Forward-Looking statements. Certain statements contained in this report are not
based on historical facts, but are forward-looking statements that are based
upon various assumptions about future conditions. Actual events in the future
could differ materially from those described in the forward-looking information.
Numerous unknown factors and future events could cause such differences,
including but not limited to, product demand, market acceptance, success of
marketing strategy, success of expansion efforts, impact of competition, adverse
economic conditions, and other factors affecting the Company's business that are
beyond the Company's control, which are discussed elsewhere in this report.
Consequently, no forward-looking statement can be guaranteed. The Company
undertakes no obligation to publicly update forward-looking statements, whether
as a result of new information, future events or otherwise. This Management's
Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with the Company's financial statements and the related
notes included elsewhere in this report.
Overview.
The Company reflected a loss from continuing operations before income tax
benefit of $1,830,200 and $2,205,200 for the three and nine months ended March
31, 2021 compared to a loss of $276,900 and $88,900 for the three and nine
months ended March 31, 2020, primarily due to increased operating expenses
incurred by the Company's Bioprocessing Systems Operations, stock options
expense amounting to $1,292,000 and $1,429,400 for the three and nine months
ended March 31, 2021 compared to $14,600 and $50,000 for the three and nine
months ended March 31 2020, and expenses related to mergers and acquisitions
("M&A") activities. The results reflected the Company's continued expansion of
its Bioprocessing Systems Operations with increased personnel and expenditures
for product development, sales, and marketing activities, and M&A activity,
partially offset by the profits generated by increased sales of the Benchtop
Laboratory Equipment Operations.
The Company's results for the nine months ended March 31, 2021, reflect
discontinued operations of the Catalyst Research Instruments Operations due to
the sale of substantially all its assets at an approximate $405,400 loss at the
end of the second quarter, which is reflected in Income (loss) from discontinued
operations of $758,400, compared to an operating loss from discontinued
operations of $360,300 for the nine months ended March 31, 2020. Income from
discontinued operations for the three months ended March 31, 2021 was $16,400
compared to a loss of $99,600 for the three months ended March 31, 2020,
primarily due to a product sale that was delivered to a customer in March 2021
after the sale.
Results of Operations
The Three Months Ended March 31, 2021 Compared With The Three Months Ended March
31, 2020
Net revenues for the three months ended March 31, 2021 increased $372,400
(17.4%) to $2,508,600 from $2,136,200 for the three months ended March 31, 2020,
reflecting an increase of $565,000 in sales of benchtop laboratory equipment,
partially offset by decreased earned royalties of $193,600 by the Bioprocessing
Systems Operations. The Company's benchtop laboratory equipment sales reflected
$466,200 and $430,400 of Torbal brand product gross sales for the three months
ended March 31, 2021 and 2020, respectively.
The overall gross profit percentage for the three months ended March 31, 2021
was 54.3% compared to 51.5% for the three months ended March 31, 2020,
reflecting increased margins for the Benchtop Laboratory Equipment Operations
due to increased sales. The gross profit for the Bioprocessing Systems
Operations was positively impacted by the recording of an amount related to
expected lower future contingent consideration payments resulting from expected
lower future royalties.
General and administrative expenses for the three months ended March 31, 2021
increased by $875,900 (171.8%) to $1,385,600 compared to $509,700 for the three
months ended March 31, 2020, due to the expansion of the Scientific
Bioprocessing Systems Operations, stock options expense, and expenses related to
M&A activities.
Selling expenses for the three months ended March 31, 2021 increased $1,041,200
(301.9%) to $1,386,100 from $344,900 for the three months ended March 31, 2020,
due to increased sales and marketing costs related to personnel (including stock
options expense), websites, market research, and advertising expenses incurred
by the Bioprocessing Systems Operations, and to a lesser extent increased online
marketing for the Benchtop Laboratory Equipment Operations' Torbal pill counter
product line.
Research and development expenses increased by $151,100 (50.6%) to $450,000 for
the three months ended March 31, 2021 compared to $298,900 for the three months
ended March 31, 2020, primarily due to the ramp up in product development
activities by the Bioprocessing Systems Operations which included staffing,
facilities, and materials and to new product development costs related to the
Benchtop Laboratory Equipment Operations.
In the three months ended March 31, 2020, the Company reflected a non-recurring
charge of termination costs for the severance pay and related payroll costs,
pertaining to the early termination in February 2020 of the Company's Vice
President of Corporate Strategy and Vice President of Sales for the Company's
wholly-owned subsidiary, Altamira Instruments, Inc. which was sold at the end of
the second quarter.
Total other income (expense), net was $28,600 for the three months ended March
31, 2021 compared to ($41,900) for the three months ended March 31, 2020,
primarily due to increased interest and dividend income generated from
investment securities, and holding losses on investments in the prior year
period.
The Company reflected an income tax benefit related to continuing operations of
$378,200 for the three months ended March 31, 2021 compared to $45,500 for the
three months ended March 31, 2020 due to the increased loss for the period.
The Company reflected income from discontinued operations of $16,400 for the
three months ended March 31, 2021, compared to a $99,600 loss for the three
months ended March 31, 2020, primarily due to revenue generated post-sale of
substantially all the assets of Altamira Instruments, Inc.
The Company reflected no income tax expense or benefit for the three months
ended March 31, 2021 and an income tax benefit related to discontinued
operations of $16,400 for the three months ended March 31, 2020 due to the loss
during the prior year period.
The net income from discontinued operations was $16,400 for the three months
ended March 31, 2021 compared to net loss of $83,200 for the three months ended
March 31, 2020, primarily due to revenue generated post-sale of substantially
all the assets of Altamira Instruments, Inc.
As a result of the foregoing, the Company recorded a net loss of $1,435,600 for
the three months ended March 31, 2021 compared to a net loss of $314,600 for the
three months ended March 31, 2020.
The Nine Months Ended March 31, 2021 Compared With The Nine Months Ended March
31, 2020
Net revenues for the nine months ended March 31, 2021 increased $1,010,600
(16.2%) to $7,245,100 from $6,234,500 for the nine months ended March 31, 2020,
reflecting a $1,483,000 increase in net sales of benchtop laboratory equipment,
and a decrease of $632,800 in earned royalties by the Bioprocessing Systems
Operations due to terminated patents. The Benchtop Laboratory Equipment sales
reflected $1,560,700 of Torbal brand gross product sales for the nine months
ended March 31, 2021, compared to $1,428,900 in the nine months ended March 31,
2020.
The overall gross profit percentage for the nine months ended March 31, 2021 was
52.8% and 52.2% for the nine months ended March 31, 2020, which reflected a
higher gross profit margin percentage for the Benchtop Laboratory Equipment
Operations due to fixed overhead on increased sales.
General and administrative expenses for the nine months ended March 31, 2021
increased $983,600 (67.5%) to $2,441,700 from $1,458,100 for the nine months
ended March 31, 2020, due to the expansion of the Scientific Bioprocessing
Systems Operations, stock options expense, and expenses related to M&A
activities.
Selling expenses for the nine months ended March 31, 2021 increased $1,778,600
(202.0%) to $2,658,900 from $880,300 for the nine months ended March 31, 2020,
due to increased sales and marketing costs related to personnel (including stock
options expense), websites, market research, and advertising expenses incurred
by the Bioprocessing Systems Operations, and to a lesser extent increased online
marketing for the Benchtop Laboratory Equipment Operations' Torbal pill counter
product line.
Research and development expenses increased by $228,700 (28.8%) to $1,024,000
for the nine months ended March 31, 2021 compared to $795,300 for the nine
months ended March 31, 2020, primarily due to the ramp up in product development
activities by the Bioprocessing Systems Operations which included staffing,
facilities, and materials and to new product development costs related to the
Benchtop Laboratory Equipment Operations.
In the nine months ended March 31, 2020, the Company reflected a non-recurring
charge of termination costs for the severance pay and related payroll costs,
pertaining to the early termination in February 2020 of the Company's Vice
President of Corporate Strategy and Vice President of Sales for the Company's
wholly-owned subsidiary, Altamira Instruments, Inc. which was sold at the end of
the second quarter.
Total other income (expense), net was $93,700 for the nine months ended March
31, 2021 compared to ($30,100) for the nine months ended March 31, 2020,
primarily due to increased interest and dividend income generated from
investment securities, and holding losses on investments in the prior year
period.
The Company reflected an income tax benefit related to continuing operations of
$472,300 for the nine months ended March 31, 2021 compared to $15,000 for the
nine months ended March 31, 2020 due to the increased loss for the current year
period.
The Company reflected a loss from discontinued operations of $758,400 for the
nine months ended March 31, 2021, compared to $360,300 for the nine months ended
March 31, 2020, due to the loss on disposal in the current year period.
The Company reflected an income tax benefit related to discontinued operations
of $179,900 for the nine months ended March 31, 2021 compared to $67,000 for the
nine months ended March 31, 2020 due to the increased loss during the current
year period.
The net loss from discontinued operations was $578,500 for the nine months ended
March 31, 2021 compared to $293,300 for the nine months ended March 31, 2020,
primarily due to the loss on disposal during the current year period.
As a result of the foregoing, the Company recorded a net loss of $2,311,400 for
the nine months ended March 31, 2021 compared to a net loss of $367,200 for the
nine months ended March 31, 2020.
Liquidity and Capital Resources. Cash and cash equivalents decreased by
$6,932,200 to $627,500 as of March 31, 2021 from $7,559,700 as of June 30, 2020,
primarily due to converting cash on-hand to short term liquid investment
securities and the loss for the period.
Net cash used in operating activities was $2,592,500 for the nine months ended
March 31, 2021 compared to net cash used of $803,800 during the nine months
ended March 31, 2020, primarily due to the increased loss for the period. Net
cash used in investing activities was $4,763,100 for the nine months ended March
31, 2021 compared to $66,300 used during the nine months ended March 31, 2020,
principally due to net purchases of investments, and to a lesser extent new
capital equipment purchases by the Bioprocessing Systems Operations during the
current period, partially offset by the cash received from the sale of the
subsidiary. Net cash provided by financing activities was $423,400 for the nine
months ended March 31, 2021, due to a Payroll Protection Program loan received
by the Federal Government, compared to $7,000 provided during the nine months
ended March 31, 2020 from cash proceeds related to the exercises of stock
options.
The Company's working capital decreased by $1,222,600 to $9,325,900 as of March
31, 2021 compared to $10,548,500, as of June 30, 2020 mainly due to the loss
during the period.
The Company has a Demand Line of Credit through December 2021 with First
National Bank of Pennsylvania which provides for borrowings of up to $300,000
for regular working capital needs, bearing interest at prime, 3.25% currently.
Advances on the line, are secured by a pledge of the Company's assets including
inventory, accounts, chattel paper, equipment and general intangibles of the
Company. As of March 31, 2021, no borrowings were outstanding under such line.
Management believes that the Company will be able to meet its cash flow needs
during the 12 months ending March 31, 2022 from its available financial
resources including, its cash and investment securities, operations and the line
of credit.
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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'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.
Changes in Internal Control Over Financial Reporting. There was no change in the
Company's internal controls over financial reporting that occurred during the
most recently completed fiscal quarter that materially affected or is reasonably
likely to materially affect the Company's internal controls over financial
reporting.
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