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OFFON

SCIENTIFIC INDUSTRIES, INC.

(SCND)
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SCIENTIFIC INDUSTRIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/17/2021 | 02:04pm EDT

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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Financials (USD)
Sales 2022 12,5 M - -
Net income 2022 -7,70 M - -
Net Debt 2022 - - -
P/E ratio 2022 -4,96x
Yield 2022 -
Capitalization 43,9 M 43,9 M -
Capi. / Sales 2022 3,51x
Capi. / Sales 2023 2,53x
Nbr of Employees -
Free-Float 49,5%
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Number of Analysts 1
Last Close Price 6,79 
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Helena R. Santos President, CEO, CFO, Treasurer & Director
John A. Moore Chairman
Reinhard Vogt Independent Director
Joseph G. Cremonese Chairman-Emeritus
Marcus H. Frampton Director
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