UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   

For the quarterly period ended September 30, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
2021

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to________

Commission file number 0-6658

SCIENTIFIC INDUSTRIES, INC.
(Exact Name of Registrant as specified in Its Charter)

Delaware04-2217279

SCIENTIFIC INDUSTRIES, INC.

(Exact Name of Registrant as specified in Its Charter)

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)

(631) 567-4700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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) and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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 number of shares outstanding of the registrant’s common stock, par value $.05 per share (“Common Stock”) as of November 6, 20205, 2021 is 2,861,2636,458,143 shares.

SCIENTIFIC INDUSTRIES, INC.

Table of Contents

PART I - Financial Information

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

#

Condensed Consolidated Balance Sheets

2

3

Condensed Consolidated Statements of Operations and Comprehensive Loss

3

4

Condensed Consolidated Statements of Changes in Shareholders' Equity

4

5

Condensed Consolidated Statements of Cash Flows

5

6

Notes to Unaudited Condensed Consolidated Financial Statements

6

7

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

13

15

CONTROLS AND PROCEDURES

14

16

PART II - Other Information

EXHIBITS AND REPORTS ON FORM 8-K

14

17

SIGNATURE

18

 
152

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS
 
 
September 30, 2020
 
 
June 30, 2020
 
Current assets:
 
(Unaudited)
 
 
 
 
Cash and cash equivalents
 $3,355,500 
 $7,559,700 
Investment securities
  4,017,700 
  331,800 
Trade accounts receivable, less allowance for doubtful accounts of $11,600 at September 30, 2020
and June 30, 2020
  1,171,300 
  1,064,000 
Inventories
  2,941,200 
  2,884,700 
Income tax receivable
  331,500 
  334,800 
Prepaid expenses and other current assets
  134,700 
  112,300 
Total current assets
  11,951,900 
  12,287,300 
 
    
    
Property and equipment, net
  325,200 
  279,700 
 
    
    
Intangible assets, net
  129,000 
  128,700 
 
    
    
Goodwill
  705,300 
  705,300 
 
    
    
Other assets
  57,900 
  56,000 
 
    
    
Deferred taxes
  598,200 
  537,100 
 
    
    
Operating lease right-of-use assets
  826,600 
  803,300 
 
    
    
Total assets
 $14,594,100 
 $14,797,400 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
 
 
Accounts payable
 $531,900 
 $354,700 
Accrued expenses
  538,000 
  799,700 
Contract liabilities
  82,700 
  89,000 
Contingent consideration, current portion
  97,600 
  111,000 
Bank overdraft
  109,400 
  43,100 
Current portion of operating lease liabilities
  161,300 
  226,900 
Payroll Protection Program loan
  563,800 
  563,800 
Total current liabilities
  2,084,700 
  2,188,200 
Contingent consideration payable, less current portion
  247,000 
  247,000 
Operating lease liabilities, less current portion
  743,000 
  640,800 
 
    
    
Total liabilities
  3,074,700 
  3,076,000 
Shareholders’ equity:
    
    
Common stock, $.05 par value; 7,000,000 shares authorized; 2,881,065 shares issued; 2,861,263 shares outstanding at September 30, 2020 and June 30, 2020
  144,100 
  144,100 
Additional paid-in capital
  8,669,600 
  8,608,300 
Retained earnings
  2,758,100 
  3,021,400 
 
  11,571,800 
  11,773,800 
Less common stock held in treasury at cost, 19,802 shares
  52,400 
  52,400 
 
    
    
Total shareholders’ equity
  11,519,400 
  11,721,400 
 
    
    
Total liabilities and shareholders’ equity
 $14,594,100 
 $14,797,400 

 

 

September 30,

2021

 

 

June 30,

2021

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$5,268,700

 

 

$9,675,200

 

Investment securities

 

 

6,985,800

 

 

 

3,744,600

 

Trade accounts receivable, less allowance for doubtful accounts of $15,600 at September 30, 2021 and June 30, 2021

 

 

1,493,200

 

 

 

1,294,700

 

Inventories

 

 

3,094,700

 

 

 

2,977,100

 

Income tax receivable

 

 

66,000

 

 

 

333,300

 

Prepaid expenses and other current assets

 

 

502,100

 

 

 

350,900

 

Assets of discontinued operations

 

 

56,200

 

 

 

55,300

 

Total current assets

 

 

17,466,700

 

 

 

18,431,100

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

435,300

 

 

 

412,600

 

Goodwill

 

 

4,395,400

 

 

 

4,395,400

 

Other intangible assets, net

 

 

2,418,900

 

 

 

2,557,800

 

Deferred taxes

 

 

2,812,500

 

 

 

2,489,900

 

Operating lease right-of-use assets

 

 

631,300

 

 

 

665,300

 

Other assets

 

 

54,200

 

 

 

54,300

 

 

 

 

 

 

 

 

 

 

Total assets

 

$28,214,300

 

 

$29,006,400

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$620,500

 

 

$453,500

 

Accrued expenses

 

 

542,700

 

 

 

633,500

 

Contingent consideration, current portion

 

 

136,600

 

 

 

136,600

 

Bank overdraft

 

 

0

 

 

 

321,700

 

Lease liabilities, current portion

 

 

234,000

 

 

 

270,500

 

Payroll Protection Program loan

 

 

433,800

 

 

 

433,800

 

Liabilities of discontinued operations

 

 

26,400

 

 

 

37,200

 

Total current liabilities

 

 

1,994,000

 

 

 

2,286,800

 

 

 

 

 

 

 

 

 

 

Contingent consideration payable, less current portion

 

 

23,400

 

 

 

23,400

 

Lease liabilities, less current portion

 

 

469,200

 

 

 

460,500

 

Other long-term liabilities

 

 

0

 

 

 

10,900

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

2,486,600

 

 

 

2,781,600

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $.05 par value; 15,000,000 shares authorized; 6,477,945 shares issued; 6,458,143 shares   outstanding at September 30, 2021 and June 30, 2021

 

 

324,000

 

 

 

324,000

 

Additional paid-in capital

 

 

27,288,900

 

 

 

26,613,500

 

Accumulated comprehensive gain (loss)

 

 

27,100

 

 

 

(9,200)

Accumulated deficit

 

 

(1,859,900)

 

 

(651,100)

 

 

 

25,780,100

 

 

 

26,277,200

 

Less common stock held in treasury at cost, 19,802 shares

 

 

52,400

 

 

 

52,400

 

Total shareholders’ equity

 

 

25,727,700

 

 

 

26,224,800

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

28,214,300

 

 

$29,006,400

 

See notes to unaudited condensed consolidated financial statements.

 2

3

Table of Contents

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

 
 
For the Three Month Period Ended September 30, 2020
 
 
For the Three Month Period Ended September 30, 2019
 
 
 
 
 
 
 
 
Revenues
 $2,156,300 
 $2,004,200 
 
    
    
Cost of revenues
  1,146,600 
  1,023,800 
 
    
    
Gross profit
  1,009,700 
  980,400 
 
    
    
Operating expenses:
    
    
General and administrative
  579,600 
  510,200 
Selling
  521,700 
  309,100 
Research and development
  244,300 
  236,600 
 
    
    
Total operating expenses
  1,345,600 
  1,055,900 
 
    
    
Loss from operations
  (335,900)
  (75,500)
 
    
    
Other income (expense):
    
    
Other income (expense), net
  11,500 
  (200)
 
    
    
Loss before income tax benefit
  (324,400)
  (75,700)
 
    
    
Income tax benefit:
    
    
Current
  - 
  - 
Deferred
  (61,100)
  (19,500)
 
    
    
Total income tax benefit
  (61,100)
  (19,500)
 
    
    
Net loss
 $(263,300)
 $(56,200)
 
    
    
Basic loss per common share
 $(.09)
 $(.04)
 
    
    
Diluted loss per common share
 $(.09)
 $(.04)

 

 

For the Three Month Period Ended

September 30,

2021

 

 

For the Three Month Period Ended

September 30,

2020

 

 

 

 

 

 

 

 

Revenues

 

$2,854,500

 

 

$2,019,200

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

1,340,900

 

 

 

962,500

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

1,513,600

 

 

 

1,056,700

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

1,465,700

 

 

 

519,200

 

Selling

 

 

935,800

 

 

 

493,900

 

Research and development

 

 

636,500

 

 

 

244,300

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

3,038,000

 

 

 

1,257,400

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,524,400)

 

 

(200,700)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

(7,900)

 

 

11,500

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income tax benefit

 

 

(1,532,300)

 

 

(189,200)

 

 

 

 

 

 

 

 

 

Income tax benefit, deferred

 

 

(322,600)

 

 

(35,600)

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(1,209,700)

 

 

(153,600)

 

 

 

 

 

 

 

 

 

Discontinued operations (Note 9):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) from discontinued operations, net of tax

 

 

900

 

 

 

(109,700)

 

 

 

 

 

 

 

 

 

Net loss

 

 

(1,208,800)

 

 

(263,300)

 

 

 

 

 

 

 

 

 

Comprehensive gain:

 

 

 

 

 

 

 

 

Unrealized holding gain on investment securities, net of tax

 

 

2,200

 

 

 

0

 

Foreign currency translation adjustment

 

 

34,100

 

 

 

0

 

Comprehensive gain

 

 

36,300

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

$(1,172,500)

 

$(263,300)

 

 

 

 

 

 

 

 

 

Basic loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$(.19)

 

$(.05)

Discontinued operations

 

$.00

 

 

$(.04)

Consolidated operations

 

$(.19)

 

$(.09)

See notes to unaudited condensed consolidated financial statements.


  3

4

Table of Contents

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Paid-in
 
 
Retained
 
 
Treasury Stock
 
 
Shareholders’
 
Fiscal Year 2021
 
Shares
 
 
Amount
 
 
Capital
 
 
Earnings
 
 
Shares
 
 
Amount
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 1, 2020
  2,881,065 
 $144,100 
 $8,608,300 
 $3,021,400 
  19,802 
 $52,400 
 $11,721,400 
 
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  (263,300)
  - 
  - 
  (263,300)
 
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  61,300 
  - 
  - 
  - 
  61,300 
Balance, September 30, 2020
  2,881,065 
 $144,100 
 $8,669,600 
 $2,758,100 
  19,802 
 $52,400 
 $14,594,100 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Paid-in
 
 
Retained
 
 
Treasury Stock
 
 
Shareholders’
 
Fiscal Year 2019
 
Shares
 
 
Amount
 
 
Capital
 
 
Earnings
 
 
Shares
 
 
Amount
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 1, 2019
  1,513,914 
 $75,700 
 $2,592,700 
 $3,724,700 
  19,802 
 $52,400 
 $6,340,700 
 
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  (56,200)
  - 
  - 
  (56,200)
 
    
    
    
    
    
    
    
Stock options exercised
  2,000  
  100  
  6,900  
    
    
    
  7,000  
 
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  17,700 
  - 
  - 
  - 
  17,700 
Balance, September 30, 2019
  1,515,914 
 $75,800 
 $2,617,300 
 $3,668,500 
  19,802 
 $52,400 
 $6,309,200 

  4
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
For the Three Month Period Ended
September 30, 2020
 
 
For the Three Month Period Ended
September 30, 2019
 
Operating activities:
 
 
 
 
 
 
Net loss
 $(263,300)
 $(56,200)
Adjustments to reconcile net loss to net
cash used in operating activities:
    
    
Depreciation and amortization
  40,600 
  41,000 
Deferred income taxes
  (61,100)
  (19,500)
Stock-based compensation
  61,300 
  17,700 
(Gain) loss on sale of investments
  (16,800)
  800 
Unrealized holding (gain) loss of investments
  20,900 
  (2,300)
Changes in operating assets and liabilities:
    
    
Trade accounts receivable
  (107,300)
  106,400 
Income tax receivable
  3,300 
  - 
Right -of- use assets
  (23,300)
  (902,500)
Lease liability
  36,600 
  969,100 
Inventories
  (56,500)
  (120,800)
Prepaid and other assets
  (24,300)
  (6,800)
Accounts payable
  177,200 
  (111,800)
Contract liabilities
  (6,300)
  62,000 
Bank overdraft
  66,300 
  - 
Accrued expenses
  (261,700)
  (301,200)
 
    
    
Total adjustments
  (151,100)
  (267,900)
 
    
    
Net cash used in operating activities
  (414,400)
  (324,100)
 
    
    
Investing activities:
    
    
Purchase of investment securities
  (3,723,500)
  (25,000)
Redemption of investment securities
  33,800 
  23,800 
Capital expenditures
  (70,500)
  (17,000)
Purchase of other intangible assets
  (16,200)
  (7,500)
 
    
    
Net cash used in investing activities
  (3,776,400)
  (25,700)
 
    
    
Financing activities:
    
    
Proceeds from stock options exercised
  - 
  7,000 
Payments of contingent consideration
  (13,400)
  - 
 
    
    
Net cash provided by (used in) financing activities
  (13,400)
  7,000 
 
    
    
Net decrease in cash and cash equivalents
  (4,204,200)
  (342,800)
 
    
    
Cash and cash equivalents, beginning of year
  7,559,700 
  1,602,500 
 
    
    
Cash and cash equivalents, end of period
 $3,355,500 
 $1,259,700 
 
    
    
Supplemental disclosures:
    
    
 
    
    
Cash paid during the period for:
    
    
Income taxes
 $500 
 $40,900 
Interest
  - 
  - 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

other

Comprehensive

Income

 

 

Retained Earnings (Accumulated

 

 

Treasury Stock

 

 

Total

Shareholders’

 

Fiscal Year 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

 Deficit)

 

 

Shares

 

 

Amount

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, July 1, 2021

 

 

6,477,945

 

 

$324,000

 

 

$26,613,500

 

 

$(9,200)

 

$(651,100)

 

 

19,802

 

 

$52,400

 

 

$26,224,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(1,208,800)

 

 

-

 

 

 

0

 

 

 

(1,208,800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

-

 

 

 

0

 

 

 

0

 

 

 

34,100

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

34,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain on investment securities, net of tax

 

 

-

 

 

 

0

 

 

 

0

 

 

 

2,200

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

2,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

0

 

 

 

675,400

 

 

 

0

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

675,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, September 30, 2021

 

 

6,477,945

 

 

$324,000

 

 

$27,288,900

 

 

$27,100

 

 

$(1,859,900)

 

 

19,802

 

 

$52,400

 

 

$25,727,700

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

other

Comprehensive

Income

 

 

Retained

 

 

Treasury Stock

 

 

Total

Shareholders’

 

Fiscal Year 2021

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, July 1, 2020

 

 

2,881,065

 

 

$144,100

 

 

$8,608,300

 

 

$0

 

 

$3,021,400

 

 

 

19,802

 

 

$52,400

 

 

$11,721,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(263,300)

 

 

-

 

 

 

0

 

 

 

(263,300)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

0

 

 

 

61,300

 

 

 

0

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

61,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, September 30, 2020

 

 

2,881,065

 

 

$144,100

 

 

$8,669,600

 

 

$0

 

 

$2,758,100

 

 

 

19,802

 

 

$52,400

 

 

$14,594,100

 

See notes to unaudited condensed consolidated financial statements.

 5

5

Table of Contents

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

For the Three Month Period Ended

September 30,

2021

 

 

For the Three Month Period Ended

September 30,

2020

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$(1,208,800)

 

$(263,300)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

165,100

 

 

 

40,600

 

Deferred income tax benefit

 

 

(322,600)

 

 

(61,100)

Stock-based compensation

 

 

675,400

 

 

 

61,300

 

(Gain) loss on sale of investments

 

 

200

 

 

 

(16,800)

Unrealized holding loss of investments

 

 

32,800

 

 

 

20,900

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(198,500)

 

 

(107,300)

Income tax receivable

 

 

267,300

 

 

 

3,300

 

Right -of- use assets

 

 

34,000

 

 

 

(23,300)

Lease liabilities

 

 

(27,800)

 

 

36,600

 

Inventories

 

 

(117,600)

 

 

(56,500)

Prepaid and other current assets

 

 

(151,200)

 

 

(24,300)

Accounts payable

 

 

167,000

 

 

 

177,200

 

Contract liabilities

 

 

0

 

 

 

(6,300)

Bank overdraft

 

 

(321,700)

 

 

66,300

 

Other long-term liabilities

 

 

(10,800)

 

 

0

 

Accrued expenses

 

 

(90,700)

 

 

(261,700)

 

 

 

 

 

 

 

 

 

Total adjustments

 

 

100,900

 

 

 

(151,100)

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(1,107,900)

 

 

(414,400)

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchase of investment securities

 

 

(3,982,400)

 

 

(3,723,500)

Redemption of investment securities

 

 

708,200

 

 

 

33,800

 

Capital expenditures

 

 

(48,900)

 

 

(70,500)

Purchase of other intangible assets

 

 

0

 

 

 

(16,200)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(3,323,100)

 

 

(3,776,400)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Payments of contingent consideration

 

 

0

 

 

 

(13,400)

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

0

 

 

 

(13,400)

 

 

 

 

 

 

 

 

 

Effect of changes in foreign currency exchange rates and gain on investment securities

 

 

24,500

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(4,406,500)

 

 

(4,204,200)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of year

 

 

9,675,200

 

 

 

7,559,700

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$5,268,700

 

 

$3,355,500

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Income taxes

 

$0

 

 

$500

 

See notes to unaudited condensed consolidated financial statements.

6

Table of Contents

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

General:

The accompanying unaudited interim condensed consolidated financial statements are prepared pursuant to the Securities and Exchange Commission’s rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States for complete financial statements are not included herein. The Company believes all adjustments necessary for a fair presentation of these interim statements have been included and that they are of a normal and recurring nature. These interim statements should be read in conjunction with the Company’s financial statements and notes thereto, included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2020.2021. The results for the three months ended September 30, 2020,2021 are not necessarily an indication of the results for the full fiscal year ending June 30, 2021.

2022.

1. Summary of Significant Accounting Policies

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 (discontinued operation as of November 30, 2020), and Scientific Bioprocessing Holdings, Inc. (“SBHI”), a Delaware corporation, and its wholly-owned subsidiaries, Scientific Bioprocessing, Inc. (“SBI”), a Delaware corporation, and wholly-owned subsidiary, and Scientific Packaging Industries, Inc.aquila biolabs GmbH (“Aquila”), an inactive wholly-owned subsidiarya German corporation, which was acquired on April 29, 2021, (all collectively referred to as the “Company”). On April 30, 2021 Scientific Industries, Inc. contributed 100% of the stock of SBI to SBHI. All material intercompany balances and transactions have been eliminated.

eliminated in consolidation.

COVID-19 Pandemic

The challenges posed by the COVID-19 pandemic on the global economy began to impacttake effect and adversely effected the Company’s operations at the end of the third quarter of the fiscal year ended June 30, 2020. At that time, the Company took appropriate action and put plans in place to diminish the adverse 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 pertainspertaining 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 -quarantineself-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 toThe Bioprocessing Systems Operations’ SBI facility was 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 downtemporarily 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’sCompany’ receipt of a $563,800 loantwo loans under the Federal Government’s Small Business Administration Paycheck Protection Program. The Company has not experiencedreceived $563,800 and does not anticipate$433,800 in Payroll Protection Program loans in April 2020 and March 2021, respectively. The first loan was forgiven in June 2021 except for $32,700 which was repaid by the Company. The Company expects to apply and receive forgiveness for the second loan. The Company elected to account for its PPP Loans in accordance with Accounting Standards Codification (“ASC”), 470 Debt, with interest, if any, material impactaccrued in accordance with the interest method under ASC 835-30, Imputation of Interest. Initially, the Company recognized the entire loan amounts as liabilities on its ability to collectbalance sheets, and remain as liabilities until either the Company is legally released from its accounts receivable due toobligations or pays the nature of its customers, which are primarily distributors of laboratory equipment and supplies that havelender. Once the ability to pay. However, there were some delaysloan is forgiven, the amount forgiven is recorded 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 operations. 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, resultsstatement 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 “Other Income.”

Adopted Accounting Pronouncements

In August 2018,December 2019, the The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU"(“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 was effective for fiscal years beginning after December 15, 2019. Early adoption was 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 adoption of this standard on July 1, 2020 did not have a material impact on the Company’s financial statements. 

RRecent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying“Simplifying the Accounting for Income Taxes,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 evaluatingadoption of this standard as of July 1, 2021 did not have a material impact on the impact of adopting this guidance.
 6

Company’s financial statements.

7

Table of Contents

2. Revenue

The Company records revenues in accordance with Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers, as amended” (“ASC Topic 606”). 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 generategenerates revenues from the following sources: (1) Benchtop Laboratory Equipment, and (2) Catalyst Research Instruments, and (3) Royalties.
The following table summarizes the Company’s disaggregation of revenues for the three months ended September 30, 2020 and 2019.
 
 
Benchtop Laboratory Equipment
 
 
Catalyst Research Instruments
 
 
Bioprocessing
Systems
 
 
Corporate
And
Other
 
 
Consolidated
 
Three Months Ended
September 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $1,930,300 
 $137,100 
 $88,900 
 $- 
 $2,156,300 
 
    
    
    
    
    
Foreign Sales
  631,900 
  57,200 
  86,300 
  - 
  775,400 
 
 
Benchtop Laboratory Equipment
 
 
Catalyst Research Instruments
 
 
Bioprocessing Systems
 
 
Corporate
And
Other
 
 
Consolidated
 
Three Months Ended
September 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $1,576,200 
 $138,700 
 $289,300 
 $- 
 $2,004,200 
 
    
    
    
    
    
Foreign Sales
  397,600 
  71,700 
  - 
  - 
  469,300 
Bioprocessing Systems.

 

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Consolidated

 

Three Months Ended September 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$2,529,900

 

 

$324,600

 

 

$2,854,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

1,071,800

 

 

 

91,500

 

 

 

1,163,300

 

 

 

Benchtop

Laboratory

Equipment

 

 

Bioprocessing

Systems

 

 

Consolidated

 

Three Months Ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$1,930,300

 

 

$88,900

 

 

$2,019,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

631,900

 

 

 

86,300

 

 

 

718,200

 

Benchtop Laboratory Equipment sales are comprised primarily of standard benchtop laboratory equipment from its stocksold 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 varyingranging from a day to a few weeks. Customers either pay by credit card (online sales) or netNet 30-90 days, 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. The standard warranty is typically for a period of, one toor two years, forcovering parts and labor, and is deemed immaterial.

Catalyst Research Instrument sales are comprised primarily Revenue is recognized at the point in time when the risks and rewards 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 receivedownership have transferred 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 ancillarygenerally upon shipment.

 
Bioprocessing Systems revenues consist of royalty revenues generated through SBI
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 the fulfillment of which normally consists of replacement of small components or software support.

product revenues generated primarily through Aquila. Royalty revenues pertain to royaltiesare earned by the Company which are paid on a calendar year basis, under a licensing agreement from a single licensee and its sublicenses. The license agreement includes two United States patents, one which expired in August 2021 and another which will expire in December 2023. The Company is then obligated to pay 50% of all royalties receivedearned 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 customer8
Identification of the performance obligations in the contract

DeterminationTable of the transaction priceContents
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, a performance obligation is satisfied
 7
The Company has made the following accounting policy elections and elected to use certain practical expedients, as permitted by the 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.

3. Segment Information and Concentrations

The Company views its operations as threetwo 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, manufacture, 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
 
Three Months Ended
September 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $1,930,300 
 $137,100 
 $88,900 
 $- 
 $2,156,300 
 
    
    
    
    
    
Foreign Sales
  631,900 
  57,200 
  86,300 
  - 
  775,400 
 
    
    
    
    
    
Income (Loss) From Operations
  383,800 
  (135,200)
  (532,300)
  (52,200)
  (335,900)
 
    
    
    
    
    
Assets
  5,871,900 
  996,000 
  775,700 
  6,950,500 
  14,594,100 
 
    
    
    
    
    
Long-Lived Asset Expenditures
  21,800 
  - 
  64,900 
  - 
  86,700 
 
    
    
    
    
    
Depreciation and Amortization
  26,300 
  300 
  14,000 
  - 
  40,600 
 
 
Benchtop Laboratory Equipment
 
 
Catalyst Research Instruments
 
 
Bioprocessing Systems
 
 
Corporate
And
Other
 
 
Consolidated
 
Three Months Ended
September 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $1,576,200 
 $138,700 
 $289,300 
 $- 
 $2,004,200 
 
    
    
    
    
    
Foreign Sales
  397,600 
  71,700 
  - 
  - 
  469,300 
 
    
    
    
    
    
Income (Loss) From Operations
  12,900 
  (90,200)
  1,800 
  - 
  (75,500)
 
    
    
    
    
    
Assets
  5,589,400 
  1,400,900 
  1,088,100 
  784,200 
  8,862,600 
 
    
    
    
    
    
Long-Lived Asset Expenditures
  7,800 
  - 
  16,700 
  - 
  24,500 
 
    
    
    
    
    
Depreciation and Amortization
  30,500 
  400 
  10,100 
  - 
  41,000 

 

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate

And Other

 

 

Consolidated

 

Three Months Ended September 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$2,529,900

 

 

$324,600

 

 

$-

 

 

$2,854,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

1,071,800

 

 

 

91,500

 

 

 

-

 

 

 

1,163,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

561,600

 

 

 

(1,685,500)

 

 

(400,500)

 

 

(1,524,400)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

9,689,700

 

 

 

8,670,100

 

 

 

9,854,500

 

 

 

28,214,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Asset Expenditures

 

 

33,800

 

 

 

15,100

 

 

 

0

 

 

 

48,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

22,800

 

 

 

142,300

 

 

 

0

 

 

 

165,100

 

 

 

Benchtop Laboratory Equipment

 

 

Bioprocessing Systems

 

 

Corporate

And Other

 

 

Consolidated

 

Three Months Ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$1,930,300

 

 

$88,900

 

 

$-

 

 

$2,019,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

631,900

 

 

 

86,300

 

 

 

-

 

 

 

718,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

383,800

 

 

 

(532,300)

 

 

(52,200)

 

 

(200,700)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

5,871,900

 

 

 

775,700

 

 

 

7,946,500

 

 

 

14,594,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Asset Expenditures

 

 

21,800

 

 

 

64,900

 

 

 

0

 

 

 

86,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

26,300

 

 

 

14,000

 

 

 

0

 

 

 

40,300

 

Approximately 47%52% and 36%47% of net sales of Benchtop Laboratory Equipment for the three month periodsmonths ended September 30, 20202021 and 2019,2020, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories.

Approximately 27%20% and 33%27% of total Benchtop Laboratory Equipment sales were derived from the Torbal Scales Division for the three months ended September 30, 2021 and 2020, and 2019, respectively.

For the three months ended September 30, 20202021 and 2019,2020, respectively, three customers accounted for approximately 22% and 23% (both periods) of net sales of the Benchtop Laboratory Equipment Operations (21%(19% and 18%22% of the Company’s total revenues). , respectively.

Sales of Catalyst Research Instruments are generally comprisedproducts from Aquila of a few very large orders averaging approximately $50,000 per orderthe Bioprocessing Systems Operations, amounted to a limited number of customers, who differ from order to order. Sales to two customers during$168,200 for the three months ended September 30, 2020 accounted for approximately 88% of2021 and none in the Catalyst Research Instruments Operations revenues and 6% of the Company’s total revenues. Sales to two other customers during the three months ended September 30, 2019 accounted for approximately 90% of the Catalyst Research Instrument Operations’ revenues and 6% of the Company’s total revenues.

 8
corresponding prior year period.

9

Table of Contents

4. 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 are 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 tables.

table.

The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis at September 30, 20202021 and June 30, 20202021 according to the valuation techniques the Company used to determine their fair values:

 
 
 
 
 
Fair Value Measurements Using Inputs Considered as
 
 
 
Fair Value at September 30, 2020
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $3,355,500 
 $3,355,500 
 $- 
 $- 
Investment securities
  4,017,700 
  4,017,700 
  - 
  - 
 
    
    
    
    
Total
 $7,373,200 
 $7,373,200 
 $- 
 $- 
 
    
    
    
    
Liabilities:
    
    
    
    
Contingent consideration
 $344,600 
 $- 
 $- 
 $344,600 
Payments amounting to $13,400 for contingent consideration were made during the three months ended September 30, 2020.
 
 
 
 
 
  Fair Value Measurements Using Inputs Considered as
 
 
 
Fair Value at June 30, 2020
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $7,559,700 
 $7,559,700 
 $- 
 $- 
Investment securities
  331,800 
  331,800 
  - 
  - 
 
    
    
    
    
Total
 $7,891,500 
 $7,891,500 
 $- 
 $- 
 
    
    
    
    
Liabilities:
    
    
    
    
Contingent consideration
 $358,000 
 $- 
 $- 
 $358,000 
 9

 

 

Fair Value at

 

 

Fair Value Measurements Using Inputs Considered as

 

 

 

September 30, 2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$5,268,700

 

 

$5,268,700

 

 

$0

 

 

$0

 

Investment securities

 

 

6,985,800

 

 

 

6,878,200

 

 

 

107,600

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$12,254,500

 

 

$12,146,900

 

 

$107,600

 

 

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$160,000

 

 

$0

 

 

$0

 

 

$160,000

 

 

 

Fair Value at

 

 

Fair Value Measurements Using Inputs Considered as

 

 

 

June 30, 2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$9,675,200

 

 

$9,675,200

 

 

$0

 

 

$0

 

Investment securities

 

 

3,744,600

 

 

 

2,920,600

 

 

 

824,000

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$13,419,800

 

 

$12,595,800

 

 

$824,000

 

 

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$160,000

 

 

$0

 

 

$0

 

 

$160,000

 

Investments in marketable securities classified as available-for-sale by security type at September 30, 20202021 and June 30, 20202021 consisted of the following:

 
 
Cost
 
 
Fair Value
 
 
Unrealized Holding Gain (Loss)
 
At September 30, 2020:
 
 
 
 
 
 
 
 
 
Equity securities
 $110,800 
 $118,400 
 $7,600 
Mutual and bond funds
  3,876,200 
  3,899,300 
  23,100 
 
    
    
    
 
 $3,987,000 
 $4,017,700 
 $30,700 
 
 
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

 

At September 30, 2021:

 

 

 

 

 

 

 

 

 

Equity securities

 

$112,100

 

 

$159,200

 

 

$47,100

 

Mutual funds

 

 

6,714,600

 

 

 

6,719,000

 

 

 

4,400

 

Debt securities

 

 

105,400

 

 

 

107,600

 

 

 

2,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$6,932,100

 

 

$6,985,800

 

 

$53,700

 

 

 

Cost

 

 

Fair Value

 

 

Unrealized

Holding Gain (Loss)

 

At June 30, 2021:

 

 

 

 

 

 

 

 

 

Equity securities

 

$102,200

 

 

$154,100

 

 

$51,900

 

Mutual funds

 

 

2,752,400

 

 

 

2,766,500

 

 

 

14,100

 

Debt securities

 

 

832,700

 

 

 

824,000

 

 

 

(8,700)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$3,687,300

 

 

$3,744,600

 

 

$57,300

 

10

Table of Contents

5. Inventories

 
 
September 30,2020
 
 
June 30,2020
 
Raw materials
 $1,883,500 
 $1,838,500 
Work-in-process
  323,500 
  228,600 
Finished goods
  734,200 
  817,600 
 
 $2,941,200 
 $2,884,700 

 

 

September 30, 2021

 

 

June 30, 2021

 

Raw materials

 

$2,139,200

 

 

$2,170,400

 

Work-in-process

 

 

91,900

 

 

 

39,600

 

Finished goods

 

 

863,600

 

 

 

767,100

 

 

 

$3,094,700

 

 

$2,977,100

 

6. Goodwill and OtherFinite Lived 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$4,395,400 at September 30, 20202021 and June 30, 2020,2021, all of which is expected to be deductible for tax purposes.

The components of otherfinite lived intangible assets are as follows:

 Useful Lives
 
Cost
 
 
Accumulated Amortization
 
 
Net
 
At September 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 
  324,800 
  32,200 
Sublicense agreements10 yrs.
  294,000 
  260,900 
  33,100 
Non-compete agreements5 yrs.
  384,000 
  384,000 
  - 
IPR&D3 yrs.
  110,000 
  110,000 
  - 
Other intangible assets5 yrs.
  262,700 
  201,700 
  61,000 
 
    
    
    
 
 $2,422,400 
 $2,293,400 
 $129,000 

 10
 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 

 

 

Useful Lives

 

Cost

 

 

Accumulated Amortization

 

 

Net

 

At September 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

Technology, trademarks

 

5-10 yrs.

 

$364,700

 

 

$363,000

 

 

$1,700

 

Trade names

 

3-6 yrs.

 

 

592,300

 

 

 

171,500

 

 

 

420,800

 

Websites

 

3-7 yrs.

 

 

210,000

 

 

 

210,000

 

 

 

0

 

Customer relationships

 

4-10 yrs.

 

 

372,200

 

 

 

112,600

 

 

 

259,600

 

Sublicense agreements

 

10 yrs.

 

 

294,000

 

 

 

290,300

 

 

 

3,700

 

Non-compete agreements

 

4-5 yrs.

 

 

1,060,500

 

 

 

357,500

 

 

 

703,000

 

IPR&D

 

3-5 yrs.

 

 

852,100

 

 

 

172,000

 

 

 

680,100

 

Patents

 

5-7 yrs.

 

 

591,500

 

 

 

241,500

 

 

 

350,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$4,337,300

 

 

$1,918,400

 

 

$2,418,900

 

 

 

Useful Lives

 

Cost

 

 

Accumulated Amortization

 

 

Net

 

At June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

Technology, trademarks

 

5-10 yrs.

 

$364,700

 

 

$362,200

 

 

$2,500

 

Trade names

 

3-6 yrs.

 

 

592,300

 

 

 

152,600

 

 

 

439,700

 

Websites

 

3-7 yrs.

 

 

210,000

 

 

 

210,000

 

 

 

0

 

Customer relationships

 

4-10 yrs.

 

 

372,200

 

 

 

102,400

 

 

 

269,800

 

Sublicense agreements

 

10 yrs.

 

 

294,000

 

 

 

283,000

 

 

 

11,000

 

Non-compete agreements

 

4-5 yrs.

 

 

1,060,500

 

 

 

308,600

 

 

 

751,900

 

IPR&D

 

3-5 yrs.

 

 

852,100

 

 

 

134,800

 

 

 

717,300

 

Patents

 

5-7 yrs.

 

 

591,500

 

 

 

225,900

 

 

 

365,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$4,337,300

 

 

$1,779,500

 

 

$2,557,800

 

Total amortization expense was $15,800$138,900 and $19,500$15,800 for the three months ended September 30, 20202021 and 2019,2020, respectively. As of September 30, 2020,2021, estimated future amortization expense related to intangible assets is $44,000$386,800 for the remainder of the fiscal year ending June 30, 2021, $36,800 for fiscal 2022, $20,200$520,300 for fiscal 2023, $16,400$508,800 for fiscal 2024, and $11,600$474,100 for fiscal 2025.

2025, $272,400 for fiscal 2026 and $256,500 thereafter.

11

Table of Contents

7.Loss Per Common Share

Loss

The Company presents the computation of earnings per share (“EPS”) on a basic basis. Basic EPS is computed by dividing net income, if any, by the weighted average number of shares outstanding during the reported period. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased to include the number of additional common share data was computed as follows:

 
 
For the Three Months Ended September 30, 2020
 
 
For the Three Months Ended September 30, 2019
 
Loss
 $(263,300)
 $(56,200)
 
    
    
Weighted average common shares outstanding
  2,861,263 
  1,494,212 
 
    
    
Basic loss per common share
  (.09)
  (.04)
Diluted loss per common share
  (.09)
  (.04)
shares that would have been outstanding if the potential additional common shares that were dilutive had been issued. Common shares are excluded from the calculation if they are determined to be anti-dilutive; accordingly, no dilution is shown for loss periods. The following table sets forth the weighted average number of common shares outstanding for each period presented.

 

 

September 30,

2021

 

 

September 30,

2020

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

6,458,143

 

 

 

2,861,263

 

Effect of dilutive securities:

 

 

-

 

 

 

-

 

Weighted average number of dilutive common shares outstanding

 

 

6,458,143

 

 

 

2,861,263

 

 

 

 

 

 

 

 

 

 

Basic loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$(.19)

 

$(.05)

Discontinued operations

 

$(.00)

 

$(.04)

Consolidated operations

 

$(.19)

 

$(.09)

Approximately 126,700539,357 and 1,349,8503,246,984 shares of the Company's common stock issuable upon the exercise of options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the three months ended September 30, 2020.2021. Approximately, 44,200126,700 and 1,349,850 shares of the Company’s common stock issuable upon the exercise of outstanding options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the three months ended September 30, 2019 because they were anti-dilutive.


2020.

8. Leases

The Company recognizes 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.

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 Operationswhich was amended effective October 2021, toincrease the space by approximately 25% and lease term through November 2020 and onapproximately October 2028, a month to month basis thereafter, and another facility in Pittsburgh, Pennsylvania for its Bioprocessing Systems Operations through May 2023, and a facility for sales and administration office in Orangeburg, New York for its Torbal Division of the Benchtop Laboratory Equipment Operations through October 2022. The Company had a lease for its discontinued operations through November 2020. 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.

 11

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.

guarantees

The Company elected available practical expedients for existing or expired contracts of lessees whereinwhereby 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.

12

Table of Contents

8. Leases (continued)

As of September 30, 2020,2021, the weighted-average remaining lease term for operating lease liabilities was approximately 3.52.5 years and the weighted-average discount rate was 5.0%. Total cash payments under these leases were $78,600,approximately $68,300, for the three months ended September 30, 2021 of which $78,800$62,600 was recorded as leases expense.

The Company’s approximate future minimum rental payments under all leases existing at September 30, 20202021 through FebruaryJanuary 2025 are as follows:

Fiscal year ending June 30,
 
Amount
 
Remainder of 2021
 $204,200 
2022
  260,300 
2023
  245,300 
2024
  195,900 
2025
  91,600 
 
    
Total future minimum payments
  997,300 
Less: Imputed interest
  93,000 
 
    
Total Present Value of Operating Lease Liabilities
  904,300 

  12
Item

Fiscal year ending June 30,

 

Amount

 

Remainder of 2022

 

$209,000

 

2023

 

 

261,100

 

2024

 

 

195,900

 

2025

 

 

91,600

 

 

 

 

 

 

Total future minimum payments

 

$757,600

 

Less imputed interest

 

 

(54,400)

 

 

 

 

 

Total Present Value of Operating Lease Liabilities

 

$703,200

 

9.Discontinued Operations

Effective November 30, 2020, as part of its strategic shift to becoming a life sciences tool provider, the Company sold its operations relating to the manufacture and marketing of custom-made catalyst research instruments for universities, government laboratories, and chemical petrochemical companies sold on direct basis (the “ Catalyst Research Instruments Operations” through the sale by Altamira of substantially all of its assets, and inventory to Beijing JWGB Sci. & Tech. Co. Ltd., a corporation formed under the laws of the People’s Republic of China (“JWGB”) for $440,000 which was fully paid in cash by January 2021, resulting in a $405,400 pre-tax loss. To preserve business continuity for the buyer, Altamira agreed to purchase certain components on behalf of JWGB for which JWGB agreed to reimburse Altamira. The Company retained all its receivables and payables related to sales made prior to November 30, 2020, certain inventory related to two work-in-process orders that will be shipped by the end of the fiscal year ending June 30, 2022, product warranty and other miscellaneous liabilities related to certain employee benefits, and expenses related to the closure of the Altamira facility, which was completed at the end of December 2020.

As a result of the disposal described above, the operating results of the former Catalyst Research Instruments Operations segment have been presented as discontinued operations in the balance sheets, the statements of operations, and the statements of cash flows, as detailed below.

Assets:

 

September 30,

2021

 

 

June 30,

 2021

 

Cash

 

$900

 

 

$0

 

Accounts receivable

 

 

52,000

 

 

52,000

 

Inventories

 

 

3,300

 

 

 

3,300

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

$56,200

 

 

$55,300

 

Liabilities:

 

September 30,

2021

 

 

June 30,

 2021

 

Accrued expenses and taxes

 

$9,900

 

 

$20,700

 

Contract liabilities

 

 

16,500

 

 

 

16,500

 

 

 

 

 

 

 

 

 

 

 

 

$26,400

 

 

$37,200

 

13

Table of Contents

9.Discontinued Operations (continued)

 

 

September 30,

2021

 

 

September 30,

2020

 

Revenues

 

$1,200

 

 

$137,100

 

Cost of goods sold

 

 

0

 

 

 

184,200

 

Gross profit

 

 

1,200

 

 

 

(47,100)

Selling, general and administrative expenses

 

 

300

 

 

 

88,100

 

Loss from operations before income tax benefit

 

 

900

 

 

 

(135,200)

Income tax benefit, deferred

 

 

-

 

 

 

(25,500)

Net income (loss) attributable to discontinued operations

 

$900

 

 

$(109,700)

In our Consolidated Statements of Cash Flows, the cash flows from discontinued operations are not separately classified. Cash provided by operating activities from discontinued operations for three months ended September 30, 2021 and September 30, 2020 was $900 and $245,700, respectively. There was no cash provided by or used in investing or financing activities for both periods.

10. Acquisition of Aquila Biolabs GmbH

Effective April 29, 2021, pursuant to a Stock Purchase Agreement ("SPA") the Company acquired all the outstanding capital stock of Aquila, a German start-up company engaged from its facility in Baesweiler, Germany in the design, production, and sale of bioprocessing systems and products which focus on the control and analysis of bioprocesses in bioreactors and incubation shakers for an aggregate purchase price of $7,880,100 in cash upon closing. Aquila’s principal customers are universities, pharmaceutical companies, and industrial companies. The products are sold primarily on a direct basis and to a lesser extent, through distributors.

The acquisition was accounted for in accordance with ASC 805, Business Combinations (“ASC 805”) in which the Company is treated as the accounting acquirer. Accordingly, the assets acquired and liabilities assumed have been measured at estimated fair value.

For purposes of measuring the estimated fair value, where applicable, of the assets acquired and liabilities assumed, as reflected in the unaudited pro forma condensed consolidated financial information, the guidance in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) has been applied, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined as “the price 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.” Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.

Management of the Company allocated the purchase price based on its estimated valuation of the assets acquired and liabilities assumed as follows:

 

 

Amount

 

 

Useful life

 

Fair value of assets acquired:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$201,100

 

 

 

 

Accounts receivable

 

 

159,200

 

 

 

 

Inventory

 

 

187,500

 

 

 

 

Prepaid expenses and other current assets

 

 

25,400

 

 

 

 

Property, plant and equipment

 

 

40,200

 

 

 

 

Deferred tax asset

 

 

800,300

 

 

 

 

Tradename

 

 

452,300

 

 

6 years

 

Non-compete agreements

 

 

784,500

 

 

4 years

 

IPR&D

 

 

742,100

 

 

5 years

 

Customer relationships

 

 

252,200

 

 

9 years

 

Patents and other intangibles

 

 

286,200

 

 

7 years

 

Total assets acquired

 

$3,931,000

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of liabilities assumed:

 

 

 

 

 

 

 

Accounts payable

 

$(39,300)

 

 

 

Accrued expenses

 

 

(90,300)

 

 

 

Other current liabilities

 

 

(59,400)

 

 

 

Total liabilities assumed

 

$

(189,000)

 

 

 

 

 

 

 

 

 

 

 

Total identifiable net assets

 

$

3,742,000

 

 

 

 

Fair value of consideration transferred

 

 

7,880,100

 

 

 

 

Goodwill

 

$4,138,100

 

 

 

 

14

Table of Contents

Item 2. 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’s results reflect the results from the Benchtop Laboratory Equipment Operations and the Bioprocessing Systems Operations, which includes three months of results for Aquila, following its acquisition on April 29, 2021. The Company reflectedrealized a loss from continuing operations before income tax benefit of $324,400$1,532,700 for the three months ended September 30, 2021 compared to a loss from continuing operations before income tax benefit of $189,200 for the three months ended September 30, 2020, compared to a loss before income tax benefit of $75,500 for the three months ended September 30, 2019, primarily due to increased operating expenses incurred by the Company’sof its Bioprocessing Systems Operations, which included significant amounts for product development, sales and marketing, and non-cash compensation expense related to stock options, partially offset by the profits generated by increased income fromsales of the Benchtop Laboratory Equipment Operations resultingOperations.

COVID-19 Pandemic. The Company has not experienced and does not expect to experience 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, and pharmaceutical companies, which have benefitted from increasedthe Pandemic due to the nature of the products and have the ability to pay. The Company also has not experienced and does not expect to experience any material impairment to its tangible and intangible assets, system of internal controls, 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, which are uncertain and cannot be predicted at this time. The Company has experienced some delays from its supply chain which has had an immaterial impact on its business with delayed delivery of some products to its customers, however this is deemed temporary and does not affect the Company’s major product – the Vortex-Genie 2. In addition, due to the travel restrictions imposed by the United States and other governments worldwide, Company personnel has been and may be restricted in the future from traveling to conduct its operations including site visits, customer visits and installations, vendor facility visits, and other sales and marketing related travel that can negatively impact the Company. The operations of Aquila were negatively affected in their ability to secure new orders because Aquila had historically relied on face-to-face meetings at trade shows for its Genie™ brand products. The Bioprocessing Systems Operations continues to expand its operations with additional personnel and infrastructure and investingsales opportunities. While it has participated in virtual trade shows, management believes that certain sales and marketing.

opportunities were lost as a result.

Results of Operations. Net revenues for the three months ended September 30, 20202021 increased $152,100 (7.6%$835,400 (41.4%) to $2,156,300$2,854,500 from $2,004,200$2,019,100 for the three months ended September 30, 2019,2020, reflecting an increase of $354,100 (22.5%$599,500 (31.1%) in net sales of Benchtop Laboratory Equipment primarily due to sales of its Genie brand products, which are used in COVID related research and testing. The Benchtop Laboratory Equipment sales reflected $517,700$509,800 of Torbal® brand product sales for the three months ended September 30, 2020,2021, compared to $522,400 in$517,700 for the three months ended September 30, 20192020 primarily due to decreased sales of pharmacy scales, partially offset by increased sales of its new automated VIVID pill counter. Sales of Catalyst Research Instruments decreased slightlyRevenues derived from the Bioprocessing Systems Operations increased by $1,600$235,900 (265.7%) to $137,100$324,600 for the three months ended September 30, 2020 compared to $138,700 for the three months ended September 30, 2019 with an order backlog for Catalyst Research Instruments of $263,500, all of which is expected to be shipped during the fiscal year ending June 30, 2021 compared to $173,500 as of September 30, 2019. Revenues derived from the Bioprocessing Systems Operations which are comprised primarily of net royalties accrued from sublicenses decreased by $200,400 (69.3%) to $88,900 for the three months ended September 30, 2020 compared to $289,300 for the three months ended September 30, 2019 due to decreased royalties resultingproduct revenues of $168,200 derived from the termination of the Company’s previously held European patent.

Aquila.

The gross profit percentage on a combined basis was 46.8%53.0% for the three months ended September 30, 2021 compared to 52.3% for the three months ended September 30, 2020 compared to 48.9% for the three months ended September 30, 2019 due primarily to lower margins on the Catalyst Research Instruments. However, grossincreased margins for the Benchtop Laboratory Equipment Operations were higher due to increased sales particularly of higher profit margin products.

General and administrative expenses for the three months ended September 30, 20202021 increased by $69,400 (13.6%$946,500 (182.3%) to $579,600 compared to $510,200$1,465,700 from $519,200 for the three months ended September 30, 2019 mainly2020 due primarily to the expansionstock option compensation-related costs, newly incurred costs by Aquila of the Scientific Bioprocessing Systems Operations, with increased personnel and related expenses, and corporate expenses

.
expenses.

Selling expenses for the three months ended September 30, 20202021 increased $212,600 (68.8%$441,900 (89.5%) to $521,700$935,800 from $309,100$493,900 for the three months ended September 30, 20192020 which were incurred primarily due to increased sales and marketing costs related to new personnel, websites, market research, and advertising expendituresby the by the Bioprocessing Systems Operations.

operations for sales and marketing personnel, sales and marketing activities, and stock option compensation-related costs.

Research and development expenses increased by $7,700 (3.3%$392,200 (160.5%) to $636,500 for the three months ended September 30, 2021 compared to $244,300 for the three months ended September 30, 2020, comparedmainly due to $236,600product development costs incurred by the Bioprocessing Systems Operations’ Aquila operation which was acquired in the fourth quarter of fiscal 2021.

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Total other income (expense), net was ($7,900) for the three months ended September 30, 2019, mainly due2021 compared to product development activities by the Bioprocessing Systems Operations.

The Company reflected an income tax benefit of $61,100$11,500 for the three months ended September 30, 2020 compareddue to $19,500holding losses on investment securities.

The Company reflected income tax benefit for continuing operations of $322,600 for the three months ended September 30, 2019,2021 compared to income tax benefit of $35,600 for the three months ended September 30, 2020, primarily due to the increased loss generated during the current period.

loss.

As a result of the foregoing, the Company recorded a net loss from continuing operations of $263,300$1,209,700 for the three months ended September 30, 2021 compared to a loss from continuing operations of $153,600 for the three months ended September 30, 2020.

The Company reflected a gain from discontinued operations of $900 for the three months ended September 30, 2021, compared to a $109,700 loss for the three months ended September 30 2020, compareddue to a netinsignificant activity during the current year period.

Liquidity and Capital Resources. Cash and cash equivalents decreased by $4,406,500 to $5,268,700 as of September 30, 2021 from $9,675,200 as of June 30, 2021, due primarily the Company’s purchases of investment securities and the loss of $56,200during the period.

Net cash used in operating activities was $1,107,900 for the three months ended September 30, 2019.

Liquidity and Capital Resources. Cash and cash equivalents decreased by $4,204,2002021 compared to $3,355,500 as of September 30, 2020 from $7,559,700 as of June 30, 2020, due primarily to converting cash on-hand to short term liquid investments.
Net cash used in operating activities was $414,400 forduring the three months ended September 30, 2020, compared to $324,100 during the three months ended September 30, 2019,primarily as a result of the increased loss incurred for the current period.Net cash used in investing activities was $3,776,400$3,323,100 for the three months ended September 30, 20202021 compared to $25,700$3,776,400 used during thethree months ended September 30, 20192020 principally due to purchases and redemptions of investments, and to a lesser extent new capital equipment purchases by the Bioprocessing Systems Operations.equipment. Net cash used in financing activities was $13,400 for the three months ended September 30, 2020 all due to contingent consideration payments made to sellers of the Bioprocessing Systems Operations, compared to cash proceeds of $7,000Operations. There were no financing activities during the three months ended September 30, 2019 from exercises of stock options.
2021.

The Company's working capital decreased by $231,900$671,600 to $9,867,200$15,472,700 as of September 30, 20202021 compared to $10,099,100,$16,144,300, as of June 30, 20202021 due to the loss generated during the period.


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Item

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, 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 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'sSecurities and Exchange Commission'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.

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PART II – OTHER INFORMATION

Item

Item 6. Exhibits and Reports on Form 8-K

Exhibit

Number

Description

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Reports on Form 8-K:

Current Report filed on Form 8-K8-K/A dated July 22, 2020 reporting under Items 1.01 and 5.2.

Current Report filed on Form 8-K dated August 13, 202012, 2021 reporting under Item 5.03.

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2.01.

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SIGNATURE

Pursuant to the requirements 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: November 23, 2020

SCIENTIFIC INDUSTRIES, INC.

(Registrant)

Date: November 15, 2021

/s/ Helena R. Santos

Helena R. Santos

President, Chief Executive Officer,

Chief Financial Officer and Treasurer

 
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