,$5,005,800, as of June 30, 2016.2019, primarily due to the cash received from the equity financing.
  
The Company has a Demand Line of Credit through December 20172020 with First National Bank of Pennsylvania which provides for borrowings of up to $300,000 for regular working capital needs, bearing interest at prime, currently 4.25%.3.25% at June 30, 2020. Advances on the line are secured by a pledge of the Company’s assets including inventory, accounts receivable, chattel paper, equipment and general intangibles of the Company. As of June 30, 20172020, no borrowings were outstanding under such line. On April 14, 2020 the Company received a loan, all of which is outstanding, under the Federal Government’s Paycheck Protection Program with its bank, First National Bank, amounting to $563,700 at an interest rate of 1% with a maturity date of April 17, 2022, a majority of which is expected to be forgiven under the program.
  
       In June 2020, the Company raised $6,004,400 (net of issuance costs) through the sale of 1,349,850 shares of the Company’s common stock and 1,349,850 warrants to purchase Common Stock. The sale was made in a private placement transaction, pursuant to the exemption provided by Section 4(2) of the Securities Act and certain rules and regulations promulgated under that section and pursuant to exemptions under state securities laws, as a sale to “accredited investors” as defined in Rule 501(a) of the Securities Act. The Company intends to use the net proceeds from the sale of the securities for the development of the business of its Bioprocessing Systems operations.

Management believes that the Company will be able to meet its cash flow needs during the next 12 months ending June 30, 2018 from its available financial resources including the linescash raised in June, cash from operations, its investments, and the line of credit, its cashcredit. Commencing in the fourth quarter of fiscal 2019 the Company began committing significant resources to the Bioprocessing Systems operations for staffing, sales and investment securities,marketing, and operations.administration. 
     
Capital Expenditures. During fiscal 2017,2020, the Company incurred $17,000$50,900 in capital expenditures. The Company expects that based on its current operations, its capital expenditures will be higherapproximately the same for the fiscal year ending June 30, 2018, due to toolings for new products, all of which will be funded from operations.2021.
 
Off-Balance Sheet Arrangements. None.
 

Item 8. 
Item 8. Financial Statements and Supplementary Data.
 
The consolidated Financial Statements required by this item are attached hereto on pages F1-F26.F1-F25.
 
Item Item9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
 
 Not applicable.
ItemItem 9A.
Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures.Procedures. As of the end of the period covered by this Annual Report on Form 10-K, based on an evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), the Chief Executive Officer and Chief Financial Officer of the Company has concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act reports is recorded, processed, summarized and reported within the applicable time periods specified by the SEC’s rules and forms. The Company also concluded that information required to be disclosed in such reports is accumulated and communicated to the Company's management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
Management’s Annual Report on Internal Control Over Financial Reporting.Reporting. Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting, as such term is defined in Securities Exchange Act Rule 13a-15(f) and 15d-15(f). The Company’s internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
  
The Chief Executive Officer and Chief Financial Officer of the Company conducted an evaluation of the effectiveness of the Company’s internal controls over financial reporting as of June 30, 20172020 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.
   
Based on the assessment of the Company’s Chief Executive and Financial Officer of the Company, it was concluded that as of June 30, 2017, the Company’s internal controls over financial reporting were effective based on these criteria.
 
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
 
Changes in Internal Control Over Financial Reporting. ThereExcept as otherwise discussed above, there was no change in the Company's internal controls over financial reporting that occurred during the most recent fiscal quarter that materially affected or is reasonably likely to materially affect the Company's internal controls over financial reporting.
 
Inherent Limitations on Effectiveness of Controls.  The Company’s management, including its Chief Executive Officer and Chief Financial Officer, believes that its disclosure on controls and procedures and internal controls over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that its disclosure on controls and procedures or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
   
ItemItem 9B. Other Information.
 
Not applicable.
 
PART
  PART III
 
ItemItem 10. Directors, Executive Officersand Corporate Governance.
 
Directors
   
The Company has the following fivesix Directors:
 
Joseph G. Cremonese (age 81)(age 85), a Director since November 2002 and Chairman of the Board sincefrom February 2006 to January 2020, has been, through his affiliate, a marketing consultant to the Company since 1996. Mr. Cremonese has been since 1991, President of his affiliate, Laboratory Innovation Company, Ltd, which is a vehicle for the consulting services for the Company.
 
Grace S. MorinMarcus Frampton (age 69)40), a Director since December 4, 2006,March 2019 is the Chief Investment Officer of the Alaska Permanent Fund Corporation and serves on the Board of Directors of Managed Funds Association and Nyrada, Inc., a drug development company. He served as Director of Investments, Real Assets and Absolute Return of the Alaska Permanent Fund from 2016 to 2018 and Director of Investments, Private Markets of the Alaska Permanent Fund from 2012 to 2016 for the Alaska Permanent Fund Corporation. 

John A. Moore (age 55), a Director since January 2019 and Chairman of the Board since January 2020, is also the President of SBI since January 2020 and had been providing consulting services to SBI since March 2019. Mr. Moore serves as Chairman of Nyrada, Inc., a drug development company since July 2019 and prior to that served as a director with Noxopharm Limited, a drug development company, and is also the Chairman of Trialogics, a clinical trial software provider. Mr. Moore was President, DirectorChief Executive Officer and principal stockholderdirector of Altamira Instruments,Acorn Energy, Inc. from December 2003 until its acquisition in November 2006 by the Company. Ms. Morin had been employed by Altamira to supervise its administrative functions at the Pittsburgh, Pennsylvania facility as a full-time employee through March 31, 2009 and since that date as a part-time consultant.2016. 
 
Helena R. Santos (age 53)(age 56), a Director since 2009, has been employed by the Company since 1994, and has served since August 2002 as its President, Chief Executive Officer, Chief Financial Officer and Treasurer. She had served as Vice President, Controller from 1997 and as Secretary from May 2001.
 
James S. SegastureReinhard Vogt (age 81)(age 64), a Director since 1991, has been retiredAugust 2020, served as Executive Vice President and on the Executive Board of Sartorius Stedim Biotech GmbH for the last five years.10 years prior to his retirement in July 2019.
 
John F. F.F.F. Watkins (age 50)(age 53), a Director since January 2017, is a corporate and securities attorney and has been a member of Reitler Kailas & Rosenblatt LLC since 2002.  Mr. Watkins was first elected to the Board of Directors of the Company in January 2017.
 


The Directors are elected to three-year staggered terms. The current terms of the Directors expire at the annual meeting of stockholders of the Company following:as follows: the fiscal year ended June 30, 2017 –2020 - two directors (Mr. Cremonese and Mr. Watkins, Class C), the fiscal year ending June 30, 2018 –2021 - two directors (Ms. Santos and Mr. Segasture,Vogt, Class A), and the fiscal year ending June 30, 2019 - one director (Ms. Morin,2022 – two directors (Mr. Frampton and Mr. Moore, Class B).
 
Board Committees
 
The Company’s Stock OptionCompany has two committees – The Compensation Committee administersand the Company’s 2012 Stock Option Plan.Audit Committee. The membersCompensation Committee is comprised of Mr. Frampton and Mr. Watkins. The Audit Committee is comprised of the committee are non-management Directors of the Company – James S. Segasture and Joseph G. Cremonese. The members of the Committee serve at the discretion of the Board. During fiscal 2017 the Stock Option Committee held one meeting.
Grace S. Morin and James S. Segasture are the current members of the Company’s Compensation Committee serving at the discretion of the Board. The Committee administers the Company’s compensation policies. During fiscal 2017, the Compensation Committee held one meeting.
Theentire Board of Directors acts as the Company’s Audit Committee, which in its function as the Committee, held six meetings during fiscal 2017. Ms. Santos, who is not “independent” and Ms. Morin are “financial experts” as defined by the Securities and Exchange Commission.Directors.
 
Executive Officers
 
See above for the employment history of Ms. SantosandMr. Moore.
 
Robert P. Nichols (age 56)(age 59), is the President of the Genie Products Division of the Benchtop Laboratory Equipment Operationsoperations and Corporate Secretary and has been employed by the Company since February 1998. Previously, he had been since May 2001, the Company’s Vice President of Engineering.
Brookman P. March (age 72) has been since July 1, 2017 Vice President of Corporate Development and Strategy and Vice President of Sales of Altamira. Previously he had been President and Director of Sales and Marketing of Altamira. He had been Vice President and a Director of Altamira from December 2003 until it was acquired by the Company in 2006. Mr. March is the husband of Ms. Morin, a Director of the Company.
 
Karl D. Nowosielski (age 37)(age 42), is the President of the Torbal Products Division of the Benchtop Laboratory Equipment Operationsoperations and Director of Marketing for the Company. He had been until February 2014was Vice President of Fulcrum, Inc. (the seller of the Torbal Products Division assets) from 2004 until February 2014.

Anthony J. Mitri (age 38), has been the President of Altamira since May 2017. Prior to that he had been Director of Operations and Engineer since he began his employment with the Company in 2004.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
The Company believes that, for fiscal 2017,2020, its officers, directors and 10% stockholders timely complied with all filing requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.
 
Code of Ethics
  
The Company has adopted a code of ethics that applies to the Executive Officers and Directors. A copy of the code of ethics can be found on the Company’s website at www.scientificindustries.com.website.
 
ItemItem 11. Executive Compensation.
 
Compensation Discussion and Analysis. The Compensation Committee reviews and recommends to the Board of Directors the compensation to be paid to each executive officer. Executive compensation, in all instances except for the compensation for the Chief Executive Officer (“CEO”), is based on recommendations from the CEO. The CEO makes a determination by comparing the performance of each executive being reviewed with objectives established at the beginning of each fiscal year and with objectives established during the business year with regard to the success of the achievement of such objectives and the successful execution of management targets and goals.
  
With respect to the compensation of the CEO, the Committee considers performance criteria, 50% of which is related to the direction, by the CEO, of the reporting executives, the establishment of executive objectives as components for the successful achievement of Company goals and the successful completion of programs leading to the successful completion of the Business Plan for the Company and 50% is based on the achievement by the Company of its financial and personnel goals tempered by the amount of the income or loss of the Company during the fiscal year.
 


The compensation at times includes grants of options under its stock option plan to the named executives. Each officer is employed pursuant to a long-term employment agreement, containing terms proposed by the Compensation Committee and approved as reasonable by the Board of Directors. The Board is cognizant that as a relatively small company, the Company has limited resources and opportunities with respect to recruiting and retaining key executives. Accordingly, the Company has relied upon long-term employment agreements and grants of stock options to retain qualified personnel.
 

 
Compensation for each of its executive officers provided by their employment agreements were based on the foregoing factors and the operating and financial results of the segments under their management.
 
The following table summarizes all compensation paid by the Company to each of its executive officers for the fiscal years ended June 30, 20172020 and 2016.
2019.
 
SUMMARY COMPENSATION TABLE

Name and Principal Position (a)
 
Fiscal Year (b)
 
 
Salary ($) (c)
 
 
 
Bonus ($) (d)
 
 
 
Stock Awards ($) (e)
 
 
 
Option Awards ($) (f)
 
 
 
Non- Equity Incentive Plan Comp- ensation ($) (g)
 
 
 
Non- Qualified Deferred Compensation Earnings ($) (h)
 
 
 
Changes in Pension Value and Non-Qualified Deferred Compensation Earnings
 
 
 
All Other Comp- ensation ($) (i)
 
 
 
Total ($) (j)
 
 
Helena R. Santos,
CEO, President, CFO
2017
  162,000 
  20,000 
  0 
  0 
  0 
  0 
  0 
  6,500(1)
  188,500 

2016
  157,100 
  0 
  0 
  0 
  0 
  0 
  0 
  6,300(1)
  163,400 
 
    
    
    
    
    
    
    
    
    
Brookman P. March,
Vice President Corporate Strategy, VP, Sales of Altamira
2017
  147,000 
  10,000 
  0 
  500(2)
  0 
  0 
  0 
  5,900(1)
  163,400 

2016
  142,800 
  0 
  0 
  1,200(2)
  0 
  0 
  0 
  5,700(1)
  149,700 
 
    
    
    
    
    
    
    
    
    
Robert P. Nichols,
President of Genie Division and Corporate Secretary
2017
  146,000 
  10,000 
  0 
  500(2)
  0 
  0 
  0 
  5,800(1)
  162,300 

2016
  141,800 
  0 
  0 
  1,200(2)
  0 
  0 
  0 
  5,700(1)
  148,700 
 
    
    
    
    
    
    
    
    
    
Karl D. Nowosielski
President of Torbal Division and Director of Marketing
2017
  143,000 
  10,000 
  0 
  1,200(3)
  0 
  0 
  0 
  5,700(1)
  159,900 

2016
  141,900 
  0 
  0 
  9,500(3)
  0 
  0 
  0 
  5,700(1)
  157,100 
Name and Principal Position
(a)
 
Fiscal Year (b)
 
 
 
Salary
($)
(c)
 
 
Bonus ($)
(d) 
 
Stock Awards ($)
  (e) 
 
Option Awards ($)
  (f) 
 
Non- Equity Incentive Plan Compensation ($)
  (g) 
 
Non- Qualified Deferred Compensation
Earnings
($)
  (h) 
 
Changes in Pension Value and Non-Qualified Deferred Compensation   Earnings 
 
All Other Compensation ($)
  (i) 
 
Total
($)
  (j) 
Helena R. Santos,
CEO, President, CFO
2020
 
  185,700 
  50,000 
  0 
  13,100(1)
  0 
  0 
  0 
  9,400(6)
  258,200 
Helena R. Santos,
CEO, President, CFO
2019
   
        180,300  
0 
  0 
  13,100(1)
  0 
  0 
  0 
  4,900(6)
  198,300 
 
    
    
    
    
    
    
    
    
    
John A. Moore,
President of
SBI
2020
 
  145,000 
  50,000 
  0 
  36,000(2)
  0 
  0 
  0 
  28,900(7)
  259,900 
John A. Moore,
President of
SBI
2019
 
  40,000 
  0 
  0 
  12,000(2)
  0 
  0 
  0 
  9,800(7)
  61,800 
 
    
    
    
    
    
    
    
    
    
Anthony Mitri,
President of Altamira
2020
 
  130,000 
  0 
  0 
  6,500(3)
  0 
  0 
  0 
  5,200(6)
  141,700 
Anthony Mitri,
President of Altamira
2019
 
  120,000 
  0 
  0 
  6,500(3)
  0 
  0 
  0 
  4,800(6)
  131,300 
 
    
    
    
    
    
    
    
    
    
Robert P. Nichols,
President of Genie Division
2020
 
  162,300 
  5,000 
  0 
  3,900(4)
  0 
  0 
  0 
  6,700(6)
  177,900 
Robert P. Nichols,
President of Genie Division
2019
 
  157,600 
  0 
  0 
  3,900(4)
  0 
  0 
  0 
  6,800(6)
  168,300 
 
    
    
    
    
    
    
    
    
    
Karl D. Nowosielski
President of Torbal Division and Director of Marketing
2020
 
  169,800 
  10,000 
  0 
  6,300(5)
  0 
  0 
  0 
  7,200(6)
  193,300 
Karl D. Nowosielski
President of Torbal Division and Director of Marketing
 
2019
 
  163,300 
  10,000 
  0 
  7,400(5)
  0 
  0 
  0 
  6,400(6)
  187,100 
 
 
(1) The amounts represent the Company’s matching contribution under the Company’s 401(k) Plans.
(1)
(2) The amounts represent compensation expense for the 2014stock options granted on July 1, 2017 valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The option was valued at a total of $39,200 of which $13,100 was expensed in each of fiscal 2020 and fiscal 2019. On June 23, 2020, the Company awarded Ms. Santos options to purchase 215,366 shares of Common Stock, subject to amendment of the Company’s 2012 Stock Option Plan.

(2)
The amounts represent consulting expense for the stock options granted from March 2019 through June 2020 valued at $3,000 per month utilizing the Black-Scholes-Merton options pricing model, of which $36,000 was expensed in fiscal 2020 and $12,000 in fiscal 2019.

(3)
The amounts represent compensation expense for the stock options granted on June 30, 2018 and December 31, 2017 valued utilizing the Black-Scholes-Merton options pricing model. The option was valued at a total of $10,000 and $9,500, respectively, utilizing the Black-Scholes-Merton options pricing model, of which a total of $6,500 was expensed in each of fiscal 2020 and fiscal 2019.

(4)
The amounts represent compensation expense for the July 1, 2017 stock options granted valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The 2014 option was valued at a total of $3,500$11,800, of which $500 and $1,200$3,900 was expensed in each of fiscal 20172020 and 2016 respectively.2019.
 
(3)
(5)
The amounts represent compensation expense for the 2017, 2016 and 2015 stock options granted as part of his employment agreement,on July 1, 2017, and February 26, 2017, valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The stock options were granted as part of his employment agreement. The options were valued at a total of $11,800, and $10,500, $9,500respectively, of which $6,300 and $7,100,$7,400 was expensed in fiscal 2020 and 2019, respectively.

(6)
The amounts represent the Company’s matching contribution under the Company’s 401(k).

(7)
The amounts represent director and chairman fees paid to Mr. Moore through June 30, 2020. On July 1, 2020 Mr. Moore became an employee of the Company and thereafter will not be paid any director fees.
 

 
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR ENDED JUNE 30, 20172020
 
Name
(a)
Grant
Date
(b)
Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan
$
(c)
Estimated
Future
Payouts
Under
Equity
Incentive
Plan
$
(d)
All Other
Stock
Awards:
Number
Of
Shares
Of Stock
Or Units
(#)
(e)
All Other
Option
Awards:
Number
Of
Securities
Underlying
Options
(#)
(f)
Exercise
Or Base
Price
Of Option
Awards
($/Sh)
(g)
Grant
Date
Fair
Value of
Stock
And
Option
Awards
(h)
Grant
Date
(b)
 
Estimate Future Payouts
Under
Non-Equity
Incentive
Plan
$
(c)
 
 
Estimated
Future
Payouts
Under
Equity
Incentive
Plan
$
(d)
 
 
All Other
Stock Awards
Number
Of
Shares
Of Stock
Or Units
(#)
(e)
 
 
All Other
Option
Awards:
Number
Of
Securities
Underlying
Options
(#)
(f)
 
 
Exercise
Or Base
Price
Of Option
Awards
($/Sh)
(g)
 
 
Grant
Date
Fair
Value of
Stock
And
Option
Awards
(h)
 
Karl D. Nowosielski02/26/17
0
 0   6,000   2.91   10,500 
John A. Moore07/01/19- 06/30/20
  0 
  5,881 
  5.35-11.30 
  36,000 
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
Option Awards
Name
(a)
Number
of
Securities
Under-
lying
Unexercised
Options (#)
Exercisable
(b)
Number
of
Securities
Under-
lying
Unexercised
Options (#)
Unexerci-
sable
(c)
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
(d)
Option
Exercise
Price
($)
(e)
Option
Expiration
Date
(f)
Brookman P. March 7,000 0 0 3.71-3.96 05/2022-12/2023
Robert P. Nichols 2,000 0 0 3.50 12/2023
Karl D. Nowosielski 6,333 10,667 0 3.05-4.05 02/2024-02/2027
 
Option Awards
 
Name
(a)
 
 
  Number of
Securities
Underlying 
Unexercised 
Options
(#) Exercisable
(b)  
 
 
 
Number of
Securities
Underlying Unexercised
Options
(#)
Unexercisable
(c)  
 
 
 
 Equity Incentive Plan Awards
Number of Securities Underlying Unexercised Unearned Options
 (#)
(d)
 
 
 
 Option 
Exercise 
Price
 ($)
(e)
 
 
 
Option
Expiration
Date
(f)
 
 
Helena Santos
  8,666 
  8,334 
  0 
  3.08 
  07/2027 
Anthony Mitri
  6,668 
  3,332 
  0 
  3.05-3.15 
  12/2027-06/2028
John A. Moore
  1,902 
  10,684 
  0 
  4.50-11.30 
 03/2029-06/2030
Robert Nichols
  5,000 
  2,500 
  0 
  3.08 
 12/2023-07/2027
Karl Nowosielski
  22,000 
  2,500 
  0 
  3.05-4.05 
 02/2024-07/2027
 
Employment Agreements
 
On July 1, 2017, the Company entered into a new employment agreement with Ms. Helena R. Santos through June 30, 2020 with the option to extend for two additional one-year periods.periods, with the first one-year option exercised through June 30, 2021. The agreements provideagreement provides for an annual base salary for the fiscal year endingended June 30, 2018 of $175,000 with annual increases thereafter of 3% per annum or the percentage increase, if any, in the Consumer Price Index, whichever is higher. The agreement also providesprovided for a bonus of $25,000 for the fiscal year endingended June 30, 2018 and on a discretionary basis thereafter. A bonus of $20,000$50,000 was awarded duringgranted for fiscal 20172020 and no bonus was awarded during fiscal 2016.none in 2019. The agreement also providesprovided for a grant of options to purchase 25,000 shares of the Company’s stock which were granted during the year ended June 30, 2018. The agreement does not provide for the grant of stock options in 2019. On June 23, 2020 the Board of Directors authorized to be granted to Ms. Santos options to purchase 25,000215,366 shares during fiscal year ending June 30, 2018,of the Company’s stock, subject to continued employment.amendment of the Company’s 2012 Stock Option Plan.
 
On July 1, 2017, the Company also entered into a new employment agreement with Mr. Robert P. Nichols through June 30, 2020 with the option to extend for two additional one-year periods.periods, with the first one-year option exercised through June 30, 2021. The agreements providesagreement provided for an annual base salary for the fiscal year endingended June 30, 2018 of $153,000 with annual increases thereafter of 3% per annum or the percentage increase, if any, in the Consumer Price Index, whichever is higher. The agreement also providesprovided for a bonus of $10,000 for the fiscal year endingended June 30, 2018 and on a discretionary basis thereafter. A bonus of $10,000$5,000 was awarded duringgranted for fiscal 20172020 and no bonus was awarded during fiscal 2016.none in 2019. The agreement also providesprovided for a grant of options to purchase 7,500 shares of the Company’s stock which were granted during the year ended June 30, 2018. The agreement does not provide for the grant of stock options to purchase 7,500 shares during fiscal year ending June 30, 2018, subject to continued employment.in 2019 or 2020.

 

On July 1, 2017, the Company also entered into a new employment agreement with Mr. Brookman P. March through June 30, 2020 with the option to extend for two additional one-year periods. The agreements provides for an annual base salary for the fiscal year ending June 30, 2018 of $155,000 with annual increases thereafter of 3% per annum or the percentage increase, if any, in the Consumer Price Index, whichever is higher. The agreement also provides for a bonus of $10,000 for the fiscal year ending June 30, 2018 and on a discretionary basis thereafter. A bonus of $10,000 was awarded during fiscal 2017 and no bonus was awarded during fiscal 2016. The agreement also provides for the grant of stock options to purchase 7,500 shares during fiscal year ending June 30, 2018, subject to continued employment. Mr. March is the husband of Grace S. Morin, a Director of the Company and of Altamira and a former principal stockholder of Altamira.
On July 1, 2017, the Company also entered into a new employment agreement with Mr. Karl Nowosielski through June 30, 2020 with the option to extend for two additional one-year periods.periods, with the first one-year option exercised through June 30, 2021. The agreements providesagreement provided for an annual base salary for the fiscal year endingended June 30, 2018 of $157,000 with annual increases thereafter of 4% per annum. The agreement also providesprovided for a bonus of $10,000 for the fiscal year ending June 30, 2018 and $10,000 for each subsequent year, provided a minimum 5% increase in the EBITDA of the Torbal Products Division is achieved. A bonus of $10,000 was awarded during fiscal 20172020 and no bonus was awarded during fiscal 2016.2019. The agreement also provided for a grant of options to purchase 7,500 shares of the Company’s stock which were granted during the year ended June 30, 2018. The agreement does not provide for the grant of stock options in 2019 or 2020.

On July 1, 2020, the Company entered into a new employment agreement with Mr. John A. Moore through June 30, 2023 with the option to extend for two additional one-year periods. The agreement provides for an annual base salary for the fiscal year ended June 30, 2021 of $175,000 with annual increases thereafter of 3% per annum or the percentage increase, if any, in the Consumer Price Index, whichever is higher. The agreement also provides for discretionary bonuses as determined by the Board of Directors or Compensation Committee. A bonus of $50,000 was granted for fiscal 2020 and none in 2019. The agreement also provides for a grant of options to purchase 215,366 shares of the Company’s stock, subject to amendment of the Company’s 2012 Stock Option Plan. Mr. Moore had been providing consulting services to the Company’s wholly owned subsidiary, Scientific Bioprocessing, Inc., since March 2019 pursuant to a consulting agreement through June 30, 2020, at which time he became an employee of the Company. The agreement provided for a monthly cash fee of $10,000 through August 2019 and $12,500 from September 2019 through June 2020 plus the monthly issuance of stock options valued at $3,000 per month. The agreement contained confidentiality and non-competition covenants. The Company paid fees of $40,000 and granted options with a value of $12,000 for fiscal 2019.

On May 16, 2017, the Company entered into a new employment agreement with Mr. Anthony Mitri through June 30, 2019 with the option to extend for one additional year period, which was exercised by mutual agreement through June 30, 2020 at an annual salary of $130,000. The agreement provided for an annual base salary for the fiscal year ended June 30, 2019 of $120,000 and $110,000 for the fiscal year ending June 30, 2018 plus incentive pay based on achievement of certain sales and income levels of Altamira Instruments, Inc. No incentive pay was earned for the fiscal year ended June 30, 2020 or 2019. The agreement also provided for the grant of stock options to purchase 7,500up to an aggregate of 10,000 shares, all of which were granted during the fiscal year endingended June 30, 2018, subject to continued employment.2018. No shares were granted during the years ended June 30, 2019 or June 30, 2020.
 
The employment agreements for Ms. Santos, Mr. Nichols, Mr. March,Moore, Mr. Nowosielski, and Mr. NowosielskiMitri contain confidentiality and non-competition covenants. The employment agreements for all the named executives aboveMs. Santos, Mr. Nichols and Mr. Nowosielski, contain termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if the relevant employee resigns for “good reason” (as such term is defined therein), the Company shall pay severance payments equal to one year’s salary at the rate of the compensation at the time of termination, and continue to pay the regular benefits provided by the Company for a period of one year from termination. The employment agreement for Mr. Moore contains termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if Mr. Moore resigns for “good reason” (as such term is defined therein), the Company shall pay severance payments equal to either one year’s salary at the rate of the compensation at the time of termination if Mr. Moore is terminated within 12 months of the date of his agreement or six months’ salary if Mr. Moore is terminated after 12 months of the date of his agreement, continue to pay the regular benefits provided by the Company for the period equal to the length of the severance payments and pay a pro rata portion of any bonus achieved prior to such termination of employment. Ms. Santos’ employment agreement also contains a provision that within one year of a change of control, if either the Company terminates her employment for any reason other than for “cause” or she terminates her employment for “good reason”, she will have the right to receive a lump sum payment equal to three times the average of her total annual compensation paid for the last five years immediately preceding such termination, minus $1.00.

 
 
Directors’ Compensation and Options
 
DIRECTORS’ COMPENSATION
For the Year Ended June 30, 20172020
 
Name(a)
 
Fees Earned or Paid in Cash ($)
(b)
 
 
Stock Awards ($)
(c)
 
 
Option Awards($)
(d)
 
 
Non-Equity Incentive Plan Comp-ensation ($) (e)
 
 
Changes in Pension Value and Non-qualified Deferred Compens-ation Earnings($)
(f)
 
 
Non-qualified Deferred Comp-ensation Earnings ($) (g)
 
 
All Other
Comp-
ensation ($)
(h)
 
 
Total ($) (i)
 
Joseph G.Cremonese
  35,900 
  0 
  0 
  0 
  0 
  0 
  43,200(1)
  79,100 
Roger B. Knowles (3)
  4,000 
  0 
  0 
  0 
  0 
  0 
  0 
  4,000 
Grace S.Morin
  18,100 
  0 
  0 
  0 
  0 
  0 
  5,200(2)
  23,300 
James S.Segasture
  18,100 
  0 
  0 
  0 
  0 
  0 
  00 
  18,100 
John F.F. Watkins (3)
  7,600 
  0 
  0 
  0 
  0 
  0 
  0 
  7,600 
Name
(a)
 
  Fees
Earned
or Paid in Cash
($)
   (b) 
 
  Stock Awards
($)
   (c) 
 
  Option Awards
($)
   (d) 
 
  Non-Equity Incentive Plan
Comp-
Ensation
($)
   (e) 
 
  Changes
in Pension Value and Non-qualified Deferred Compensation Earnings
($)
  (f) 
 
  Non-qualified Deferred Comp-sensation Earnings
 ($)
   (g) 
 
  All
Other
Comp- ensation
  ($)
    (h) 
 
  Total
($)
 (i) 
Joseph G. Cremonese
  36,700 
  0 
  0 
  0 
  0 
  0 
  76,200(1)
  112,900 
Marcus Frampton
  24,800 
  0 
  0 
  0 
  0 
  0 
  0 
  24,800 
John A. Moore (2)
    
    
    
    
    
    
    
    
Grace S. Morin
  6,400 
  0 
  0 
  0 
  0 
  0 
  8,400(3)
  14,800 
James S. Segasture
  16,800 
  0 
  0 
  0 
  0 
  0 
  0 
  16,800 
John F.F. Watkins
  24,800 
  0 
  0 
  0 
  0 
  0 
  0 
  24,800 
 
(1) Represents amount paid to him and his affiliate pursuant to a marketing consulting agreement (see Items 12 and 13).
 
(2) Director is also a named officer. Refer to Compensation Table in Item 11.

(3) Represents compensation received for her administrative services as a consultant for Altamira (see Items 12 and 13).through March 2020, upon termination of her consulting agreement. Ms. Morin’s directorship terminated in January 2020.
  
(3) On January 19, 2017 Mr. Knowles resigned and Mr. Watkins became his duly elected successor.

The Company payspaid each Director who is not an employee of the Company or a subsidiary a quarterly retainer fee of $2,200 and $1,800a meeting fee of $2,000 for each meeting attended.attended for each of fiscal 2020 and fiscal 2019. In addition, the Company reimburses each Director for out-of-pocket expenses incurred in connection with attendance at board meetings. From July 2019 through January 2020, Mr. Cremonese, and from February 2020 through June 2020, Mr. Moore, as Chairman of the Board, receiveseach received an additional fee of $1,600$1,700 per month. During fiscal 2017,2020, total director compensation to non-employee Directors aggregated $132,100,$418,000, including the consulting fees paid to Mr. Cremonese’s affiliate, Mr. Moore, and to Ms. Morin.
 
Since December 1, 2003,

                On June 23, 2020, Mr. Joseph G. Cremonese haswas awarded 20,000 options in connection with his consulting agreement. Prior to that, Mr. Cremonese, had been awarded a total of 45,000 stock options under the Company's 2002 and 2012 Stock Option Plans of which 5,000 remain unexercised. None of the other directors have options outstanding.
 
ItemItem 12. Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters.
  
The following table sets forth, as of June 30, 2017,2020, the number of shares of Common Stock beneficially owned by (i) each person known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each director of the Company, (iii) each named executive officer of the Company, and (iv) all directors and executive officers as a group. Shares not outstanding but deemed beneficially owned by virtue of the right of any individual to acquire shares within 60 days are treated as outstanding only when determining the amount of and percentage of outstanding shares of Common Stock owned by such individual. Each person has sole voting and investment power with respect to the shares shown, except as noted. Except as indicated in the table, the address for each of the following is c/o Scientific Industries, Inc., 80 Orville Drive, Bohemia, New York 11716.
 
   
Name
 
Amount and
Nature of Beneficial Ownership
 
% of Class
 
Roy T. Eddleman Trustee
c/o Troy Gould PC
1801 Century Park East, Ste. 1600
Los Angeles, CA 90067
124,736 (1)
  8.3%  8.3%
 
Fulcrum, Inc.
100 Delawanna Avenue
Clifton, NJ 07014
  117,370 (2)
 
7.9%
Joseph G. Cremonese138,262 (3)9.2%
Brookman P. March89,950 (4)6.0%
Grace S. Morin89,950 (5)6.0%
Robert P. Nichols20,397 (6)1.4%
Karl D. Nowosielski26,683 (7)1.8%
Helena R. Santos15,7791.1%
James S. Segasture162,500 (8)10.9%
John F. F. Watkins            00.0%
All directors and executive officers as a group (7 persons)453,571 (9)29.7%
Name
Amount and Natureof
Beneficial Ownership
%  of  Class
Roy T. Eddleman, Trustee, Roy T. Eddleman Trust UAD 8-7-2000
Troy Gould PC
1801 Century Park East Suite 1600
Los Angeles, CA 900067
1,495,686(1)
42.2%
Christopher Cox
One World Financial Center
New York, NY 10281
444,000(2)
14.4%
Lyon Polk
1585 Broadway 22ndFloor
New York, NY 10036
444,000(3)
14.4%
Joseph G. Cremonese
136,062(4)
4.7%
Marcus Frampton
81,812(5)
2.9%
John A. Moore
34,786(6)
1.2%
Helena R. Santos
38,252(7)
1.3%
John F. F. Watkins
0
(*)
Karl D. Nowosielski
34,183(8)
1.2%
Anthony J. Mitri
10,000(9)
(*)
Robert P. Nichols
27,085(10)
1.0%
All directors and executive officers as a group (8 persons)
362,180(11)
12.2%

 
(1) 
Based on information reported on Form 3 filed with the Securities and Exchange Commission on June 11, 2017.
(2)
Stock ownership in conjunction with acquisition of the Torbal division assets from Fulcrum, Inc. on February 26, 2014.
(3) 
126,262 shares are owned jointly with his wife, 7,000 shares are owned by his wife, and 5,000 shares are issuable upon exercise of options.
(4) 
Represents 82,950 shares owned by Ms. Morin, his wife and 7,000 shares issuable upon exercise of options.
(5) 
Includes 7,000 shares issuable upon exercise of options held by her husband, Mr. March.
(6) 
Includes 2,000 shares issuable upon exercise of options.
(7) 
Includes 9,683 stock issued in connection with the acquisition of the Torbal Division in February 2014. Includes 17,000 shares issuable upon exercise of options.
(8) 
Shares owned jointly with his wife.
(9) 
Includes 31,000 shares issuable upon exercise of options.

 
(1)Based upon form Schedule 13D filed with the Securities and Exchange Commission (“SEC”) on June 24, 2020. Includes 683,850 shares issuable upon exercise of warrants.
 
(2) Based upon from Schedule 13D filed with the SEC on June 29, 2020. Includes 222,000 shares issuable upon exercise of warrants.
(3) Based upon form Schedule 13G filed with the SEC on July 9, 2020. Includes 222,000 shares issuable upon exercise of warrants.
(4) 126,262 shares are owned jointly with his wife, 7,000 shares are owned by his wife, and 5,000 shares are issuable upon exercise of options.
(5) 2,250 shares are owned by Mr. Frampton. Mr. Frampton has voting power over 77,085 shares.
(6) Includes 12,586 shares issuable upon exercise of options.
(7) Includes 17,000 shares issuable upon exercise of options.
(8) Includes 9,683 stock issued in connection with the acquisition of the Torbal Division in February 2014.
(9) Represents shares issuable upon exercise of options.
(10) Includes 7,500 shares issuable upon exercise of options.
(11) Includes 96,586 shares issuable upon exercise of options.
(*) - % of Class is less than 1%.
EQUITY COMPENSATION PLAN INFORMATION
 
The following table sets forth information with respect to Company options, warrants and rights as of June 30, 2017.2020.

Plan Category
 
 
 
 
 
  Number
of
Securities
 to be Issued Upon Exercise
of Outstanding Options, Warrants and Rights
  (a) 
 
  Weighted-Average
 Exercise Price
of
Outstanding Options, Warrants
and
Rights
($) 
  (b) 
 
  Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in
Column
(a)
   (c) 
Equity Compensation plans
approved by security holders
  96,600 
  4.35 
  147,400 
Equity Compensation plans
not approved by security holders
  N/A 
  N/A 
  N/A 
Total
  96,600 
  4.35 
  147,400 
 
Plan Category
 
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)
 
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($) (b)
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
 
Equity Compensation plans approved by security holders34,5003.2583,500
Equity Compensation plans not approved by security holdersN/AN/AN/A
Total34,5003.2583,500
 25


 
ItemItem 13. Certain Relationships and Related Transactions and Director Independence.
   
Mr. Joseph G. Cremonese, a Director since November 2002, through his affiliate, Laboratory Innovation Company, Ltd., has been providing independent marketingprovides consulting services to the Company since January 1, 2003 pursuant tounder a consulting agreement expiring on December 31, 2017. The agreement currently provides that Mr. Cremonese and his affiliate shall render,2020 at the request of the Company, marketing consulting services for a monthly paymentretainer of $3,600.$9,000. The agreement contains confidentiality and non-competition covenants. The Company paid fees of $76,200 and $43,200 pursuant to the agreement for each of fiscal 20172020 and 2016.fiscal 2019, respectively.
 
Ms. Grace S. Morin, was elected a Director in December 2007 following the sale of her 90.36% ownership interest in Altamira to the Company in November 2006. Up until March 31, 2009, Ms. Morin had been employed by Altamira as an administrative employee. Since April 1, 2009, she has provided consulting services on a part-time basis pursuant to an agreement expiring December 31, 2017 at the rate of $85 per hour, resulting in payments of $5,200 and $5,800 for fiscal 2017 and fiscal 2016, respectively. The agreement contains confidentiality and non-competition covenants.
ItemItem 14. Principal Accountant Fees and Services.
  
The following is a description of the fees incurred by the Company for services by the firm of Nussbaum Yates Berg Klein & Wolpow, CPAs LLP (the “Firm”) during fiscal 20172020 and fiscal 2016.2019.
     
The Company incurred for the services of the Firm fees of approximately $69,000$77,500 and $67,000$73,000 for fiscal 20172020 and fiscal 2016,2019, respectively, in connection with the audit of the Company’s annual consolidated financial statements and quarterly reviews; and $6,000 for each fiscal year$7,500 and $7,500 for the preparation of the Company’s corporate tax returns.returns for fiscal 2020 and fiscal 2019, respectively.
 
In approving the engagement of the independent registered public accounting firm to perform the audit and non-audit services, the Board of Directors as the Company’s audit committee evaluates the scope and cost of each of the services to be performed including a determination that the performance of the non-audit services will not affect the independence of the firm in the performance of the audit services.
 
PART  PART IV
 
Item
Item 15. Exhibits and Financial Statement Schedules.
 

Financial Statements. The required financial statements of the Company are attached hereto on pages F1-F26.F1-F-25.
 
Exhibits. The following Exhibits are filed as part of this report on Form 10-K:
 

 
Exhibit NumberExhibit
  
3Articles of Incorporation and By-Laws:
  
3(a)
Certificate of Incorporation of the Company as amended (filed as Exhibit 1(a-1) to the Company's General Form for Registration of Securities on Form 10 dated February 14, 1973 and incorporated by reference thereto.)
  
3(b)
Certificate of Amendment of the Company’s Certificate of Incorporation, as filed on January 28, 1985 (filed as Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 1985 and incorporated by reference thereto.)
  
3(c)
By-Laws of the Company, as restated and amended (filed as Exhibit 3(ii) to the Company’s Current Report on Form 8-K filed on January 6, 2003 and Exhibit 3(ii) to the Company’s Current Report on Form 8-K filed on December 5, 2007 and incorporated by reference thereto).

3(d)
Second Amended and Restated By-Laws of Scientific Industries, Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on August 10, 2020 and incorporated by reference thereto).
  
4Instruments defining the rights of security holders:
  
4(a)
2002 Stock Option Plan (filed as Exhibit 99-1 to the Company’s Current Report on Form 8-K filed on November 25, 2002 and incorporated by reference thereto).
  
4(b)
2012 Stock Option Plan (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on January 23, 2012 and incorporated by reference thereto).
  
4(c)
Amendment to the Company’s 2012 Stock Option Plan (Filed as Exhibit 4(c) to the Company’s Quarterly Report on Form 10-Q filed on May 12, 2016 and incorporated by reference thereto).
4(d) Form of Warrant issued by the Company to Investors (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020, and incorporated by reference thereto).
  
10Material Contracts:
  
10(a)
Lease between Registrant and AIP Associates, predecessor-in-interest of current lessor, dated October, 1989 with respect to Company's offices and facilities in Bohemia, New York (filed as Exhibit 10(a) to the Company’s Annual Report on Form 10-KSB filed on September 28, 2005 and incorporated by reference thereto).
  
10(a)-1
Amendment to lease between Registrant and REP A10 LLC, successor in interest of AIP Associates, dated September 1, 2004 (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on September 2, 2004, and incorporated by reference thereto).
  
10(a)-2
Second amendment to lease between Registrant and REP A10 LLC dated November 5, 2007 (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on November 8, 2007, and incorporated by reference thereto).
  
10(a)-3
Lease agreement dated August 8, 2014 by and between the Company and 80 Orville Drive Associates LLC.
 
10(b)
Employment Agreement dated January 1, 2003, by and between the Company and Ms. Santos (filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K filed on January 22, 2003, and incorporated by reference thereto).
10(b)-1
 
10(b)-1Employment Agreement dated September 1, 2004, by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on September 1, 2004, and incorporated by reference thereto).
  
10(b)-2
Employment Agreement dated December 29, 2006, by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on December 29, 2006, and incorporated by reference thereto).
 

   
10(b)-3
Employment Agreement dated July 31, 2009 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on August 7, 2009, and incorporated by reference thereto).
 
10(b)-4
Employment Agreement dated May 14, 2010 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 18, 2010, and incorporated by reference thereto).
  
10(b)-5
Employment Agreement dated September 13, 2011 by and between the Company and Ms. Santos (filed as exhibit 10(b)-5 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, and incorporated by reference thereto).
  
10(b)-6
Amended Employment Agreement dated May 20, 2013 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 20, 2013, and incorporated by reference thereto).
  
10(b)-7
Agreement extension dated June 9, 2015 to amend employment agreement by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto)
  
10(b)-8
Agreement extension dated May 25, 2016 to amend employment agreement by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
  
10(b)-9
Employment agreement dated July 1, 2017 by and between the Company and Ms. Santos (filed as an exhibit herewith)to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto).


  
10(c)
Employment Agreement dated January 1, 2003, by and between the Company and Mr. Robert P. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 22, 2003, and incorporated by reference thereto).
  
10(c)-1
Employment Agreement dated September 1, 2004, by and between the Company and Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on September 1, 2004, and incorporated by reference thereto).
  
10(c)-2
Employment Employment Agreement dated December 29, 2006, by and between the Company and Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on December 29, 2006, and incorporated by reference thereto).
  
10(c)-3
Employment Agreement dated July 31, 2009 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on August 7, 2009, and incorporated by reference thereto).
  
10(c)-4
Employment A Employment Agreement dated May 14, 2010 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on May 18, 2010, and incorporated by reference thereto).
  
10(c)-5
Employment Agreement dated September 13, 2011 by and between the Company and Mr. Nichols (filed as Exhibit 10(c)-5 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, and incorporated by reference thereto).
  
10(c)-6
Amended Employment Agreement dated May 20, 2013 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company’s current Report on Form 8-K filed on May 20, 2013, and incorporated by reference thereto).
  
10(c)-7
Agreement extension dated June 9, 2015 to amend employment agreement with Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto).
  
10(c)-8
Agreement e Agreement extension dated May 25, 2016 to amend employment agreement with Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
10(c)-9
Employment agreement dated July 1, 2017 by and between the Company and Mr. Nichols (filed as an exhibit herewith)to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto).
  
10(d)
Consulting Agreement dated January 1, 2003 by and between the Company and Mr. Cremonese and his affiliate, Laboratory Innovation Company, Ltd. (filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K filed on January 6, 2003, and incorporated by reference thereto).
  
10(d)-1
Amended and Restated Consulting Agreement dated March 22, 2005, by and between the Company and Mr. Cremonese and Laboratory Innovation Company, Ltd. (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 23, 2005, and incorporated by reference thereto).
  
10(d)-2
Second Amended and Restated Consulting Agreement dated March 15, 2007, by and between the Company and Mr. Cremonese and Laboratory Innovation Company Ltd. (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 16, 2007, and incorporated by reference thereto).
  
10(d)-3
Third Amended and Restated Consulting Agreement dated September 23, 2009, by and between the Company and Mr. Cremonese and Laboratory Innovation Company, Ltd. (filed as Exhibit 10 to the Company’s Annual Report on Form 10-K field on September 24, 2009, and incorporated by reference thereto).
  
10(d)-4
Fourth Amended and Restated Consulting Agreement dated January 7, 2011 (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K (filed on January 18, 2011, and incorporated by reference thereto)thereto).

10(d)-5
10(d)-5
Fifth Amendment and Restated Consulting Agreement dated January 20, 2012 (filed as Exhibit 10 to the Company’s Current Report on Form 8-K (filed on January 23, 2012, and incorporated by reference thereto).
  
10(d)-6
Agreement extension dated November 29, 2012 to Amended and Restated Consulting Agreement (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on December 4, 2012, and incorporated by reference thereto).
  
10(d)-7
Agreement extension dated December 12, 2013 to Amended and Restated Consulting Agreement (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on December 12, 2013, and incorporated by reference thereto).
  
10(d)-8
Agreement extension dated January 14, 2015 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 15, 2015, and incorporated with reference thereto).
  
10(d)-9
Agreement extension dated January 7, 2016 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 26, 2016, and incorporated with reference thereto).
  
10(d)-10
Agreement extension dated February 16, 2018 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10-A1 to the Company’s Current Report on Form 8-K filed on March 9, 2018, and incorporated with reference thereto).
10(d)-11
Agreement extension dated January 23, 2019 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10-1 to the Company’s Current Report on Form 8-K filed on January 25, 2019, and incorporated with reference thereto).

10(d)-12
Monthly Retainer Agreement between Scientific Bioprocessing, Inc. and Mr. Cremonese and affiliates (filed as Exhibit 10(d)-12 to the Company’s Quarterly Report on Form 10-Q on February 13, 2020, and incorporated by reference thereto).
10(e)
Sublicense from Fluorometrix Corporation (filed as Exhibit 10(a)1 to the Company’s Current Report on Form 8-K filed on June 14, 2006, and incorporated by reference thereto).
  
10(f)
Stock Purchase Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
  
10(g)
Escrow Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).

10(h)
Registration Rights Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
  
10(i)
Employment Agreement, dated as of November 30, 2006, between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
  
10(i)-1
Employment Agreement, dated as of October 30, 2008, between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on October 30, 2008, and incorporated by reference thereto).
10(i)-2
 
10(i)-2Employment Agreement, dated as of October 1, 2010, between Altamira Instruments, Inc., and Brookman P. March (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on October 13, 2010, and incorporated by reference thereto).
  
10(i)-3
Employment Agreement, dated as of May 18, 2012 between Altamira Instruments,Inc.and Inc. and Brookman P. March (filed as Exhibit 10(i)-3 to the Company’s Annual Report on Form 10-K filed on September 27, 2012, and incorporated by reference thereto).
  
10(i)-4
Agreement Extension, dated as of May 21, 2014 between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on May 21, 2014, and incorporated by reference thereto).
  
10(i)-5
Agreement extension dated June 9, 2015 to amend employment agreement (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto).
  
10(i)-6
Agreement extension dated May 25, 2016 to amend employment agreement (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
  
10(i)-7
Employment agreement dated July 1, 2017 by and between the Company and Mr. March (filed as an exhibit herewith)to the Company's Annual Report on Form 10-K filed on June 30, 2017, and incorporated by reference thereto).

10(i)-8Termination notice dated February 14, 2020 to Mr. March (filed as Exhibit 10(I-8) to the Company’s Current Report on Form 8-K filed on February 18, 2020, and incorporated by reference thereto).
  
10(j)
Indemnity Agreement, dated as of April 13, 2007 by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(j) to the Company’s Annual Report on Form 10-KSB filed on September 28, 2007 and incorporated by reference thereto).
  
10(k)
Lease between Altamira Instruments, Inc. and Allegheny Homes, LLC, with respect to the Company’s Pittsburgh, Pennsylvania facilities (filed as Exhibit 10(k) to the Company’s Annual Report on Form 10-KSB filed on September 28, 2007 and incorporated by reference thereto).

10(k)-1
10(k)-1
Lease between Altamira Instruments, Inc. and Allegheny Homes, LLC, with respect to the Company’s Pittsburgh, Pennsylvania facilities (filed as Exhibit 10(k)-1 to the Company’s Quarterly Report on Form 10-Q filed on February 14, 2013, and incorporated by reference thereto).
  
10(l)
Line of Credit Agreements dated October 30, 2008, by and among the Company and Capital One, N.A. (filed as Exhibits 10-A1(a) through (f) to the Company’s Current Report on Form 8-K filed on October 30, 2008, and incorporated by reference thereto.
  
10(l)-1
Restated Promissory Note Agreement dated January 20, 2010 by and among the Company and Capital One N.A. (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on January 20, 2010, and incorporated by reference thereto).
  
10(I)-2
Consulting Agreement dated April 1, 2009 by and between the Company and Grace Morin (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on April 1, 2009, and incorporated by reference thereto).
  
10(m)-1
Agreement dated January 12, 2015 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on January 15, 2015, and incorporated by reference thereto).
  
10(m)-2
Agreement dated January 7, 2016 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on January 26, 2016, and incorporated by reference thereto).
  
10(m)-3
Agreement dated February 16, 2018 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on March 9, 2018, and incorporated by reference thereto).
10(m)-4
Agreement dated January 23, 2019 to extend Consulting Agreement (filed as Exhibit 10-2 to the Company’s Current Report on Form 8-K filed on January 25, 2019, and incorporated by reference thereto).
10(n)
Line of Credit Agreements dated June 14, 2011, by and among the Company and JPMorgan Chase Bank, N.A. (filed as Exhibits 99.1 through 99.3 to the Company’s Current Report on Form 8-K filed on June 16, 2011, and incorporated by reference thereto).
  
10(n)-1
Promissory Note dated June 5, 2013 by and among the Company and JP Morgan Chase Bank, N.A. (filed as Exhibit 99 to the Company’s Current Report on Form 8-K filed on June 7, 2013, and incorporated by reference thereto).
  
10(o)
Purchase Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Fluorometrix Corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
10(p)
Escrow Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Fluorometrix Corporation (filed as Exhibit 10(A) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
  
10(q)
Research and Development Agreement dated as of November 14, 2011, by and between Scientific Bioprocessing, Inc. and Biodox R&D Corporation (filed as Exhibit 10(B) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).

  
10(q)-1
Notice of termination of Research and Development Agreement dated June 12, 2013 (filed as Exhibit 99 to the Company’s Current Report on Form 8-K filed on June 27, 2013, and incorporated by reference thereto)
  
10(r)
Non-Competition Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Joseph E. Qualitz (filed as Exhibit 10(D) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
  
10(s)
Promissory Note, dated as of November 14, 2011, by and between the Company and the University of Maryland, Baltimore County (filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
  
10(t)
License Agreement, dated as of January 31, 2001 by and between University of Maryland, Baltimore County and Fluorometrix Corporation (filed as Exhibit 10(E) to the Company’s Current Report on Form 8-K filed on November 21, 2011, and incorporated by reference thereto).
  
10(u)
Line of Credit Agreements dated June 25, 2014, by and among the Company and Bank of America Merrill Lynch (filed as Exhibits 99.1 through 99.2 (to the Company’s Current Report on Form 8-K filed on July 2, 2014, and incorporated by reference thereto).
  
10(v)
Asset Purchase Agreement, dated as of February 26, 2014, by and among the Company and Fulcrum, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
  
10(v)-1
Escrow Agreement, dated as of February 26, 2014, by and among the Company, and Fulcrum, Inc. (filed as Exhibit 10(e) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
  
10(v)-2
Non-Competition Agreements, dated as of February 26, 2014, by and among the Company, and James Maloy and Karl Nowosielski (filed as Exhibits 10(b) and 10(c) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
  
10(v)-3
Registration Rights Agreement,Agreement, dated as of February 26, 2014, by and among the Company, and Fulcrum, Inc. (filed as Exhibit 10(d) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).

10(v)-4
Supply Agreement, dated as of February 20, 2014, by and among the Company, and Axis Sp 3.O.O. (filed as Exhibit 10(g) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
  
10(w)
Line of Credit Agreements dated June 26, 2015, by and among the Company and First National Bank of Pennsylvania (filed as Exhibit 10.1 through 10.4 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
  
10(w)-1
Commercial Security Agreement dated July 5, 2016 by and among the Company, and First National Bank of Pennsylvania.
  
10(y)
Note Purchase Agreements with James Maloy dated May 7, 2015 (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
  
10(z)
Note Purchase Agreements with Grace March dated May 19, 2015 (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
10(aa)

Employment agreementConsulting Agreement dated JulyMarch 1, 2017 by and2019 between the Company and Mr. Karl NowosielskiJohn A. Moore (filed as an exhibit herewith)Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 6, 2019, and incorporated by reference thereto).

10(aa)-1Amendment to Consulting Agreement dated November 7, 2019 between the Company and Mr. John A. Moore (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 11, 2019, and incorporated by reference thereto).

10(aa)-2Employment Agreement dated July 1, 2020 between Scientific Bioprocessing, Inc. and John A. Moore (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2020, and incorporated by reference thereto).

10(bb)
Consulting Agreement dated July 20, 2020 between the Company and Mr. Reinhard Vogt and his affiliate Societat Reinhard and Noah Vogt AG (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on July 22, 2020, and incorporated by reference thereto.)

10(cc)
Employment Agreement dated July 1, 2020 between Scientific Bioprocessing, Inc. and James Polk (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 25, 2020, and incorporated by reference thereto).
10(dd)Securities Purchase Agreement dated June 18, 2020 between the Company and Investors (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020, and incorporated by reference thereto).
  
10(ee)
Loan Agreement under the U.S. Small Business Administration Paycheck Protection Program dated April 14, 2020 between the Company and First National Bank (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 21, 2020, and incorporated by reference thereto).
14
Code of Ethics (filed as Exhibit 14 to the Company’s Annual 10KSB filed on September 28, 2007 and incorporated by reference thereto).
  
21Subsidiaries of the Registrant
  
 Altamira Instruments, Inc., a Delaware Corporation, is a wholly-owned subsidiary of the Company.
  
 Scientific Bioprocessing, Inc., a Delaware Corporation, is a wholly-owned subsidiary of the Company since November 2011.
  
 Scientific Packaging Industries, Inc., a New York corporation, is a wholly-owned inactive subsidiary of the Company.
  
31.01
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
  
32.01
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
2002.
 


 
SIGNATURESSIGNATURES
 
Pursuant to the requirements of Section13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Date: September 28, 2017October 09, 2020
 
SCIENTIFIC INDUSTRIES, INC.
(Registrant)
 
/s/Helena R. Santos
 
Helena R. Santos
President, Chief Executive Officer, Treasurer
Chief Financial Officer and Principal Accounting OfficerTreasurer
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Name
Title
Date
   
/s/ Helena R. SantosPresident and Treasurer (Chief Executive Officer and Financial Officer) and DirectorSeptember 28, 2017
Helena R. Santos  
/s/ Joseph G. Cremonese
Helena R. Santos
Chairman of the Board
President, Chief Executive Officer, Chief Financial Officer and Treasurer
September 28, 2017
October 09, 2020
Joseph G. Cremonese  
/s/ Grace S. Morin
Joseph G. Cremonese
Director
September 28, 2017
October 09, 2020
Grace S. Morin  
/s/ James S. Segasture
Marcus Frampton
Director
September 28, 2017
October 09, 2020
James S. Segasture  
/s/
John A. Moore
Chairman of the Board
October 09, 2020
Reinhard Vogt
Director
October 09, 2020
John F.F. Watkins
Director
September 28, 2017
October 09, 2020
John F.F. Watkins  
 
 

 


 
SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
 
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
AS OF AND FOR THE YEARS ENDED
JUNE 30, 20172020 AND 2016
2019
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 

CONTENTS
 
 
 Page
  
Report of independent registered public accounting firmF-1
  
Consolidated financial statements: 
  
Balance sheetsF-2
  
Statements of operationsF-3
  
Statements of comprehensive income (loss)F-4
Statements of changes in shareholders’stockholders’ equityF-5F-4
  
Statements of cash flowsF-6 – F-7F-5
  
Notes to financial statementsF-8F-6 – F-26F-25
 
 
 
Report of Independent Registered Public Accounting Firm
 
Board of Directors and ShareholdersStockholders’
Scientific Industries, Inc.
Bohemia, New York
 
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Scientific Industries, Inc. and its subsidiaries (the “Company”) as of June 30, 20172020 and 2016, and2019, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders'stockholders' equity and cash flows for the years then ended. These consolidated financial statements areended, and the responsibility of the Company’s management. Our responsibility isrelated notes to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate inand schedules (collectively, the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
“financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Scientific Industries, Inc. and subsidiariesthe Company as of June 30, 20172020 and 2016,2019, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
  /s/ Nussbaum Yates Berg Klein & Wolpow, LLP
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Nussbaum Yates Berg Klein & Wolpow, LLP
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1991.
 
 
Melville, New York
September 28, 2017
October 9, 2020
 
F-1
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
AS OF JUNE 30, 20172020 AND 20162019
 
ASSETS
 
 
 2017
 
 
 2016
 
 
 2020 
 
 
 2019 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $1,025,100 
 $1,245,000 
 $7,559,700 
 $1,602,500 
Investment securities
  295,500 
  290,100 
  331,800 
  330,900 
Trade accounts receivable, less allowance for doubtful accounts of $11,600 in 2017 and 2016
  1,424,400 
  1,231,900 
Trade accounts receivable, less allowance for doubtful accounts of $11,600 and $15,000, respectively
  1,064,000 
  1,974,200 
Inventories
  1,961,200 
  2,412,100 
  2,884,700 
  2,592,300 
Income tax receivable
  334,800 
  -  
Prepaid expenses and other current assets
  80,300 
  47,200 
  112,300 
  91,200 
Deferred taxes
  129,000 
  140,600 
    
Total current assets
  4,915,500 
  5,366,900 
  12,287,300 
  6,591,100 
    
    
Property and equipment, net
  199,300 
  251,100 
  279,700 
  318,800 
    
    
Intangible assets, net
  579,000 
  897,600 
  128,700 
  175,000 
    
    
Goodwill
  705,300 
  705,300 
  705,300 
  705,300 
    
    
Operating lease right-of-use assets
  803,300 
  - 
    
Other assets
  52,500 
  52,500 
  56,000 
  54,700 
    
    
Deferred taxes
  376,100 
  275,900 
  537,100 
  431,100 
    
    
Total assets
 $6,827,700 
 $7,549,300 
 $14,797,400 
 $8,276,000 
 
LIABILITIES AND SHAREHOLDERS’STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
 
 
Accounts payable
 $139,200 
 $342,400 
 $354,700 
 $569,000 
Accrued expenses and taxes, current portion
  491,000 
  849,700 
Accrued expenses and taxes
  799,700 
  608,300 
Contract liabilities
  89,000 
  - 
Contingent consideration, current portion
  175,700 
  136,500 
  111,000 
  268,000 
Notes payable, current portion
  6,700 
  6,400 
Bank overdraft
  43,100 
  140,000 
Lease liabilities, current portion
  226,900 
  - 
Payroll Protection Program loan
  563,800 
  - 
    
    
Total current liabilities
  812,600 
  1,335,000 
  2,188,200 
  1,585,300 
    
    
Accrued expenses, less current portion
  60,000 
  60,000 
Notes payable, less current portion
  5,800 
  12,500 
Lease liabilities, less current portion
  640,800 
  - 
Contingent consideration payable, less current portion
  121,300 
  209,800 
  247,000 
  350,000 
    
    
Total liabilities
  999,700 
  1,617,300 
  3,076,000 
  1,935,300 
    
    
Shareholders’ equity:
    
Common stock, $.05 par value; authorized 7,000,000 shares; issued 1,513,914 shares in 2017 and 1,508,914 shares in 2016
  75,700 
  75,400 
Stockholders’ equity:
    
Common stock, $.05 par value; 7,000,000 shares authorized; 2,881,065 and 1,513,914 shares issued; 2,861,263 and 1,494,112 shares outstanding in 2020 and 2019, respectively
  144,100 
  75,700 
Additional paid-in capital
  2,515,900 
  2,498,500 
  8,608,300 
  2,592,700 
Accumulated other comprehensive income (loss)
  (3,500)
  900 
Retained earnings
  3,292,300 
  3,409,600 
  3,021,400 
  3,724,700 
  5,880,400 
  5,984,400 
  11,773,800 
  6,393,100 
Less common stock held in treasury at cost, 19,802 shares
  52,400 
  52,400 
  52,400 
  52,400 
    
    
Total shareholders’ equity
  5,828,000 
  5,932,000 
Total stockholders’ equity
  11,721,400 
  6,340,700 
    
    
Total liabilities and shareholders’ equity
 $6,827,700 
 $7,549,300 
Total liabilities and stockholders’ equity
 $14,797,400 
 $8,276,000 
See notes to consolidated financial statements.
 
F-2
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
FOR THE YEARS ENDED JUNE 30, 20172020 AND 2016
2019
 
 
2017
 
 
2016
 
 
 2020 
 
 
 2019 
 
 
 
 
 
 
 
Revenues
 $8,149,300 
 $9,597,600 
 $8,570,300 
 $10,199,800 
    
    
Cost of revenues
  5,270,000 
  5,680,300 
  4,716,900 
  5,832,700 
    
    
Gross profit
  2,879,300 
  3,917,300 
  3,853,400 
  4,367,100 
    
    
Operating expenses:
    
    
General and administrative
  1,665,400 
  1,695,200 
  2,412,300 
  1,924,400 
Selling
  888,800 
�� 1,415,400 
  1,436,400 
  1,136,100 
Research and development
  437,500 
  349,000 
  1,140,000 
  530,500 
Impairment of intangible assets
  48,000 
  212,700 
    
    
Total operating expenses
  3,039,700 
  3,672,300 
  4,988,700 
  3,591,000 
    
    
Income (loss) from operations
  (160,400)
  245,000 
  (1,136,300)
  776,100 
    
    
Other income (expense):
    
    
Interest income
  10,600 
  6,000 
  12,600 
  3,400 
Other income, net
  5,900 
  1,800 
Other income (expense), net
  (16,200)
  (7,800)
Interest expense
  (2,900)
  (33,900)
  - 
  (1,500)
    
    
Total other income (expense), net
  13,600 
  (26,100)
  (3,600)
  (5,900)
    
    
Income (loss) before income tax expense (benefit)
  (146,800)
  218,900 
  (1,139,900)
  770,200 
    
    
Income tax expense (benefit):
    
    
Current
  13,400 
  202,500 
  - 
  166,600 
Deferred
  (87,600)
  (149,200)
  (436,600)
  (42,000)
    
    
Total income tax expense (benefit)
  (74,200)
  53,300 
  (436,600)
  124,600 
    
    
Net income (loss)
 $(72,600)
 $165,600 
 $(703,300)
 $645,600 
    
    
Basic earnings (loss) per common share
 $(.05)
 $.11 
 $(.46)
 $.43 
    
    
Diluted earnings (loss) per common share
 $(.05)
 $.11 
 $(.46)
 $.43 
    
    
Weighted average common shares outstanding, basic
  1,491,167 
  1,489,112 
Weighted average common shares, basic
  1,515,103 
  1,494,112 
    
    
Weighted average common shares outstanding, assuming dilution (in 2016)
  1,491,167 
  1,489,387 
Weighted average common shares outstanding, assuming dilution (in 2019)
  1,515,103 
  1,512,178 
 
See notes to consolidated financial statements.
 
F-3
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
 
 
 2017
 
 
 2016
 
 
 
 
 
 
 
 
Net income (loss)
 $(72,600)
 $165,600 
 
    
    
Other comprehensive income (loss):
    
    
Unrealized holding gain (loss)
    
    
arising during period,
    
    
net of tax
  (4,400)
  4,200 
 
    
    
Comprehensive income (loss)
 $(77,000)
 $169,800 
See notes to consolidated financial statements.
F-4
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'STOCKHOLDERS' EQUITY
 
FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
 
 
 
 Additional
 
 
 Accumulated
 Other
 
 
 
 
 
 
 
 
 Total
 
 
 
Common Stock
 
 
 Paid-in
 
 
Comprehensive
 
 
 Retained
 
 
Treasury Stock
 
 
Stockholders’
 
 
 
 Shares 
 
 
 Amount 
 
 
 Capital 
 
 
 Income (Loss) 
 
 
 Earnings 
 
 
 Shares 
 
 
 Amount 
 
 
 Equity 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 1, 2018
  1,513,914 
 $75,700 
 $2,545,900 
 $1,200 
 $3,131,800 
  19,802 
 $52,400 
 $5,702,200 
 
    
    
    
    
    
    
    
    
Cumulative effect of the adoption of Accounting Standards Update (“ASU”) 2016-01 - Financial Instruments
  - 
  - 
  - 
  (22,000)
  22,000 
  - 
  - 
  - 
 
    
    
    
    
    
    
    
    
Net income
  - 
  - 
  - 
  - 
  645,600 
 ��- 
  - 
  645,600 
 
    
    
    
    
    
    
    
    
Cash dividend declared and paid, $.05
  - 
  - 
  - 
  - 
  (74,700)
  - 
  - 
  (74,700)
 
    
    
    
    
    
    
    
    
Holding loss on investment securities, net of tax
  - 
  - 
  - 
  20,800 
  - 
  - 
  - 
  20,800 
 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  46,800 
  - 
  - 
  - 
  - 
  46,800 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2019
  1,513,914 
  75,700 
  2,592,700 
  - 
  3,724,700 
  19,802 
  52,400 
  6,340,700 
 
    
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  - 
  (703,300)
  - 
  - 
  (703,300)
 
    
    
    
    
    
    
    
    
Issuance of Common Stock and Warrants, net of issuance costs (Note 15)
  1,349,850 
  67,500 
  5,936,900 
  - 
  - 
  - 
  - 
  6,004,400 
 
    
    
    
    
    
    
    
    
Stock options exercised
  17,301 
  900 
  12,900 
  - 
  - 
  - 
  - 
  13,800 
 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  65,800 
  - 
  - 
  - 
  - 
  65,800 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2020
  2,881,065 
 $144,100 
 $8,608,300 
 $- 
 $3,021,400 
  19,802 
 $52,400 
 $11,721,400 
 
 
 
 
 
 
 
Additional
 
 
Accumulated
Other
 
 
 
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Paid-in
 
 
Comprehensive
 
 
Retained
 
 
Treasury Stock
 
 
Shareholders’
 
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Gain (Loss)
 
 
Earnings
 
 
Shares
 
 
Amount
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 1, 2015
  1,508,914 
 $75,400 
 $2,486,700 
 $(3,300)
 $3,244,000 
  19,802 
 $52,400 
 $5,750,400 
 
    
    
    
    
    
    
    
    
Net income
  - 
  - 
  - 
  - 
  165,600 
  - 
  - 
  165,600 
 
    
    
    
    
    
    
    
    
Unrealized holding gain on investment securities, net of tax
  - 
  - 
  - 
  4,200 
  - 
  - 
  - 
  4,200 
 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  11,800 
  - 
  - 
  - 
  - 
  11,800 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2016
  1,508,914 
  75,400 
  2,498,500 
  900 
  3,409,600 
  19,802 
  52,400 
  5,932,000 
 
    
    
    
    
    
    
    
    
Net loss
    
    
    
    
  (72,600)
    
    
  (72,600)
 
    
    
    
    
    
    
    
    
Cash dividend declared and paid $.03
    
    
    
    
  (44,700)
    
    
  (44,700)
 
    
    
    
    
    
    
    
    
Unrealized holding loss on investment securities, net of tax
    
    
    
  (4,400)
    
    
    
  (4,400)
 
    
    
    
    
    
    
    
    
Exercise of stock options
  5,000 
  300 
  15,200 
    
    
    
    
  15,500 
 
    
    
    
    
    
    
    
    
Stock-based compensation
    
    
  2,200 
    
    
    
    
  2,200 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2017
  1,513,914 
 $75,700 
 $2,515,900 
 $(3,500)
 $3,292,300 
  19,802 
 $52,400 
 $5,828,000 
See notes to consolidated financial statements.
 
F-5F-4
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
FOR THE YEARS ENDED JUNE 30, 20172020 AND 2016
2019
 
 
 2017
 
 
 2016
 
 
 
 
 
 2020 
 
 
 2019 
 
Operating activities:
 
 
 
 
 
 
Net income (loss)
 $(72,600)
 $165,600 
 $(703,300)
 $645,600 
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
    
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
    
(Gain) loss on sale of investment securities
  (4,400)
  13,200 
Depreciation and amortization
  355,900 
  428,900 
  160,900 
  257,300 
Impairment of intangible assets
  48,000 
  212,700 
Gain on sale of property and equipment
  - 
  (300)
Deferred income tax benefit
  (87,600)
  (149,200)
Gain on sale of investment securities
  (3,200)
  - 
Deferred income tax (benefit) expense
  (106,000)
  (38,500)
Unrealized holding (gain) loss on investment securities
  12,400 
  (3,000)
Bad debt recovery
  3,400 
  - 
Gain on sale of fixed assets
  (300)
  - 
Stock-based compensation
  2,200 
  11,800 
  65,800 
  46,800 
Change in fair value of contingent consideration
  140,000 
  110,000 
  112,600 
  521,200 
Changes in operating assets and liabilities:
    
    
Trade accounts receivable
  (192,500)
  (150,200)
  906,800 
  (6,500)
Inventories
  450,900 
  (198,400)
  (292,400)
  (324,400)
Prepaid and other current assets
  (33,100)
  21,400 
Income tax receivable
  (334,800)
  - 
Prepaid expenses and other assets
  (22,400)
  (60,100)
Right-of-use assets
  (803,300)
  - 
Accounts payable
  (203,200)
  114,800 
  (214,400)
  141,000 
Customer advances
  - 
  (76,400)
Lease liabilities
  867,700 
  - 
Accrued expenses and taxes
  (358,700)
  389,700 
  191,500 
  (109,300)
Contract liabilities
  89,000 
  (63,800)
Bank overdraft
  (96,900)
  140,000 
    
    
Total adjustments
  118,700 
  714,800 
  535,200 
  513,900 
    
    
Net cash provided by operating activities
  46,100 
  880,400 
Net cash (used in) provided by operating activities
  (168,100)
  1,159,500 
    
    
Investing activities:
    
    
Decrease in restricted cash
  - 
  300,000 
Proceeds from sale of property and equipment
  - 
  3,000 
Purchase of investment securities, available for sale
  (18,700)
  (2,700)
Redemption of investment securities, available for sale
  11,100 
  - 
Purchase of investment securities
  (63,400)
  (157,900)
Redemption of investment securities
  55,000 
  151,900 
Proceeds from sale of fixed assets
  1,000 
  - 
Capital expenditures
  (17,000)
  (92,000)
  (50,900)
  (187,800)
Purchase of other intangible assets
  (16,500)
  (13,900)
Purchase of intangible assets
  (25,800)
  (24,600)
    
    
Net cash provided by (used in) investing activities
  (41,100)
  194,400 
Net cash used in investing activities
  (84,100)
  (218,400)
    
    
Financing activities:
    
    
Proceeds from notes
  - 
  20,000 
Principal payments on notes payable
  (6,400)
  (201,000)
  - 
  (5,800)
Cash dividend paid
  (44,700)
  - 
Cash dividend declared and paid
  - 
  (74,700)
Proceeds from Payroll Protection Program loan
  563,800 
  - 
Line of credit proceeds
  250,000 
  970,000 
  - 
  50,000 
Issuance of common stock and warrants, net of issuance costs
  6,004,400 
  - 
Line of credit repayments
  (250,000)
  (970,000)
  - 
  (50,000)
Proceeds from exercise of stock options
  13,800 
  - 
Payments for contingent consideration
  (189,300)
  (130,800)
  (372,600)
  (311,200)
Proceeds from exercise of stock options
  15,500 
  - 
    
    
Net cash used in financing activities
  (224,900)
  (311,800)
Net cash provided by (used in) financing activities
  6,209,400 
  (391,700)
    
Net increase in cash and cash equivalents
  5,957,200 
  549,400 
    
Cash and cash equivalents, beginning of year
  1,602,500 
  1,053,100 
    
Cash and cash equivalents, end of year
 $7,559,700 
 $1,602,500 
    
Supplemental disclosures:
    
Cash paid during the period for:
    
Income taxes
 $40,900 
 $56,700 
Interest
 $- 
 $1,500 
See notes to consolidated financial statements.
 
F-6F-5
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
 
 
 2017
 
 
 2016
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
  (219,900)
  763,000 
 
    
    
Cash and cash equivalents, beginning of year
  1,245,000 
  482,000 
 
    
    
Cash and cash equivalents, end of year
 $1,025,100 
 $1,245,000 
 
    
    
Supplemental disclosures:
    
    
 
    
    
Cash paid during the period for:
    
    
Income taxes
 $213,500 
 $34,500 
Interest
  2,900 
  33,900 
See notes to consolidated financial statements.
F-7
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
1.
Summary of Significant Accounting Policies
Nature of Operations
 
Scientific Industries, Inc. and its subsidiaries (the “Company”) design, manufacture, and market a variety of benchtop laboratory equipment, bioprocessing products and catalyst research instruments. The Company is headquartered in Bohemia, New York where it produces benchtop laboratory equipment for research andequipment. Additionally, the Company has another locationtwo other locations in Pittsburgh, Pennsylvania, where it produces a variety of custom-made catalyst research instruments and designs bioprocessing products, and an administrative facility in Oradell,Orangeburg, New JerseyYork related to sales and marketing. The equipmentproducts, which are sold by the Company includesto customers worldwide, include mixers, shakers, stirrers, refrigerated incubators, pharmacy balances and scales, force gauges, catalyst characterization instruments, reactor systems and high throughput systems. The Company also sublicenses certain patents and technology under a license with the University of Maryland, Baltimore County, and receives royalty fees from the sublicenses.
 
COVID-19 Pandemic
The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impact the Company’s operations at the end of the third quarter of the year ended June 30, 2020.  At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from home, social distancing in the workplace, requiring self quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. However, if an employee becomes infected in the future, and the Company is forced to shut down for a period of time, it could have a short-term negative impact on operations. At the beginning of the pandemic, the Catalyst Research Instruments and Bioprocessing Systems Operations were shut down due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of $563,800 loan under the Federal Government’s Paycheck Protection Program. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies that have the ability to pay. However, there were some delays in receiving some accounts receivable due for catalyst research instruments due to customer shutdowns, and there was a material negative impact on the revenues of the Catalyst Research Instruments. The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, supply chain, or delivery and distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.
F-6
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
1.
Summary of Significant Accounting Policies (Continued)
Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of Scientific Industries, Inc., Scientific Packaging Industries, Inc., an inactive wholly-owned subsidiary, Altamira Instruments, Inc. (“Altamira”), a Delaware corporation and wholly-owned subsidiary, and Scientific Bioprocessing, Inc. (“SBI”), a Delaware corporation and wholly-owned subsidiary, (all collectively referred to as the “Company”). All material intercompany balances and transactions have been eliminated.
 
Revenue Recognition
 
RevenueOn July 1, 2018 the Company adopted Accounting Standards Codification (“ASC”) Topic 606 “Revenue from product salesContracts with Customers, as amended” (“ASC Topic 606”), using the modified retrospective method applied to those contracts which were not completed as of the adoption date. The adoption of the standard did not have a material impact on how the Company recognizes its revenues. In accordance with Topic 606, the Company accounts for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized when, allor as, performance obligations are satisfied by transferring control of a promised product or service to a customer.
Nature of Products and Services
We generate revenues from the following criteria are met:sources: (1) Benchtop Laboratory Equipment, (2) Catalyst Research Instruments, and (3) Royalties.
 
 
 Benchtop
 Laboratory
 Equipment 
 
 
 Catalyst
 Research
 Instruments 
 
 
Bioprocessing
 Systems 
 
 
 Corporate
 and
 Other 
 
 
 Consolidated 
 
June 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $6,783,600 
 $785,900 
 $1,000,800 
 $- 
 $8,570,300 
 
    
    
    
    
    
Foreign Sales
  2,589,800 
  586,500 
  1,000,400 
  - 
  4,176,700 
 
 
 Benchtop
 Laboratory
 Equipment 
 
 
 Catalyst
 Research
 Instruments 
 
 
Bioprocessing
 Systems 
 
 
 Corporate
 and
 Other 
 
 
 Consolidated 
 
June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $7,078,800 
 $1,814,900 
 $1,306,100 
 $- 
 $10,199,800 
 
    
    
    
    
    
Foreign Sales
  2,680,300 
  1,102,300 
  1,301,200 
  - 
  5,083,800 
 
●
Persuasive evidence of an arrangement exists, including receipt of a written purchase order agreement which is binding on the customer.
●
Goods are shipped and title passes.
●
Prices are fixed and determinable.
●
Collectability is reasonably assured.
●
All material obligations under the agreement have been substantially performed.
Revenues are net of normal discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues.
Substantially all orders are F.O.B. shipping point, all sales are final without right of return or payment contingencies, and there are no special sales arrangements or agreements with any customers.
Royalty revenue received under the Company’s sublicenses is recorded net of payments due to its licensors.
F-8F-7
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
1.
Summary of Significant Accounting Policies (Continued)
Revenue Recognition (Continued)
Nature of Products and Services (Continued)
Benchtop laboratory equipment sales comprise primarily of standard benchtop laboratory equipment from its stock to laboratory equipment distributors, or to end users primarily via e-commerce. The sales cycle from time of receipt of order to shipment is very short varying from a day to a few weeks. Customers either pay by credit card (online sales) or Net 30-90, depending on the customer. Once the item is shipped under the FOB terms specified in the order, which is primarily “FOB Factory”, other than a standard warranty, there are no other obligations to the customer. Warranty usually comprises of one to two year parts and labor and is deemed immaterial.

Catalyst research instrument sales comprise primarily of large instruments which begin with a standard model and then are customized to a customer’s specifications. The sales cycle can be quite long, typically ranging from one to three months, from the time an order is received to the time the instrument is shipped to the customer. Payment terms vary from customer to customer and can include advance payments which are recorded as contract liabilities. Some contracts call for training and installation, which is considered ancillary and not a material part of the contract. Due to the size and nature of the instruments, the Company subjects the instruments to an extensive factory acceptance testing process prior to shipment to ensure that they are fully operational once they reach the customer’s site. Normally, the Company warrantees its instruments for a period of twelve months for parts and labor which normally consists of replacement of small components or software support. Catalyst research instruments are never returned for repairs.
Royalty revenues pertain to royalties earned by the Company, which are paid to the Company on a calendar year basis, under a licensing agreement from a single licensee and its sublicensees. The license pertained to royalties received under a United States patent and a European Union patent. As of January 2020, the European Union patent which was due to expire in August 2021, was terminated and the Company will only receive royalties under the United States patent, which will have a material reduction in total royalties expected to be received. The Company is then obligated to pay 50% of all royalties received to the entity that licenses the intellectual property to the Company. During the year, the Company’s management uses its best judgement to estimate the royalty revenues earned during the period.

The Company determines revenue recognition through the following steps:

●
Identification of the contract, or contracts, with a customer
●
Identification of the performance obligations in the contract
●
Determination of the transaction price
●
Allocation of the transaction price to the performance obligations in the contract
●
Recognition of revenue when, or as, a performance obligation is satisfied
F-8
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
1.
Summary of Significant Accounting Policies (Continued)
Revenue Recognition (Continued)
Nature of Products and Services (Continued)
The Company has made the following accounting policy elections and elected to use certain practical expedients, as permitted by the Financial Accounting Standards Board (“FASB”), in applying ASC Topic 606: 1) All revenues are recorded net of returns, allowances, customer discounts, and incentives; 2) Although sales and other taxes are immaterial, the Company accounts for amounts collected from customers for sales and other taxes, if any, net of related amounts remitted to tax authorities; 3) the Company expenses costs to obtain a contract as they are incurred if the expected period of benefit, and therefore the amortization period, is one year or less; 4) the Company accounts for shipping and handling activities that occur after control transfers to the customer as a fulfillment cost rather than an additional promised service and these fulfillment costs fall within selling expenses; 5) the Company is always considered the principal and never an agent, because it has full control and responsibility until title is transferred to the customer; 6) the Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer such as is the case with catalyst instruments.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid debt instruments purchased with a maturityoriginal maturities of 90 days or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. As of June 30, 20172020, and 2016, $442,0002019, $6,729,300 and $497,200$1,328,600, respectively of cash balances were in excess of such limit.
 
Accounts Receivable
 
In order to record the Company’s accounts receivable at their net realizable value, the Company must assess their collectability. A considerable amount of judgment is required in order to make this assessment, including an analysis of historical bad debts and other adjustments, a review of the aging of the Company’s receivables, and the current creditworthiness of the Company’s customers. The Company has recorded allowances for receivables which it considered uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices, customer satisfaction claims and pricing discrepancies. However, depending on how such potential issues are resolved, or if the financial condition of any of the Company’s customers was to deteriorate and its ability to make required payments became impaired, increases in these allowances may be required. The Company actively manages its accounts receivable to minimize credit risk. The Company does not obtain collateral for its accounts receivable. Based on its assessment, the Company concluded that there are no collection issues related to the COVID-19 Pandemic.
 
Customer Advances
F-9
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
InNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
1.
Summary of Significant Accounting Policies (Continued)
Contract Liabilities
Contract liabilities consists of billings or payments received in advance of revenue recognition and is recognized as the ordinary courserevenue recognition criteria are met. Amounts that have been invoiced are initially recorded in accounts receivable and contract liabilities. The Company invoices its customers in accordance with the terms of business, customers may make advance payments for purchase orders. Such amounts, when received,the underlying contract. Accordingly, the contract liabilities balance does not represent the total contract value of outstanding arrangements. Contract liabilities that are categorizedexpected to be recognized during the subsequent 12-month period are recorded as current and the remaining portion as noncurrent. Contract liabilities under the caption customer advances.amounted to $89,000 and $0 at June 30, 2020 and 2019, respectively.
 
Investment Securities
 
Securities available for sale are carried atInvestment securities consist of equity securities and mutual funds with realized gains and losses recorded using the specific identification method. Changes in fair value withare recorded as unrealized holding gains or losses reported in a separate componentother income (loss), net on the statement of shareholders’ equity. Realizedoperations. We determine the cost of the investment sold based on an average cost basis at the individual security level, and record the interest income and realized gains or losses are determined based on the specific identification method.sale of these investments in other income (loss), net.
 
Inventories
 
Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or marketnet realizable value, and have been reduced by an allowance for excess and obsolete inventories. The estimate is based on management’s review of inventories on hand compared to estimated future usage and sales. Cost of work-in-process and finished goods inventories include material, labor and manufacturing overhead.
F-9
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
1.        Summary of Significant Accounting Policies (Continued)
 
Property and Equipment
 
Property and equipment are stated at cost. Depreciation of property and equipment is provided for primarily by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized by the straight-line method over the remaining term of the related lease or the estimated useful lives of the assets, whichever is shorter.
 
Intangible Assets
 
Intangible assets consist primarily of acquired technology, customer relationships, non-compete agreements, patents, licenses, websites, intellectual property and research and development (“IPR&D”), trademarks and trade names. All intangible assets are amortized on a straight-line basis over the estimated useful lives of the respective assets, generally 3 to 10 years. The Company continually evaluates the remaining estimated useful lives of intangible assets that are being amortized to determine whether events or circumstances warrant a revision to the remaining period of amortization.
F-10
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
1.
Summary of Significant Accounting Policies (Continued)
 
Goodwill and Long-Lived Assets
 
Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill and long-lived intangible assets are tested for impairment at least annually in accordance with the provisions of ASC No. 350, “Intangibles-Goodwill and Other” (“ASC No. 350”). ASC No. 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The Company tests goodwill and long-lived assets annually as of June 30, the last day of its fiscal year, unless an event occurs that would cause the Company to believe the value is impaired at an interim date. The Company concluded as of June 30, 20172020 and 20162019, there was no impairment of goodwill.
 
Impairment of Long-Lived Assets
 
The Company follows the provisions of ASC No. 360-10, “Property, Plant and Equipment - Impairment or Disposal of Long-Lived Assets (“ASC No. 360-10”). ASC No. 360-10 which requires evaluation of the need for an impairment charge relating to long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation for impairment is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write down to a new depreciable basis is required. If required, an impairment charge is recorded based on an estimate of future discounted cash flows. For the years endedThe Company concluded as of June 30, 20172020 and 2016, the Company determined that the intangible assets2019, there was no impairment of SBI were impaired, and accordingly an impairment charge of $48,000 and $212,700 respectively were recorded.long-lived assets.
 
F-10
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
1.        Summary of Significant Accounting Policies (Continued)
Income Taxes
 
The Company and its subsidiaries file a consolidated U.S. federal income tax return. Income taxes are accounted for under the asset and liability method. The Company provides for federal, and state income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributed to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date.
 
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
F-11
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
1.
Summary of Significant Accounting Policies (Continued)
 
Advertising
 
Advertising costs are expensed as incurred. Advertising expense amounted to $111,400$218,700 and $79,800$207,500 for the years ended June 30, 20172020 and 2016,2019, respectively.
 
Research and Development
 
Research and development costs consisting of expenses for activities that are useful in developing and testing new products, as well as expenses that may significantly improve existing products, are expensed as incurred.
 
Stock Compensation Plan
 
The Company has a ten-year stock option plan (the “2012 Plan”) which provides for the grant of options to purchase up to 100,000250,000 shares of the Company’s Common Stock, par value $.05 per share (“Common Stock”), plus up to 57,000 shares under options previously granted under the 2002 Stock Option Plan of the Company (the “Prior Plan”).
The 2012 Plan provides for the granting of incentive or non-incentive stock options as defined in the 2012 Plan and options under the 2012 Plan may be granted until 2022. Incentive stock options may be granted to employees at an exercise price equal to 100% (or 110% if the optionee owns directly or indirectly more than 10% of the outstanding voting stock) of the fair market value of the shares of Common Stock on the date of the grant. Non-incentive stock options shall be granted at the fair market value of the shares of Common Stock on the date of grant. At June 30, 20172020 and 2016, 83,5002019, 147,414 and 79,50020,795 shares respectively, of Common Stock were available for grant of options under the 2012 Plan.
F-11
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
1.
SummaryThe Company has a ten-year stock option plan (the "2012 Plan") which provided for the grant of Significant Accounting Policies (Continued)
options to purchase up to 100,000 shares of the Company's Common Stock, Compensation Plan (Continued)par value $.05 per share ("Common Stock") and was further amended in January 2020 to increase the number of options to 250,000 shares of common stock.
 
Stock-based compensation is accounted for in accordance with ASC No. 718 “Compensation-Stock Compensation” (“ASC No. 718”) which requires compensation costs related to stock-based payment transactions to be recognized. With limited exceptions, the amount of compensation cost is measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards are measured at each reporting period. Compensation costs are recognized over the period that an employee provides service in exchange for the award. During the years ended June 30, 20172020 and 2016,2019, the Company granted 6,00025,881 and 5,0006,705 options, respectively, to employees that had a fair value of $10,600$144,500 and $9,500,$12,000, respectively. The fair value of the options granted during fiscal year 2017the years ended June 30, 2020 and 20162019, were determined using the Black-Scholes-Merton option-pricing model. The weighted average assumptions used for fiscal 2017the years ended June 30, 2020 and 2016,2019, was an expected life of 10 years; risk free interest rate of 2.53%.89%% and 1.82%2.44%; volatility of 59%74% and 51%35%, and dividend yield of 1.04%.08% and 0% for fiscal 2017 and 2016.1.29%, respectively. The Company declared a dividend of $0.03$0.05 per share on November 2016. The Company did not declare dividends during the year ended June 30, 2016. Therefore a zero value for the expected dividend value factor was used to determine the fair value of options granted during 2016.2019 and none in 2020. The weighted-average value per share of the options granted in 2017during the years ended June 30, 2020 and 20162019, was $1.76$5.58 and $1.89,$1.79, respectively, and total stock-based compensation costs were $2,200$65,800 and $11,800$46,800 for the years ended June 30, 20172020 and 2016,2019, respectively. Stock-based compensation costs related to nonvested awards expected to be recognized in the future are $10,300$113,400 and $1,000$38,600 as of June 30, 20172020 and 2016,2019, respectively.
F-12
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2019 AND 2018
1.
Summary of Significant Accounting Policies (Continued)
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for, but not limited to, the allowance for doubtful accounts, slow-moving inventory reserves, depreciation and amortization, assumptions made in valuing equity instruments issued for services, and the fair values of intangibles and goodwill. The actual results experienced by the Company may differ materially from management’s estimates.
 
Earnings (Loss) Per Common Share
 

Basic earnings or loss per common share is computed by dividing net income (loss) by the weighted-average number of shares outstanding. Diluted earnings per common share includes the dilutive effect of stock options, if any.
 
Recent Accounting Pronouncements
In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement", which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify, and add certain disclosure requirements related to fair value measurements covered in Topic 820, "Fair Value Measurement." The new standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements applied prospectively, and all other requirements applied retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which is designed to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years; this ASU allows for early adoption in any interim period after issuance of the update. The Company is currently evaluating the impact of adopting this guidance.

Adopted Accounting Pronouncement

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces previous lease guidance in its entirety with ASC 842 and requires lessees to recognize lease assets and lease liabilities for those arrangements classified as operating leases under previous guidance, with the exception of leases with a term of twelve months or less. The Company adopted ASU No. 2016-02 on July 1, 2019 using the additional transition method, which allows prior periods to be presented under previous lease accounting guidance. Refer to Note 11, "Leases", for related disclosures.
F-12
F-13
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 2016
1.
Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In July 2015, the Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards Update (ASU) No. 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). The amendments in this Update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-11 on the consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes”, which will require entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU simplifies the current guidance, which requires entities to separately present deferred tax assets and deferred tax liabilities as current and noncurrent in a classified balance sheet. The ASU may be applied either prospectively or retrospectively. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual period. The Company is currently evaluating the effects of ASU 2015-17 on the consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The update addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted only for certain portions of the ASU related to financial liabilities. The Company is currently evaluating the impact of the provisions of this new standard on the consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
F-13
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
1.
Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation” (Topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09, which the Company intends to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is in the process of evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.
In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.
In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments”. This update provides guidance on how to record eight specific cash flow issues. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and a retrospective transition method to each period should be presented. The Company is currently evaluating the effect of this update on its consolidated financial statements.
F-14
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
1.
Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard. 
In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This standard is required to be adopted in the first quarter of 2018. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures.
In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is evaluating the effect that ASU 2017-11 will have on its financial statements and related disclosures.
F-15
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 20162019
 
 
2.
Segment Information and Concentrations
 
The Company views its operations as three segments: the manufacture and marketing of standard benchtop laboratory equipment for research in university, hospital and industrial laboratories sold primarily through laboratory equipment distributors and laboratory and pharmacy balances and scales (“Benchtop Laboratory Equipment Operations”), the manufacture and marketing of custom-made catalyst research instruments for universities, government laboratories, and chemical and petrochemical companies sold on a direct basis (“Catalyst Research Instruments Operations”) and the design and marketing of bioprocessing systems and products and related royalty income (“Bioprocessing Systems”).
 
Segment information is reported as follows:
 
 
Benchtop
Laboratory
Equipment
 
 
Catalyst
Research
Instruments
 
 
Bioprocessing
Systems
 
 
Corporate
and
Other
 
 
Consolidated
 
 
 Benchtop
 Laboratory
 Equipment 
 
 
 Catalyst
 Research
 Instruments 
 
 
Bioprocessing
 Systems 
 
 
 Corporate
 and
 Other 
 
 
 Consolidated 
 
 
 
 
June 30, 2017:
 
 
 
June 30, 2020:
 
 
 
 
 
 
 
 
 
Revenues
 $5,784,400 
 $2,070,200 
 $294,700 
 $- 
 $8,149,300 
 $6,783,600 
 $785,900 
 $1,000,800 
 $- 
 $8,570,300 
    
    
Foreign Sales
  2,467,400 
  129,200 
  - 
  2,596,600 
  2,589,800 
  586,500 
  1,000,400 
  - 
  4,176,700 
    
    
Income (Loss) From Operations
  288,100 
  (312,900)
  (135,600)
  - 
  (160,400)
  449,700 
  (472,800)
  (727,500)
  (385,700)
  (1,136,300)
    
    
Assets
  4,100,800 
  1,518,100 
  408,200 
  800,600 
  6,827,700 
  12,232,600 
  1,149,800 
  546,100 
  868,900 
  14,797,400 
    
    
Long-Lived Asset Expenditures
  20,700 
  - 
  12,800 
  - 
  33,500 
  36,000 
  - 
  40,700 
  - 
  76,700 
    
    
Depreciation, Amortization and Impairment
  292,600 
  14,000 
  97,300 
  - 
  403,900 
Depreciation and Amortization
  116,900 
  1,300 
  42,700 
  - 
  160,900 
 
 
 
Benchtop
Laboratory
Equipment
 
 
Catalyst
Research
Instruments
 
 
Bioprocessing
Systems
 
 
Corporate
and
Other
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $5,449,700 
 $4,032,800 
 $115,100 
 $- 
 $9,597,600 
 
    
    
    
    
    
Foreign Sales
  2,414,600 
  2,674,300 
  - 
  - 
  5,088,900 
 
    
    
    
    
    
Income (Loss) From Operations
  223,800 
  479,500
  (458,300)
  - 
  245,000 
 
    
    
    
    
    
Assets
  4,120,700 
  2,292,100 
  429,900 
  706,600 
  7,549,300 
 
    
    
    
    
    
Long-Lived Asset Expenditures
 92,500 
 4,000 
 9,400 
  -
 105,900 
 
    
    
    
    
    
Depreciation, Amortization and Impairment
  299,000 
  31,900 
  310,700 
  - 
  641,600 
During the years ended June 30, 2017 and 2016, one customer accounted for approximately 11% and 26%, respectively, of total revenues.
 
 
 Benchtop
 Laboratory
 Equipment 
 
 
 Catalyst
 Research
 Instruments 
 
 
Bioprocessing
 Systems 
 
 
 Corporate
 and
 Other 
 
 
 Consolidated 
 
June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $7,078,800 
 $1,814,900 
 $1,306,100 
 $- 
 $10,199,800 
 
    
    
    
    
    
Foreign Sales
  2,680,300 
  1,102,300 
  1,301,200 
  - 
  5,083,800 
 
    
    
    
    
    
Income (Loss) From Operations
  449,800 
  (130,600)
  365,000 
  91,900 
  776,100 
 
    
    
    
    
    
Assets
  5,280,700 
  1,443,200 
  790,100 
  762,000 
  8,276,000 
 
    
    
    
    
    
Long-Lived Asset Expenditures
  194,500 
  2,200 
  15,700 
  - 
  212,400 
 
    
    
    
    
    
Depreciation and Amortization
  217,800 
  1,000 
  38,500 
  - 
  257,300 
 
F-16F-14
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
3.
Fair Value of Financial Instruments
 
The FASB defines the fair value of financial instruments as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements do not include transaction costs.
 
The accounting guidance also expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are described below:
 
Level 1 
Inputs that are based upon unadjusted quoted prices for identical instruments traded in active markets.
 
Level 2 
Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.
 
Level 3 
Prices or valuation that require inputs that are both significant to the fair value measurement and unobservable.
 
In valuing assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company calculated the fair value of its Level 1 and 2 instruments based on the exchange traded price of similar or identical instruments where available or based on other observable instruments. These calculations take into consideration the credit risk of both the Company and its counterparties. The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the period.
 
The fair value of the contingent consideration obligations areis based on a probability weighted approach derived from the estimates of earn-out criteria and the probability assessment with respect to the likelihood of achieving those criteria. The measurement is based on significant inputs that are not observable in the market, therefore, the Company classifies this liability as Level 3 in the following table.
 
F-17
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
3.
Fair Value of Financial Instruments (Continued)
The following tables set forth by level within the fair value hierarchy the Company’s financial assets that were accounted for at fair value on a recurring basis at June 30, 20172020 and 20162019 according to the valuation techniques the Company used to determine their fair values:
 
 
 
 
 
Fair Value Measurements Using Inputs Considered as
 
 
 Fair Value at
 June 30, 2017
 
 
 Level 1
 
 
 Level 2
 
 
 Level 3
 
 
 
 
 
Fair Value Measurements Using Inputs Considered as
 
 
 
 
 
 Fair Value at
 June 30, 2020 
 
 
 Level 1 
 
 
 Level 2 
 
 
 Level 3 
 
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $1,025,100 
 $- 
 $7,559,700 
 $- 
Available for sale securities
  295,500 
  - 
Investment securities
  331,800 
  - 
    
    
Total
 $1,320,600 
 $- 
 $7,891,500 
 $- 
    
    
Liabilities:
    
    
    
Contingent consideration
 $297,000 
 $- 
 $297,000 
 $358,000 
 $- 
 $358,000 
F-15
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
 
 
 
 
 
 
 
Fair Value Measurements Using Inputs Considered as
 
 
 
 Fair Value at
 June 30, 2016
 
 
 
 Level 1
 
 
 
 Level 2
 
 
 
 Level 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $1,245,000 
 $1,245,000 
 $- 
 $- 
Available for sale securities
  290,100 
  290,100 
  - 
  - 
 
    
    
    
    
Total
 $1,535,100 
 $1,535,100 
 $- 
 $- 
 
    
    
    
    
Liabilities:
    
    
    
    
 
    
    
    
    
Contingent consideration
 $346,300 
 $- 
 $- 
 $346,300 
3.
Fair Value of Financial Instruments (Continued)
 
 
 
 
 
Fair Value Measurements Using Inputs Considered as
 
 
 
 Fair Value at
 June 30, 2019 
 
 
 Level 1 
 
 
 Level 2 
 
 
 Level 3 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $1,602,500 
 $1,602,500 
 $- 
 $- 
Investment securities
  330,900 
  330,900 
  - 
  - 
 
    
    
    
    
Total
 $1,933,400 
 $1,933,400 
 $- 
 $- 
 
    
    
    
    
Liabilities:
    
    
    
    
Contingent consideration
 $618,000 
 $- 
 $- 
 $618,000 
 
The following table sets forth an analysis of changes during fiscalthe years 2017ended June 30, 2020 and 20162019, respectively, in Level 3 financial liabilities of the Company:
 
 
 2020 
 
 
 2019 
 
 
 2017
 
 
 2016
 
 
 
 
Beginning balance
 $346,300 
 $367,100 
 $618,000 
 $408,000 
Increase in contingent consideration liability
  140,000 
  110,000 
  112,600 
  521,200 
Payments
  (189,300)
  (130,800)
Payments and accruals
  (372,600)
  (311,200)
    
    
Ending balance
 $297,000 
 $346,300 
 $358,000 
 $618,000 
 
The Company’s contingent obligations require cash payments to the sellers of certain acquired operations based on royalty payments received or operating results achieved. These contingent considerations are classified as liabilities and the liabilities are remeasured to an estimated fair value at each reporting date. During the years ended June 30, 20172020 and June 30, 2016,2019, the Company recorded an increase in the estimated fair value of contingent liabilities of approximately $140,000$112,600 and $110,000,$521,200, respectively related to its Bioprocessing Systems Operations segment.
 
Investments in marketable securities classified as available-for-sale by security type at June 30, 2020 and 2019 consisted of the following:
 
 
 Cost 
 
 
 Fair Value 
 
 
 Unrealized
 Holding
 Gain (Loss) 
 
At June 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 $77,600 
 $101,900 
 $24,300 
Mutual funds
  250,300 
  229,900 
  (20,400)
 
    
    
    
 
 $327,900 
 $331,800 
 $3,900 
 
 
 Cost 
 
 
 Fair Value 
 
 
 Unrealized
 Holding
 Gain (Loss) 
 
At June 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 $47,100 
 $72,000 
 $24,900 
Mutual funds
  292,300 
  258,900 
  (33,400)
 
    
    
    
 
 $339,400 
 $330,900 
 $(8,500)
F-18
F-16
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
3.
Fair Value of Financial Instruments (Continued)
Investments in marketable securities classified as available-for-sale by security type at June 30, 2017 and 2016 consisted of the following:
 
 
 Cost
 
 
 Fair Value
 
 
 Unrealized
 Holding Gain
 (Loss)
 
At June 30, 2017:
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Equity securities
 $37,000 
 $50,800 
 $13,800 
Mutual funds
  262,000 
  244,700 
  (17,300)
 
    
    
    
 
 $299,000 
 $295,500 
 $(3,500)
 
 
 
 
 Cost
 
 
 
 
 Fair Value
 
 
 Unrealized
 Holding Gain
 (Loss)
 
At June 30, 2016:
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Equity securities
 $29,300 
 $40,700 
 $11,400 
Mutual funds
  259,900 
  249,400 
  (10,500)
 
    
    
    
 
 $289,200 
 $290,100 
 $900 
4.
Inventories
 
 
 2017
 
 
 2016
 
 
 2020 
 
 
 2019 
 
 
 
 
 
 
 
Raw materials
 $1,373,800 
 $1,529,800 
 $1,838,500 
 $1,738,300 
Work-in-process
  166,500 
  425,300 
  228,600 
  106,400 
Finished goods
  420,900 
  457,000 
  817,600 
  747,600 
    
    
 $1,961,200 
 $2,412,100 
 $2,884,700 
 $2,592,300 
 
5.
Property and Equipment
 
 
 Useful Lives
 
 
 
 
 
Useful Lives
 
 
 
 

 
 (Years)
 
 
 2017
 
 
 2016
 
 (Years) 
 
 2020 
 
 
 2019 
 
 
 
 
 
 
 
  
 
 
 
Automobiles
 5
 $22,000 
5
 $22,000 
Computer equipment
3-5
  162,800 
  162,200 
3-5
  247,900 
  233,900 
Machinery and equipment
 3-7
  819,600 
  803,300 
3-7
  1,010,600 
  986,500 
Furniture and fixtures
4-10
  205,900 
4-10
  209,700 
  205,900 
Leasehold improvements
3-10
  34,200 
3-10
  53,300 
  45,300 
    
    
    
    
  1,244,500 
  1,227,600 
    
  1,543,500 
  1,493,600 
Less accumulated depreciation and amortization
 
  1,045,200 
  976,500 
    
  1,263,800 
  1,174,800 
    
    
    
 
 $199,300 
 $251,100 
    
 $279,700 
 $318,800 
 
Depreciation expense was $67,900$88,900 and $76,300$67,300 for the years ended June 30, 20172020 and 2016,2019, respectively.
 
F-19
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
6.
Goodwill and Other Intangible Assets
 
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in connection with the Company’s acquisitions. Goodwill amounted to $705,300 at June 30, 20172020 and 2016,2019, all of which is expected to be deductible for tax purposes.
 
The components of other intangible assets are as follows:
 
 
  Useful
   Lives
 
 Cost
 
 
 Accumulated
 Amortization
 
 
 Net
 
  
 
 
 
 
 
 
 
 
 
At June 30, 2017: 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Technology, trademarks5/10 yrs.
 $662,800 
 $541,100 
 $121,700 
Trade names6 yrs.
  140,000 
  77,800 
  62,200 
Websites5 yrs.
  210,000 
  140,000 
  70,000 
Customer relationships9/10 yrs.
  357,000 
  281,400 
  75,600 
Sublicense agreements10 yrs.
  294,000 
  165,400 
  128,600 
Non-compete agreements5 yrs.
  384,000 
  294,000 
  90,000 
IPR&D3 yrs.
  110,000 
  110,000 
  - 
Other intangible assets5 yrs.
  194,500 
  163,600 
  30,900 
 
    
    
    
 
 $2,352,300 
 $1,773,300 
 $579,000 
 
  Useful
  Lives
 
 
 Cost
 
 
 Accumulated
 Amortization
 
 
 
 Net
 
  
 
 
 
 
 
 
 
 
 
At June 30, 2016: 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Technology, trademarks5/10 yrs.
 $722,800 
 $468,800 
 $254,000 
Trade names6 yrs.
  140,000 
  54,400 
  85,600 
Websites5 yrs.
  210,000 
  98,000 
  112,000 
Customer relationships9/10 yrs.
  357,000 
  261,600 
  95,400 
Sublicense agreements10 yrs.
  294,000 
  136,000 
  158,000 
Non-compete agreements5 yrs.
  384,000 
  239,100 
  144,900 
IPR&D3 yrs.
  110,000 
  85,500 
  24,500 
Other intangible assets5 yrs.
  177,900 
  154,700 
  23,200 
 
    
    
    
 
 $2,395,700 
 $1,498,100 
 $897,600 
Total amortization expense was $288,000 and $352,600 in 2017 and 2016, respectively.
Estimated future amortization expense of intangible assets is as follows:
Fiscal Years
 
 
 
 
 
 
 
2018
 $243,600 
2019
  185,800 
2020
  65,400 
2021
  48,000 
2022
  27,000 
Thereafter
  9,200 
 
    
Total
 $579,000 
 
  Useful
   Lives 
 
 Cost 
 
 
 Accumulated
 Amortization 
 
 
 Net 
 
At June 30, 2020: 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Technology, trademarks5/10 yrs.
 $664,700 
 $662,000 
 $2,700 
Trade names6 yrs.
  140,000 
  140,000 
  - 
Websites5 yrs.
  210,000 
  210,000 
  - 
Customer relationships9/10 yrs.
  357,000 
  321,400 
  35,600 
Sublicense agreements10 yrs.
  294,000 
  253,600 
  40,400 
Non-compete agreements5 yrs.
  384,000 
  384,000 
  - 
IPR&D3 yrs.
  110,000 
  110,000 
  - 
Other intangible assets5 yrs.
  246,600 
  196,600 
  50,000 
 
    
    
    
 
 $2,406,300 
 $2,277,600 
 $128,700 
 
F-20F-17
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
6.
Goodwill and Other Intangible Assets (Continued)
 
  Useful
   Lives 
 
 Cost 
 
 
 Accumulated
 Amortization 
 
 
 Net 
 
At June 30, 2019: 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Technology, trademarks5/10 yrs.
 $663,800 
 $661,700 
 $2,100 
Trade names6 yrs.
  140,000 
  124,400 
  15,600 
Websites5 yrs.
  210,000 
  210,000 
  - 
Customer relationships9/10 yrs.
  357,000 
  308,100 
  48,900 
Sublicense agreements10 yrs.
  294,000 
  224,100 
  69,900 
Non-compete agreements5 yrs.
  384,000 
  384,000 
  - 
IPR&D3 yrs.
  110,000 
  110,000 
  - 
Other intangible assets5 yrs.
  221,700 
  183,200 
  38,500 
 
    
    
    
 
 $2,380,500 
 $2,205,500 
 $175,000 
Total amortization expense was $72,000 and $190,000 in 2020 and 2019, respectively.
Estimated future amortization expense of intangible assets as of June 30, 2020 is as follows:
Year Ended June 30,
 
 
 
 
 
 
 
2021
 $59,800 
2022
  36,800 
2023
  20,200 
2024
  8,400 
2025
  3,500 
 
    
Total
 $128,700 
7.
LinesLine of Credit
 
The Company has a Demand Line of Credit through December 20172020 with First National Bank of Pennsylvania which provides for borrowings of up to $300,000 for regular working capital needs, bearing interest at prime, currently 4.25%3.25%. The agreement containsdoes not contain a financial covenant requiring the Company to maintain a minimum net worthcovenants and borrowings are also secured by a pledge of the Company’s assets including inventory, accounts receivable, chattel paper, equipment and general intangibles of the Company. The Company also had an Export Related Revolving Line through June 2017 which as amended allowed for borrowings up to $200,000 bearing interest at prime plus 1%. This line was not reviewed by the Company upon expiration. As of June 30, 20172020 and 2016,2019, there were no borrowings outstanding under eitherthe line.
 
8.
Notes PayablePayroll Protection Program Loan
 
The Company has a $20,000 36-month auto$563,800 Payroll Protection Program loan for proceeds received in April 2020 pursuant to the Paycheck Protection Program loan (“PPP”) administered by the U.S. Small Business Administration through April 2019, with its bank, with monthly payments of $600 bearingbank. The loan bears interest at 4%1% per annum and matures in April 2022 and contains no collateral or guarantee requirements. The Company expects to apply and receive forgiveness for a vehicle used by the Company’s sales manager. The outstanding balance remaining on thismajority of the loan as of, for which it will apply in the fiscal year ending June 30, 2017 and June2021.
F-18
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2016 was $12,500 and $18,900 with principal payments of $6,700 and $5,800 due over the next two fiscal years.2020 AND 2019
 
9.
Employee Benefit Plans
 
The Company has a 401(k) profit sharing plan covering all its employees, which provides for voluntary employee salary contributions not to exceed the statutory limitations provided by the Internal Revenue Code. The plan provides for Company matching contribution equal to 100% of employee’s deferral up to 3% of pay, plus 50% of employee’s deferral over 3% of pay up to 5%. Total matching contributions amounted to $75,100$84,100 and $69,500$69,600 for the years ended June 30, 20172020 and 2016,2019, respectively.
 
10.
Commitments and Contingencies
 
The Company entered into a lease in August 2014 for its Bohemia, New York premises through February 2025 which requires minimum annual rental payments plus other expenses, including real estate taxes and insurance. The future minimum annual rental expense, computed on a straight-line basis, is approximately $170,000 under the terms of the lease. Rental expense for the Bohemia facility amounted to approximately $175,200 in 2017 and $170,000 in 2016. Accrued rent, payable in future years, amounted to $59,600 and $48,800 at June 30, 2017 and 2016, respectively.
The Company is also obligated under an operating lease for its facility in Pittsburgh, Pennsylvania, which requires monthly minimum rental payments through November 2017, plus common area expenses. The Company is currently in negotiations for a lease extension. Total rent expense for the Pittsburgh facility was $106,500 and $105,400 for the fiscal years ended June 30, 2017 and 2016, respectively.
F-21
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
10.
Commitments and Contingencies (Continued)
In addition, the Company maintains an office in Oradell, New Jersey from which it performs its sales and marketing functions. The Company is obligated under an operating lease for its facility in Oradell, New Jersey, which requires monthly minimum rental payments through June 2018, plus common area expenses. Total rent expense for the New Jersey facilities, was $22,500 and $23,300 for the years ended June 30, 2017 and 2016, respectively.
The Company’s approximate future minimum rental payments under all operating leases are as follows:
Fiscal Years
 
 
 
 
 
 
 
2018
 $220,000 
2019
  169,000 
2020
  174,000 
2021
  179,300 
2022
  184,600 
Thereafter
  477,700 
 
    
 
 $1,404,600 
The Company has a three yearthree-year employment contract with its President, effective July 1, 2017.2017, which was extended by mutual agreement for a one year period ending June 30, 2021. The agreement providesprovided for an annual base salary of $175,000 for the fiscal year endingended June 30, 2018, with subsequent annual increases of 3% or percentage increase in Consumer Price Index “CPI”(“CPI”), whichever is higher, plus $25,000 cash bonus for the fiscal year endingended June 30, 2018, and a discretionary bonus for subsequent years. A bonus of $50,000 was awarded for the year ended June 30, 2020 and none in 2019. The agreement also providesprovided for a grant of options to purchase 25,000 shares of the Company’s stock, which were granted during the year endingended June 30, 2018. A bonusNo shares were granted during the year ended June 30, 2019, and 215,366 shares were authorized to be granted by the Board of $20,000 was awardedDirectors during the year ended June 30, 2020 which are subject to amendment to the Company’s 2012 Stock Option Plan.  The agreement also contains a provision that within one year of a change of control, if either the Company terminates the employment for any reason other than for "cause" or the Presidents terminates her employment for "good reason", the President duringwill have the fiscal year ending June 30, 2017 and no bonus was awarded duringright to receive a lump sum payment equal to three times the fiscal year ending June 30, 2016.average of her total annual compensation paid for the last five years preceding such termination, minus $1.00.
 
The Company has a three yearthree-year employment contract with its President of the Genie Products Division of the Benchtop Laboratory Equipment Operations and Corporate Secretary effective July 1, 2017.2017, which was extended by mutual agreement for a one year period ending June 30, 2021. The agreement provides for an annual base salary of $153,000 for the fiscal year endingended June 30, 2018, with subsequent annual increases of 3% or percentage increase in Consumer Price Index “CPI”,the CPI, whichever is higher, plus $10,000 cash bonus for the fiscal year endingended June 30, 2018, and a discretionary bonus for subsequent years. A bonus of $5,000 was awarded for the year ended June 30, 2020 and none in 2019.  The agreement also provides for a grant of options to purchase 7,500 shares of the Company’s stock, which were granted during the year endingended June 30, 2018. A bonus of $10,000 was awarded to the Corporate SecretaryNo options were granted during the fiscal year endingended June 30, 2017 and no bonus was awarded during the fiscal year ending June 30, 2016.
F-22
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
10.
Commitments and Contingencies (Continued)
2020 or 2019.
 
The Company has a three year employment contract with its Vice President of Corporate Development and Strategy and Vice president of Sales and Marketing of Altamira Instruments, Inc. effective July 1, 2017. The agreement provides for an annual base salary of $155,000 for the fiscal year ending June 30, 2018 with subsequent annual increases of 3% or percentage increase in Consumer Price Index “CPI”, whichever is higher, plus $10,000 cash bonus for the fiscal year ending June 30, 2018 and discretionary for subsequent years. The agreement also provides for a grant of options to purchase 7,500 shares of the Company’s stock during the year ending June 30, 2018. A bonus of $10,000 was awarded during the fiscal year ending June 30, 2017 and no bonuses were awarded during the fiscal year ending June 30, 2016.
The Company has a three yearthree-year employment contract with its President of Torbal Products Division of the Benchtop Laboratory Equipment Operations and Director of Marketing effective July 1, 2017.2017, which was extended by mutual agreement for a one year period ending June 30, 2021. The agreement provides for an annual base salary of $157,000 for the fiscal year endingended June 30, 2018, with subsequent annual increases of 4% or percentage increase in Consumer Price Index “CPI”,the CPI, whichever is higher, plus $10,000 cash bonus for the fiscal year endingended June 30, 2018 and subsequent years, subject to a minimum increase of 5% in the divisions’ EBITDA for the related year. The agreement also provides for a grant of options to purchase 7,500 shares of the Company’s stock, which were granted during the year endingended June 30, 2018. No options were granted during the year ended June 30, 2020 or 2019. A performance-based bonus of $10,000 was awarded during the fiscal year ending June 30, 2017 and no bonuses were awarded during the fiscal year ending June 30, 2016.
The Company has a consulting agreement which expires on December 31, 2017 with an affiliate of the Chairman of the Board of Directors for marketing consulting services. The agreement provides that the consultant be paid a monthly fee of $3,600 for a certain number of consulting days as defined in the agreement. Consulting expense related to this agreement amounted to $43,200 for both years ended June 30, 2017 and 2016.
The Company has a consulting agreement which expires December 31, 2017 with another member of its Board of Directors for administrative services providing that the consultant be paid at the rate of $85 per hour. Consulting expense related to this agreement amounted to $5,200 and $5,800 for the fiscal years ended June 30, 2017 and 2016, respectively.
In connection with a February 26, 2014 acquisition of a privately owned company, The Company remained obligated to make its last additional payment to the seller based on a percentage of net sales of the business acquired equal to 11% for the year ended June 30, 2017. Payments related to this contingent consideration for each period were due in September following the fiscal year. The Company is also required to make payments of 30% of the net royalties received from the license and sublicense acquired in the SBI acquisition in fiscal 2012. Total contingent consideration payments made for all acquisitions amounted to $189,300 and $130,800 for the years ended June 30, 20172018, 2019, and 2016, respectively.2020.
 
F-23F-19
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
10.
Commitments and Contingencies (Continued)
The Company has a three-year employment contract with its President of Scientific Bioprocessing, Inc., effective July 1, 2020. The agreement provides for an annual base salary of $175,000 for the year ended June 30, 2021, with subsequent annual increases of 3% or percentage increase in Consumer Price Index (“CPI”), whichever is higher, plus discretionary bonuses. The agreement also provides for a grant of options to purchase 215,366 shares which were authorized to be granted by the Board of Directors during the year ended June 30, 2020, and are subject to amendment to the Company’s 2012 Stock Option Plan. Prior to July 1, 2020, the officer had a consulting agreement through June 30, 2020. Consulting fees paid under this agreement amounted to $145,000 and $40,000 for the years ended June 30, 2020 and 2019, respectively. In addition stock options valued at $36,000 and $12,000 were granted as part of the total compensation under the consulting agreement, for the years ended June 30, 2020 and 2019, respectively.  In addition to the  fees paid and stock options granted under the consulting agreement, a bonus of $50,000 was awarded during the year ended June 30, 2020 and none in 2019. The agreement contains termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if employee resigns for "good reason" (as such term is defined there), the Company shall pay severance payments equal to either one year's salary at the rate of the compensation at the time of termination is employee is terminated within 12 months of the date of the agreement or six months' salary is the employee is terminated after 12 months of the date of the agreement, continue to pay the regular benefits provided by the Company for the period equal tot he length of the severance payments and pay a pro rata portion of any bonus achieved prior to such termination of employment. 
The Company had a two-year agreement with its President of Altamira Instruments, Inc. effective July 1, 2017, which was extended by mutual agreement through June 30, 2020, and has not yet been renewed. The agreement provided for an annual base salary of $130,000 and $120,000 for the years ended June 30, 2020 and 2019, respectively, plus incentive pay based on achievement of certain revenue and income levels, which were not achieved in both fiscal years and therefore there was no incentive pay. The agreement also provided for a grant of options for an aggregate of 10,000 shares of the Company’s common stock, which were granted during the year ended June 30, 2018. No shares were granted during the year ended June 30, 2020 or 2019.
The Company had a three-year employment contract with its Vice President of Corporate Development and Strategy and Vice president of Sales and Marketing of Altamira Instruments, Inc. effective July 1, 2017. This agreement was terminated by the Company in February 2020 with termination costs of $180,700, of which $110,900 remains unpaid as of June 30, 2020 and is expected to be paid by February 2021.
The Company has a consulting agreement, which expires on December 31, 2020, with a Director of the Company and his affiliate for product development consulting services. The agreement provides that the consultant be paid a monthly retainer fee of $9,000, plus a grant of 20,000 options during the year ended June 30, 2020. Consulting expense related to this agreement amounted to $76,200 and $43,200 for the years ended June 30, 2020 and 2019, respectively.
On July 20, 2020, the Company entered into a two-year consulting agreement with a new member of the Board of Directors and his affiliate for consulting on strategic matters of the Company’s wholly-owned SBI’s operations. The agreement provides that the consultant be paid a monthly retainer of 5,000 euros, an annual bonus of up to 2% of net sales of the subsidiary’s net sales over mutually agreed upon sales targets, plus the issuance of 125,000 stock options of the Company.
The Company is required to make payments of 30% of the net royalties received from the license and sublicense acquired in the SBI acquisition in fiscal 2014. Total contingent consideration payments made for this acquisition amounted to $372,600 and $311,200 for the years ended June 30, 2020 and 2019, respectively.
F-20
SCIENTIFIC INDUSTRIES, INC. AND 2016SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
 
 
10.
Commitments and Contingencies (Continued)
 
The fair value of contingent consideration estimated to be paid as of June 30, 20172020 is as follows:
 
Year ended June 30,
 
 Amount
 
 
 
 
 
2018
 $175,700 
2019
  35,000 
2020
  30,000 
2021
  26,000 
2022
  14,000 
Thereafter
  16,300 
 
    
 
 $297,000 
Year ended June 30,
 
 Amount 
 
 
 
 
 
2021
 $111,000 
2022
  95,000 
2023
  82,000 
2024
  70,000 
 
    
 
 $358,000 
 
11.
Income TaxesLeases
 
On July 1, 2019, the Company adopted the new accounting pronouncement as it relates to its leases which requires a lessee to recognize all long-term leases on its balance sheet as a liability for its lease obligation, measured at the present value of lease payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the lease term and expands disclosure of key information about leasing arrangements.
The reconciliationCompany leases certain properties consisting principally of a facility in Bohemia, New York (headquarters) through January 2025, a facility in Pittsburgh, Pennsylvania for its Catalyst Research Instrument Operations through November 2020 and on a month to month thereafter, and another facility in Pittsburgh, Pennsylvania for its Bioprocessing Systems Operations through May 2021. In addition, the Company had a lease for its Torbal Division of the provisionBenchtop Laboratory Equipment Operations which was mutually terminated early effective as of October 31, 2019 and a new lease for income taxesa similar sales and administration office in Orangeburg, New York was entered into as of November 1, 2019 through October 2022. There are no renewal options with any of the leases, no residual values or significant restrictions or covenants other than those customary in such arrangements, and no non-cash activities, and any rent escalations incorporated within the leases are included in the calculation of the future minimum lease payments, as further described below. All of the Company’s leases are deemed operating leases.
The Company determines whether an agreement contains a lease at inception based on the Company’s right to obtain substantially all of the economic benefits from the use of the identified asset and its right to direct the use of the identified asset. Lease liabilities represent the present value of future lease payments and the Right-Of-Use (“ROU”) assets represent the Company’s right to use the underlying assets for the respective lease terms. ROU assets and lease liabilities are recognized at the federal statutorylease commencement date based on the present value of the lease payments over the lease term. The ROU asset is further adjusted to account for previously recorded lease expenses such as deferred rent and other lease liabilities. As the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate of 35%5.0% as the discount rate to calculate the actual tax expense or benefitpresent value of future lease payments, which was the interest rate that its bank would charge for the applicable fiscal year was as follows:
 
 
 2017
 
 
 2016
 
 
 
 Amount
 
 
 % of
 Pre-tax
 Income
 
 
 Amount
 
 
 % of
 Pre-tax
 Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Computed “expected” income tax (benefit)
 $(51,400)
  (35.0)%
 $76,600 
  35.0%
Research and development credits
  (13,100)
  (8.9)
  (15,700)
  (7.2)
Other, net
  (9,700)
  (6.6)
  (7,600)
  (3.5)
 
    
    
    
    
Income tax expense (benefit)
 $(74,200)
  (50.5)%
 $53,300 
  24.3%
Deferred tax assets and liabilities consist of the following:
 
 
 2017
 
 
 2016
 
 
 
 
 
 
 
 
Deferred tax assets:
 
 
 
 
 
 
Amortization of intangible assets
 $390,000 
 $287,000 
Research and development credits
  3,400 
  - 
Various accruals
  102,300 
  132,800
Other
  55,000 
  48,900 
 
    
    
 
  550,700 
  468,700 
Deferred tax liability:
    
    
Depreciation of property and amortization of goodwill
  (45,600)
  (52,200)
 
    
    
Net deferred tax assets
 $505,100 
 $416,500 
a similar loan.
F-24F-21
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
11.
Leases (Continued)
The Company elected not to recognize a ROU asset and a lease liability for leases with an initial term of twelve months or less. In addition to minimum lease payments, certain leases require payment of a proportionate share of real estate taxes and certain building operating expenses or payments based on an excess of a specified base. These variable lease costs are not included in the measurement of the ROU asset or lease liability due to unpredictability of the payment amount and are recorded as lease expenses in the period incurred. The Company’s lease agreements do not contain residual value guarantees.
The Company elected available practical expedients for existing or expired contracts of lessees wherein the Company is not required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. The Company is not utilizing the practical expedient which allows the use of hindsight by lessees and lessors in determining the lease term and in assessing impairment of its ROU assets. The Company utilized the transition method allowing entities to only apply the new lease standard in the year of adoption.
As of June 30, 2020, the weighted-average remaining lease term for operating lease liabilities was approximately 3.85 years and the weighted-average discount rate was 5.0%. Total cash payments under these leases were $295,700 for the year ended June 30, 2020, of which $293,500 was recorded as leases expense.
The Company’s approximate future minimum rental payments under all leases existing at June 30, 2020 and 2019, respectively, through January 2025 are as follows:
Year ended June 30,
 
 Amount 
 
 
 
 
 
2021
 $265,800 
2022
  210,600 
2023
  198,900 
2024
  195,900 
2025
  91,600 
 
    
 
 $962,800 
12.
Income Taxes
The reconciliation of the provision for income taxes at the federal statutory rate of 21% to the actual tax expense or benefit for the applicable fiscal year was as follows:
 
 
 2020 
 
 
 2019 
 
 
 
 
 
 
 
 
Computed “expected” income tax (benefit)
 $(239,400)
 $161,700 
Research and development credits
  (89,400)
  (24,300)
Rate changes and NOL carrybacks
  (122,600) 
  - 
Other, net
  14,800 
  (12,800)
 
    
    
Income tax expense (benefit)
 $(436,600)
 $124,600 
F-22
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
12.
Income Taxes (Continued)
 
The breakdown between current and long-term deferredDeferred tax assets and liabilities is as follows:consist of the following:
 
 
 
 2017
 
 
 2016
 
 
 
 
 
 
 
 
Current deferred tax assets
 $129,000 
 $140,600 
 
    
    
Long-term deferred tax assets
  421,700 
  328,100 
Long-term deferred tax liabilities
  (45,600)
  (52,200)
 
    
    
Net long-term deferred tax assets
  376,100 
  275,900 
 
    
    
Net deferred tax assets
 $505,100 
 $416,500 
 
 
 2020 
 
 
 2019 
 
Deferred tax assets:
 
 
 
 
 
 
Amortization of intangible assets
 $329,700 
 $303,900 
Research and development credits
  89,400 
  - 
Various accruals
  150,700 
  173,600 
Other
  19,400 
  13,300 
 
  589,200 
  490,800 
Deferred tax liability:
    
    
Depreciation of property and amortization of goodwill
  (52,100)
  (59,700)
 
    
    
Net deferred tax assets
 $537,100 
 $431,100 
 
ASC No. 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC No. 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As of June 30, 20172020 and 2016,2019, the Company did not have any unrecognized tax benefits related to various federal and state income tax matters.
 
The Company’s policy is to recognize interest and penalties on any unrecognized tax benefits as a component of income tax expense. The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits. The Company is subject to U.S. federal income tax, as well as various state jurisdictions. The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years endingended June 30, 20142017 and after. The Company does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
 
12.13.
Stock Options
 
Option activity is summarized as follows:
 
 
Fiscal 2017
 
 
Fiscal 2016
 
 
 June 30, 2020 
 
 
 June 30, 2019 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
 
 
 
Average
 
 
 
 
 
Average
 
 
 
 
 
 Average
 
 
 
 
 
 Average
 
 
 
 
 
Exercise
 
 
 
 
 
Exercise
 
 
 
 
 
 Exercise
 
 
 
 
 
 Exercise
 
 
 Shares
 
 
 Price 
 
 
 Shares
 
 
 Price 
 
 
 Shares 
 
 
 Price 
 
 
 Shares 
 
 
 Price 
 
Shares under option:
 
 
 
 
 
 
Outstanding, beginning of year
  43,500 
 $3.33 
  38,500 
 $3.33 
  97,205 
 $3.24 
  92,000 
 $3.15 
Granted
  6,000 
  2.91 
  5,000 
  3.05 
  25,881 
  7.47 
  6,705 
  4.54 
Exercised
  (5,000)
  3.10 
  - 
    
  (24,000)
  3.35 
  - 
Forfeited
  (10,000)
  3.45 
  - 
    
  (2,500)
  3.08 
  1,500 
  3.27 
    
    
Outstanding, end of year
  34,500 
  3.25 
  43,500 
  3.33 
  96,586 
 $4.35 
  97,205 
 $3.24 
    
    
Options exercisable at year-end
  23,833 
 $3.52 
  32,200 
 $3.43 
  49,236 
 $3.29 
  50,167 
 $3.29 
    
    
Weighted average fair value per share of options granted during the fiscal year
    
 $1.76 
    
 $1.89 
    
 $5.58 
    
 $1.79 
 
F-25F-23
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 20172020 AND 20162019
 
 
12.13.
Stock Options (Continued)
 

 
As of June 30, 2017
Options Outstanding
 
 
As of June 30, 2017
Exercisable
 
 
As of June 30, 2020
 Options Outstanding 
 
 
As of June 30, 2020
 Exercisable 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
Average
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
 
 
 
Average
 
 
Weighted-
 
 
 
 
 
Weighted-
 
Range
 
 
 
 
Remaining
 
 
Average
 
 
 
 
 
Average
 
 
 
 
 
Remaining
 
 
Average
 
 
 
 
 
Average
 
Exercise
 
Number
 
 
Contractual
 
 
Exercise
 
 
Number
 
 
Exercise
 
 
Number
 
 
Contractual
 
 
Exercise
 
 
Number
 
 
Exercise
 
Prices
 
Outstanding
 
 
Life (Years)
 
 
 Price 
 
 
Outstanding
 
 
 Price 
 
 
Outstanding
 
 
Life (Years)
 
 
 Price 
 
 
Outstanding
 
 
 Price 
 
 
 
 
 
 
 
$3.50 -$4.05
 20,000
  6.13  $3.64 
 18,666
 $3.64 
$5.35 - $ 11.30
  25,881 
  9.87 
 $7.47 
  - 
 $0.00 
    
    
    
    
    
$2.91 -$3.27
 14,500
  3.67  $3.02 
 5,167
 $3.12 
$2.91 - $ 4.65
  70,705 
  6.46 
 $3.33 
  49,236 
 $3.29 
    
    
 34,500
    
 23,833
    
  96,586 
    
  49,236 
    
 
 
As of June 30, 2016
Options Outstanding
 
 
As of June 30, 2016
Exercisable
 
 
As of June 30, 2019
 Options Outstanding 
 
 
As of June 30, 2019
 Exercisable 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
Average
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
 
 
 
Average
 
 
Weighted-
 
 
 
 
 
Weighted-
 
Range
 
 
 
 
Remaining
 
 
Average
 
 
 
 
 
Average
 
 
 
 
 
Remaining
 
 
Average
 
 
 
 
 
Average
 
Exercise
 
Number
 
 
Contractual
 
 
Exercise
 
 
Number
 
 
Exercise
 
 
Number
 
 
Contractual
 
 
Exercise
 
 
Number
 
 
Exercise
 
Prices
 
Outstanding
 
 
Life (Years)
 
 
 Price 
 
 
Outstanding
 
 
 Price 
 
 
Outstanding
 
 
Life (Years)
 
 
 Price 
 
 
Outstanding
 
 
 Price 
 
 
 
 
 
 
 
$3.50 -$4.05
 20,000
  7.13  $3.64 
 13,700
 $3.65 
$2.91 - $ 3.08
  70,500 
  7.81 
 $3.07 
  30,167 
 $2.80 
    
    
    
    
    
$3.07 -$3.45
 23,500
  2.83  $3.25 
 18,500
 $3.30 
$3.65 - $ 4.65
  26,705 
  5.57 
 $4.02 
  20,000 
 $3.84 
    
    
    
 43,500
    
 32,200
    
  97,205 
    
  50,167 
    
 
13.14.
Earnings (Loss) Per Common Share
 
Earnings (loss) per common share data was computed as follows:
 
 2017
 
 
 2016
 
 
 2020 
 
 
 2019 
 
 
 
 
 
 
 
Net income (loss)
 $(72,600)
 $165,600 
 $(703,300)
 $645,600 
    
    
Weighted average common shares outstanding
  1,491,167 
  1,489,112 
  1,515,103 
  1,494,112 
Effect of dilutive securities
  - 
  275 
  - 
  18,066 
    
Weighted average dilutive common shares outstanding
  1,491,167 
  1,489,387 
  1,515,103 
  1,512,178 
    
    
Basic earnings (loss) per common share
 $(.05)
 $.11 
    
Diluted earnings (loss) per common share
 $(.05)
 $.11 
Basic and diluted earnings (loss) per common share
 $(.46)
 $.43 
 
Approximately 34,50054,513 and 20,0001,349,850 shares of the Company's common stock issuable upon the exercise of stock options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the year ended June 30, 2020.  Approximately 1,600 shares of the Company's common stock issuable upon the exercise of outstanding options were excluded from the calculation of diluted earnings per common share for the yearsyear ended June 30, 20172019, because they were anti-dilutive.
F-24
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
15.
Equity
On June 18, 2020 the Company entered into a securities purchases agreement with several accredited investors for the sale and 2016, respectively, becauseissuance of 1,349,850 shares of the effect would be anti-dilutive.Company’s Common Stock at an offering of $4.50 per share and warrants to purchase up to 1,349,850 shares of the Company’s Common Stock at $9.00 per share for total proceeds of $6,074,400.  The Company incurred approximately $70,000 in issuance related costs.  The proceeds are earmarked for the operations of the Company’s SBI operations.  The warrants are immediately exercisable and expire five years from the date of issuance.  If at any time commencing twelve months from the date of the agreement, but before the  expiration  of the  warrant, the volume weighted average price of the Company’s Common Stock exceeds $18 per share for each of thirty consecutive days, the Company may at any time in its sole discretion, call for the exercise of the Warrants, in their entirety.
 
F-26
F-25