10-Q 1 scnd_10q.htm FORM 10-Q scnd_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2024

 

☐ 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)

 

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 ☒

 

The number of shares outstanding of the registrant’s common stock, par value $.05 per share (“Common Stock”) as of August 13, 2024 is 10,503,599 shares.

 

 

 

SCIENTIFIC INDUSTRIES, INC.

 

Table of Contents

 

PART I - Financial Information

 

 

 

 

 

 

 

 

Item 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

 

Item 2.

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

 

16

 

 

 

 

 

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

19

 

 

 

 

 

 

Item 4.

CONTROLS AND PROCEDURES

 

19

 

 

 

PART II - Other Information

 

 

 

Item 1.

Legal Proceedings

 

21

 

 

 

 

 

 

Item 1A.

Risk Factors

 

21

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

21

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

21

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

21

 

 

 

 

 

 

Item 5.

Other Information

 

21

 

 

 

 

 

 

Item 6.

Exhibits

 

22

 

 

 

 

 

 

SIGNATURE

 

 

23

 

 

 
2

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$560,500

 

 

$796,100

 

Investment securities

 

 

3,295,100

 

 

 

4,928,700

 

Trade accounts receivable, less allowance for doubtful accounts of $33,600 at June 30, 2024 and December 31, 2023

 

 

1,214,900

 

 

 

1,157,100

 

Inventories

 

 

4,797,700

 

 

 

4,883,900

 

Income tax receivable

 

 

73,600

 

 

 

161,400

 

Prepaid expenses and other current assets

 

 

444,600

 

 

 

413,500

 

Total current assets

 

 

10,386,400

 

 

 

12,340,700

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

999,800

 

 

 

1,082,300

 

Goodwill

 

 

115,300

 

 

 

115,300

 

Other intangible assets, net

 

 

1,006,000

 

 

 

1,249,900

 

Inventories

 

 

598,300

 

 

 

609,000

 

Operating lease right-of-use assets

 

 

1,109,800

 

 

 

1,273,900

 

Other assets

 

 

59,400

 

 

 

59,400

 

Total assets

 

$14,275,000

 

 

$16,730,500

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$712,600

 

 

$711,700

 

Accrued expenses

 

 

685,900

 

 

 

777,900

 

Contract liabilities

 

 

28,700

 

 

 

23,600

 

Lease liabilities, current portion

 

 

346,800

 

 

 

324,100

 

Total current liabilities

 

 

1,774,000

 

 

 

1,837,300

 

 

 

 

 

 

 

 

 

 

Lease liabilities, less current portion

 

 

819,400

 

 

 

1,007,800

 

Total liabilities

 

 

2,593,400

 

 

 

2,845,100

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.05 par value; 30,000,000 shares authorized; 10,503,599 and 10,145,211, shares issued and 10,503,599 and 10,145,211, shares outstanding at June 30, 2024 and December 31, 2023

 

 

525,200

 

 

 

507,300

 

Additional paid-in capital

 

 

42,002,600

 

 

 

40,844,600

 

Accumulated other comprehensive gain (loss)

 

 

(25,900 )

 

 

18,600

 

Accumulated deficit

 

 

(30,820,300 )

 

 

(27,485,100 )

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

 

11,681,600

 

 

 

13,885,400

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$14,275,000

 

 

$16,730,500

 

 

See notes to unaudited condensed consolidated financial statements.

 

 
3

Table of Contents

 

 

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

 

 

 For the Three Months Ended June 30,

 

 

 For the Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues

 

$2,647,300

 

 

$2,982,500

 

 

$5,130,800

 

 

$5,787,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

1,354,900

 

 

 

1,632,500

 

 

 

2,797,600

 

 

 

3,099,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

1,292,400

 

 

 

1,350,000

 

 

 

2,333,200

 

 

 

2,688,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

1,062,000

 

 

 

1,299,900

 

 

 

2,583,800

 

 

 

2,869,200

 

Selling

 

 

900,600

 

 

 

1,591,800

 

 

 

1,798,400

 

 

 

3,036,600

 

Research and development

 

 

666,000

 

 

 

684,500

 

 

 

1,376,700

 

 

 

1,476,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

2,628,600

 

 

 

3,576,200

 

 

 

5,758,900

 

 

 

7,381,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,336,200)

 

 

(2,226,200)

 

 

(3,425,700)

 

 

(4,693,800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

(2,000)

 

 

4,100

 

 

 

(6,300)

 

 

90,400

 

Interest income

 

 

54,600

 

 

 

37,000

 

 

 

96,800

 

 

 

46,400

 

Total other income, net

 

 

52,600

 

 

 

41,100

 

 

 

90,500

 

 

 

136,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income tax expense benefit

 

 

(1,283,600)

 

 

(2,185,100)

 

 

(3,335,200)

 

 

(4,557,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

-

 

 

 

108,800

 

 

 

-

 

 

 

108,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(1,283,600)

 

 

(2,293,900)

 

 

(3,335,200)

 

 

(4,665,800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain from discontinued operations, net of tax

 

 

-

 

 

$1,900

 

 

 

-

 

 

 

3,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(1,283,600)

 

 

(2,292,000)

 

$(3,335,200)

 

$(4,662,500)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (loss) on investment securities, net of tax

 

 

-

 

 

 

(2,100)

 

 

-

 

 

 

1,600

 

Foreign currency translation (loss) gain

 

 

15,800

 

 

 

(30,100)

 

 

(44,500)

 

 

10,100

 

Comprehensive (loss) gain

 

 

15,800

 

 

$(32,200)

 

 

(44,500)

 

 

11,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

$(1,267,800)

 

 

(2,324,200)

 

$(3,379,700)

 

$(4,650,800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted loss per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$(0.12)

 

$(0.33)

 

$(0.32)

 

$(0.67)

Discontinued operations

 

$-

 

 

 

-

 

 

$-

 

 

$-

 

Consolidated operations

 

$(0.12)

 

 

(0.33)

 

$(0.32)

 

$(0.67)

 

See notes to unaudited condensed consolidated financial statements.

 

 
4

Table of Contents

 

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

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

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

Other

 Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury Stock

 

 

 Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance December 31, 2023

 

 

10,145,211

 

 

$507,300

 

 

$40,844,600

 

 

$18,600

 

 

$(27,485,100)

 

 

 

$

 

 

$

13,885,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,051,600)

 

 

-

 

 

 

-

 

 

 

(2,051,600)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Common Stock and Warrants, net of issuance costs (Note 7)

 

 

358,388

 

 

 

17,900

 

 

 

204,000

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

221,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value modification of warrants recorded as stock issuance costs

 

 

-

 

 

 

-

 

 

 

423,800

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

423,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(60,300)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(60,300)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

199,900

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

199,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2024

 

 

10,503,599

 

 

$525,200

 

 

$41,672,300

 

 

 

(41,700)

 

$(29,536,700)

 

 

-

 

 

$-

 

 

$12,619,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,283,600)

 

 

-

 

 

 

-

 

 

 

(1,283,600)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,800

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

330,300

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

330,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2024

 

 

10,503,599

 

 

$525,200

 

 

$42,002,600

 

 

 

(25,900)

 

$(30,820,300)

 

 

-

 

 

$-

 

 

$11,681,600

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury Stock

 

 

Stockholders’ 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance December 31, 2022

 

 

7,023,401

 

 

$351,200

 

 

$32,900,800

 

 

$(8,400)

 

$(18,398,600)

 

 

19,802

 

 

$52,400

 

 

$14,792,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,370,500)

 

 

-

 

 

 

-

 

 

 

(2,370,500)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

40,200

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

40,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain on investment securities, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,700

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

602,600

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

602,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2023

 

 

7,023,401

 

 

$351,200

 

 

$33,503,400

 

 

 

35,500

 

 

$(20,769,100)

 

 

19,802

 

 

$52,400

 

 

$13,068,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,292,000)

 

 

-

 

 

 

-

 

 

 

(2,292,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(30,100)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(30,100)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding loss on investment securities, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,100)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,100)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement of treasury stock

 

 

(19,802

)

 

 

(1,000)

 

 

(51,400)

 

 

-

 

 

 

-

 

 

 

(19,802)

 

 

(52,400)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

584,700

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

584,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2023

 

 

7,003,599

 

 

$350,200

 

 

$34,036,700

 

 

 

3,300

 

 

$(23,061,100)

 

 

-

 

 

$-

 

 

$11,329,100

 

  

See notes to unaudited condensed consolidated financial statements

 

 
5

Table of Contents

 

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

For the Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$(3,335,200)

 

$(4,662,500)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

377,300

 

 

 

378,500

 

Stock-based compensation

 

 

530,200

 

 

 

1,187,300

 

Povision for bad debt

 

 

2,000

 

 

 

-

 

Loss on sale of investment securities

 

 

3,500

 

 

 

105,000

 

Unrealized holding (gain) on investment securities

 

 

(12,700)

 

 

(155,100)

Carrying value of right of use assets

 

 

167,400

 

 

 

136,000

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(57,800)

 

 

188,200

 

Inventories

 

 

88,800

 

 

 

(471,600)

Prepaid and other current assets

 

 

(31,200)

 

 

(77,100)

Income tax receivable

 

 

87,800

 

 

 

108,800

 

Accounts payable

 

 

500

 

 

 

(270,100)

Accrued expenses

 

 

(94,200)

 

 

137,900

 

Contract liabilities

 

 

5,100

 

 

 

(126,100)

Lease liabilities

 

 

(168,300)

 

 

(138,900)

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(2,436,800)

 

 

(3,659,700)

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchase of investment securities

 

 

(479,000)

 

 

(941,500)

Redemption of investment securities

 

 

2,121,900

 

 

 

3,420,300

 

Capital expenditures

 

 

(72,200)

 

 

(106,200)

 

 

 

 

 

 

 

 

 

Net cash provided by investing activities

 

 

1,570,700

 

 

 

2,372,600

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

716,800

 

 

 

-

 

Issuance costs of common stock and warrants

 

 

(71,100)

 

 

-

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

645,700

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Effect of changes in foreign currency exchange rates on cash and cash equivalents

 

 

(15,200)

 

 

4,500

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(235,600)

 

 

(1,282,600)

Cash and cash equivalents, beginning of period

 

 

796,100

 

 

 

1,927,100

 

Cash and cash equivalents, end of period

 

$560,500

 

 

$644,500

 

 

See notes to unaudited condensed consolidated financial statements

 

 
6

Table of Contents

 

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Nature of the Business and Basis of Presentation

 

Scientific Industries, Inc. and its subsidiaries (the “Company”) design, manufacture, and market a variety of benchtop laboratory equipment and bioprocessing products. The Company is headquartered in Bohemia, New York where it produces benchtop laboratory and pharmacy equipment. Additionally, the Company has a location in Baesweiller, Germany, where it designs and produces a variety of bioprocessing products, and administrative facilities in Orangeburg, New York and Pittsburgh, Pennsylvania related to sales and marketing. The products, which are sold to customers worldwide, include mixers, shakers, stirrers, refrigerated incubators, pharmacy balances and scales, force gauges, bioprocessing sensors and analytical tools.

 

The accompanying (a) unaudited condensed balance sheet as of December 31, 2023, which have been derived from audited financial statements, and (b) 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 notes 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 consolidated financial statements and notes thereto, included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The results for the three and six months ended June 30, 2024 are not necessarily an indication of the results for the full fiscal year ending December 31, 2024.

 

2. Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Scientific Industries, Inc., Scientific Bioprocessing Holdings, Inc. (“SBHI”), a Delaware corporation and wholly-owned subsidiary, which holds 100% of the outstanding stock of Scientific Bioprocessing, Inc. (“SBI”), a Delaware corporation, and aquila biolabs GmbH (“Aquila”), a German corporation, since its acquisition on April 29, 2021, Scientific Packaging Industries, Inc., an inactive wholly-owned subsidiary (all collectively referred to as the “Company”). All material intercompany balances and transactions have been eliminated in consolidation.

 

Liquidity and Going Concern Considerations

 

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) which contemplate continuation of the Company as a going concern. For the six months ended June 30, 2024, the Company generated negative cash flows from operations of $2,436,800 and has an accumulated deficit of $30,820,300 as of June 30, 2024. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Company management does not believe that cash on hand and cash flows expected to be generated internally by the Company will be adequate to fund its operations and other cash flow requirements over the next twelve months. These reasons raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are to be filed.

 

 
7

Table of Contents

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management is making plans to secure such resources for the Company which may include capital from management and significant shareholders sufficient to meet its operating expenses and third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Reclassifications

 

Certain balances from fiscal 2023 have been reclassified to conform to the current year presentation.

 

3. Fair Value of Financial Instruments

 

The Company follows ASC - Accounting Standards Codification (“ASC 820”), Fair Value Measurement, which has defined 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 was 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 were not observable in the market, therefore, the Company classifies this liability as Level 3 in the following table.

 

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 as of June 30, 2024 and December 31, 2023 according to the valuation techniques the Company used to determine their fair values:

 

 

 

Fair Value Measurements as of June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Investment securities - Mutual funds

 

$3,295,100

 

 

$-

 

 

$-

 

 

$3,295,100

 

Total

 

$3,295,100

 

 

$-

 

 

$-

 

 

$3,295,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements as of December 31, 2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Investment securities - Mutual funds

 

$4,928,700

 

 

$-

 

 

$-

 

 

$4,928,700

 

Total

 

$4,928,700

 

 

$-

 

 

$-

 

 

$4,928,700

 

 

 
8

Table of Contents

 

Investments in marketable securities by security type as of June 30, 2024 and December 31, 2023 consisted of the following:

 

As of June 30, 2024:

 

Cost

 

 

Fair Value

 

 

Unrealized Holding

 Gain

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$3,284,700

 

 

$3,295,100

 

 

$10,400

 

Total

 

$3,284,700

 

 

 

3,295,100

 

 

$10,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023:

 

Cost

 

 

Fair Value

 

 

Unrealized Holding

(Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$4,929,300

 

 

$4,928,700

 

 

$(600 )

Total

 

$4,929,300

 

 

$4,928,700

 

 

$(600 )

 

4. Inventories

 

 

 

As of

June 30,

 

 

As of

December 31,

 

 

 

2024

 

 

2023

 

Raw materials

 

$3,446,000

 

 

$3,436,300

 

Work-in-process

 

 

24,500

 

 

 

23,200

 

Finished goods

 

 

1,925,500

 

 

 

2,033,400

 

Total Inventories

 

$5,396,000

 

 

$5,492,900

 

 

 

 

 

 

 

 

 

 

Inventories - Current Asset

 

$4,797,700

 

 

$4,883,900

 

Inventories - Noncurrent Asset

 

 

598,300

 

 

 

609,000

 

 

5. Goodwill and Finite Lived Intangible Assets

 

Goodwill amounted to $115,300 as of June 30, 2024 and December 31, 2023.

 

 
9

Table of Contents

 

Finite lived intangible assets consist of the following:

 

As of June 30, 2024:

 

Useful Lives

 

Cost

 

 

Accumulated

Amortization

 

 

Net

 

Technology, trademarks

 

3-10 yrs.

 

$1,216,800

 

 

$945,500

 

 

$271,300

 

Trade names

 

3-6 yrs.

 

 

592,300

 

 

 

379,400

 

 

 

212,900

 

Websites

 

3-7 yrs.

 

 

210,000

 

 

 

210,000

 

 

 

-

 

Customer relationships

 

4-10 yrs.

 

 

372,200

 

 

 

207,400

 

 

 

164,800

 

Sublicense agreements

 

10 yrs.

 

 

294,000

 

 

 

294,000

 

 

 

-

 

Non-compete agreements

 

4-5 yrs.

 

 

1,060,500

 

 

 

895,400

 

 

 

165,100

 

Patents

 

5-7 yrs.

 

 

605,600

 

 

 

413,700

 

 

 

191,900

 

 

 

 

 

$4,351,400

 

 

$3,345,400

 

 

$1,006,000

 

 

As of December 31, 2023

 

Useful Lives

 

Cost

 

 

Accumulated

Amortization

 

 

Net

 

Technology, trademarks

 

3-10 yrs.

 

$1,216,800

 

 

$870,900

 

 

$345,900

 

Trade names

 

3-6 yrs.

 

 

592,300

 

 

 

341,600

 

 

 

250,700

 

Websites

 

3-7 yrs.

 

 

210,000

 

 

 

210,000

 

 

 

-

 

Customer relationships

 

4-10 yrs.

 

 

372,200

 

 

 

193,600

 

 

 

178,600

 

Sublicense agreements

 

10 yrs.

 

 

294,000

 

 

 

294,000

 

 

 

-

 

Non-compete agreements

 

4-5 yrs.

 

 

1,060,500

 

 

 

797,600

 

 

 

262,900

 

Patents

 

5-7 yrs.

 

 

595,800

 

 

 

384,000

 

 

 

211,800

 

 

 

 

 

$4,341,600

 

 

$3,091,700

 

 

$1,249,900

 

 

Total amortization expense was $126,700 and $127,800 for the three months ended June 30, 2024 and 2023, respectively.

 

Total amortization expense was $253,700 and $257,800 for the six months ended June 30, 2024 and 2023, respectively.

 

Estimated future fiscal year amortization expense of intangible assets as of June 30, 2024 is as follows:

 

As of June 30, 2024

 

Amount 

 

Remainder of fiscal year ending 2024

 

$257,100

 

2025

 

 

373,500

 

2026

 

 

195,900

 

2027

 

 

94,500

 

2028

 

 

43,700

 

Thereafter

 

 

41,300

 

Total

 

$1,006,000

 

 

6. Commitment and Contingencies

 

Legal Matters

 

During the normal course of business, the Company may be named from time to time as a party to claims and litigations arising in the ordinary course of business. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450, Contingencies. Litigation and contingency accruals are based on our assessment, including advice of legal counsel, regarding the expected outcome of litigation or other dispute resolution proceedings. If the Company determines that an unfavorable outcome is probable and can be reasonably assessed, it establishes the necessary accruals. As of June 30, 2024 and December 31, 2023, the Company is not aware of any contingent legal liabilities that should be reflected in the consolidated financial statements.

 

 
10

Table of Contents

 

 Leases

 

The Company’s approximate future minimum rental payments under all operating leases as of June 30, 2024 were as follows:

 

As of June 30, 2024:

 

Amount

 

Remainder of fiscal year ending 2024

 

$190,600

 

2025

 

 

357,500

 

2026

 

 

266,600

 

2027

 

 

274,600

 

2028

 

 

201,000

 

Total future minimum payments

 

$1,290,300

 

Less:  Imputed interest

 

 

(124,100 )

Total Present Value of Operating Lease Liabilities

 

$1,166,200

 

 

7. Stockholders’ Equity

 

Issuance of Common Stock and Warrants

 

On January 17, 2024, the Company completed the last closing of its sale of securities pursuant to the Securities Purchase Agreement (the “Purchase Agreement”) entered on December 13, 2023, as filed in the Company’s Form 8-K on December 15, 2023. At this closing, the Company sold an aggregate of 358,388 Units, comprising 358,388 shares of the Company’s common stock, par value $.05 per share (“Common Stock”) and warrants (“Warrants”) to purchase 358,388 shares of Common Stock for a total consideration of $716,776. The Company recognized $98,700 of issuance cost, which includes $71,100 attributable to legal and placement agent fees and $27,600 attributable to the fair value of warrants, issued to the placement agent, to purchase up to 17,919 shares of Common Stock at an exercise price of $2.00 per share on substantially the same terms as the Warrants issued to the purchasers of Units (“Investors”).  

 

As an incentive to certain Investors of the Company who participated in previous private placements (“Existing Investors”) and received as part of those financings, warrants (“Outstanding Warrants”) to purchase shares of Common Stock, the Company agreed that, if any Existing Investor were to purchase Units at a certain level in the offering thereof under the Purchase Agreement (the “Offering”), the Company would reduce the exercise price of the Outstanding Warrants held by such Existing Investor to $2.50 per share and extend the period in which such Outstanding Warrants could be exercised to the fifth anniversary of the date on which the Existing Investor purchased Units under the Purchase Agreement. Each Existing Investor purchasing Units at the requisite level will receive a new warrant (the “Replacement Warrants”) to replace such Existing Investor’s Outstanding Warrants. On January 17, 2024, as a result of their purchase of Units, Existing Investors became entitled to receive Replacement Warrants to replace 333,884 Outstanding Warrants, and therefore reducing the exercise price of such Outstanding Warrants to $2.50 per share and extending the period in which such Outstanding Warrants could be exercised to the fifth anniversary of the relevant closing under the Purchase Agreement.

 

Salary for Equity Incentive Options

 

On April 1, 2024 and May 17, 2024, as part of the Company’s strategic initiatives to reduce operating costs and conserve cash for operations, the Company entered into a voluntary Salary/Compensation Waiver Program pursuant to which each director, officer and employee of the Company and its subsidiaries could elect to waive a portion of his or her salary/compensation for twelve months and receive instead options to purchase shares of the Common Stock of the Company (the “stock options”). As a result, the Company issued 628,960 stock options, having a exercise price of $2.50 per share, which vest monthly over twelve months, valued at $948,200 on the grant date using the Black-Scholes-Merton option pricing model.

 

 
11

Table of Contents

 

Equity Cancel and Replacement Options

 

On April 1, 2024, as part of the Company’s strategic initiatives to incentivize current employees, the Company entered into a cancellation and replacement agreement of certain out-of-the money outstanding employee stock options (the “replacement stock options”), whereby employees surrendered outstanding stock options (“cancelled option awards") and the Company granted and replaced with the same number of replacement stock options, having an exercise price of $2.50 per share, which vest monthly over three years. The Company accounted for the replacements options as a modification of the terms of the cancelled option awards and in accordance with ASC 718-20-35-2A the Company will recognize $613,400 stock compensation expense over the three year vesting period, which was determined by the grant-date fair value of the original award for which the service is expected to be rendered at the cancellation date, plus incremental costs measured as the excess of the fair value of the replacement options on the grant date using the Black-Scholes-Merton option pricing model over the fair value of the cancelled option award at the cancellation date in accordance with ASC 718-20-35-3.

 

Board of Director Stock Options

 

On April 12, 2024, the Board of Directors of the Company (the “Board”) appointed Michael Blechman (“Mr. Blechman”) (i) as a Class B Director of the Company, (ii) a member of the Board’s audit committee, (iii) a member of the Board’s compensation committee, and (iv) the Chair and member of the Company’s Nominating Committee. On May 17, 2024, in connection with Mr. Blechman’s appointment, the Company granted and issued 25,000 stock options with an exercise price of $1.75 which vest monthly over three years, valued at $34,500 on the grant date using the Black-Scholes-Merton option pricing model.

 

8. Loss Per Common Share

 

The Company presents the computation of earnings per share (“EPS”) on a basic basis. Basic EPS is computed by dividing net income or loss 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 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. The following table sets forth the weighted average number of common shares outstanding for each period presented.

 

 

 

For the three months ended

 

 

For the six months ended

 

June 30,

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

10,503,599

 

 

 

7,003,599

 

 

 

10,436,647

 

 

 

7,003,599

 

Effect of dilutive securities:

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Weighted average number of dilutive common shares outstanding

 

 

10,503,599

 

 

 

7,003,599

 

 

 

10,436,647

 

 

 

7,003,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$(0.12)

 

$(0.33)

 

$(0.32)

 

$(0.67)

Discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Consolidated operations

 

$(0.12)

 

$(0.33)

 

$(0.32)

 

$(0.67)

 

 
12

Table of Contents

 

Approximately 1,766,547 and 8,232,510 shares of the Company’s common stock issuable upon the exercise of stock options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for both the three and six months ended June 30, 2024.

 

Approximately 18,077 and 0 shares of the Company’s common stock issuable upon the exercise of stock options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the three months ended June 30, 2023.

 

Approximately 20,336 and 0 shares of the Company’s common stock issuable upon the exercise of stock options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the six months ended June 30, 2023.

 

9. Related Parties

 

Consulting Agreements

 

During the three and six months ended June 30, 2024 and 2023, respectively, the Company paid $31,300 and $47,300, respectively, and $0 and $0, respectively, to Mr. John Nicols, a Director of the Company, who provided consulting services to the Bioprocessing Systems segment. 

 

10. Segment Information and Concentration

 

The Company views its operations as two operating 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”), and the manufacture, design, and marketing of bioprocessing systems and products (“Bioprocessing Systems”). The Company also has included a non-operating Corporate segment. All inter-segment revenues are eliminated.

 

Segment information is reported as follows.

 

Three Months Ended June 30, 2024:

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate And

Other

 

 

Consolidated

 

Revenues

 

$2,281,900

 

 

$365,400

 

 

$-

 

 

$2,647,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

629,800

 

 

 

205,700

 

 

 

 

 

 

 

835,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

214,500

 

 

 

(1,292,900 )

 

 

(257,800 )

 

 

(1,336,200 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

6,224,600

 

 

 

4,754,300

 

 

 

3,295,100

 

 

 

14,274,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Asset Expenditures

 

 

24,100

 

 

 

600

 

 

 

-

 

 

 

24,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

21,400

 

 

 

167,800

 

 

 

-

 

 

 

189,200

 

 

 
13

Table of Contents

 

Three Months Ended June 30, 2023:

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate And

Other

 

 

Consolidated

 

Revenues

 

$2,614,300

 

 

$368,200

 

 

$-

 

 

$2,982,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

723,200

 

 

 

139,900

 

 

 

 

 

 

 

863,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

215,400

 

 

 

(1,794,600 )

 

 

(647,000 )

 

 

(2,226,200 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

7,023,400

 

 

 

5,332,400

 

 

 

1,844,100

 

 

 

14,199,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Asset Expenditures

 

 

17,000

 

 

 

43,400

 

 

 

-

 

 

 

60,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

20,400

 

 

 

170,200

 

 

 

-

 

 

 

190,600

 

 

For the three months ended June 30, 2024 no customers accounted for approximately 10% or more of the Company’s total revenue. For the three months ended June 30, 2023 one customer accounted for approximately 10% or more of the Company’s total revenue.

 

Six Months Ended June 30, 2024:

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate And

Other

 

 

Consolidated

 

Revenues

 

$4,449,300

 

 

$681,500

 

 

$-

 

 

$5,130,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

1,284,900

 

 

 

406,200

 

 

 

 

 

 

 

1,691,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

287,300

 

 

 

(2,894,700 )

 

 

(818,300 )

 

 

(3,425,700 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

6,224,600

 

 

 

4,754,300

 

 

 

3,295,100

 

 

 

14,274,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Asset Expenditures

 

 

69,900

 

 

 

2,300

 

 

 

-

 

 

 

72,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

42,800

 

 

 

334,500

 

 

 

-

 

 

 

377,300

 

 

Six Months Ended June 30, 2023:

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate And

Other

 

 

Consolidated

 

Revenues

 

$5,196,500

 

 

$591,400

 

 

$-

 

 

$5,787,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Sales

 

 

1,579,800

 

 

 

235,800

 

 

 

 

 

 

 

1,815,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) From Operations

 

 

481,600

 

 

 

(3,867,100 )

 

 

(1,308,300 )

 

 

(4,693,800 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

7,023,400

 

 

 

5,332,400

 

 

 

1,844,100

 

 

 

14,199,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Asset Expenditures

 

 

25,200

 

 

 

81,000

 

 

 

-

 

 

 

106,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

43,700

 

 

 

334,800

 

 

 

-

 

 

 

378,500

 

 

 
14

Table of Contents

 

For the six months ended June 30, 2024 no customers accounted for approximately 10% or more of the Company’s total revenue. For the six months ended June 30, 2023 no customers accounted for approximately 10% or more of the Company’s total revenue.

 

A reconciliation of the Company’s consolidated segment income (loss) from operations to consolidated loss from operations before income taxes and net loss for the three and six months ended June 30, 2024 and 2023, respectively are as follows:

 

For the three months ended June 30, 2024

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate

 

 

Consolidated

 

Income (Loss) from Operations

 

$214,500

 

 

$(1,292,900 )

 

$(257,800 )

 

$(1,336,200 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income(expense), net

 

 

(3,700 )

 

 

5,600

 

 

 

(3,900 )

 

 

(2,000 )

Interest income

 

 

-

 

 

 

 

 

 

 

54,600

 

 

 

54,600

 

Total other income(expense), net

 

 

(3,700)

 

 

5,600

 

 

 

50,700

 

 

 

52,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from operations before discontinued operations and income taxes

 

$210,800

 

 

$(1,287,300 )

 

$(207,100 )

 

$(1,283,600 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended June 30, 2023

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate

 

 

Consolidated

 

Income (Loss) from Operations

 

$215,400

 

 

$(1,794,600 )

 

$(647,000 )

 

$(2,226,200 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

4,200

 

 

 

100

 

 

 

(200 )

 

 

4,100

 

Interest income

 

 

-

 

 

 

-

 

 

 

37,000

 

 

 

37,000

 

Total other income, net

 

 

4,200

 

 

 

100

 

 

 

36,800

 

 

 

41,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from operations before discontinued operations and income taxes

 

$219,600

 

 

$(1,794,500 )

 

$(610,200 )

 

$(2,185,100 )

 

For the six months ended June 30, 2024

 

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate

 

 

Consolidated

 

Income (Loss) from Operations

 

 

$287,300

 

 

$(2,894,700)

 

$(818,300)

 

$(3,425,700)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income(expense), net

 

 

 

(7,200)

 

 

11,100

 

 

 

(10,200)

 

 

(6,300)

Interest income

 

 

 

-

 

 

 

-

 

 

 

96,800

 

 

 

96,800

 

Total other income(expense), net

 

 

 

(7,200)

 

 

11,100

 

 

 

86,600

 

 

 

90,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from operations before discontinued operations and income taxes

 

 

$280,100

 

 

$(2,883,600)

 

$(731,700)

 

$(3,335,200)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2023

 

 

Benchtop Laboratory Equipment

 

 

Bioprocessing

Systems

 

 

Corporate

 

 

Consolidated

 

Income (Loss) from Operations

 

 

$481,600

 

 

$(3,867,100)

 

$(1,308,300)

 

$(4,693,800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

 

2,400

 

 

 

11,100

 

 

 

76,900

 

 

 

90,400

 

Interest income

 

 

 

-

 

 

 

-

 

 

 

46,400

 

 

 

46,400

 

Total other income, net

 

 

 

2,400

 

 

 

11,100

 

 

 

123,300

 

 

 

136,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from operations before discontinued operations and income taxes

 

 

$484,000

 

 

$(3,856,000)

 

$(1,185,000)

 

$(4,557,000)

 

 
15

Table of Contents

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking statements. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. 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 statements. 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. Throughout this Quarterly Report on Form 10-Q, the terms the “Company,” “Scientific,” “we,” “our” or “us,” refer to Scientific Industries, Inc. and its subsidiaries on a consolidated basis, unless stated or the context implies otherwise.

 

Overview.

 

Scientific Industries, Inc., a Delaware corporation (“SI” and along with its subsidiaries, the “Company”, “we”, “our”), is engaged in the design, manufacture, and marketing of standard benchtop laboratory equipment (“Benchtop Laboratory Equipment”), and through its wholly-owned subsidiary, Scientific Bioprocessing Holdings, Inc., a Delaware corporation (“SBHI”), the design, manufacture, and marketing of bioprocessing systems and products (“Bioprocessing Systems”). SBHI has two wholly-owned subsidiaries – Scientific Bioprocessing, Inc., a Delaware corporation (“SBI”), and aquila biolabs GmbH, a German corporation (“Aquila”). The Company’s products are used primarily for research purposes by universities, pharmaceutical companies, pharmacies, national laboratories, medical device manufacturers, and other industries performing laboratory-scale research. The Company’s results reflect those of the Benchtop Laboratory Equipment Operations and the Bioprocessing Systems Operations and its corporate operation.

 

Results of Operations.

 

Three months ended June 30, 2024 and 2023

 

The Company was able to reduce the loss from continuing operations to $1,283,600 for the three months ended June 30, 2024 as compared to $2,185,100 loss from continuing operations for the three months ended June 30, 2023, primarily due to decreased expenses resulting from operating cost reductions mostly in the Bioprocessing Systems Operations segment and decreased Corporate expenses compared to the prior year periods.

 

Revenue

 

Net revenues for the three months ended June 30, 2024 decreased $335,200 (11.2%) to $2,647,300 from $2,982,500 for the three months ended June 30, 2023, driven primarily by lower revenues of Benchtop Laboratory Equipment Operations. Sales of Genie brand products reflected a decrease due to post-COVID destocking and overall market softness for laboratory equipment, particularly in Asia. Sales of Torbal and VIVD brand products amounted to $789,100 for the current year period compared to $943,000 in the prior year, due to reduced VIVID pill counter sales resulting primarily from the new regulations related to pharmacy direct and indirect renumeration fees “DIR fees” charged by pharmacy benefit managers, which caused financial hardships and cash flow challenges for the independent pharmacy market in the beginning of 2024.

 

 
16

Table of Contents

 

Gross profit

 

The gross profit percentage for the three months ended June 30, 2024 and 2023, was 48.8% and 45.3%, respectively. The increase is due primarily to higher gross margin percentage in the Bioprocessing Systems Operations.

 

General and administrative

 

General and administrative expenses for the three months ended June 30, 2024 decreased $237,900 (18.3%) to $1,062,000 from $1,299,900 for the three months ended June 30, 2023, primarily due to decreased Corporate expenses related to external professional services and non-cash stock-based compensation expense compared to prior year period, partially offset by employee related costs associated with a reduction in force in the Bioprocessing Systems Operations.

 

Selling

 

Selling expenses for the three months ended June 30, 2024 decreased $691,200 (43.4%) to $900,600 from $1,591,800 for the three months ended June 30, 2023 due primarily to the reduction of sales and marketing employees in conjunction to the strategic operational and product development plan for the Bioprocessing Systems Operations.

 

Research and development

 

Research and development expenses for the three months ended June 30, 2024 and 2023, were $666,000 and $684,500, respectively. The decrease of $18,500 (2.7%) is due primarily to the reduction of research and development expenditures related to the VIVID automated pill counter in the Benchtop Laboratory Equipment Operations due to the completion of a new product development in the current year as compared to prior year period.

 

Other income, net

 

Other income, net, for the three months ended June 30, 2024 and 2023, were $52,600 and $41,100, respectively. The increase is due primarily to the increase in interest income on investment securities, and a decrease in realized loss on investment securities attributable to more investment securities held in mutual funds as compared to investment securities held in equity securities during the current year period as compared to prior year period.

 

Income tax

 

Income tax for the three months ended June 30, 2024 and 2023, was $0 and $108,800, respectively. The Company maintains a full valuation allowance of $10,542,700 against the consolidated net deferred tax asset as the Company determined the net deferred tax assets which includes net operating loss carry-forwards and other tax credits, are not more likely than not to be realized in the future.

 

Six months ended June 30, 2024 and 2023

 

The Company realized a loss from continuing operations of $3,335,200 for the six months ended June 30, 2024 compared to a $4,557,000 loss from continuing operations for the six months ended June 30, 2023, primarily due to decreased expenses resulting from operating cost reductions mostly in the Bioprocessing Systems Operations segment and decreased Corporate expenses compared to the prior year periods

 

 
17

Table of Contents

 

Revenue

 

Net revenues for the six months ended June 30, 2024 decreased $657,100 (12.8%) to $5,130,800 from $5,787,900 for the six months ended June 30, 2023, driven primarily by lower revenues of Benchtop Laboratory Equipment Operations of $747,200, resulting primarily from decreased Genie brand sales due to post-COVID destocking and overall market softness for laboratory equipment, particularly in Asia.  Sales of Torbal and VIVD brand products amounted to $1,541,100 in the current year period, compared to $1,808,500 in the prior year period, due to reduced VIVID pill counter sales resulting primarily from the new regulations related to pharmacy direct and indirect renumeration fees “DIR fees” charged by pharmacy benefit managers, which caused financial hardships and cash flow challenges for the independent pharmacy market in the beginning of 2024. Bioprocessing Systems Operations revenues increased $90,100 to $681,500 for the current year period compared to $591,400 in the prior year period, despite a record one-time order in the prior year period reflecting a trend in growth of steady orders for  bioprocessing products.

 

 Gross profit

 

The gross profit percentage for the six months ended June 30, 2024 and 2023, was 45.5% and 46.4%, respectively. The 0.9% decrease is due primarily to lower gross margin percentage in the Benchtop Laboratory Equipment Operations, resulting from increases in material, labor and overhead costs.

 

General and administrative

 

General and administrative expenses for the six months ended June 30, 2024 decreased $285,400 (11.0%) to $2,583,800 compared to$2,869,200 for the six months ended June 30, 2023 due primarily to decreased Corporate expenses related to external professional services costs compared to prior year period, partially offset by employee related costs associated with a reduction in force in the Bioprocessing Systems Operations.

 

Selling

 

Selling expenses for the six months ended June 30, 2024 and 2023 decreased by $1,238,200 (68.9%) to $1,798,400, compared to $3,036,600 for the six months ended June 30, 2023 due primarily to the decreased non-cash stock-based compensation expenses and reduction of sales and marketing employees in conjunction to the strategic operational and product development plan for the Bioprocessing Systems Operations.

 

Research and development

 

Research and development expenses for the six months ended June 30, 2024 and 2023, were $1,376,700 and $1,476,000, respectively. The decrease of $99,300 (7.2%) is due primarily to the reduction of research and development expenditures related to the VIVID automated pill counter in the Benchtop Laboratory Equipment Operations as compared to prior year period.

 

Other income, net

 

Other income, net, for the six months ended June 30, 2024 and 2023, were $90,500 and $136,800, respectively. The decrease is due primarily to the decrease in unrealized gain and on investment securities offset with a decrease in realized loss on investment securities attributable to more investment securities held in mutual funds as compared to investment securities held in equity securities during the current year period as compared to prior year period.

 

Income tax

 

Income tax for the six months ended June 30, 2024, and 2023, was $0 and $108,800, respectively. The Company maintains a full valuation allowance of $10,542,700 against the consolidated net deferred tax asset as the Company determined the net deferred tax assets which includes net operating loss carry-forwards and other tax credits, are not more likely than not to be realized in the future.

 

Liquidity and Capital Resources.

 

Our primary sources of liquidity are existing cash and investment securities, and cash generated from operating activities of the Benchtop Laboratory Equipment Operations. We assess our liquidity in terms of our ability to generate cash to fund our short and long-term cash requirements.  For the six months ended June 30, 2024, the Company reflected negative cash flows from operations of $2,436,800 and has an accumulated deficit of $30,820,300 as of June 30, 2024. We believe that our operating cash flows derived primarily from the Benchtop Laboratory Equipment Operations, our cash and investment securities  on hand, and the availability of our line of credit, are not sufficient to fund our cash requirements for the next 12 months. The accompanying unaudited condensed financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 
18

Table of Contents

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management is making plans to obtain such resources for the Company which may include capital from management and significant shareholders sufficient to meet its operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The following table discloses our cash flows for the periods presented:

 

 

 

For the six months ended June 30,

 

 

 

2024

 

 

2023

 

Net cash used in operating activities

 

$(2,436,800 )

 

$(3,659,700 )

Net cash provided by investing activities

 

 

1,570,700

 

 

 

2,372,600

 

Net cash provided by financing activities

 

 

645,700

 

 

 

-

 

Effect of changes in foreign currency exchange rates

 

 

(15,200 )

 

 

4,500

 

Decrease in cash and cash equivalents

 

$(235,600 )

 

$(1,282,600 )

 

Net cash used in operating activities was $2,436,800 for the six months ended June 30, 2024 compared to $3,659,700 for the six months ended June 30, 2023. The net decrease of $1,222,900 is primarily due to the decreased operating expenses associated with a reduction in force in the Bioprocessing Systems operations and decreased corporate expenses in the current period compared to prior year period.

 

Net cash provided by investing activities was $1,570,700 for the six months ended June 30, 2024 compared to $2,372,600 provided in the six months ended June 30, 2023. The net decrease of $801,900 is primarily due to the net decrease in net redemption of investment securities, in the current year period compared to prior year period.

 

Net cash provided by financing activities was $645,700 for the six months ended June 30, 2024 compared to $0 for the six months ended June 30, 2023. The net increase of $645,700, is primarily due to issuance of the Units pursuant to the Purchase Agreement in the current year period.

 

Critical Accounting Estimates

 

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. “Note 2-Summary of significant accounting policies” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Our critical accounting estimates are identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2023 Form 10-K. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the consolidated financial statements, and actual results could differ from our assumptions and estimates, and such differences could be material.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

 

ITEM 4. Controls and Procedures

 

 
19

Table of Contents

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, have evaluated 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). In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and that we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. Based on the evaluation of our disclosure controls and procedures and internal controls over financial reporting as of June 30, 2024, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective. Our management has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods disclosed in accordance with U.S. GAAP.

 

Changes in Internal Controls Over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the six months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
20

Table of Contents

 

PART II – OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

None

 

ITEM 1A. Risk Factors

 

Not required for smaller reporting companies.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Refer to Current Report on Form 8-K filed with the SEC on January 22, 2024 as incorporated by reference for recent sales of unregistered securities.

 

ITEM 3. Defaults Upon Senior Securities

 

None

 

ITEM 4. Mine Safety Disclosures

 

Not applicable

 

ITEM 5. Other Information

 

None

 

 
21

Table of Contents

 

ITEM 6. Exhibits

 

Exhibit Number

 

Description of document

31.1

 

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

31.2

 

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

32.1

 

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

32.2

 

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

 

 
22

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

SCIENTIFIC INDUSTRIES, INC. (Registrant)

 

 

 

 

Date: August 14, 2024 

By:

/s/ Helena R. Santos

 

 

Helena R. Santos

 

 

 

President, Chief Executive Officer, and Treasurer

 

 

 

SCIENTIFIC INDUSTRIES, INC. (Registrant)

 

 

 

 

Date: August 14, 2024

By:

/s/ Reginald Averilla

 

 

Reginald Averilla

 

 

 

Chief Financial Officer

 

 

 
23