☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 04-2217279 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
80 Orville Drive, Suite 102, Bohemia, New York | 11716 |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered |
None | None |
Title of Class |
Common stock, $.05 par value |
Large accelerated filer☐ | Accelerated filer☐ | |
Non-accelerated filer☐ | Smaller reporting company☒ | |
Emerging Growth ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)☐Yes☒No |
PART I | ||
BUSINESS | 4 | |
RISK FACTORS | ||
8 | ||
2. | PROPERTIES | |
LEGAL PROCEEDINGS | 12 | |
Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | |
PART II | ||
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 13 | |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | | |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 17 | |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 17 | |
CONTROLS AND PROCEDURES | | |
OTHER INFORMATION | 17 | |
PART III | ||
10. | DIRECTORS, EXECUTIVE | |
EXECUTIVE COMPENSATION | 19 | |
Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE | ||
PRINCIPAL ACCOUNTANT FEES AND SERVICES | 26 | |
PART IV | ||
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 26 | |
35 | ||
CERTIFICATION | ||
CERTIFICATION | ||
37 |
For Fiscal Quarter Ended | Low Bid | High Bid |
09/30/18 | 2.82 | 3.24 |
12/31/18 | 2.99 | 4.00 |
03/31/19 | 3.50 | 4.50 |
06/30/19 | 3.88 | 4.75 |
09/30/19 | 4.00 | 6.88 |
12/31/19 | 6.01 | 9.10 |
03/31/20 | 6.56 | 10.20 |
06/30/20 | 5.55 | 10.61 |
For Fiscal Quarter Ended | Low Bid | High Bid |
09/30/17 | 2.92 | 3.50 |
12/31/17 | 2.85 | 3.20 |
03/31/18 | 2.85 | 3.30 |
06/30/18 | 3.05 | 3.30 |
09/30/18 | 2.82 | 3.24 |
12/31/18 | 2.99 | 4.00 |
03/31/19 | 3.50 | 4.50 |
06/30/19 | 3.88 | 4.75 |
Name and Principal Position (a) | Fiscal Year (b) | Salary ($) (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 ($) (j) |
Helena R. Santos, CEO, President, CFO | 2020 | 185,700 | 50,000 | 0 | 13,100(1) | 0 | 0 | 0 | 9,400(6) | 258,200 |
Helena R. Santos, CEO, President, CFO | 2019 | 180,300 | 0 | 0 | 13,100(1) | 0 | 0 | 0 | 4,900(6) | 198,300 |
John A. Moore, President of SBI | 2020 | 145,000 | 50,000 | 0 | 36,000(2) | 0 | 0 | 0 | 28,900(7) | 259,900 |
John A. Moore, President of SBI | 2019 | 40,000 | 0 | 0 | 12,000(2) | 0 | 0 | 0 | 9,800(7) | 61,800 |
Anthony Mitri, President of Altamira | 2020 | 130,000 | 0 | 0 | 6,500(3) | 0 | 0 | 0 | 5,200(6) | 141,700 |
Anthony Mitri, President of Altamira | 2019 | 120,000 | 0 | 0 | 6,500(3) | 0 | 0 | 0 | 4,800(6) | 131,300 |
Robert P. Nichols, President of Genie Division | 2020 | 162,300 | 5,000 | 0 | 3,900(4) | 0 | 0 | 0 | 6,700(6) | 177,900 |
Robert P. Nichols, President of Genie Division | 2019 | 157,600 | 0 | 0 | 3,900(4) | 0 | 0 | 0 | 6,800(6) | 168,300 |
Karl D. Nowosielski President of Torbal Division and Director of Marketing | 2020 | 169,800 | 10,000 | 0 | 6,300(5) | 0 | 0 | 0 | 7,200(6) | 193,300 |
Karl D. Nowosielski President of Torbal Division and Director of Marketing | 2019 | 163,300 | 10,000 | 0 | 7,400(5) | 0 | 0 | 0 | 6,400(6) | 187,100 |
Name and Principal Position (a) | Fiscal Year (b) | Salary ($) (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 | 2019 | 180,300 | 0 | 0 | 13,100(1) | 0 | 0 | 0 | 4,900(5) | 198,300 |
2018 | 175,000 | 25,000 | 0 | 13,100(1) | 0 | 0 | 0 | 6,700(5) | 219,800 | |
Brookman P. March, Vice President Corporate Strategy, VP, Sales of Altamira | 2019 | 159,600 | 0 | 0 | 3,900(2) | 0 | 0 | 0 | 6,400(5) | 169,900 |
2018 | 155,000 | 10,000 | 0 | 3,900(2) | 0 | 0 | 0 | 6,200(5) | 175,100 | |
Anthony Mitri, President of Altamira | 2019 | 120,000 | 0 | 0 | 6,500(3) | 0 | 0 | 0 | 4,800(5) | 131,300 |
2018 | 110,000 | 0 | 0 | 1,600(3) | 0 | 0 | 0 | 4,400(5) | 116,000 | |
Robert P. Nichols, President of Genie Division | 2019 | 157,600 | 0 | 0 | 3,900(2) | 0 | 0 | 0 | 6,800(5) | 168,300 |
2018 | 153,000 | 10,000 | 0 | 3,900(2) | 0 | 0 | 0 | 6,300(5) | 173,200 | |
Karl D. Nowosielski President of Torbal Division and Director of Marketing | 2019 | 163,300 | 10,000 | 0 | 7,400(4) | 0 | 0 | 0 | 6,400(5) | 187,100 |
2018 | 161,700 | 10,000 | 0 | 7,400(4) | 0 | 0 | 0 | 6,400(5) | 185,500 |
Name (a) | 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 ($/Sh) (g) | Grant Date Fair Value of Stock And Option Awards (h) |
John A. Moore | 07/01/19- 06/30/20 | 0 | 0 | 0 | 5,881 | 5.35-11.30 | 36,000 |
Option Awards | Option Awards | Option Awards | ||||||||
Name (a) | Number of Securities Under- lying Unexercised Options (#) Exercisable (b) | Number of Securities Under- lying Unexercised Options (#) Unexerci- sable (c) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | 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 ($) (e) | Option Expiration Date (f) |
Helena Santos | 8,333 | 16,667 | 0 | 3.08 | 07/2027 | 8,666 | 8,334 | 0 | 3.08 | 07/2027 |
Anthony Mitri | 3,334 | 6,666 | 0 | 3.05-3.27 | 09/2018-06/2028 | 6,668 | 3,332 | 0 | 3.05-3.15 | 12/2027-06/2028 |
Brookman March | 9,500 | 5,000 | 0 | 3.71-3.96 | 05/2022-07/2027 | |||||
John A. Moore | 1,902 | 10,684 | 0 | 4.50-11.30 | 03/2029-06/2030 | |||||
Robert Nichols | 4,500 | 5,000 | 0 | 3.50 | 12/2023-07/2027 | 5,000 | 2,500 | 0 | 3.08 | 12/2023-07/2027 |
Karl Nowosielski | 17,500 | 7,000 | 0 | 3.05-4.05 | 02/2024-07/2027 | 22,000 | 2,500 | 0 | 3.05-4.05 | 02/2024-07/2027 |
Name (a) | Fees Earned or Paid in Cash ($) (b) | Stock Awards ($) (c) | Option Awards($) (d) | Non-Equity Incentive Plan Compensation ($) (e) | Changes in Pension Value and Non-qualified Deferred Compensation Earnings($) (f) | Non-qualified Deferred Comp-sensation Earnings ($) (g) | All Other Comp- ensation ($) (h) | Total ($) (i) | Fees Earned or Paid in Cash ($) (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 | 41,200 | 0 | 43,200(1) | 84,400 | ||||||||||||
Joseph G. Cremonese | 36,700 | 0 | 76,200(1) | 112,900 | ||||||||||||
Marcus Frampton | 2,800 | 0 | 2,800 | 24,800 | 0 | 24,800 | ||||||||||
John A. Moore | 9,800 | 0 | 12,000 | 0 | 40,000 | 61,800 | ||||||||||
Grace S.Morin | 20,800 | 0 | 18,200(2) | 39,000 | ||||||||||||
James S.Segasture | 16,800 | 0 | 16,800 | |||||||||||||
Grace S. Morin | 6,400 | 0 | 8,400(3) | 14,800 | ||||||||||||
James S. Segasture | 16,800 | 0 | 16,800 | |||||||||||||
John F.F. Watkins | 20,800 | 0 | 0 | 20,800 | 24,800 | 0 | 0 | 24,800 |
Name | Amount and Nature of Beneficial Ownership | % of Class |
Falcon Juneau, LLC 800 F Street Unit #P2 Juneau, AK 99801 | 77,085(1) | 5.2% |
Fulcrum, Inc. 100 Delawanna Avenue Clifton, NJ 07014 | 117,370(2) | 7.9% |
Joseph G. Cremonese | 138,262(3) | 9.2% |
Marcus Frampton | 2,250(4) | 0.2% |
John A. Moore | 6,705(5) | 0.0% |
Grace S. Morin | 97,450(6) | 6.5% |
Helena R. Santos | 40,779(7) | 2.7% |
James S. Segasture | 162,500(8) | 10.9% |
John F. F. Watkins | 0 | 0.0% |
Karl D. Nowosielski | 34,183(9) | 2.3% |
Brookman P. March | 97,450(10) | 6.5% |
Anthony J. Mitri | 10,000(11) | 0.0% |
Robert P. Nichols | 27,897(12) | 1.9% |
All directors and executive officers as a group (11 persons) | 510,026(13) | 32.1% |
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 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 | |
(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 | |
(8) | |
(9) Represents shares issuable upon exercise of options. | |
(10) Includes | |
(11) Includes | |
(*) - % of Class is less than 1%. |
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) | 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 | 97,200 | 3.24 | 20,800 | 96,600 | 4.35 | 147,400 |
Equity Compensation plans not approved by security holders | N/A | N/A | ||||
Total | 97,200 | 3.24 | 20,800 | 96,600 | 4.35 | 147,400 |
Exhibit Number | Exhibit |
3 | Articles 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.) |
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). | |
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). | |
4 | Instruments defining the rights of security holders: |
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). | |
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). | |
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). | |
10 | Material Contracts: |
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). | |
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). | |
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). | |
Lease agreement dated August 8, 2014 by and between the Company and 80 Orville Drive Associates LLC. | |
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). | |
Employment 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). | |
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). |
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). | |
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). | |
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). | |
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). | |
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) | |
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). | |
Employment agreement dated July 1, 2017 by and between the Company and Ms. Santos (filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto). |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
Employment agreement dated July 1, 2017 by and between the Company and Mr. Nichols (filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto). | |
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). | |
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). | |
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). | |
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). | |
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). |
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). | ||
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). | ||
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). | ||
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). | ||
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). | ||
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). | ||
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). | |
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). | ||
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). | ||
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). |
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). | ||
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). | ||
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). | ||
Employment 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). | ||
Employment Agreement, dated as of May 18, 2012 between Altamira Instruments, 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). | ||
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). | ||
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). | ||
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). | ||
Employment agreement dated July 1, 2017 by and between the Company and Mr. March (filed as an exhibit to the Company's Annual Report on Form 10-K filed on June 30, 2017, and incorporated by reference thereto). | ||
10(i)-8 | Termination 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). | |
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). | ||
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). |
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). | |
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. | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). |
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) | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
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). | |
Registration Rights 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). |
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). | |
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). | |
Commercial Security Agreement dated July 5, 2016 by and among the Company, and First National Bank of Pennsylvania. | |
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). | |
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). | |
Consulting Agreement dated March 1, 2019 between the Company and Mr. John A. Moore (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 6, | |
10(aa)-1 | Amendment 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)-2 | Employment 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). |
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). |
Code of Ethics (filed as Exhibit 14 to the Company’s Annual 10KSB filed on September 28, 2007 and incorporated by reference thereto). | |
21 | Subsidiaries 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. |
Date: October | SCIENTIFIC INDUSTRIES, INC. (Registrant) /s/Helena R. Santos |
Helena R. Santos President, Chief Executive Officer, Chief Financial Officer and Treasurer |
Name | Title | Date
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AS OF AND FOR THE YEARS ENDED JUNE 30, 2019 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES AS OF AND FOR THE YEARS ENDED JUNE 30, CONTENTS
Report of Independent Registered Public Accounting Firm 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, 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) 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. 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 October 9, 2020F-1 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES AS OF JUNE 30, ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
See notes to consolidated financial statements. F-2 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2019
See notes to consolidated financial statements. F-3 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FOR THE YEARS ENDED JUNE 30, 2019
See notes to consolidated financial statements. F-4 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
FOR THE YEARS ENDED JUNE 30, 2019
See notes to consolidated financial statements. SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JUNE 30, 1. 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. Additionally, the Company has two 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 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 On July 1, 2018 the Company adopted Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts 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, or 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 sources: (1) Benchtop Laboratory Equipment, (2) Catalyst Research Instruments, and (3) Royalties.
F-7 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
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 Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with 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. F-9 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) Contract Liabilities Contract liabilities consists of billings or payments received in advance of revenue recognition and is recognized as the revenue 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 the underlying contract. Accordingly, the contract liabilities balance does not represent the total contract value of outstanding arrangements. Contract liabilities that are expected to be recognized during the subsequent 12-month period are recorded as current and the remaining portion as noncurrent. Investment Securities Investment securities consist of equity securities and mutual funds with realized gains and losses recorded using the specific identification method. Changes in fair value are recorded as unrealized holding gains or losses in other income (loss), net on the Inventories Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or net 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. 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, 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. The Company concluded as of June 30, 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 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 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, 2020 and 2019, 147,414 and 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, 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 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, 2. Segment Information 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:
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, 2019
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 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,
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, 3. Fair Value of Financial Instruments (Continued)
The following table sets forth an analysis of changes during the years ended June 30, 2020 and 2019,
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, Investments in marketable securities classified as available-for-sale by security type at June 30,
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30,
4. Inventories
5. Property and Equipment
Depreciation expense was 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, The components of other intangible assets are as follows:
F-17 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, 6. Goodwill and Other Intangible Assets (Continued)
Total amortization expense was $72,000 and $190,000 in 2020 and Estimated future amortization expense of intangible assets as of June 30,
7. Line of Credit The Company has a Demand Line of Credit through December 8. The Company 2021. F-18 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, 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 10. Commitments and Contingencies
The Company has a three-year employment contract with its President, effective July 1, The Company has a three-year employment contract with its President of the Genie Products Division of the Benchtop Laboratory Equipment Operations and Corporate Secretary effective July 1, The Company has a three-year employment contract with its President of Torbal Products Division of the Benchtop Laboratory Equipment Operations and Director of Marketing effective July 1, F-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 The Company has a consulting agreement, which expires on December 31, 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 F-20 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 The fair value of contingent consideration estimated to be paid as of June 30,
11. Leases 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 Company 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 Benchtop Laboratory Equipment Operations which was mutually terminated early effective as of October 31, 2019 and a new lease for a 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 lease 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 5.0% as the discount rate to calculate the present value of future lease payments, which was the interest rate that its bank would charge for a similar loan. F-21 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019 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:
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:
F-22 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, Income Taxes (Continued) Deferred tax assets and liabilities consist of the following:
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, 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 ended June 30, Stock Options Option activity is summarized as follows:
F-23 SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF AND FOR THE YEARS ENDED JUNE 30, 13. Stock Options (Continued)
Earnings (Loss) Per Common Share Earnings (loss) per common share data was computed as follows:
Approximately 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 |