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EX-32 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - SCIENTIFIC INDUSTRIES INCexh32.htm
EX-31 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - SCIENTIFIC INDUSTRIES INCexhib31.htm
        

UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549
 
  FORM 10-K
  
  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended June 30, 2020
   
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 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)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Name of each exchange on which registered
None
None
 
Securities registered pursuant to Section 12(g) of the Exchange Act:
 
Title of Class
Common stock, $.05 par value
 
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 Yes No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company
Emerging Growth
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes No
 
  
 
 
 
 
The aggregate market value of the voting stock held by non-affiliates computed by reference to the average bid and asked prices of such stock, as of October 2, 2020 is $7,436,000.
 
The number of shares outstanding of the registrant’s common stock, par value $.05 per share (“Common Stock”) as of  October 2, 2020 is 2,861,263 shares.
 
 
 
 
DOCUMENTS INCORPORATED BY REFERENCE
 
None.
 
 
 
 
SCIENTIFIC INDUSTRIES, INC.
 
Table of Contents
 
PART I
 
 
 
 
Item 1.
BUSINESS
4
 
 
 
Item 1A.
RISK FACTORS
8
 
 
 
Item 2.
PROPERTIES
12
 
 
 
Item 3.
LEGAL PROCEEDINGS       
  12
 
 
 
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
12
 
 
 
PART II


 
 
 
Item 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
13
 
 
 
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  14
 
 
 
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
17
 
 
 
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
17
 
 
 
Item 9A.
CONTROLS AND PROCEDURES
 17
 
 
 
Item 9B.
OTHER INFORMATION
17
 
 
 
PART III
 

 
 
 
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
18
 
 
 
Item 11.
EXECUTIVE COMPENSATION
19
 
 
 
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
24
 
 
 
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
26
 
 
 
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
26
 
 
 
PART IV
 
 
 
 
 
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
26
 
 
 
SIGNATURES
 
35
 
 
 
EXHIBIT 31.0
CERTIFICATION
36
 
 
 
EXHIBIT 32.0
CERTIFICATION
37

 
 
 
 
Forward Looking Statements. The Company and its representatives may from time to time make written or oral forward-looking statements with respect to the Company’s annual or long-term goals, including statements contained in its filings with the Securities and Exchange Commission and in its reports to stockholders.
 
 The words or phrases "will likely result", “will be”, “will”, "are expected to", "will continue to", "is anticipated", "estimate", "project" or similar expressions identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
 
PART I
 
Item 1. Business.
  
General. Incorporated in 1954, Scientific Industries, Inc., a Delaware corporation (which along with its subsidiaries, the “Company”) is engaged in the design, manufacture, and marketing of standard benchtop laboratory equipment (“Benchtop Laboratory Equipment”), customized catalyst research instruments (“Catalyst Research Instruments”) under its wholly-owned subsidiary, Altamira Instruments, Inc. (“Altamira”) and through its wholly-owned subsidiary Scientific Bioprocessing, Inc. (“SBI”), the licensing and development of bioprocessing systems and products (“Bioprocessing Systems”). The Company’s products are used primarily for research purposes by universities, pharmaceutical companies, pharmacies, national laboratories, medical device manufacturers, petrochemical companies and other industries performing laboratory-scale research.
   
Operating Segments. The Company views its operations as three segments: the manufacture and marketing of standard Benchtop Laboratory Equipment for research and sample preparation in university, pharmacy and industrial laboratories sold primarily through laboratory equipment distributors and online; the manufacture and marketing of custom-made Catalyst Research Instruments for universities, government laboratories, and chemical and petrochemical companies; and the development and sublicensing of bioprocessing products. For certain financial information regarding the Company’s operating segments, see Note 2 to the consolidated financial statements included under Item 8.
 
Products.
   
Benchtop Laboratory Equipment. The Company’s Benchtop Laboratory Equipment products consist of mixers and shakers, rotators/rockers, refrigerated and shaking incubators, and magnetic stirrers sold under the “Genie ™” brand, and pharmacy and laboratory balances and scales, force gauges, and moisture analyzers under the “Torbal®” brand. Sales of the Company’s principal product, the Vortex-Genie® 2 Mixer, excluding accessories, represented approximately 36% and 32% of the Company’s total net revenues for each of the fiscal years ended June 30, 2020 (“fiscal 2020”) and June 30, 2019 (“fiscal 2019”), and 45% and 46% of the segment’s sales for fiscal 2020 and fiscal 2019, respectively.
   
The Company’s vortex mixer is used to mix the contents of test tubes, beakers, and other various containers by placing such containers on a rotating cup or other attachments which cause the contents to be mixed at varying speeds.
   
The Company’s additional mixers and shakers include a high-speed touch mixer, a mixer with an integral timer, a patented cell disruptor, microplate mixers, two vortex mixers incorporating digital control and display, a large capacity multi-vessel vortex mixer and a line of various orbital shakers.
  
 
 
4
 
The Company also offers various benchtop multi-purpose rotators and rockers, designed to rotate and rock a wide variety of containers, and a refrigerated incubator and incubated shakers, which are multi-functional benchtop environmental chambers designed to perform various shaking and stirring functions under controlled environmental conditions.
   
Its line of magnetic stirrers includes a patented high/low programmable magnetic stirrer, a four-place high/low programmable magnetic stirrer, a large volume magnetic stirrer, and a four-place general purpose stirrer.
 
The Company’s Torbal brand line of products includes pharmacy, laboratory, and industrial digital scales, mechanical balances, moisture analyzers, pill counters, and force gauges.
   
Catalyst Research Instruments. The Catalyst Research Instrument products are offered through the Company’s subsidiary, Altamira. Its flagship product is the AMI-300™, which is used to perform traditional catalyst characterization experiments on an unattended basis. The product also features a stand-alone personal computer to control the instrument and incorporates proprietary LabVIEW®-based software. The Company’s AMI-300™ Catalyst Characterization Instrument incorporates a sophisticated data handling package and is designed to perform dynamic temperature-programmed catalyst characterization experiments. All AMI model instruments are designed or adapted to a customer’s individual requirements.
 
Altamira’s other Catalyst Research Instrument products include reactor systems, high throughput systems and micro-activity reactors, including the Company’s BenchCAT™ custom reactor systems. They are available with single and multiple reactor paths and with reactor temperatures up to 1,200 degrees Celsius. The systems feature multiple gas flows, are available in gas and gas/liquid configurations, and feature one or more stand-alone personal computers with the LabVIEW®-based control software.
 
 Bioprocessing Systems. The Company, through SBI, sublicenses the patents and technology it holds relating to bioprocessing products exclusively under a license with the University of Maryland, Baltimore County (“UMBC”), for which it receives royalties for patents expiring through December 2023. The Company is also engaged in the design and development of bioprocessing products, principally products incorporating disposable sensors which includes coaster systems and other shaking products using vessels such as T-Flasks and shake flasks.
 
 Product Development. The Company designs and develops substantially all of its products. Company personnel formulate plans and concepts for new products and improvements or modifications of existing products. The Company engages outside consultants to augment its internal engineering capabilities in areas such as industrial and electronics design.
 
Major Customers. Sales to three customers, principally of the Vortex-Genie 2 Mixer, represented 17% and 15% of total net revenues for fiscal 2020 and fiscal 2019, respectively, and 21% of Benchtop Laboratory Equipment product sales, for both fiscal 2020 and fiscal 2019. Sales of Catalyst Research Instrument products are generally pursuant to a few large orders amounting on average to over $50,000 to a limited number of customers. In fiscal 2020, sales to two customers accounted for 25% of the segment’s sales (2% of total net revenues) and in fiscal 2019 sales to two other customers accounted for 27% of the segment’s sales (5% of total net revenues).
 
 Marketing.
 
 Benchtop Laboratory Equipment. The Company’s Benchtop Laboratory Equipment products sold under the “Genie” brand are generally distributed and marketed through an established network of domestic and overseas laboratory equipment distributors who sell the Company’s products through printed catalogs, websites and sales force.
 
 
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 The Company’s “Torbal” brand products are primarily marketed and sold online, and primarily on a direct basis, with only a few distributors. The Company also markets products through attendance at industry trade shows, trade publication advertising, brochures and catalogs, the Company’s websites, one sales manager in the U.S. and a consultant in Europe.
 
 In general, due to the reliance on sales through distribution, it takes two to three years for a new Genie brand Benchtop Laboratory Equipment product to begin generating meaningful sales.
 
 Catalyst Research Instruments. The Company’s Catalyst Research Instrument products are sold directly worldwide to universities, government laboratories, and chemical and petrochemical companies through its sales personnel and independent representatives engaged on a commission basis. Its marketing efforts include attendance at various trade shows, Altamira’s website, outside sales representatives and printed materials.
 
 Bioprocessing Systems. The Company’s Bioprocessing Systems products are currently under development as well as its sales and marketing activities for these products. The Company recently hired a Chief Commercial Officer as well as several application scientists and a sales and marketing consultant to implement a sales and marketing strategy for the Bioprocessing Systems products that the Company plans to offer for sale in the near future. Its marketing efforts include a new website, trade shows, online marketing campaigns, and membership in various organizations. The products, once available, will be offered for sale both directly and through distribution worldwide.
 
 Assembly and Production. The Company has an operating facility in Bohemia, New York and a small facility in Orangeburg, New York at which its Benchtop Laboratory Equipment operations are conducted and one in Pittsburgh, Pennsylvania at which its Catalyst Research Instruments operations are conducted. The Company also has a small facility in Pittsburgh where it conducts product development and plans to operate future small-scale production for the Bioprocessing Systems operations. The Company’s production operations principally involve assembly of components supplied by various domestic and international independent suppliers. The Company has not commenced production of bioprocessing products, but anticipates that its current facilities will be adequate for such purpose, although no assurances can be provided.
 
Patents, Trademarks and Licenses.
 
 The Company holds several patents relating to its benchtop laboratory products which include a United States patent expiring in November 2022 on the MagStir Genie® and on the MultiMagStir Genie ®, another patent that relates to its Vortex-Genie Pulse expiring in January 2036, and a newly issued patent relating to Torbal’s VIVID® automated pill counter which expires in March 2039. Two additional patents held by the Company relating to Bioprocessing Systems expire in January 2029 for a biocompatible bag with integral sensors and another patent expiring in 2036 on an apparatus for detecting PH and dissolved oxygen. The Company has several patent applications pending, related primarily to bioprocessing technology. The Company does not anticipate any material adverse effect on its operations following the expiration of the patents.
 
   The Company has various proprietary trademarks, including AMI™, BenchCAT™, Biocoaster™, BioGenie®, Cellphase®, Cellstation®, Disruptor Beads™, Disruptor Genie®, Enviro-Genie®, Genie™, Genie Temp-Shaker™, ID.Developer’s Kit™, ID.Rocker™, ID.Shaker™, Incubator Genie™, MagStir Genie®, MegaMag Genie®, MicroPlate Genie®, MultiMagStir Genie®, Multi-MicroPlate Genie®, Orbital Genie®, QuadMag Genie®, Rotator Genie®, SBI®, Roto-Shake Genie®, Torbal®, TurboMix™, VIVID®, and Vortex-Genie®, each of which it considers important to the success of the related product. The Company also has several trademark applications pending. No representation can be made that any application will be granted or as to the protection that any existing or future trademark may provide.
 
 
6
 
 
  The Company has an exclusive license from UMBC with respect to rights and know-how under a patent held by UMBC related to disposable sensor technology, on a United States patent through December 2023 and a European Union patent that terminated in December 2019 which the Company further sublicenses on an exclusive basis to a German company, and non-exclusive rights held by the Company as it relates to the use of the technology with vessels of sizes ranging from 250 milliliters to 5 liters. Net total license fees paid or owed to the Company under this license for fiscal 2020 and fiscal 2019 amounted to $1,286,800 and $1,035,400, respectively.
 
 Foreign Sales. The Company’s sales to overseas customers, principally in Asia and Europe, accounted for approximately 49% and 50% of the Company’s net revenues for fiscal 2020 and 2019, respectively. Payments are in United States dollars and are therefore not subject to risks of currency fluctuation, foreign duties and customs.
 
Seasonality. The Company does not consider its business to be seasonal.
   
Backlog. Backlog for Benchtop Laboratory Equipment products is not a significant factor because this line of products is comprised of standard catalog items requiring lead times which usually are not longer than two weeks. There is no backlog for Bioprocessing Systems. The backlog for Catalyst Research Instrument products as of June 30, 2020 was $176,500, all of which is expected to be filled by June 30, 2021, as compared to a backlog of $124,200 as of June 30, 2019, all of which was filled in fiscal 2020.
  
Competition. Most of the Company's principal competitors are substantially larger and have greater financial, production and marketing resources than the Company. Competition is generally based upon technical specifications, price, and product recognition and acceptance. The Company’s main competition for its Benchtop Laboratory Equipment products derives from private label brand mixers offered by laboratory equipment distributors in the United States and Europe and products exported from China.
 
The Company's major competitors for its Genie brand Benchtop Laboratory Equipment are Henry Troemner, Inc. (a private label supplier to the two largest laboratory equipment distributors in the U.S. and Europe), IKA-Werke GmbH & Co. KG, a German company, Benchmark Scientific, Inc., (a United States importer of China-produced products), and Heidolph Instruments GmbH, a German company. The Company’s main competitors for its Torbal brand products are Ohaus Corporation, an American company, A&D Company Ltd., a Japanese company, and Adam Equipment Co., Ltd., a British company.
 
 The primary competition for the Company’s Catalyst Research Instrument products is in the form of instruments produced internally by research laboratory staff of potential customers. Major competitors in the United States include Anton Paar (formerly Quantachrome Instruments) and Micromeritics Instrument Corporation, each a privately held company. The Company sells instruments to Anton Paar.
 
         The potential major competitors for the Company’s Bioprocessing Systems are Applikon Biotechnology, B.V. (Netherlands), PreSens GmbH (Germany), DASGIP Technology GmbH (Germany), and Sartorius AG (Germany).
 
Research and Development. The Company incurred research and development expenses, the majority of which related to its Bioprocessing Systems of $1,140,000 during fiscal 2020 compared to $530,500 during fiscal 2019. The Company expects that research and development expenditures in the fiscal year ending June 30, 2021 will continue to increase due to increased product development efforts for the Bioprocessing Systems.
 
Government and Environmental Regulation. The Company’s products and claims with respect thereto have not required approval of the Food and Drug Administration or any other government approval. The Company's manufacturing operations, like those of the industry in general, are subject to numerous existing and proposed, if adopted, federal, state, and local regulations to protect the environment, establish occupational safety and health standards and cover other matters. The Company believes that its operations are in compliance with existing laws and regulations and the cost to comply is not significant to the Company.
 
 
7
 
 
 Employees. As of September 4, 2020, the Company employed 44 persons (27 for the Benchtop Laboratory Equipment operations, 8 for the Catalyst Research Instruments operations, and 9 for the Bioprocessing Systems operations) of whom 39 were full-time, including its five executive officers. In addition, certain activities of the Bioprocessing Systems operations are being performed by employees of the Company’s other operations and consultants. None of the Company's employees are represented by any union.
 
 Available Information. The Company’s Annual Report to Stockholders for fiscal 2020, includes its Annual Report on Form 10-K. The Annual Report will be mailed to security holders together with the Company’s proxy material and solicitation as it relates to the Company’s 2020 Annual Meeting of Stockholders. All the Company’s reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other information filed with, or furnished to, the Securities and Exchange Commission (the “SEC” or the “Commission”), including amendments to such reports, are available on the SEC’s website that contains such reports, proxy and information statements, and other information regarding companies that file electronically with the Commission. This information is available at www.sec.gov. In addition, all the Company’s public filings can be accessed through the Company’s website at https://www.scientificindustries.com/sec-filings.
 
Item 1A. Risk Factors.
 
In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, important risk factors are identified below that could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to such future periods in any current statements. The Company undertakes no obligation to publicly revise any forward-looking announcements to reflect future events or circumstances.
 
Dependence on Major Customers
 
Although the Company does not depend on any one single major customer, sales to the top three Benchtop Laboratory Equipment operations customers accounted for a combined aggregate of 21% of the segment’s total sales for each of fiscal 2020 and 2019 (17% and 15% of its total net revenues for fiscal 2020 and 2019, respectively).
   
No representation can be made that the Company will be successful in retaining any of these customers, or not suffer a material reduction in sales, either of which could have an adverse effect on future operating results of the Company.
 
One Benchtop Laboratory Equipment Product Accounts for a Substantial Portion of Revenues
 
The Company has a limited number of Benchtop Laboratory Equipment products with one product, the Vortex-Genie 2 Mixer, accounting for approximately 45% and 46% of Benchtop Laboratory Equipment sales, for fiscal 2020 and fiscal 2019, (36% and 32% of total net revenues for fiscal 2020 and fiscal 2019, respectively).
   
The Company is a Small Participant in Each of the Industries in Which It Operates
 
  The Benchtop Laboratory Equipment industry is a highly competitive mature industry. Although the Vortex-Genie 2 Mixer has been widely accepted, the annual sales of the Benchtop Laboratory Equipment products ($6,783,600 for fiscal 2020 and $7,078,800 for fiscal 2019) are significantly lower than the annual sales of many of its competitors in the industry. The principal competitors are substantially larger with much greater financial, production and marketing resources than the Company. There are constant new entrants into the vortex mixer market, including those offering products imported from China, which the Company is unable to compete with on price. The Torbal line of products is also a small market participant in its industry with significant competition from well-known brands.
 
 
8
 
 
  The production and sale of Catalyst Research Instruments products is highly competitive. Altamira’s competitors include several companies with greater resources and many laboratories which produce their own instruments.
 
         The Company’s Bioprocessing Systems operation is a participant in the laboratory-scale sector of the larger bioprocessing products industry, which is dominated by several companies that are many times larger than SBI, which is still in its start-up phase of operations.
 
The Company’s Ability to Grow and Compete Effectively Depends In Part on Its Ability to Develop and Effectively Market New Products
 
The Company continuously invests in development and marketing of new Benchtop Laboratory Equipment products with a view to increase revenues and reduce the Company’s dependence on the Vortex-Genie 2 Mixer, including the acquisition of the Torbal line of products in fiscal 2014. However, gross revenues derived from non Vortex-Genie Benchtop Laboratory Equipment products including Torbal products only amounted to $3,712,800 (55% of the segment’s sales and 43% of total revenues) for fiscal 2020; and $3,843,500, (54% of the segment’s sales and 38% of total revenues) for fiscal 2019. The segment’s ability to compete will depend upon the Company’s success in continuing to develop and market new laboratory equipment as to which no assurance can be given.
 
The Company relies heavily on distributors and their catalogs to market the majority of its Benchtop Laboratory Equipment products, as is customary in the industry. Accordingly, sales of new products are heavily dependent on the distributors’ decision to include and retain a new product in their catalogs and on their websites. It may be at least 24 to 36 months between the completion of development of a product and the distribution of the catalog in which it is first offered; furthermore, not all distributors feature the Company’s products in their catalogs.
 
The Company’s line of Catalyst Research Instruments consists of only a few products. The ability of the Company to compete in this segment and expand the line will depend on its ability to make engineering improvements to existing products and develop and add new products incorporating more current technology. Over the last few years the Company has introduced two new catalyst research products to increase its product offerings and has recently expanded its outside sales force.
 
The success of the Company’s Bioprocessing Systems operation will be heavily dependent on its ability to successfully develop, produce, and market new products. Commencing in the last quarter of fiscal 2019, the Company began to commit substantial resources to its Bioprocessing Systems operations in the form of employees, materials, supplies, marketing, and facilities to accelerate its new product development efforts and marketing activities. Such products are of a complex nature in an industry that the Company has not traditionally operated in and have taken much longer to develop than previously anticipated. In addition, they will be subject to beta testing by end users, which could result in design and/or production changes which could further delay development time. The Company expects the sale and marketing of these new products, at least initially, to be through the Company’s website, online marketing, direct selling efforts, and some distributors. The Company is incurring substantial product development and marketing expenditures for its bioprocessing products.
 
No assurance can be given that the Company will be successful with its new product development or that its sales and marketing programs will be sufficient to develop additional commercially feasible products which will be accepted by the marketplace, or that any distributor will include or retain any such products in its catalogs and websites.
 
 
9
 
 
The Company May Be Subject to General Economic, Political and Social Factors
 
Orders for the Company’s products, particularly its Catalyst Research Instruments products, depend in part, on the customer’s ability to secure funds to finance purchases, especially government funding. Availability of funds can be affected by budgetary constraints. Factors including a general economic recession, a European crisis, slowdown in Asian economies, or a major terrorist attack may have a negative impact on the availability of funding including government or academic grants to potential customers. Please also see the separate COVID-19 pandemic related discussion in this “Risk Factors” section below.
 
As discussed in Item 1, sales to overseas customers, including sales in China, account for approximately 49% of the Company’s net revenues. The high value of the U.S. dollar relative to foreign currencies has a negative impact on sales because the Company’s products, which are paid in U.S. dollars, become more expensive to overseas customers.
 
The current political situation as it pertains to tariffs has not had a material impact on the Company, other than higher component costs which affects gross margins and somewhat lower sales to China due to tariffs on the Company’s products. Continuation of tariffs and/or increased trade tensions could have a negative effect on the Company’s gross margins and level of future exports, because the Company is unable to pass such cost increases to its customers, and may not be able to replace lost revenues to customers in China.
 
        The Company’s ability to secure new Catalyst Research Instruments orders can also be affected by changes in domestic and international policies pertaining to energy and the environment, which could affect funding of potential customers.
 
The Company Has Been Adversely Affected and Could Be Materially Adversely Impacted in the Future by the COVID-19 pandemic
 
The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impact the Company’s operations at the end of the third quarter of the year ended June 30, 2020.  At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from  home, social distancing in the workplace, requiring self quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. However, if an employee becomes infected in the future, and the Company is forced to shut down for a period of time, it could have a short-term negative impact on operations. At the beginning of the pandemic, the Catalyst Research Instruments and Bioprocessing Systems Operations were shut down due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of $563,800 loan under the Federal Government’s Paycheck Protection Program. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies that have the ability to pay. However, there were some delays in receiving some accounts receivable due for catalyst research instruments due to customer shutdowns, and there was a material negative impact on the revenues of the Catalyst Research Instruments. The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, supply chain, or delivery and distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.
 
 
10
 
 
As further discussed in Item 7 below, in April 2020, the Company received loan proceeds of $563,800 under the Paycheck Protection Program (“PPP”). The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support its ongoing operations at the time without need to furlough its employees, especially for the Catalyst Research Instruments, which was negatively impacted by customer shutdowns and its own temporary shutdown. This certification further required the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these loan proceeds, and the forgiveness of the related note payable, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.
 
             Under the terms of the CARES Act, the use of the proceeds of the loan is restricted to payroll costs (as defined in the CARES Act), covered rent, covered utility payments and certain other expenditures that, while permitted, would not result in forgiveness of a corresponding portion of the loan. Following recent amendments to the PPP, after an eight- or twenty-four-week period starting with the disbursement of the respective loan proceeds, the Company may, and intends to, apply for forgiveness of some or all of the loan, with the amount which may be forgiven equal to the sum of eligible payroll costs, covered rent, and covered utility payments, in each case incurred during the eight- or twenty-four-week period following the date of first disbursement. Certain reductions in the Company’s payroll costs or full-time equivalent employees (when compared against the applicable measurement period) could reduce the amount of the loan eligible for forgiveness, although it is not anticipated. Further, any future amendment to the CARES Act or rules by The U.S. Department of the Treasury or the Small Business Administration (“SBA”) as it pertains to the PPP could have an impact on the loan’s forgiveness with no guarantee that the Company will receive forgiveness for any amount, and forgiveness will be subject to the Company’s submission to its lender of information and documentation as required by SBA and the lender.
 
  The Company is Heavily Dependent on Outside Suppliers for the Components of Its Products
 
The Company purchases all its components from outside suppliers and relies on a few suppliers for some components, mostly due to cost considerations. Most of the Company’s suppliers, including United States vendors, produce the components directly or indirectly in overseas factories, and orders are subject to long lead times and potential other risks related to production in a foreign country, such as current and potential future tariffs, and the COVID-19 pandemic. To minimize the risk of supply shortages, the Company keeps more than normal quantities on hand of the critical components that cannot easily be procured or, where feasible and cost effective, purchases are made from more than one supplier. The Company seeks to mitigate the effect of the tariffs on its component costs through supplier negotiations, however, alternate suppliers are not always feasible for various reasons including complexity and cost of toolings. A shortage of such components could halt production and have a material negative effect on the Company’s operations.
 
The Company’s Ability to Compete Depends in Part on Its Ability To Secure and Maintain Proprietary Rights to its Products
 
The Company has no patent protection for its principal Benchtop Laboratory Equipment product, the Vortex-Genie 2 Mixer, the Torbal balances other than the VIVID pill counter, or for its Catalyst Research Instruments products, and limited patent protection on a few other Benchtop Laboratory Equipment products. There are several competitive products available in the marketplace possessing similar technical specifications and design.
 
11
 
 
As part of the asset purchase by SBI during fiscal 2012, the Company acquired the rights to various patents for bioprocessing products which it licenses from UMBC, however these United States patents expire in December 2023, and it lost European patent protection as of end of December 2019, which was originally due to expire in August 2021.  Hence, the Company will not receive any further license fees on the European Union patent for calendar year 2020 or thereafter and will receive license fees on the United States patent through December 2023
 
There can be no assurance that any patent issued, licensed or sublicensed to the Company provides or will provide the Company with competitive advantages or will not be challenged by third parties. Furthermore, there can be no assurance that others will not independently develop similar products or design around the patents. Any of the foregoing activities could have a material adverse effect on the Company. Moreover, the enforcement by the Company of its patent or license rights may require substantial litigation costs.
 
  The Company Has Limited Management Resources
 
  The loss of services from either of Ms. Helena Santos, the Company’s President, Chief Executive, Financial Officer and Treasurer, Mr. Robert Nichols, the President of the Company’s Genie Products Division of the Benchtop Laboratory operations, Mr. Karl Nowosielski, the President of the Torbal Products Division of the Benchtop Laboratory operations, Mr. Anthony Mitri, the President of Altamira, or Mr. John A. Moore, President of SBI, or any material expansion of the Company’s operations could place a significant additional strain on the Company’s limited management resources and could be materially adverse to the Company’s operating results and financial condition.
 
   The Common Stock of the Company is Thinly Traded and is Subject to Volatility
   
As of October 2, 2020, there were 2,861,263 shares of Common Stock of the Company outstanding, of which 1,856,378 (65%) were held by affiliates or Directors and Officers of the Company. The Common Stock of the Company is traded on the Over-the-Counter Bulletin Board and, historically, has been thinly traded. There have been a number of trading days during fiscal 2020 on which no trades of the Company’s Common Stock were reported. Accordingly, the market price for the Common Stock is subject to great volatility.
    
  Item 2. Properties.
 
 The Company’s executive office and principal manufacturing facility for its Benchtop Laboratory Equipment operations comprises approximately 19,000 square feet. This facility is located in Bohemia, New York and is held under a lease which expires in February 2025. The Company’s Catalyst Research Instruments operations are conducted from an approximately 9,000 square foot facility in Pittsburgh, Pennsylvania under a lease which expires in November 2020. The Bioprocessing Systems operations are conducted from an approximately a 1,400 square foot laboratory facility in Pittsburgh Pennsylvania under a lease which expires in May 2021. The Company has a 1,200 square foot facility in Orangeburg, New York from where it conducts its sales and marketing functions, primarily for the Torbal Products Division of the Benchtop Laboratory Equipment operations expiring in October 2022. See Note 11 to the consolidated Financial Statements in Item 8. The leased facilities are suitable and adequate for each of the Company’s operations. In the opinion of management, all properties are adequately covered by insurance.
   
Item 3. Legal Proceedings.
   
The Company is not a party to any pending legal proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
 
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2020.
 
 
12
 
 
   
PART II
 
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
   
The Company's Common Stock is traded in the over-the-counter market. The following table sets forth the low and high bid quotations at the end of each quarter of fiscal 2019 and fiscal 2020, as reported by the National Association of Securities Dealers, Inc. Electronic Bulletin Board. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:
 
 
For Fiscal Quarter Ended
 
Low Bid 
 
 
High Bid 
09/30/18
  2.82 
  3.24 
12/31/18
  2.99 
  4.00 
03/31/19
  3.50 
  4.50 
06/30/19
  3.88 
  4.75 
09/30/19
  4.00 
  6.88 
12/31/19
  6.01 
  9.10 
03/31/20
  6.56 
  10.20 
06/30/20
  5.55 
  10.61 
 
 As of September 6, 2020, there were 261 record holders of the Company's Common Stock.
 
 
13
 
 
 
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
  
Forward-Looking statements. Certain statements contained in this report are not based on historical facts, but are forward-looking statements that are based upon various assumptions about future conditions. Actual events in the future could differ materially from those described in the forward-looking information. Numerous unknown factors and future events could cause such differences, including but not limited to, product demand, market acceptance, success of marketing strategy, success of expansion efforts, impact of competition, adverse economic conditions, and other factors affecting the Company’s business that are beyond the Company’s control, which are discussed elsewhere in this report. Consequently, no forward-looking statement can be guaranteed. The Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s financial statements and the related notes included elsewhere in this report.
  
Overview. The Company reflected a loss before income tax benefit of $1,139,900 for fiscal 2020 compared to income before income tax expense of $770,200 for fiscal 2019, primarily due to increased operating expenses as a result of the Company’s investment in its Bioprocessing Systems operations, decreased sales of catalyst research products, a non-recurring charge for the termination of a management employee, and other corporate expenses. Commencing in the last quarter of the Company’s fiscal year 2019, the Company began to invest heavily in its bioprocessing business by hiring a new President of SBI, engineering staff, application scientists, sales and marketing personnel, which is expected to continue at increased levels into fiscal 2021. In June 2020 the Company raised approximately $6 million through the sale of its Common Stock and warrants to purchase Common Stock to finance these efforts. The Company’s results also suffered from a material decrease in sales of Catalyst Research Instruments due mostly to the COVID-19 pandemic, and to a lesser extent, decreased sales of Benchtop Laboratory Equipment in the last quarter of fiscal 2020, also due to the pandemic. The results reflect total non-cash amounts for depreciation, amortization, and adjustments to contingent consideration liabilities of approximately $273,500 for fiscal 2020 and approximately $778,500 for fiscal 2019.
  
    
 
 
14
 
 
  
 
 The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impact the Company’s operations at the end of the third quarter of the year ended June 30, 2020.  At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from home, social distancing in the workplace, requiring self quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. However, if an employee becomes infected in the future, and the Company is forced to shut down for a period of time, it could have a short-term negative impact on operations. At the beginning of the pandemic, the Catalyst Research Instruments and Bioprocessing Systems Operations were shut down due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of $563,800 loan under the Federal Government’s Paycheck Protection Program. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies that have the ability to pay. However, there were some delays in receiving some accounts receivable due for catalyst research instruments due to customer shutdowns, and there was a material negative impact on the revenues of the Catalyst Research Instruments. The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, supply chain, or delivery and distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.
  
Results of Operations. Net revenues for fiscal 2020 decreased $1,629,500 (15.9%) to $8,570,300 from $10,199,800 for fiscal 2019, reflecting a decrease of $1,029,000 in net sales of Catalyst Research Instruments, due mostly to COVID-19; a decrease of $305,300 in royalties earned by the Bioprocessing Systems operations due to lack of royalties under a previous European patent, and a decrease of $295,200 in sales of Benchtop Laboratory Equipment due to COVID-19.
 
        Sales of Catalyst Research Instruments are comprised of a small number of large orders, while sales of Benchtop Laboratory Equipment are comprised of a large number of small orders. As of June 30, 2020, the order backlog for Catalyst Research Instruments was $176,500, all of which is expected to be shipped during the fiscal year ending June 30, 2021, compared to $124,200 as of June 30, 2019.
    
        The gross profit percentage for fiscal 2020 was 44.9% compared to 42.8% for fiscal 2019. The current year reflected higher gross profit margin percentage for the Bioprocessing Systems operations, a slightly lower gross margin percentage for the Benchtop Laboratory Equipment Operations due in part to higher material costs including tariffs and fixed overhead, and a negative gross profit margin percentage for the Catalyst Research Instruments due to materially lower sales.
   
        General and administrative expenses for fiscal 2020 increased by approximately $489,500 (25.4%) to $2,413,900 compared to $1,924,400 for fiscal 2019 due primarily to non-recurring termination costs for a management employee, director fees, and increased administrative costs incurred by the Bioprocessing Systems operations.
  
Selling expenses for fiscal 2020 increased approximately $300,300 (26.4%) to $1,436,400 from $1,136,100 for fiscal 2019, primarily due to increased sales and marketing expenses incurred by the Bioprocessing Systems operations.
  
Research and development expenses amounted to $1,140,000 for fiscal 2020 compared to $530,500 for fiscal 2019, due to increased product development expenditures of both labor and materials by the Bioprocessing Systems operations. During the last quarter of fiscal 2019, the Company's Bioprocessing Systems operations began to expand its product development efforts with the hiring of several engineers.
  
 
15
 
 
Total other income (loss), net was $(3,600) for fiscal 2020 compared to $(5,900) in fiscal 2019.
  
The Company reflected income tax benefit of $436,600 for fiscal 2020 compared to income tax expense of $124,600 for fiscal 2019, primarily due to the loss incurred.
  
As a result of the foregoing, the Company recorded a net loss of $703,300 for fiscal 2020 compared to net income of $645,600 for fiscal 2019.
 
Liquidity and Capital Resources. Cash and cash equivalents increased by $5,957,200 to $7,559,700 as of June 30, 2020 from $1,602,500 as of June 30, 2019.
 
 Net cash used in operating activities was 168,100 for fiscal 2020 compared to net cash provided by operating activities of $1,159,500 for fiscal 2019, primarily due to the net loss for the current year. Net cash used in investing activities was $84,100 for fiscal 2020 compared to $218,400 for fiscal 2019 due mainly to decreased capital expenditures in the current year. Net cash provided by financing activities was $6,209,400 for fiscal 2020 compared to $391,700 used by the Company during fiscal 2019 due mainly to the equity financing and the proceeds from the Payroll Protection Program loan.
 
 The Company's working capital increased by $5,003,300 to $10,099,100 as of June 30, 2020 compared to $5,005,800, as of June 30, 2019, primarily due to the cash received from the equity financing.
  
 The Company has a Demand Line of Credit through December 2020 with First National Bank of Pennsylvania which provides for borrowings of up to $300,000 for regular working capital needs, bearing interest at prime, currently 3.25% at June 30, 2020. Advances on the line are secured by a pledge of the Company’s assets including inventory, accounts receivable, chattel paper, equipment and general intangibles of the Company. As of June 30, 2020, no borrowings were outstanding under such line. On April 14, 2020 the Company received a loan, all of which is outstanding, under the Federal Government’s Paycheck Protection Program with its bank, First National Bank, amounting to $563,700 at an interest rate of 1% with a maturity date of April 17, 2022, a majority of which is expected to be forgiven under the program.
  
       In June 2020, the Company raised $6,004,400 (net of issuance costs) through the sale of 1,349,850 shares of the Company’s common stock and 1,349,850 warrants to purchase Common Stock. The sale was made in a private placement transaction, pursuant to the exemption provided by Section 4(2) of the Securities Act and certain rules and regulations promulgated under that section and pursuant to exemptions under state securities laws, as a sale to “accredited investors” as defined in Rule 501(a) of the Securities Act. The Company intends to use the net proceeds from the sale of the securities for the development of the business of its Bioprocessing Systems operations.
  
Management believes that the Company will be able to meet its cash flow needs during the next 12 months from its available financial resources including the cash raised in June, cash from operations, its investments, and the line of credit. Commencing in the fourth quarter of fiscal 2019 the Company began committing significant resources to the Bioprocessing Systems operations for staffing, sales and marketing, and administration. 
      
 Capital Expenditures. During fiscal 2020, the Company incurred $50,900 in capital expenditures. The Company expects that based on its current operations, its capital expenditures will be approximately the same for the fiscal year ending June 30, 2021.
 
 Off-Balance Sheet Arrangements. None.
 
 
16
 
  
Item 8. Financial Statements and Supplementary Data.
 
The consolidated Financial Statements required by this item are attached hereto on pages F1-F25.
 
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
 
  Not applicable.
 
Item 9A. Controls and Procedures.
 
  Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Annual Report on Form 10-K, 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 Officer 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.
 
Management’s Annual Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting, as such term is defined in Securities Exchange Act Rule 13a-15(f) and 15d-15(f). The Company’s internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
  
The Chief Executive Officer and Chief Financial Officer of the Company conducted an evaluation of the effectiveness of the Company’s internal controls over financial reporting as of June 30, 2020 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.
    
  This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
 
Changes in Internal Control Over Financial Reporting. Except as otherwise discussed above, there was no change in the Company's internal controls over financial reporting that occurred during the most recent fiscal quarter that materially affected or is reasonably likely to materially affect the Company's internal controls over financial reporting.
 
Inherent Limitations on Effectiveness of Controls.  The Company’s management, including its Chief Executive Officer and Chief Financial Officer, believes that its disclosure on controls and procedures and internal controls over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that its disclosure on controls and procedures or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
   
 Item 9B. Other Information.
 
Not applicable.
 
 
17
 
 
  PART III
 
Item 10. Directors, Executive Officers and Corporate Governance.
 
Directors
    
The Company has the following six Directors:
 
Joseph G. Cremonese (age 85), a Director since November 2002 and Chairman of the Board from February 2006 to January 2020, has been, through his affiliate, a consultant to the Company since 1996. Mr. Cremonese has been since 1991, President of his affiliate, Laboratory Innovation Company, Ltd, which is a vehicle for the consulting services for the Company.
 
Marcus Frampton (age 40), a Director since March 2019 is the Chief Investment Officer of the Alaska Permanent Fund Corporation and serves on the Board of Directors of Managed Funds Association and Nyrada, Inc., a drug development company. He served as Director of Investments, Real Assets and Absolute Return of the Alaska Permanent Fund from 2016 to 2018 and Director of Investments, Private Markets of the Alaska Permanent Fund from 2012 to 2016 for the Alaska Permanent Fund Corporation. 
 
John A. Moore (age 55), a Director since January 2019 and Chairman of the Board since January 2020, is also the President of SBI since January 2020 and had been providing consulting services to SBI since March 2019. Mr. Moore serves as Chairman of Nyrada, Inc., a drug development company since July 2019 and prior to that served as a director with Noxopharm Limited, a drug development company, and is also the Chairman of Trialogics, a clinical trial software provider. Mr. Moore was President, Chief Executive Officer and director of Acorn Energy, Inc. from 2006 to 2016. 
 
Helena R. Santos (age 56), a Director since 2009, has been employed by the Company since 1994, and has served since August 2002 as its President, Chief Executive Officer, Chief Financial Officer and Treasurer. She had served as Vice President, Controller from 1997 and as Secretary from May 2001.
  
Reinhard Vogt (age 64), a Director since August 2020, served as Executive Vice President and on the Executive Board of Sartorius Stedim Biotech GmbH for the 10 years prior to his retirement in July 2019.
 
John F.F. Watkins (age 53), a Director since January 2017, is a corporate and securities attorney and has been a member of Reitler Kailas & Rosenblatt LLC since 2002.
 
 
18
 
 
The Directors are elected to three-year staggered terms. The current terms of the Directors expire at the annual meeting of stockholders of the Company as follows: the fiscal year ended June 30, 2020 - two directors (Mr. Cremonese and Mr. Watkins, Class C), the fiscal year ending June 30, 2021 - two directors (Ms. Santos and Mr. Vogt, Class A), and the fiscal year ending June 30, 2022 – two directors (Mr. Frampton and Mr. Moore, Class B).
 
Board Committees
 
  The Company has two committees – The Compensation Committee and the Audit Committee. The Compensation Committee is comprised of Mr. Frampton and Mr. Watkins. The Audit Committee is comprised of the entire Board of Directors.
 
Executive Officers
 
 See above for the employment history of Ms. Santos and Mr. Moore.
 
Robert P. Nichols (age 59), is the President of the Genie Products Division of the Benchtop Laboratory Equipment operations and Corporate Secretary and has been employed by the Company since February 1998. Previously, he had been since May 2001, the Company’s Vice President of Engineering.
 
Karl D. Nowosielski (age 42), is the President of the Torbal Products Division of the Benchtop Laboratory Equipment operations and Director of Marketing for the Company. He was Vice President of Fulcrum, Inc. (the seller of the Torbal Products Division assets) from 2004 until February 2014.
 
Anthony J. Mitri (age 38), has been the President of Altamira since May 2017. Prior to that he had been Director of Operations and Engineer since he began his employment with the Company in 2004.
 
 Section 16(a) Beneficial Ownership Reporting Compliance
 
 The Company believes that, for fiscal 2020, its officers, directors and 10% stockholders timely complied with all filing requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.
 
Code of Ethics
  
The Company has adopted a code of ethics that applies to the Executive Officers and Directors. A copy of the code of ethics can be found on the Company’s website.
 
Item 11. Executive Compensation.
 
 Compensation Discussion and Analysis. The Compensation Committee reviews and recommends to the Board of Directors the compensation to be paid to each executive officer. Executive compensation, in all instances except for the compensation for the Chief Executive Officer (“CEO”), is based on recommendations from the CEO. The CEO makes a determination by comparing the performance of each executive being reviewed with objectives established at the beginning of each fiscal year and with objectives established during the business year with regard to the success of the achievement of such objectives and the successful execution of management targets and goals.
  
With respect to the compensation of the CEO, the Committee considers performance criteria, 50% of which is related to the direction, by the CEO, of the reporting executives, the establishment of executive objectives as components for the successful achievement of Company goals and the successful completion of programs leading to the successful completion of the Business Plan for the Company and 50% is based on the achievement by the Company of its financial and personnel goals tempered by the amount of the income or loss of the Company during the fiscal year.
 
 
19
 
 
The compensation at times includes grants of options under its stock option plan to the named executives. Each officer is employed pursuant to a long-term employment agreement, containing terms proposed by the Compensation Committee and approved as reasonable by the Board of Directors. The Board is cognizant that as a relatively small company, the Company has limited resources and opportunities with respect to recruiting and retaining key executives. Accordingly, the Company has relied upon long-term employment agreements and grants of stock options to retain qualified personnel.
 
 Compensation for each of its executive officers provided by their employment agreements were based on the foregoing factors and the operating and financial results of the segments under their management.
 
 The following table summarizes all compensation paid by the Company to each of its executive officers for the fiscal years ended June 30, 2020 and 2019.
 
SUMMARY COMPENSATION TABLE
 
Name and Principal Position
(a)
 
Fiscal Year (b)
 
 
 
Salary
($)
(c)
 
 
Bonus ($)
(d) 
 
Stock Awards ($)
  (e) 
 
Option Awards ($)
  (f) 
 
Non- Equity Incentive Plan Compensation ($)
  (g) 
 
Non- Qualified Deferred Compensation
Earnings
($)
  (h) 
 
Changes in Pension Value and Non-Qualified Deferred Compensation   Earnings 
 
All Other Compensation ($)
  (i) 
 
Total
($)
  (j) 
Helena R. Santos,
CEO, President, CFO
2020
 
  185,700 
  50,000 
  0 
  13,100(1)
  0 
  0 
  0 
  9,400(6)
  258,200 
Helena R. Santos,
CEO, President, CFO
2019
   
        180,300  
0 
  0 
  13,100(1)
  0 
  0 
  0 
  4,900(6)
  198,300 
 
    
    
    
    
    
    
    
    
    
John A. Moore,
President of
SBI
2020
 
  145,000 
  50,000 
  0 
  36,000(2)
  0 
  0 
  0 
  28,900(7)
  259,900 
John A. Moore,
President of
SBI
2019
 
  40,000 
  0 
  0 
  12,000(2)
  0 
  0 
  0 
  9,800(7)
  61,800 
 
    
    
    
    
    
    
    
    
    
Anthony Mitri,
President of Altamira
2020
 
  130,000 
  0 
  0 
  6,500(3)
  0 
  0 
  0 
  5,200(6)
  141,700 
Anthony Mitri,
President of Altamira
2019
 
  120,000 
  0 
  0 
  6,500(3)
  0 
  0 
  0 
  4,800(6)
  131,300 
 
    
    
    
    
    
    
    
    
    
Robert P. Nichols,
President of Genie Division
2020
 
  162,300 
  5,000 
  0 
  3,900(4)
  0 
  0 
  0 
  6,700(6)
  177,900 
Robert P. Nichols,
President of Genie Division
2019
 
  157,600 
  0 
  0 
  3,900(4)
  0 
  0 
  0 
  6,800(6)
  168,300 
 
    
    
    
    
    
    
    
    
    
Karl D. Nowosielski
President of Torbal Division and Director of Marketing
2020
 
  169,800 
  10,000 
  0 
  6,300(5)
  0 
  0 
  0 
  7,200(6)
  193,300 
Karl D. Nowosielski
President of Torbal Division and Director of Marketing
 
2019
 
  163,300 
  10,000 
  0 
  7,400(5)
  0 
  0 
  0 
  6,400(6)
  187,100 
 
 
 
(1)
The amounts represent compensation expense for the stock options granted on July 1, 2017 valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The option was valued at a total of $39,200 of which $13,100 was expensed in each of fiscal 2020 and fiscal 2019. On June 23, 2020, the Company awarded Ms. Santos options to purchase 215,366 shares of Common Stock, subject to amendment of the Company’s 2012 Stock Option Plan.
 
(2)
The amounts represent consulting expense for the stock options granted from March 2019 through June 2020 valued at $3,000 per month utilizing the Black-Scholes-Merton options pricing model, of which $36,000 was expensed in fiscal 2020 and $12,000 in fiscal 2019.
  
(3)
The amounts represent compensation expense for the stock options granted on June 30, 2018 and December 31, 2017 valued utilizing the Black-Scholes-Merton options pricing model. The option was valued at a total of $10,000 and $9,500, respectively, utilizing the Black-Scholes-Merton options pricing model, of which a total of $6,500 was expensed in each of fiscal 2020 and fiscal 2019.
  
(4)
The amounts represent compensation expense for the July 1, 2017 stock options granted valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The option was valued at a total of $11,800, of which $3,900 was expensed in each of fiscal 2020 and 2019.
 
(5)
The amounts represent compensation expense for the stock options granted on July 1, 2017, and February 26, 2017, valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The stock options were granted as part of his employment agreement. The options were valued at a total of $11,800, and $10,500, respectively, of which $6,300 and $7,400 was expensed in fiscal 2020 and 2019, respectively.
    
(6)
The amounts represent the Company’s matching contribution under the Company’s 401(k).
  
(7)
The amounts represent director and chairman fees paid to Mr. Moore through June 30, 2020. On July 1, 2020 Mr. Moore became an employee of the Company and thereafter will not be paid any director fees.
 
 
20
 
 
 GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR ENDED JUNE 30, 2020
 

Name
(a)
Grant
Date
(b)
 
Estimate Future Payouts
Under
Non-Equity
Incentive
Plan
$
(c)
 
 
Estimated
Future
Payouts
Under
Equity
Incentive
Plan
$
(d)
 
 
All Other
Stock Awards
Number
Of
Shares
Of Stock
Or Units
(#)
(e)
 
 
All Other
Option
Awards:
Number
Of
Securities
Underlying
Options
(#)
(f)
 
 
Exercise
Or Base
Price
Of Option
Awards
($/Sh)
(g)
 
 
Grant
Date
Fair
Value of
Stock
And
Option
Awards
(h)
 
John A. Moore
07/01/19- 06/30/20
  0 
  0 
  0 
  5,881 
  5.35-11.30 
  36,000 
 
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
 
Option Awards
 
Name
(a)
 
 
  Number of
Securities
Underlying 
Unexercised 
Options
(#) Exercisable
(b)  
 
 
 
Number of
Securities
Underlying Unexercised
Options
(#)
Unexercisable
(c)  
 
 
 
  Equity Incentive Plan Awards
Number of Securities Underlying Unexercised Unearned Options
 (#)
(d)
 
 
 
  Option 
Exercise 
Price
 ($)
(e)
 
 
 
Option
Expiration
Date
(f)
 
 
Helena Santos
  8,666 
  8,334 
  0 
  3.08 
  07/2027 
Anthony Mitri
  6,668 
  3,332 
  0 
  3.05-3.15 
  12/2027-06/2028
John A. Moore
  1,902 
  10,684 
  0 
  4.50-11.30 
 03/2029-06/2030
Robert Nichols
  5,000 
  2,500 
  0 
  3.08 
 12/2023-07/2027
Karl Nowosielski
  22,000 
  2,500 
  0 
  3.05-4.05 
 02/2024-07/2027
 
Employment Agreements
 
On July 1, 2017, the Company entered into a new employment agreement with Ms. Helena R. Santos through June 30, 2020 with the option to extend for two additional one-year periods, with the first one-year option exercised through June 30, 2021. The agreement provides for an annual base salary for the fiscal year ended June 30, 2018 of $175,000 with annual increases thereafter of 3% per annum or the percentage increase, if any, in the Consumer Price Index, whichever is higher. The agreement also provided for a bonus of $25,000 for the fiscal year ended June 30, 2018 and on a discretionary basis thereafter. A bonus of $50,000 was granted for fiscal 2020 and none in 2019. The agreement also provided for a grant of options to purchase 25,000 shares of the Company’s stock which were granted during the year ended June 30, 2018. The agreement does not provide for the grant of stock options in 2019. On June 23, 2020 the Board of Directors authorized to be granted to Ms. Santos options to purchase 215,366 shares of the Company’s stock, subject to amendment of the Company’s 2012 Stock Option Plan.
 
 On July 1, 2017, the Company entered into a new employment agreement with Mr. Robert P. Nichols through June 30, 2020 with the option to extend for two additional one-year periods, with the first one-year option exercised through June 30, 2021. The agreement provided for an annual base salary for the fiscal year ended June 30, 2018 of $153,000 with annual increases thereafter of 3% per annum or the percentage increase, if any, in the Consumer Price Index, whichever is higher. The agreement also provided for a bonus of $10,000 for the fiscal year ended June 30, 2018 and on a discretionary basis thereafter. A bonus of $5,000 was granted for fiscal 2020 and none in 2019. The agreement also provided for a grant of options to purchase 7,500 shares of the Company’s stock which were granted during the year ended June 30, 2018. The agreement does not provide for the grant of stock options in 2019 or 2020.
 
 
 
21
 
 On July 1, 2017, the Company entered into a new employment agreement with Mr. Karl Nowosielski through June 30, 2020 with the option to extend for two additional one-year periods, with the first one-year option exercised through June 30, 2021. The agreement provided for an annual base salary for the fiscal year ended June 30, 2018 of $157,000 with annual increases thereafter of 4% per annum. The agreement also provided for a bonus of $10,000 for the fiscal year ending June 30, 2018 and $10,000 for each subsequent year, provided a minimum 5% increase in the EBITDA of the Torbal Products Division is achieved. A bonus of $10,000 was awarded during fiscal 2020 and fiscal 2019. The agreement also provided for a grant of options to purchase 7,500 shares of the Company’s stock which were granted during the year ended June 30, 2018. The agreement does not provide for the grant of stock options in 2019 or 2020.
 
 On July 1, 2020, the Company entered into a new employment agreement with Mr. John A. Moore through June 30, 2023 with the option to extend for two additional one-year periods. The agreement provides for an annual base salary for the fiscal year ended June 30, 2021 of $175,000 with annual increases thereafter of 3% per annum or the percentage increase, if any, in the Consumer Price Index, whichever is higher. The agreement also provides for discretionary bonuses as determined by the Board of Directors or Compensation Committee. A bonus of $50,000 was granted for fiscal 2020 and none in 2019. The agreement also provides for a grant of options to purchase 215,366 shares of the Company’s stock, subject to amendment of the Company’s 2012 Stock Option Plan. Mr. Moore had been providing consulting services to the Company’s wholly owned subsidiary, Scientific Bioprocessing, Inc., since March 2019 pursuant to a consulting agreement through June 30, 2020, at which time he became an employee of the Company. The agreement provided for a monthly cash fee of $10,000 through August 2019 and $12,500 from September 2019 through June 2020 plus the monthly issuance of stock options valued at $3,000 per month. The agreement contained confidentiality and non-competition covenants. The Company paid fees of $40,000 and granted options with a value of $12,000 for fiscal 2019.
 
 On May 16, 2017, the Company entered into a new employment agreement with Mr. Anthony Mitri through June 30, 2019 with the option to extend for one additional year period, which was exercised by mutual agreement through June 30, 2020 at an annual salary of $130,000. The agreement provided for an annual base salary for the fiscal year ended June 30, 2019 of $120,000 and $110,000 for the fiscal year ending June 30, 2018 plus incentive pay based on achievement of certain sales and income levels of Altamira Instruments, Inc. No incentive pay was earned for the fiscal year ended June 30, 2020 or 2019. The agreement also provided for the grant of stock options to purchase up to an aggregate of 10,000 shares, all of which were granted during the fiscal year ended June 30, 2018. No shares were granted during the years ended June 30, 2019 or June 30, 2020.
 
                        The employment agreements for Ms. Santos, Mr. Nichols, Mr. Moore, Mr. Nowosielski, and Mr. Mitri contain confidentiality and non-competition covenants. The employment agreements for Ms. Santos, Mr. Nichols and Mr. Nowosielski, contain termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if the relevant employee resigns for “good reason” (as such term is defined therein), the Company shall pay severance payments equal to one year’s salary at the rate of the compensation at the time of termination, and continue to pay the regular benefits provided by the Company for a period of one year from termination. The employment agreement for Mr. Moore contains termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if Mr. Moore resigns for “good reason” (as such term is defined therein), the Company shall pay severance payments equal to either one year’s salary at the rate of the compensation at the time of termination if Mr. Moore is terminated within 12 months of the date of his agreement or six months’ salary if Mr. Moore is terminated after 12 months of the date of his agreement, continue to pay the regular benefits provided by the Company for the period equal to the length of the severance payments and pay a pro rata portion of any bonus achieved prior to such termination of employment. Ms. Santos’ employment agreement also contains a provision that within one year of a change of control, if either the Company terminates her employment for any reason other than for “cause” or she terminates her employment for “good reason”, she will have the right to receive a lump sum payment equal to three times the average of her total annual compensation paid for the last five years immediately preceding such termination, minus $1.00.
 
22
 
 
 Directors’ Compensation and Options
 
DIRECTORS’ COMPENSATION
For the Year Ended June 30, 2020
 
Name
(a)
 
  Fees
Earned
or Paid in Cash
($)
   (b) 
 
  Stock Awards
($)
   (c) 
 
  Option Awards
($)
   (d) 
 
  Non-Equity Incentive Plan
Comp-
Ensation
($)
   (e) 
 
  Changes
in Pension Value and Non-qualified Deferred Compensation Earnings
($)
  (f) 
 
  Non-qualified Deferred Comp-sensation Earnings
 ($)
   (g) 
 
  All
Other
Comp- ensation
  ($)
    (h) 
 
  Total
($)
 (i) 
Joseph G. Cremonese
  36,700 
  0 
  0 
  0 
  0 
  0 
  76,200(1)
  112,900 
Marcus Frampton
  24,800 
  0 
  0 
  0 
  0 
  0 
  0 
  24,800 
John A. Moore (2)
    
    
    
    
    
    
    
    
Grace S. Morin
  6,400 
  0 
  0 
  0 
  0 
  0 
  8,400(3)
  14,800 
James S. Segasture
  16,800 
  0 
  0 
  0 
  0 
  0 
  0 
  16,800 
John F.F. Watkins
  24,800 
  0 
  0 
  0 
  0 
  0 
  0 
  24,800 
 
(1) Represents amount paid to him and his affiliate pursuant to a consulting agreement (see Items 12 and 13).
 
(2) Director is also a named officer. Refer to Compensation Table in Item 11.
 
(3) Represents compensation received for her administrative services as a consultant for Altamira through March 2020, upon termination of her consulting agreement. Ms. Morin’s directorship terminated in January 2020.
  
The Company paid each Director who is not an employee of the Company or a subsidiary a quarterly retainer fee of $2,200 and a meeting fee of $2,000 for each meeting attended for each of fiscal 2020 and fiscal 2019. In addition, the Company reimburses each Director for out-of-pocket expenses incurred in connection with attendance at board meetings. From July 2019 through January 2020, Mr. Cremonese, and from February 2020 through June 2020, Mr. Moore, as Chairman of the Board, each received an additional fee of $1,700 per month. During fiscal 2020, total director compensation to non-employee Directors aggregated $418,000, including the consulting fees paid to Mr. Cremonese’s affiliate, Mr. Moore, and Ms. Morin.
 
 
23
 
 
                On June 23, 2020, Mr. Cremonese was awarded 20,000 options in connection with his consulting agreement. Prior to that, Mr. Cremonese, had been awarded a total of 45,000 stock options under the Company's 2002 and 2012 Stock Option Plans of which 5,000 remain unexercised. None of the other directors have options outstanding.
 
   Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
  
The following table sets forth, as of June 30, 2020, the number of shares of Common Stock beneficially owned by (i) each person known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each director of the Company, (iii) each named executive officer of the Company, and (iv) all directors and executive officers as a group. Shares not outstanding but deemed beneficially owned by virtue of the right of any individual to acquire shares within 60 days are treated as outstanding only when determining the amount of and percentage of outstanding shares of Common Stock owned by such individual. Each person has sole voting and investment power with respect to the shares shown, except as noted. Except as indicated in the table, the address for each of the following is c/o Scientific Industries, Inc., 80 Orville Drive, Bohemia, New York 11716.
 
   
Name
 
Amount and Nature of
Beneficial Ownership 
 
%  of  Class 
Roy T. Eddleman, Trustee, Roy T. Eddleman Trust UAD 8-7-2000
Troy Gould PC
1801 Century Park East Suite 1600
Los Angeles, CA 900067
  1,495,686(1)
  42.2%
 
    
    
Christopher Cox
One World Financial Center
New York, NY 10281
  444,000(2)
  14.4%
 
    
    
Lyon Polk
1585 Broadway 22nd Floor
New York, NY 10036
  444,000(3)
  14.4%
 
    
    
Joseph G. Cremonese
  136,062(4)
  4.7%
 
    
    
Marcus Frampton
  81,812(5)
  2.9%
 
    
    
John A. Moore
  34,786(6)
  1.2%
 
    
    
Helena R. Santos
  38,252(7)
  1.3%
 
    
    
John F. F. Watkins
  0 
  (*) 
 
    
    
Karl D. Nowosielski
  34,183(8)
  1.2%
 
    
    
Anthony J. Mitri
  10,000(9)
  (*) 
 
    
    
Robert P. Nichols
  27,085(10)
  1.0% 
 
    
    
All directors and executive officers as a group (8 persons)
  362,180(11)
  12.2%
 
 
 
24
 
 
(1) Based upon form Schedule 13D filed with the Securities and Exchange Commission (“SEC”) on June 24, 2020. Includes 683,850 shares issuable upon exercise of warrants.
 
(2) Based upon from Schedule 13D filed with the SEC on June 29, 2020. Includes 222,000 shares issuable upon exercise of warrants.
 
(3) Based upon form Schedule 13G filed with the SEC on July 9, 2020. Includes 222,000 shares issuable upon exercise of warrants.
 
(4) 126,262 shares are owned jointly with his wife, 7,000 shares are owned by his wife, and 5,000 shares are issuable upon exercise of options.
 
(5) 2,250 shares are owned by Mr. Frampton. Mr. Frampton has voting power over 77,085 shares.
 
(6) Includes 12,586 shares issuable upon exercise of options.
 
(7) Includes 17,000 shares issuable upon exercise of options.
 
(8) Includes 9,683 stock issued in connection with the acquisition of the Torbal Division in February 2014.
 
(9) Represents shares issuable upon exercise of options.
 
(10) Includes 7,500 shares issuable upon exercise of options.
 
(11) Includes 96,586 shares issuable upon exercise of options.
 
 
(*) - % of Class is less than 1%.
 
 
EQUITY COMPENSATION PLAN INFORMATION
 
The following table sets forth information with respect to Company options, warrants and rights as of June 30, 2020.
 
Plan Category
 
 
 
 
 
  Number
of
Securities
 to be Issued Upon Exercise
of Outstanding Options, Warrants and Rights
  (a) 
 
  Weighted-Average
 Exercise Price
of
Outstanding Options, Warrants
and
Rights
($) 
  (b) 
 
  Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in
Column
(a)
   (c) 
Equity Compensation plans
approved by security holders
  96,600 
  4.35 
  147,400 
Equity Compensation plans
not approved by security holders
  N/A 
  N/A 
  N/A 
Total
  96,600 
  4.35 
  147,400 
 
 
 25

 
 
 
Item 13. Certain Relationships and Related Transactions and Director Independence.
   
Mr. Joseph G. Cremonese, a Director since November 2002, through his affiliate, Laboratory Innovation Company, Ltd., provides consulting services to the Company under a consulting agreement expiring on December 31, 2020 at a monthly retainer of $9,000. The agreement contains confidentiality and non-competition covenants. The Company paid fees of $76,200 and $43,200 for fiscal 2020 and fiscal 2019, respectively.
 
Item 14. Principal Accountant Fees and Services.
  
The following is a description of the fees incurred by the Company for services by the firm of Nussbaum Berg Klein & Wolpow, CPAs LLP (the “Firm”) during fiscal 2020 and fiscal 2019.
     
 The Company incurred for the services of the Firm fees of approximately $77,500 and $73,000 for fiscal 2020 and fiscal 2019, respectively, in connection with the audit of the Company’s annual consolidated financial statements and quarterly reviews; and $7,500 and $7,500 for the preparation of the Company’s corporate tax returns for fiscal 2020 and fiscal 2019, respectively.
 
In approving the engagement of the independent registered public accounting firm to perform the audit and non-audit services, the Board of Directors as the Company’s audit committee evaluates the scope and cost of each of the services to be performed including a determination that the performance of the non-audit services will not affect the independence of the firm in the performance of the audit services.
 
 
 
   PART IV
 
 
Item 15. Exhibits and Financial Statement Schedules.
 

Financial Statements. The required financial statements of the Company are attached hereto on pages F1-F-25.
 
Exhibits. The following Exhibits are filed as part of this report on Form 10-K:
 
 
 
26
 
 
Exhibit Number
Exhibit
 
 
3
Articles of Incorporation and By-Laws:
 
 
3(a)
 
Certificate of Incorporation of the Company as amended (filed as Exhibit 1(a-1) to the Company's General Form for Registration of Securities on Form 10 dated February 14, 1973 and incorporated by reference thereto.)
 
 
3(b)
 
Certificate of Amendment of the Company’s Certificate of Incorporation, as filed on January 28, 1985 (filed as Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 1985 and incorporated by reference thereto.)
 
 
By-Laws of the Company, as restated and amended (filed as Exhibit 3(ii) to the Company’s Current Report on Form 8-K filed on January 6, 2003 and Exhibit 3(ii) to the Company’s Current Report on Form 8-K filed on December 5, 2007 and incorporated by reference thereto).
 
Second Amended and Restated By-Laws of Scientific Industries, Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on August 10, 2020 and incorporated by reference thereto).
 
 
4
Instruments defining the rights of security holders:
 
 
2002 Stock Option Plan (filed as Exhibit 99-1 to the Company’s Current Report on Form 8-K filed on November 25, 2002 and incorporated by reference thereto).
 
 
2012 Stock Option Plan (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on January 23, 2012 and incorporated by reference thereto).
 
 
 
Amendment to the Company’s 2012 Stock Option Plan (Filed as Exhibit 4(c) to the Company’s Quarterly Report on Form 10-Q filed on May 12, 2016 and incorporated by reference thereto).
 4(d) Form of Warrant issued by the Company to Investors (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020, and incorporated by reference thereto).
 
 
10
Material Contracts:
 
 
 
Lease between Registrant and AIP Associates, predecessor-in-interest of current lessor, dated October, 1989 with respect to Company's offices and facilities in Bohemia, New York (filed as Exhibit 10(a) to the Company’s Annual Report on Form 10-KSB filed on September 28, 2005 and incorporated by reference thereto).
 
 
 
Amendment to lease between Registrant and REP A10 LLC, successor in interest of AIP Associates, dated September 1, 2004 (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on September 2, 2004, and incorporated by reference thereto).
 
 
 
Second amendment to lease between Registrant and REP A10 LLC dated November 5, 2007 (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on November 8, 2007, and incorporated by reference thereto).
 
 
Lease agreement dated August 8, 2014 by and between the Company and 80 Orville Drive Associates LLC.
 

 
Employment Agreement dated January 1, 2003, by and between the Company and Ms. Santos (filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K filed on January 22, 2003, and incorporated by reference thereto).
 
 
 
Employment Agreement dated September 1, 2004, by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on September 1, 2004, and incorporated by reference thereto).
 
 
 
Employment Agreement dated December 29, 2006, by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on December 29, 2006, and incorporated by reference thereto).
 
 
27
 
   
 
Employment Agreement dated July 31, 2009 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on August 7, 2009, and incorporated by reference thereto).
 

 
Employment Agreement dated May 14, 2010 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 18, 2010, and incorporated by reference thereto).
 
 
 
Employment Agreement dated September 13, 2011 by and between the Company and Ms. Santos (filed as exhibit 10(b)-5 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, and incorporated by reference thereto).
 
 
 
Amended Employment Agreement dated May 20, 2013 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 20, 2013, and incorporated by reference thereto).
 
 
 
Agreement extension dated June 9, 2015 to amend employment agreement by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto)
 
 
 
Agreement extension dated May 25, 2016 to amend employment agreement by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
 
 
 
Employment agreement dated July 1, 2017 by and between the Company and Ms. Santos (filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto).
 
 
 
28
 
 
 
 
Employment Agreement dated January 1, 2003, by and between the Company and Mr. Robert P. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 22, 2003, and incorporated by reference thereto).
 
 
 
Employment Agreement dated September 1, 2004, by and between the Company and Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on September 1, 2004, and incorporated by reference thereto).
 
 
 
Employment Agreement dated December 29, 2006, by and between the Company and Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on December 29, 2006, and incorporated by reference thereto).
 
 
 
Employment Agreement dated July 31, 2009 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on August 7, 2009, and incorporated by reference thereto).
 
 
 
Employment Agreement dated May 14, 2010 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on May 18, 2010, and incorporated by reference thereto).
 
 
 
Employment Agreement dated September 13, 2011 by and between the Company and Mr. Nichols (filed as Exhibit 10(c)-5 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, and incorporated by reference thereto).
 
 
 
Amended Employment Agreement dated May 20, 2013 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company’s current Report on Form 8-K filed on May 20, 2013, and incorporated by reference thereto).
 
 
 
Agreement extension dated June 9, 2015 to amend employment agreement with Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto).
 
 
 
Agreement e Agreement extension dated May 25, 2016 to amend employment agreement with Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
 
 
 
Employment agreement dated July 1, 2017 by and between the Company and Mr. Nichols (filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto).
 
 
 
Consulting Agreement dated January 1, 2003 by and between the Company and Mr. Cremonese and his affiliate, Laboratory Innovation Company, Ltd. (filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K filed on January 6, 2003, and incorporated by reference thereto).
 
 
 
Amended and Restated Consulting Agreement dated March 22, 2005, by and between the Company and Mr. Cremonese and Laboratory Innovation Company, Ltd. (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 23, 2005, and incorporated by reference thereto).
 
 
 
Second Amended and Restated Consulting Agreement dated March 15, 2007, by and between the Company and Mr. Cremonese and Laboratory Innovation Company Ltd. (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 16, 2007, and incorporated by reference thereto).
 
 
 
Third Amended and Restated Consulting Agreement dated September 23, 2009, by and between the Company and Mr. Cremonese and Laboratory Innovation Company, Ltd. (filed as Exhibit 10 to the Company’s Annual Report on Form 10-K field on September 24, 2009, and incorporated by reference thereto).
 
 
 
Fourth Amended and Restated Consulting Agreement dated January 7, 2011 (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K (filed on January 18, 2011, and incorporated by reference thereto).
 
 
29
 
 
 
Fifth Amendment and Restated Consulting Agreement dated January 20, 2012 (filed as Exhibit 10 to the Company’s Current Report on Form 8-K (filed on January 23, 2012, and incorporated by reference thereto).
 
 
 
Agreement extension dated November 29, 2012 to Amended and Restated Consulting Agreement (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on December 4, 2012, and incorporated by reference thereto).
 
 
 
Agreement extension dated December 12, 2013 to Amended and Restated Consulting Agreement (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on December 12, 2013, and incorporated by reference thereto).
 
 
 
Agreement extension dated January 14, 2015 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 15, 2015, and incorporated with reference thereto).
 
 
 
Agreement extension dated January 7, 2016 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 26, 2016, and incorporated with reference thereto).
 
 
 
Agreement extension dated February 16, 2018 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10-A1 to the Company’s Current Report on Form 8-K filed on March 9, 2018, and incorporated with reference thereto).
 
 
 
Agreement extension dated January 23, 2019 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10-1 to the Company’s Current Report on Form 8-K filed on January 25, 2019, and incorporated with reference thereto).
 

10(d)-12
 
Monthly Retainer Agreement between Scientific Bioprocessing, Inc. and Mr. Cremonese and affiliates (filed as Exhibit 10(d)-12 to the Company’s Quarterly Report on Form 10-Q on February 13, 2020, and incorporated by reference thereto).
 
Sublicense from Fluorometrix Corporation (filed as Exhibit 10(a)1 to the Company’s Current Report on Form 8-K filed on June 14, 2006, and incorporated by reference thereto).
 
 
 
Stock Purchase Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
 
 
 
Escrow Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
 
 
30
 
 
 
Registration Rights Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
 
 
 
Employment Agreement, dated as of November 30, 2006, between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
 
 
 
Employment Agreement, dated as of October 30, 2008, between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on October 30, 2008, and incorporated by reference thereto).
 
 
 
Employment Agreement, dated as of October 1, 2010, between Altamira Instruments, Inc., and Brookman P. March (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on October 13, 2010, and incorporated by reference thereto).
 
 
 
Employment Agreement, dated as of May 18, 2012 between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10(i)-3 to the Company’s Annual Report on Form 10-K filed on September 27, 2012, and incorporated by reference thereto).
 
 
 
Agreement Extension, dated as of May 21, 2014 between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10 to the Company’s Current Report on Form 8-K filed on May 21, 2014, and incorporated by reference thereto).
 
 
Agreement extension dated June 9, 2015 to amend employment agreement (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto).
 
 
Agreement extension dated May 25, 2016 to amend employment agreement (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
 
 
Employment agreement dated July 1, 2017 by and between the Company and Mr. March (filed as an exhibit to the Company's Annual Report on Form 10-K filed on June 30, 2017, and incorporated by reference thereto).
 

10(i)-8
Termination notice dated February 14, 2020 to Mr. March (filed as Exhibit 10(I-8) to the Company’s Current Report on Form 8-K filed on February 18, 2020, and incorporated by reference thereto).
 
 
Indemnity Agreement, dated as of April 13, 2007 by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(j) to the Company’s Annual Report on Form 10-KSB filed on September 28, 2007 and incorporated by reference thereto).
 
 
Lease between Altamira Instruments, Inc. and Allegheny Homes, LLC, with respect to the Company’s Pittsburgh, Pennsylvania facilities (filed as Exhibit 10(k) to the Company’s Annual Report on Form 10-KSB filed on September 28, 2007 and incorporated by reference thereto).
 
 
31
 
 
 
Lease between Altamira Instruments, Inc. and Allegheny Homes, LLC, with respect to the Company’s Pittsburgh, Pennsylvania facilities (filed as Exhibit 10(k)-1 to the Company’s Quarterly Report on Form 10-Q filed on February 14, 2013, and incorporated by reference thereto).
 
 
 
Line of Credit Agreements dated October 30, 2008, by and among the Company and Capital One, N.A. (filed as Exhibits 10-A1(a) through (f) to the Company’s Current Report on Form 8-K filed on October 30, 2008, and incorporated by reference thereto.
 
 
 
Restated Promissory Note Agreement dated January 20, 2010 by and among the Company and Capital One N.A. (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on January 20, 2010, and incorporated by reference thereto).
 
 
 
Consulting Agreement dated April 1, 2009 by and between the Company and Grace Morin (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on April 1, 2009, and incorporated by reference thereto).
 
 
 
Agreement dated January 12, 2015 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on January 15, 2015, and incorporated by reference thereto).
 
 
Agreement dated January 7, 2016 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on January 26, 2016, and incorporated by reference thereto).
 
 
Agreement dated February 16, 2018 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on March 9, 2018, and incorporated by reference thereto).
 
 
Agreement dated January 23, 2019 to extend Consulting Agreement (filed as Exhibit 10-2 to the Company’s Current Report on Form 8-K filed on January 25, 2019, and incorporated by reference thereto).
 
 
Line of Credit Agreements dated June 14, 2011, by and among the Company and JPMorgan Chase Bank, N.A. (filed as Exhibits 99.1 through 99.3 to the Company’s Current Report on Form 8-K filed on June 16, 2011, and incorporated by reference thereto).
 
 
Promissory Note dated June 5, 2013 by and among the Company and JP Morgan Chase Bank, N.A. (filed as Exhibit 99 to the Company’s Current Report on Form 8-K filed on June 7, 2013, and incorporated by reference thereto).
 
 
Purchase Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Fluorometrix Corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
 
 
Escrow Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Fluorometrix Corporation (filed as Exhibit 10(A) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
 
 
Research and Development Agreement dated as of November 14, 2011, by and between Scientific Bioprocessing, Inc. and Biodox R&D Corporation (filed as Exhibit 10(B) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
 
 
32
 
 
 
 
 
Notice of termination of Research and Development Agreement dated June 12, 2013 (filed as Exhibit 99 to the Company’s Current Report on Form 8-K filed on June 27, 2013, and incorporated by reference thereto)
 
 
Non-Competition Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Joseph E. Qualitz (filed as Exhibit 10(D) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
 
 
Promissory Note, dated as of November 14, 2011, by and between the Company and the University of Maryland, Baltimore County (filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
 
 
License Agreement, dated as of January 31, 2001 by and between University of Maryland, Baltimore County and Fluorometrix Corporation (filed as Exhibit 10(E) to the Company’s Current Report on Form 8-K filed on November 21, 2011, and incorporated by reference thereto).
 
 
Line of Credit Agreements dated June 25, 2014, by and among the Company and Bank of America Merrill Lynch (filed as Exhibits 99.1 through 99.2 (to the Company’s Current Report on Form 8-K filed on July 2, 2014, and incorporated by reference thereto).
 
 
Asset Purchase Agreement, dated as of February 26, 2014, by and among the Company and Fulcrum, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
 
 
Escrow Agreement, dated as of February 26, 2014, by and among the Company, and Fulcrum, Inc. (filed as Exhibit 10(e) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
 
 
Non-Competition Agreements, dated as of February 26, 2014, by and among the Company, and James Maloy and Karl Nowosielski (filed as Exhibits 10(b) and 10(c) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
 
 
Registration Rights Agreement, dated as of February 26, 2014, by and among the Company, and Fulcrum, Inc. (filed as Exhibit 10(d) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
 
 
33
 
 
 
Supply Agreement, dated as of February 20, 2014, by and among the Company, and Axis Sp 3.O.O. (filed as Exhibit 10(g) to the Company’s Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
 
 
Line of Credit Agreements dated June 26, 2015, by and among the Company and First National Bank of Pennsylvania (filed as Exhibit 10.1 through 10.4 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
 
 
Commercial Security Agreement dated July 5, 2016 by and among the Company, and First National Bank of Pennsylvania.
 
 
Note Purchase Agreements with James Maloy dated May 7, 2015 (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
 
 
Note Purchase Agreements with Grace March dated May 19, 2015 (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
 
 

Consulting Agreement dated March 1, 2019 between the Company and Mr. John A. Moore (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 6, 2019, and incorporated by reference thereto).
 

10(aa)-1 Amendment to Consulting Agreement dated November 7, 2019 between the Company and Mr. John A. Moore (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 11, 2019, and incorporated by reference thereto).
 

10(aa)-2
Employment Agreement dated July 1, 2020 between Scientific Bioprocessing, Inc. and John A. Moore (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2020, and incorporated by reference thereto).
 

 
Consulting Agreement dated July 20, 2020 between the Company and Mr. Reinhard Vogt and his affiliate Societat Reinhard and Noah Vogt AG (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on July 22, 2020, and incorporated by reference thereto.)
 
 
10(cc)
Employment Agreement dated July 1, 2020 between Scientific Bioprocessing, Inc. and James Polk (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 25, 2020, and incorporated by reference thereto).
 
 
10(dd)
Securities Purchase Agreement dated June 18, 2020 between the Company and Investors (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020, and incorporated by reference thereto).
 
 
10(ee) 
Loan Agreement under the U.S. Small Business Administration Paycheck Protection Program dated April 14, 2020 between the Company and First National Bank (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 21, 2020, and incorporated by reference thereto).
 
 
Code of Ethics (filed as Exhibit 14 to the Company’s Annual 10KSB filed on September 28, 2007 and incorporated by reference thereto).
 
 
21
Subsidiaries of the Registrant
 
 
 
Altamira Instruments, Inc., a Delaware Corporation, is a wholly-owned subsidiary of the Company.
 
 
 
Scientific Bioprocessing, Inc., a Delaware Corporation, is a wholly-owned subsidiary of the Company since November 2011.
 
 
 
Scientific Packaging Industries, Inc., a New York corporation, is a wholly-owned inactive subsidiary of the Company.
 
 
31.01
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
 
 
32.01
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
 

 
34
 
 
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.
 
 
Date: October 09, 2020
 
 
SCIENTIFIC INDUSTRIES, INC.
(Registrant)
 
/s/Helena R. Santos
 
Helena R. Santos
President, Chief Executive Officer,
Chief Financial Officer and Treasurer
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Name
 
Title
 
Date
 
 
 
 
 
 
 
Helena R. Santos
 
President, Chief Executive Officer, Chief Financial Officer and Treasurer
 
October 09, 2020
 
 
 
 
Joseph G. Cremonese
 
Director
 
October 09, 2020
 
 
 
 
Marcus Frampton
 
Director
 
October 09, 2020
 
 
 
 
John A. Moore
 
Chairman of the Board
 
October 09, 2020
 
 
 
 
Reinhard Vogt
 
Director
 
October 09, 2020
 
 
 
 
John F.F. Watkins
 
Director
 
October 09, 2020
 
 
 
 
 
 
 
 
35
 
 

 
 
 
 
 

 
 
 
SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
 
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
AS OF AND FOR THE YEARS ENDED
JUNE 30, 2020 AND 2019
 
 
 
 
 
 
 
 
  
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
 

CONTENTS
 
 
 
     Page 
 
 
Report of independent registered public accounting firm
F-1
 
 
Consolidated financial statements:
 
 
 
Balance sheets
F-2
 
 
Statements of operations
F-3
 
 
Statements of changes in stockholders’ equity
F-4
 
 
Statements of cash flows
F-5
 
 
Notes to financial statements
F-6 – F-25
 
 
 
Report of Independent Registered Public Accounting Firm
 
Board of Directors and Stockholders’
Scientific Industries, Inc.
Bohemia, New York
 
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Scientific Industries, Inc. and its subsidiaries (the “Company”) as of June 30, 2020 and 2019, the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements and schedules (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
We have served as the Company’s auditor since 1991.
 
 
 
Melville, New York
October 9, 2020
 
F-1
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
BALANCE SHEETS
 
AS OF JUNE 30, 2020 AND 2019
 
ASSETS
 
 
 
 2020 
 
 
 2019 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $7,559,700 
 $1,602,500 
Investment securities
  331,800 
  330,900 
Trade accounts receivable, less allowance for doubtful accounts of $11,600 and $15,000, respectively
  1,064,000 
  1,974,200 
Inventories
  2,884,700 
  2,592,300 
Income tax receivable
  334,800 
   
Prepaid expenses and other current assets
  112,300 
  91,200 
 
    
    
Total current assets
  12,287,300 
  6,591,100 
 
    
    
Property and equipment, net
  279,700 
  318,800 
 
    
    
Intangible assets, net
  128,700 
  175,000 
 
    
    
Goodwill
  705,300 
  705,300 
 
    
    
Operating lease right-of-use assets
  803,300 
  - 
 
    
    
Other assets
  56,000 
  54,700 
 
    
    
Deferred taxes
  537,100 
  431,100 
 
    
    
Total assets
 $14,797,400 
 $8,276,000 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
 
 
 
 
 
 
Accounts payable
 $354,700 
 $569,000 
Accrued expenses and taxes
  799,700 
  608,300 
Contract liabilities
  89,000 
  - 
Contingent consideration, current portion
  111,000 
  268,000 
Bank overdraft
  43,100 
  140,000 
Lease liabilities, current portion
  226,900 
  - 
Payroll Protection Program loan
  563,800 
  - 
 
    
    
Total current liabilities
  2,188,200 
  1,585,300 
 
    
    
Lease liabilities, less current portion
  640,800 
  - 
Contingent consideration payable, less current portion
  247,000 
  350,000 
 
    
    
Total liabilities
  3,076,000 
  1,935,300 
 
    
    
Stockholders’ equity:
    
    
Common stock, $.05 par value; 7,000,000 shares authorized; 2,881,065 and 1,513,914 shares issued; 2,861,263 and 1,494,112 shares outstanding in 2020 and 2019, respectively
  144,100 
  75,700 
Additional paid-in capital
  8,608,300 
  2,592,700 
Retained earnings
  3,021,400 
  3,724,700 
 
  11,773,800 
  6,393,100 
Less common stock held in treasury at cost, 19,802 shares
  52,400 
  52,400 
 
    
    
Total stockholders’ equity
  11,721,400 
  6,340,700 
 
    
    
Total liabilities and stockholders’ equity
 $14,797,400 
 $8,276,000 
See notes to consolidated financial statements.
 
F-2
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
 
 
 
 2020 
 
 
 2019 
 
 
 
 
 
 
 
 
Revenues
 $8,570,300 
 $10,199,800 
 
    
    
Cost of revenues
  4,716,900 
  5,832,700 
 
    
    
Gross profit
  3,853,400 
  4,367,100 
 
    
    
Operating expenses:
    
    
General and administrative
  2,412,300 
  1,924,400 
Selling
  1,436,400 
  1,136,100 
Research and development
  1,140,000 
  530,500 
 
    
    
Total operating expenses
  4,988,700 
  3,591,000 
 
    
    
Income (loss) from operations
  (1,136,300)
  776,100 
 
    
    
Other income (expense):
    
    
Interest income
  12,600 
  3,400 
Other income (expense), net
  (16,200)
  (7,800)
Interest expense
  - 
  (1,500)
 
    
    
Total other income (expense), net
  (3,600)
  (5,900)
 
    
    
Income (loss) before income tax expense (benefit)
  (1,139,900)
  770,200 
 
    
    
Income tax expense (benefit):
    
    
Current
  - 
  166,600 
Deferred
  (436,600)
  (42,000)
 
    
    
Total income tax expense (benefit)
  (436,600)
  124,600 
 
    
    
Net income (loss)
 $(703,300)
 $645,600 
 
    
    
Basic earnings (loss) per common share
 $(.46)
 $.43 
 
    
    
Diluted earnings (loss) per common share
 $(.46)
 $.43 
 
    
    
Weighted average common shares, basic
  1,515,103 
  1,494,112 
 
    
    
Weighted average common shares outstanding, assuming dilution (in 2019)
  1,515,103 
  1,512,178 
 
See notes to consolidated financial statements.
 
F-3
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 
FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
 
 
 
 
 
 
 Additional
 
 
 Accumulated
 Other
 
 
 
 
 
 
 
 
 Total
 
 
 
Common Stock
 
 
 Paid-in
 
 
Comprehensive
 
 
 Retained
 
 
Treasury Stock
 
 
Stockholders’
 
 
 
 Shares 
 
 
 Amount 
 
 
 Capital 
 
 
 Income (Loss) 
 
 
 Earnings 
 
 
 Shares 
 
 
 Amount 
 
 
 Equity 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 1, 2018
  1,513,914 
 $75,700 
 $2,545,900 
 $1,200 
 $3,131,800 
  19,802 
 $52,400 
 $5,702,200 
 
    
    
    
    
    
    
    
    
Cumulative effect of the adoption of Accounting Standards Update (“ASU”) 2016-01 - Financial Instruments
  - 
  - 
  - 
  (22,000)
  22,000 
  - 
  - 
  - 
 
    
    
    
    
    
    
    
    
Net income
  - 
  - 
  - 
  - 
  645,600 
  - 
  - 
  645,600 
 
    
    
    
    
    
    
    
    
Cash dividend declared and paid, $.05
  - 
  - 
  - 
  - 
  (74,700)
  - 
  - 
  (74,700)
 
    
    
    
    
    
    
    
    
Holding loss on investment securities, net of tax
  - 
  - 
  - 
  20,800 
  - 
  - 
  - 
  20,800 
 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  46,800 
  - 
  - 
  - 
  - 
  46,800 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2019
  1,513,914 
  75,700 
  2,592,700 
  - 
  3,724,700 
  19,802 
  52,400 
  6,340,700 
 
    
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  - 
  (703,300)
  - 
  - 
  (703,300)
 
    
    
    
    
    
    
    
    
Issuance of Common Stock and Warrants, net of issuance costs (Note 15)
  1,349,850 
  67,500 
  5,936,900 
  - 
  - 
  - 
  - 
  6,004,400 
 
    
    
    
    
    
    
    
    
Stock options exercised
  17,301 
  900 
  12,900 
  - 
  - 
  - 
  - 
  13,800 
 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  65,800 
  - 
  - 
  - 
  - 
  65,800 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2020
  2,881,065 
 $144,100 
 $8,608,300 
 $- 
 $3,021,400 
  19,802 
 $52,400 
 $11,721,400 
 
 
See notes to consolidated financial statements.
 
F-4
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
 
 
 
 2020 
 
 
 2019 
 
Operating activities:
 
 
 
 
 
 
Net income (loss)
 $(703,300)
 $645,600 
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
    
    
(Gain) loss on sale of investment securities
  (4,400)
  13,200 
Depreciation and amortization
  160,900 
  257,300 
Deferred income tax (benefit) expense
  (106,000)
  (38,500)
Unrealized holding (gain) loss on investment securities
  12,400 
  (3,000)
Bad debt recovery
  3,400 
  - 
Gain on sale of fixed assets
  (300)
  - 
Stock-based compensation
  65,800 
  46,800 
Change in fair value of contingent consideration
  112,600 
  521,200 
Changes in operating assets and liabilities:
    
    
Trade accounts receivable
  906,800 
  (6,500)
Inventories
  (292,400)
  (324,400)
Income tax receivable
  (334,800)
  - 
Prepaid expenses and other assets
  (22,400)
  (60,100)
Right-of-use assets
  (803,300)
  - 
Accounts payable
  (214,400)
  141,000 
Lease liabilities
  867,700 
  - 
Accrued expenses and taxes
  191,500 
  (109,300)
Contract liabilities
  89,000 
  (63,800)
Bank overdraft
  (96,900)
  140,000 
 
    
    
Total adjustments
  535,200 
  513,900 
 
    
    
Net cash (used in) provided by operating activities
  (168,100)
  1,159,500 
 
    
    
Investing activities:
    
    
Purchase of investment securities
  (63,400)
  (157,900)
Redemption of investment securities
  55,000 
  151,900 
Proceeds from sale of fixed assets
  1,000 
  - 
Capital expenditures
  (50,900)
  (187,800)
Purchase of intangible assets
  (25,800)
  (24,600)
 
    
    
Net cash used in investing activities
  (84,100)
  (218,400)
 
    
    
Financing activities:
    
    
Principal payments on notes payable
  - 
  (5,800)
Cash dividend declared and paid
  - 
  (74,700)
Proceeds from Payroll Protection Program loan
  563,800 
  - 
Line of credit proceeds
  -