UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2013
TRANSITION REPORT UNDER 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 (IRS Employer Identification No.)
of incorporation or
organization)
70 Orville Drive, 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 whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act 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 X No
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a small reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"small reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ______ Accelerated Filer _____
Non-accelerated filer _______ Smaller reporting company X
(Do not check if a smaller reporting company) ________
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
____ ____
The number of shares outstanding of the issuer's common stock par value,
$0.05 per share, as of October 25, 2013 was 1,342,663 shares.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Page
____
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Comprehensive
Income (Loss) 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 12
ITEM 4 CONTROLS AND PROCEDURES 14
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURE 16
EXHIBITS 17
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, June 30,
2013 2013
___________ __________
Current Assets: (Unaudited)
Cash and cash equivalents $ 732,700 $ 927,300
Investment securities 911,500 908,400
Trade accounts receivable, net 815,800 815,900
Inventories 1,783,400 1,705,600
Prepaid expenses and other current assets 105,900 59,000
Deferred taxes 88,000 86,600
__________ __________
Total current assets 4,437,300 4,502,800
Property and equipment at cost, net 148,900 156,500
Intangible assets, net 747,300 773,500
Goodwill 589,900 589,900
Other assets 24,100 24,100
Deferred taxes 101,600 106,200
__________ __________
Total assets $6,049,100 $6,153,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 161,800 $ 156,800
Customer advances 43,300 15,900
Notes payable, current portion 79,000 78,300
Accrued expenses and taxes 289,600 407,700
Contingent consideration payable, current portion 19,000 19,000
Dividends payable 107,400 -
__________ __________
Total current liabilities 700,100 677,700
Contingent consideration payable, less current portion 51,600 51,600
Notes payable, less current portion 6,700 26,700
__________ __________
Total liabilities 758,400 756,000
__________ __________
Shareholders' equity:
Common stock, $.05 par value; authorized 7,000,000 shares;
1,357,465 issued and outstanding at
September 30, and June 30, 2013 67,900 67,900
Additional paid-in capital 1,977,900 1,977,100
Accumulated other comprehensive loss ( 15,400) ( 13,600)
Retained earnings 3,312,700 3,418,000
____________ __________
5,343,100 5,449,400
Less common stock held in treasury, at cost,
19,802 shares 52,400 52,400
____________ __________
Total shareholders' equity 5,290,700 5,397,000
Total liabilities and ____________ ___________
shareholders' equity $6,049,100 $6,153,000
============ ===========
See notes to unaudited condensed consolidated financial statements
1
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
For the Three Month
Periods Ended
September 30,
____________________________
2013 2012
__________ __________
Revenues $1,436,100 $1,351,700
Cost of sales 841,900 887,300
__________ __________
Gross profit 594,200 464,400
__________ __________
Operating Expenses:
General and administrative 303,000 279,600
Selling 197,000 156,400
Research and development 97,200 120,100
__________ __________
Total operating expenses 597,200 556,100
__________ __________
Loss from operations ( 3,000) ( 91,700)
__________ __________
Other income (expense):
Investment income 3,100 2,900
Other income 3,700 2,500
Interest expense ( 800) ( 1,400)
__________ __________
Total other income, net 6,000 4,000
__________ __________
Income (loss) before income tax expense
(benefit) 3,000 ( 87,700)
__________ __________
Income tax expense (benefit):
Current ( 3,100) ( 30,600)
Deferred 4,000 5,100
__________ __________
Total income tax expense
(benefit) 900 ( 25,500)
__________ __________
Net income (loss) $ 2,100 ($ 62,200)
========== ==========
Basic earnings (loss) per common share $ .00 ($ .05)
====== ======
Diluted earnings (loss) per common share $ .00 ($ .05)
====== ======
Cash dividends declared
per common share $ .08 $ .03
====== ======
See notes to unaudited condensed consolidated financial statements
2
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three Month
Periods Ended
September 30,
___________________
2013 2012
________ __________
Net income (loss) $ 2,100 ($ 62,200)
Other comprehensive income (loss):
Unrealized holding gain (loss)
arising during period,
net of tax ( 1,800) 9,600
________ _________
Comprehensive income (loss) $ 300 ($ 52,600)
======== =========
See notes to unaudited condensed consolidated financial statements
3
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Month Periods Ended
Sept. 30, 2013 Sept. 30, 2012
______________ ______________
Operating activities:
Net income (loss) $ 2,100 ($ 62,200)
_________ _________
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 44,200 44,300
Deferred income taxes 4,000 5,100
Stock-based compensation 800 3,400
Changes in operating assets and liabilities:
Accounts receivable 100 ( 15,600)
Inventories ( 77,800) ( 134,600)
Prepaid expenses and other
current assets ( 46,900) 17,400
Other assets - 100
Accounts payable 5,000 63,900
Customer advances 27,500 102,400
Accrued expenses and taxes ( 118,100) ( 4,400)
_________ __________
Total adjustments ( 161,200) 82,000
_________ __________
Net cash provided by (used in)
operating activities ( 159,100) 19,800
_________ __________
Investing activities:
Purchase of investment securities,
available-for-sale ( 5,700) ( 2,300)
Capital expenditures ( 8,500) ( 17,400)
Purchases of intangible assets ( 1,900) ( 2,100)
_________ __________
Net cash used in
investing activities ( 16,100) ( 21,800)
_________ __________
Financing activities:
Principal payments on note payable ( 19,400) ( 18,700)
_________ __________
Net decrease in cash and
cash equivalents ( 194,600) ( 20,700)
Cash and cash equivalents,
beginning of period 927,300 769,300
_________ __________
Cash and cash equivalents, end of period $ 732,700 $ 748,600
_________ __________
Supplemental disclosures:
Cash paid during the period for:
Income Taxes $ 100,000 $ -
Interest 800 1,400
See notes to unaudited condensed consolidated financial statements
4
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
General: The accompanying unaudited interim condensed consolidated
financial statements are prepared pursuant to the Securities
and Exchange Commission's rules and regulations for reporting
on Form 10-Q. Accordingly, certain information and footnotes
required by accounting principles generally accepted in the
United States for complete financial statements are not
included herein. The Company believes all adjustments necessary
for a fair presentation of these interim statements have been
included and that they are of a normal and recurring nature.
These interim statements should be read in conjunction with
the Company's financial statements and notes thereto, included
in its Annual Report on Form 10-K, for the fiscal year ended
June 30, 2013. The results for the three months ended September
30, 2013, are not necessarily an indication of the results for
the full fiscal year ending June 30, 2014.
1. Summary of significant accounting policies:
Principles of consolidation:
The accompanying consolidated financial statements include the
accounts of Scientific Industries, Inc. ("Scientific", a Delaware
corporation), Altamira Instruments, Inc.("Altamira", a wholly owned
subsidiary and Delaware corporation), Scientific Packaging Industries,
Inc. (an inactive wholly owned subsidiary and New York corporation)
and Scientific Bioprocessing, Inc., ("SBI", a wholly owned subsidiary
and Delaware corporation). All are collectively referred to as the
"Company". All material intercompany balances and transactions have
been eliminated.
2. New Accounting Pronouncements:
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740),
which clarifies the presentation requirements of unrecognized tax
benefits when a net operating loss carry forward, a similar tax loss,
or a tax credit carry forward exists at the reporting date. The
amendments in this ASU are effective for fiscal years, and interim
periods within those years, beginning after December 15, 2013 and
should be applied prospectively. The adoption of this ASU is not
expected to have a material impact to the Company's consolidated
financial statements.
5
3. Acquisition:
On November 14, 2011, the Company through SBI acquired substantially
all of the assets of a privately owned company consisting principally
of a license and sublicenses under patents held by the University of
Maryland, Baltimore County ("UMBC") with respect to the design,
development and production of bioprocessing methods, systems and
products. The acquisition was pursuant to an asset purchase
agreement. The Company paid to the seller $260,000 in cash, issued
135,135 shares of Common Stock valued at $400,000, issued to UMBC a
$230,000 36-month note payable, and agreed to make additional cash
payments equal to 30% of net royalties received under the acquired
license and sublicenses, estimated at a present value of $128,000
on the date of acquisition.
SBI's revenues are derived from royalties received by SBI under the
various sublicense agreements, net of royalty payments due to UMBC
and revenues from future sales of certain products being developed
under its existing license. University, government, and industrial
laboratories working primarily in the biotechnology industry worldwide
are its targeted customers.
Management of the Company allocated the purchase price based on its
valuation of the assets acquired, all of which are intangible, as
follows:
Technology, trademarks, and in-process
research & development ("IPR&D") $ 500,000
Sublicense agreements 294,000
Engineering drawings and software 64,000
Non-competition agreements 18,000
Goodwill* 142,000
__________
Total Purchase Price $1,018,000
==========
*See Note 8, "Goodwill and Other Intangible Assets".
The amounts allocated to Technology, Trademarks, and IPR&D and
Sublicense Agreements are deemed to have a useful life of 10 years,
and to the remaining intangible assets to have a useful life of 5
years, all of which are being amortized on a straight-line basis,
except for goodwill.
In connection with the acquisition, SBI entered into a research and
development agreement providing for the seller to perform services
with respect to the research and development of bioprocessing
methods, systems, and products pursuant to programs set forth in the
Agreement at a fee of $14,000 per month plus all related expenses. The
agreement was terminated in June 2013 as a result of the death of the
seller's chief operating officer.
6
4. Segment Information and Concentrations:
The Company views its operations as three segments: the manufacture
and marketing of standard benchtop laboratory equipment for research
in university, hospital and industrial laboratories sold primarily
through laboratory equipment distributors ("Benchtop Laboratory
Equipment"), the manufacture and marketing of custom-made catalyst
research instruments for universities, government laboratories, and
chemical and petrochemical companies sold on a direct basis ("Catalyst
Research Instruments") and the marketing and production of bioprocessing
systems for laboratory research in the biotechnology industry sold
directly to customers and through distributors ("Bioprocessing Systems").
Segment information is reported as follows:
Benchtop Catalyst Bio- Corporate
Laboratory Research processing and Conso-
Equipment Instruments Systems Other lidated
__________ ___________ __________ _________ ___________
Three months ended September 30, 2013:
Revenues $1,069,700 $ 339,700 $ 26,700 $ - $1,436,100
Foreign Sales 620,800 73,500 2,000 - 696,300
Income(Loss) from
Operations 117,800 ( 104,000) ( 16,800) - ( 3,000)
Assets 2,470,200 1,587,200 890,600 1,101,100 6,049,100
Long-Lived Asset
Expenditures 9,900 - 500 - 10,400
Depreciation and
Amortization 11,000 9,100 24,100 - 44,200
Benchtop Catalyst Bio- Corporate
Laboratory Research processing and Conso-
Equipment Instruments Systems Other lidated
__________ ___________ __________ _________ ___________
Three months ended September 30, 2012:
Revenues $1,064,900 $ 284,200 $ 2,600 $ - $1,351,700
Foreign Sales 621,700 239,200 - - 860,900
Income (Loss) from
Operations 117,600 ( 134,300) ( 75,000) - ( 91,700)
Assets 2,556,900 987,000 801,000 1,521,200 5,866,100
Long-Lived Asset
Expenditures 2,100 17,400 - - 19,500
Depreciation and
Amortization 11,100 9,300 23,900 - 44,300
Approximately 68% and 61% of net sales of benchtop laboratory equipment
for the three month periods ended September 30, 2013 and 2012, respectively,
were derived from the Company's main product, the Vortex-Genie 2(R) mixer,
excluding accessories.
7
Two customers accounted in the aggregate for approximately 15% and 22% of
the net sales of the Benchtop Laboratory Equipment Operations and 11% and
17% of the Company's revenues for the three months ended September 30, 2013,
and 2012, respectively. Sales of catalyst research instruments generally
comprise a few very large orders averaging at least $100,000 per order to a
limited number of customers, who differ from order to order. Sales to three
customers during the three months ended September 30, 2013 accounted for
approximately 94% of the Catalyst Research Instrument Operations' revenues
and 22% of the Company's total revenues and to five different customers
for the three months ended September 30, 2012 accounted for 97% of the
segment's revenues and 17% of the Company's total revenues.
The Company's foreign sales are principally to customers in Europe and Asia.
5. Fair Value of Financial Instruments:
The FASB defines the fair value of financial instruments as the amount that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
Fair value measurements do not include transaction costs.
The accounting guidance also expands the disclosure requirements around fair
value and establishes a fair value hierarchy of 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.
The following tables set forth by level within the fair value hierarchy
the Company's financial assets that were accounted for at fair value on a
recurring basis at September 30, 2013 and June 30, 2013 according to the
valuation techniques the Company used to determine their fair values:
Fair Value Measurements Using Inputs
Considered as
Assets:
Fair Value at
September 30, 2013 Level 1 Level 2 Level 3
______________ __________ _______ ________
Cash and cash equivalents $ 732,700 $ 732,700 $ - $ -
Available for sale securities 911,500 911,500 - -
__________ __________ _______ ________
Total $1,644,200 $1,644,200 $ - $ -
========== ========== ======= ========
Liabilities:
Contingent consideration $ 70,600 $ - $ - $ 70,600
========== ========== ======= ========
8
Fair Value Measurements Using Inputs
Considered as
Assets:
Fair Value at
June 30, 2013 Level 1 Level 2 Level 3
______________ __________ _______ ________
Cash and cash equivalents $ 927,300 $ 927,300 $ - $ -
Available for sale securities 908,400 908,400 - -
__________ __________ _______ ________
Total $1,835,700 $1,835,700 $ - $ -
========== ========== ======= ========
Liabilities:
Contingent consideration $ 70,600 $ - $ - $ 70,600
========== ========== ======= ========
Investments in marketable securities classified as available-for-sale by
security type at September 30, 2013 and June 30, 2013 consisted of the
following:
Unrealized
Fair Holding Gain
Cost Value (Loss)
____________ _________ ____________
At September 30, 2013:
Available for sale:
Equity securities $ 29,300 $ 32,400 $ 3,100
Mutual funds 897,600 879,100 (18,500)
_________ _________ __________
$ 926,900 $ 911,500 $ (15,400)
========= ========= ==========
Unrealized
Fair Holding Gain
Cost Value (Loss)
____________ _________ ____________
At June 30, 2013:
Available for sale:
Equity securities $ 29,300 $ 33,200 $ 3,900
Mutual funds 892,700 875,200 (17,500)
__________ _________ __________
$ 922,000 $ 908,400 $ (13,600)
========== ========= ==========
6. Inventories:
Inventories for financial statement purposes are based on perpetual
inventory records at September 30, 2013 and based on a physical count as
of June 30, 2013. Components of inventory are as follows:
September 30, June 30,
2013 2013
_____________ __________
Raw Materials $1,326,200 $1,336,800
Work in process 331,900 254,000
Finished Goods 125,300 114,800
__________ __________
$1,783,400 $1,705,600
========== ==========
9
7. Earnings (Loss) per common share:
Basic earnings (loss) per common share are computed by dividing net
income or loss by the weighted-average number of shares outstanding.
Diluted earnings per common share include the dilutive effect of stock
options, if any.
Earnings (Loss) per common share was computed as follows:
For the Three Month
Periods Ended
September 30,
__________________________
2013 2012
___________ _____________
Net income (loss) $ 2,100 ($ 62,200)
=========== =============
Weighted average common
shares outstanding 1,337,663 1,335,712
Dilutive securities 7,408 -
___________ _____________
Weighted average dilutive
common shares outstanding 1,345,071 1,335,712
___________ _____________
Basic earnings (loss) per
common share $ .00 ($ .05)
Diluted earnings (loss) per
common share $ .00 ($ .05)
Approximately 28,500 and 60,000 shares of the Company's Common Stock
issuable upon the exercise of outstanding stock options were excluded from
the calculation of diluted earnings per common share for the three months
ended September 30, 2013 and 2012, respectively, because the effect would
be anti-dilutive.
8. Goodwill and Other Intangible Assets:
Goodwill represents the excess of the purchase price over the fair value
of the net assets acquired in connection with the Company's acquisition of
Altamira and SBI's acquisition of assets. Goodwill amounted to $589,900
as of September 30, 2013 and June 30, 2013, all of which is expected to be
deductible for tax purposes.
The components of other intangible assets are as follows:
Useful Accumulated
Lives Cost Amortization Net
_________ _________ ____________ _________
At September 30, 2013:
Technology, trademarks 5/10 yrs. $ 865,900 $ 417,800 $ 448,100
Customer relationships 10 yrs. 237,000 205,600 31,400
Sublicense agreements 10 yrs. 294,000 55,100 238,900
Non-compete agreements 5 yrs. 114,000 106,500 7,500
Other intangible assets 5 yrs. 157,400 136,000 21,400
__________ __________ _________
$1,668,300 $ 921,000 $ 747,300
========== ========== =========
10
Useful Accumulated
Lives Cost Amortization Net
__________ _________ ____________ _________
At June 30, 2013:
Technology, trademarks 5/10 yrs. $ 865,400 $ 402,100 $ 463,300
Customer relationships 10 yrs. 237,000 203,200 33,800
Sublicense agreements 10 yrs. 294,000 47,800 246,200
Non-compete agreements 5 yrs. 114,000 105,900 8,100
Other intangible assets 5 yrs. 156,000 133,900 22,100
__________ __________ _________
$1,666,400 $ 892,900 $ 773,500
========== ========== =========
Total amortization expense was $28,100 and $28,800 for the three months
ended September 30, 2013 and 2012, respectively. As of September 30,
2013, estimated future amortization expense related to intangible assets
is $82,700 for the remainder of the fiscal year ending June 30, 2014,
$106,600 for fiscal 2015, $110,800 for fiscal 2016, $95,600 for fiscal
2017, $81,100 for fiscal 2018, and $270,500 thereafter.
11
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of Operations
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, impact
of competition, the ability to reach final agreements, the ability to
finance and produce to customers' specifications catalyst research
instruments, and to develop marketable bioprocessing systems, adverse
economic conditions, and other factors affecting the Company's business
that are beyond the Company's control. Consequently, no forward-looking
statement can be guaranteed.
We undertake no obligation to publicly update forward-looking
statements, whether as a result of new information, future events or
otherwise.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $194,600 to $732,700 as of
September 30, 2013 from $927,300 as of June 30, 2013.
Net cash used in operating activities was $159,100 for the three months
ended September 30, 2013 as compared to cash provided by operating
activities of $19,800 for the comparable three month period in 2012,
due mainly to the income tax payments made and lower cash advances in
the current period compared to the prior period. Cash used in investing
activities was $16,100 for the three month period ended September 30,
2013 compared to $21,800 for the three month period ended September 30,
2012 due primarily to decreased capital expenditures. Cash used in
financing activities was $19,400 and $18,700 for the three months ended
September 30, 2013 and 2012, respectively, related to principal payments
on a note related to a recent acquisition.
On September 20, 2013, the Board of Directors of the Company declared a
cash dividend of $.08 per share of Common Stock payable on November 4,
2013 to holders of record as of the close of business on October 11,
2013.
The Company's working capital decreased by $87,900 to $3,737,200 at
September 30, 2013 from $3,825,100 at June 30, 2013, mostly due to the
dividend declared during the period.
The Company has a line of credit with its bank, JPMorgan Chase Bank,
N.A. which provides for maximum borrowings of up to $700,000, bearing
interest at 3.05 percentage points above a defined LIBOR Index. The
interest rate as of September 30, 2013 was approximately 3.25% and is
to be secured by a pledge of collateral consisting of the inventory,
accounts, chattel paper, equipment and general intangibles of the
Company. Outstanding amounts are due and payable by June 14, 2014
with a requirement that the Company is to reduce the outstanding
principal balance to zero during the 30 day period ending on the
anniversary date of the promissory note. As of September 30, 2013
and June 30, 2013, no borrowings under the line were outstanding.
12
Management believes that the Company will be able to meet its cash
flow needs during the next 12 months from its available financial
resources which include its cash and investment securities.
Results of Operations
Financial Overview
The Company recorded income of $3,000 before income tax expense for
the three months ended September 30, 2013 compared to a loss of
$87,700 before income tax benefit for the comparable period last year;
the improvement, primarily the result of a smaller loss by the
Bioprocessing Systems Operations due to lower research and development
expenses during the current year period. The Catalyst Research
Instruments Operations also incurred a smaller loss in the current
year period primarily due to higher sales.
The Three Months Ended September 30, 2013 Compared With the Three
Months Ended September 30, 2012
Revenues for the three months ended September 30, 2013 increased by
$84,400 (6.2%) to $1,436,100 from $1,351,700 for the three months
ended September 30, 2012, primarily as a result of a $55,500 increase
in catalyst research instrument sales and a $24,100 increase in revenue
of the bioprocessing systems operations. Sales of benchtop laboratory
products increased slightly by $4,800 compared to the same period last
year. Sales of catalyst research instruments are sold pursuant to a
small number of larger orders, typically averaging over $100,000 each,
resulting in significant swings in revenues. The Bioprocessing Systems
Operations' revenues consist primarily of earned royalties. The
backlog of orders for catalyst research instruments was $513,400 as of
September 30, 2013, substantially all of which is expected to be
delivered by fiscal year end, as compared to the backlog as of
September 30, 2012 of $1,240,000.
The gross profit percentage for the three months ended September
30, 2013 increased to 41.4% compared to 34.4% for the three months
ended September 30, 2012, due to product mix.
General and administrative expenses for the three months ended
September 30, 2013 increased by $23,400 (8.4%) to $303,000 from
$279,600 for the three months ended September 30, 2012, primarily
due to an increase in expenses incurred by the Benchtop Laboratory
Equipment Operations.
Selling expenses for the three months ended September 30, 2013
increased $40,600 (26.0%) to $197,000 from $156,400 for the three
months ended September 30, 2012, primarily the result of increased
sales commissions and exhibitions expenses for the Catalyst
Research Instruments Operations.
Research and development expenses for the three months ended
September 30, 2013 decreased by $22,900 (19.1%) to $97,200 from
$120,100 for the three months ended September 30, 2012, primarily
the result of lower product development costs related to the
Bioprocessing Systems Operations during the current quarter
due to the termination of an R&D agreement.
13
Other income increased by $2,000 to $6,000 for the three months
ended September 30, 2013 from $4,000 for the prior year period,
mainly due to lower interest expense incurred by the Bioprocessing
Systems Operations and higher miscellaneous income.
For the three months ended September 30, 2013, the income tax
expense was $900 compared to an income tax benefit of $25,500 for
the three months ended September 30, 2012.
As a result, net income for the three months ended September 30, 2013
of $2,100 compared to a net loss of $62,200 for the three months
ended September 30, 2012.
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.
14
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number: Description
31.1 Certification of Chief Executive
Officer and Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive
Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
None
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SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Scientific Industries, Inc.
Registrant
/s/ Helena R. Santos
____________________________
Helena R. Santos
President, Chief Executive Officer
and Treasurer
Principal Executive, Financial and
Accounting Officer
Date: November 14, 2013
16