SCIENTIFIC INDUSTRIES INC 10-Q

Item 1. Financial Statements SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS December 31, 2021 June 30, 2021 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 4,297,000 $ 9,675,200 Investment securities 6,873,500 3,744,600 Trade accounts receivable, less allowance for doubtful accounts of $ 15,600 at December 31, 2021 and June 30, 2021 1,344,800 1,294,700 Inventories 3,615,000 2,977,100 Income tax receivable 66,000 333,300 Prepaid expenses and other current assets 580,600 350,900 Assets of discontinued operations 10,500 55,300 Total current assets 16,787,400 18,431,100 Property and equipment, net 522,600 412,600 Goodwill 4,395,400 4,395,400 Other intangible assets, net 2,350,400 2,557,800 Deferred taxes 3,223,200 2,489,900 Operating lease right-of-use assets 1,511,000 665,300 Other assets 62,500 54,300 Total assets $ 28,852,500 $ 29,006,400 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 914,800 $ 453,500 Accrued expenses 601,600 633,500 Contingent consideration 100,000 136,600 Bank overdraft 158,300 321,700 Lease liabilities, current portion 175,700 270,500 Paycheck Protection Program loan - 433,800 Liabilities of discontinued operations 13,200 37,200 Total current liabilities 1,963,600 2,286,800 Contingent consideration payable, less current portion - 23,400 Lease liabilities, less current portion 1,399,400 460,500 Other long-term liabilities - 10,900 Total liabilities 3,363,000 2,781,600 Shareholders’ equity: Common stock, $ .05 par value; 15,000,000 shares authorized; 6,477,945 shares issued; 6,458,143 shares outstanding at December 31, 2021 and June 30, 2021 324,000 324,000 Additional paid-in capital 27,879,900 26,613,500 Accumulated comprehensive gain (loss) 94,400 ( 9,200 ) Accumulated deficit ( 2,756,400 ) ( 651,100 ) 25,541,900 26,277,200 Less common stock held in treasury at cost, 19,802 shares 52,400 52,400 Total shareholders’ equity 25,489,500 26,224,800 Total liabilities and shareholders’ equity $ 28,852,500 $ 29,006,400 See notes to unaudited condensed consolidated financial statements. 3 Table of Contents SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) For the Three Month Period Ended December 31, For the Three Month Period Ended December 31, For the Six Month Period Ended December 31, For the Six Month Period Ended December 31, 2021 2020 2021 2020 Revenues $ 2,904,200 $ 2,717,400 $ 5,758,600 $ 4,736,500 Cost of revenues 1,495,400 1,311,300 2,836,300 2,273,700 Gross profit 1,408,800 1,406,100 2,922,300 2,462,800 Operating expenses: General and administrative 1,366,200 536,900 2,831,900 1,056,100 Selling 1,007,100 778,900 1,942,800 1,272,800 Research and development 880,300 329,700 1,516,800 574,000 Total operating expenses 3,253,600 1,645,500 6,291,500 2,902,900 Loss from operations ( 1,844,800 ) ( 239,400 ) ( 3,369,200 ) ( 440,100 ) Other income: Other income, net 496,800 18,200 466,200 16,200 Interest income 26,700 35,300 49,400 48,900 Total other income, net 523,500 53,500 515,600 65,100 Loss from continuing operations before income tax benefit ( 1,321,300 ) ( 185,900 ) ( 2,853,600 ) ( 375,000 ) Income tax benefit, deferred ( 414,700 ) ( 47,600 ) ( 737,300 ) ( 94,100 ) Loss from continuing operations ( 906,600 ) ( 138,300 ) ( 2,116,300 ) ( 280,900 ) Discontinued operations (Note 9): Gain (loss) from discontinued operations, net of tax 10,100 ( 474,200 ) 11,000 ( 594,900 ) Net loss ( 896,500 ) ( 612,500 ) ( 2,105,300 ) ( 875,800 ) Comprehensive gain (loss): Unrealized holding loss on investment securities, net of tax ( 2,600 ) - (400 ) - Foreign currency translation adjustment 69,900 - 104,000 - Comprehensive gain 67,300 - 103,600 - Total comprehensive loss $ ( 829,200 ) $ ( 612,500 ) $ ( 2,001,700 ) $ ( 875,800 ) Basic loss per common share Continuing operations $ ( .14 ) $ ( .05 ) $ ( .33 ) $ ( .10 ) Discontinued operations $ .00 $ ( .17 ) $ .00 $ ( .21 ) Consolidated operations $ ( .14 ) $ ( .22 ) $ ( .33 ) $ ( .31 ) See notes to unaudited condensed consolidated financial statements. 4 Table of Contents SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) Accumulated Common Stock Additional Paid-in other Comprehensive Income Retained Earnings (Accumulated Treasury Stock Total Shareholders’ Shares Amount Capital (Loss) Deficit) Shares Amount Equity Balances, July 1, 2021 6,477,945 $ 324,000 $ 26,613,500 $ ( 9,200 ) $ ( 651,100 ) 19,802 $ 52,400 $ 26,224,800 Net loss - - - - ( 1,208,800 ) - - ( 1,208,800 ) Foreign currency translation adjustment - - - 34,100 - - - 34,100 Unrealized holding gain on investment securities, net of tax - - - 2,200 - - - 2,200 Stock-based compensation - - 675,400 - - - - 675,400 Balances, September 30, 2021 6,477,945 324,000 27,288,900 27,100 ( 1,859,900 ) 19,802 52,400 25,727,700 Net loss - - - - ( 896,500 ) - - ( 896,500 ) Foreign currency translation adjustment - - - 69,900 - - - 69,900 Unrealized holding loss on investment securities, net of tax - - - ( 2,600 ) - - - ( 2,600 ) Stock-based compensation - - 591,000 - - - - 591,000 Balances, December 31, 2021 6,477,945 $ 324,000 $ 27,879,900 $ 94,400 $ ( 2,756,400 ) 19,802 $ 52,400 $ 25,489,500 5 Table of Contents SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) Additional Total Common Stock Paid-in Retained Treasury Stock Shareholders’ Shares Amount Capital Earnings Shares Amount Equity Balance, July 1, 2020 2,881,065 $ 144,100 $ 8,608,300 $ 3,021,400 19,802 $ 52,400 $ 11,721,400 Net loss - - - ( 263,300 ) - - ( 263,300 ) Stock-based compensation - - 61,300 - - - 61,300 Balance, September 30, 2020 2,881,065 144,100 8,669,600 2,758,100 19,802 52,400 11,519,400 Net loss - - - ( 612,500 ) - - ( 612,500 ) Stock-based compensation - - 76,100 - - - 76,100 Balance, December 31, 2020 2,881,065 $ 144,100 $ 8,745,700 $ 2,145,600 19,802 $ 52,400 $ 10,983,000 See notes to unaudited condensed consolidated financial statements. 6 Table of Contents SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Month Period Ended December 31, For the Six Month Period Ended December 31, 2021 2020 Operating activities: Net loss $ ( 2,105,300 ) $ ( 875,800 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain on sale of investments ( 4,000 ) ( 33,300 ) Unrealized holding loss on investments 32,600 25,700 Extinguishment of debt ( 433,800 ) - Depreciation and amortization 327,300 83,000 Deferred income taxes ( 733,300 ) ( 274,000 ) Loss on disposal of subsidiary - 405,400 Stock-based compensation 1,266,400 137,400 Change in fair value of contingent consideration ( 60,000 ) - Changes in operating assets and liabilities: Trade accounts receivable ( 50,100 ) ( 490,500 ) Inventories ( 637,900 ) ( 53,500 ) Carrying value of right of use assets ( 1,600 ) 9,800 Income tax receivable 267,300 1,200 Prepaid and other current assets ( 229,700 ) ( 205,600 ) Accounts payable 461,300 266,900 Contract liabilities - ( 20,000 ) Bank overdraft ( 163,400 ) 181,900 Other assets ( 8,200 ) - Discontinued operations 20,800 - Other long-term liabilities ( 10,900 ) - Accrued expenses and taxes ( 31,900 ) ( 376,400 ) Total adjustments 10,900 ( 342,000 ) Net cash used in operating activities ( 2,094,400 ) ( 1,217,800 ) Investing activities: Redemption of investment securities 844,300 544,800 Purchase of investment securities ( 4,001,200 ) ( 5,990,200 ) Proceeds from sale of discontinued operations - 342,400 Capital expenditures ( 163,400 ) ( 82,900 ) Purchase of other intangible assets ( 66,500 ) ( 31,300 ) Net cash used in investing activities ( 3,386,800 ) ( 5,217,200 ) Financing activities: Payments of contingent consideration - ( 13,400 ) Net cash used in financing activities - ( 13,400 ) Effect of changes in foreign currency exchange rates 103,000 - Net decrease in cash and cash equivalents ( 5,378,200 ) ( 6,448,400 ) Cash and cash equivalents, beginning of year 9,675,200 7,559,700 Cash and cash equivalents, end of period $ 4,297,000 $ 1,111,300 SUPPLEMENTAL DISCLOSURES: Cash paid during the period for: Income taxes $ - $ 2,500 Noncash financing activities: Record right-of-use assets $ 941,300 - Record lease liabilities $ 941,300 - See notes to unaudited condensed consolidated financial statements. 7 Table of Contents SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS General: The accompanying unaudited interim condensed consolidated financial statements are prepared pursuant to the Securities and Exchange Commission’s rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States for complete financial statements are not included herein. The Company believes all adjustments necessary for a fair presentation of these interim statements have been included and that they are of a normal and recurring nature. These interim statements should be read in conjunction with the Company’s financial statements and notes thereto, included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2021. The results for the three and six months ended December 31, 2021 are not necessarily an indication of the results for the full fiscal year ending June 30, 2022. 1. Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Scientific Industries, Inc., Scientific Packaging Industries, Inc., an inactive wholly-owned subsidiary, Altamira Instruments, Inc. (“Altamira”), a Delaware corporation and wholly-owned subsidiary (discontinued operation as of November 30, 2020), Scientific Bioprocessing Holdings, Inc. (“SBHI”), a Delaware corporation, and SBHI’s wholly-owned subsidiaries, Scientific Bioprocessing, Inc. (“SBI”), a Delaware corporation, and aquila biolabs GmbH (“Aquila”), a German corporation, which was acquired on April 29, 2021, (all collectively referred to as the “Company”). All material intercompany balances and transactions have been eliminated in consolidation. COVID-19 Pandemic The challenges posed by the COVID-19 pandemic on the global economy began to take effect and adversely affected the Company’s operations at the end of the third quarter of the fiscal year ended June 30, 2020. At that time, the Company took appropriate action and put plans in place to diminish the adverse 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 pertaining 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. SBI’s facility was shut down temporarily due to state mandates, however, the impact on operations was minimal, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’s receipt of two loans under the Federal Government’s Small Business Administration Paycheck Protection Program (“PPP”). The Company received $ 563,800 and $ 433,800 in PPP loans in April 2020 and March 2021, respectively. The first loan was forgiven in June 2021 except for $ 32,700 which was repaid by the Company and the second loan was forgiven in full in December 2021. The Company elected to account for its PPP Loans in accordance with Accounting Standards Codification (“ASC”), 470 Debt, with interest, if any, accrued in accordance with the interest method under ASC 835-30, Imputation of Interest. Initially, the Company recognized the entire loan amounts as liabilities on its balance sheets, and remain as liabilities until either the Company is legally released from its obligations or pays the lender. Once the loan is forgiven, the amount forgiven is recorded in the Company’s statement of operations as “Other Income.” Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes”, which is designed to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020. The adoption of this standard as of July 1, 2021 did not have a material impact on the Company’s financial statements. 8 Table of Contents 2. Revenue The Company generates revenues from the following sources: (1) Benchtop Laboratory Equipment, and (2) Bioprocessing Systems. The following table summarizes the Company’s disaggregation of revenues for the three and six months ended December 31, 2021 and 2020. Benchtop Laboratory Equipment Bioprocessing Systems Consolidated Three Months Ended December 31, 2021: Revenues $ 2,501,300 $ 402,900 $ 2,904,200 Foreign Sales 959,300 430,000 1,389,300 Benchtop Laboratory Equipment Bioprocessing Systems Consolidated Three Months Ended December 31, 2020: Revenues $ 2,507,400 $ 210,000 $ 2,717,400 Foreign Sales 1,150,700 206,100 1,356,800 Benchtop Laboratory Equipment Bioprocessing Systems Consolidated Six Months Ended December 31, 2021: Revenues $ 5,031,100 $ 727,500 $ 5,758,600 Foreign Sales 2,031,100 521,500 2,552,600 Benchtop Laboratory Equipment Bioprocessing Systems Consolidated Six Months Ended December 31, 2020: Revenues $ 4,437,600 $ 298,900 $ 4,736,500 Foreign Sales 1,782,600 292,400 2,075,000 Benchtop Laboratory Equipment sales are comprised primarily of standard benchtop laboratory equipment sold to laboratory equipment distributors, or to end users primarily via e-commerce. The sales cycle from time of receipt of order to shipment ranges from a day to a few weeks. Customers either pay by credit card (online sales) or Net 30-90 days, depending on the customer. Once the item is shipped under the terms specified in the order, which is primarily “FOB Factory”, other than a standard warranty, there are no other obligations to the customer. The standard warranty is typically one or two years, covering parts and labor, and is deemed immaterial. Revenue is recognized at the point in time when the risks and rewards of ownership have transferred to the customer, which is generally upon shipment. Bioprocessing Systems revenues consist of royalty revenues generated through SBI and product revenues generated primarily through Aquila. Royalty revenues are earned by the Company under a licensing agreement from a single licensee and its sublicenses. The license agreement included two United States patents, which expired in August 2021. The Company is obligated to pay 50% of all royalties earned to the entity that licensed the intellectual property to the Company. 9 Table of Contents 3. Segment Information and Concentrations The Company views its operations as two segments: the manufacture and marketing of standard benchtop laboratory equipment for research in university, hospital and industrial laboratories sold primarily through laboratory equipment distributors and laboratory and pharmacy balances and scales (“Benchtop Laboratory Equipment Operations”); and the design, manufacture, and marketing of bioprocessing systems and products and related royalty income (“Bioprocessing Systems”). Segment information is reported as follows: Benchtop Laboratory Equipment Bioprocessing Systems Corporate And Other Consolidated Three Months Ended December 31, 2021: Revenues $ 2,501,300 $ 402,900 $ - $ 2,904,200 Foreign Sales 959,300 430,000 - 1,389,300 Income (Loss) From Operations 290,100 (1,890,700 ) ( 244,200 ) ( 1,844,800 ) Assets 9,715,400 10,064,500 9,072,600 28,852,500 Long-Lived Asset Expenditures 32,800 148,200 - 181,000 Depreciation and Amortization 23,800 138,400 - 162,200 Benchtop Laboratory Equipment Bioprocessing Systems Corporate And Other Consolidated Three Months Ended December 31, 2020: Revenues $ 2,507,400 $ 210,000 $ - $ 2,717,400 Foreign Sales 1,150,700 206,100 - 1,356,800 Income (Loss) From Operations 568,500 (741,800 ) ( 66,100 ) ( 239,400 ) Assets 6,140,400 966,400 6,962,800 14,069,600 Long-Lived Asset Expenditures 13,700 13,800 - 27,500 Depreciation and Amortization 26,400 15,800 200 42,400 Approximately 44 % and 52 % of net sales of Benchtop Laboratory Equipment for the three months ended December 31, 2021 and 2020, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories. Approximately 29 % and 23 % of total Benchtop Laboratory Equipment sales were derived from the Torbal Scales Division for the three months ended December 31, 2021 and 2020, respectively. For the three months ended December 31, 2021 and 2020, respectively, three customers accounted for approximately 20 % for both periods of net sales of the Benchtop Laboratory Equipment Operations ( 17 % and 18 % of the Company’s total revenues), respectively. Sales of products from Aquila of the Bioprocessing Systems Operations, amounted to $332,400 for the three months ended December 31, 2021 and none in the corresponding prior year period. 10 Table of Contents 3. Segment Information and Concentrations (Continued) Benchtop Laboratory Equipment Bioprocessing Systems Corporate And Other Consolidated Six Months Ended December 31, 2021: Revenues $ 5,031,100 $ 727,500 $ - $ 5,758,600 Foreign Sales 2,031,100 521,500 - 2,552,600 Income (Loss) From Operations 851,700 (3,712,700 ) ( 508,200 ) ( 3,369,200 ) Assets 9,715,400 10,064,500 9,072,600 28,852,500 Long-Lived Asset Expenditures 66,600 163,300 - 229,900 Depreciation and Amortization 46,600 280,700 - 327,300 Benchtop Laboratory Equipment Bioprocessing Systems Corporate And Other Consolidated Six Months Ended December 31, 2020: Revenues $ 4,437,600 $ 298,900 $ - $ 4,736,500 Foreign Sales 1,782,600 292,400 - 2,075,000 Income (Loss) From Operations 952,300 (1,274,100 ) ( 118,300 ) ( 440,100 ) Assets 6,140,400 966,400 6,962,800 14,069,600 Long-Lived Asset Expenditures 35,500 78,700 - 114,200 Depreciation and Amortization 52,700 29,800 500 83,000 Approximately 48 % and 50 % of total benchtop laboratory equipment sales ( 42 % and 47 % of total revenues) for the six months ended December 31, 2021 and 2020, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories. Approximately 25 % for both periods of total benchtop laboratory equipment sales ( 22 % and 23 % of total revenues) were derived from the Torbal Scales Division for the six months ended December 31, 2021 and 2020, respectively. For the six months ended December 31, 2021 and 2020, three customers accounted for approximately 21 % for both periods of net sales of the Benchtop Laboratory Equipment Operations ( 18 % and 20 % of the Company’s total revenues), respectively. 11 Table of Contents 4. Fair Value of Financial Instruments In valuing assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company calculated the fair value of its Level 1 and 2 instruments based on the exchange traded price of similar or identical instruments where available or based on other observable instruments. These calculations take into consideration the credit risk of both the Company and its counterparties. The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the period. The fair value of the contingent consideration obligations are based on a probability weighted approach derived from the estimates of earn-out criteria and the probability assessment with respect to the likelihood of achieving those criteria. The measurement is based on significant inputs that are not observable in the market, therefore, the Company classifies this liability as Level 3 in the following table. The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis at December 31, 2021 and June 30, 2021 according to the valuation techniques the Company used to determine their fair values: Fair Value at Fair Value Measurements Using Inputs Considered as December 31, 2021 Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 4,297,000 $ 4,297,000 $ - $ - Investment securities 6,873,500 6,873,500 - - Total $ 11,170,500 $ 11,170,500 $ - $ - Liabilities: Contingent consideration $ 100,000 $ - $ - $ 100,000 Fair Value at Fair Value Measurements Using Inputs Considered as June 30, 2021 Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 9,675,200 $ 9,675,200 $ - $ - Investment securities 3,744,600 2,920,600 824,000 - Total $ 13,419,800 $ 12,595,800 $ 824,000 $ - Liabilities: Contingent consideration $ 160,000 $ - $ - $ 160,000 Investments in marketable securities by security type at December 31, 2021 and June 30, 2021 consisted of the following: Cost Fair Value Unrealized Holding Gain (Loss) At December 31, 2021: Equity securities $ 119,500 $ 178,900 $ 59,400 Mutual funds 6,705,700 6,694,600 ( 11,100 ) $ 6,825,200 $ 6,873,500 $ 48,300 Cost Fair Value Unrealized Holding Gain (Loss) At June 30, 2021: Equity securities $ 102,200 $ 154,100 $ 51,900 Mutual funds 2,752,400 2,766,500 14,100 Debt securities 832,700 824,000 ( 8,700 ) $ 3,687,300 $ 3,744,600 $ 57,300 12 Table of Contents 5 . Inventories December 31, 2021 June 30, 2021 Raw materials $ 2,372,500 $ 2,170,400 Work-in-process 94,300 39,600 Finished goods 1,148,200 767,100 $ 3,615,000 $ 2,977,100 6 . Goodwill and Finite Lived Intangible Assets Goodwill amounted to $ 4,395,400 at December 31, 2021 and June 30, 2021, all of which is expected to be deductible for tax purposes. The components of finite lived intangible assets are as follows: Useful Lives Cost Accumulated Amortization Net At December 31, 2021: Technology, trademarks 5 - 10 yrs. $ 817,000 $ 412,800 $ 404,200 Trade names 3 - 6 yrs. 140,000 140,000 - Websites 3 - 7 yrs. 210,000 210,000 - Customer relationships 4 - 10 yrs. 372,200 122,800 249,400 Sublicense agreements 10 yrs. 294,000 294,000 - Non-compete agreements 4 - 5 yrs. 1,060,500 406,400 654,100 In-process research and development 3 - 5 yrs. 918,600 209,200 709,400 Patents 5 - 7 yrs. 591,500 258,200 333,300 $ 4,403,800 $ 2,053,400 $ 2,350,400 Useful Lives Cost Accumulated Amortization Net At June 30, 2021: Technology, trademarks 5-10 yrs. $ 364,700 $ 362,200 $ 2,500 Trade names 3-6 yrs. 592,300 152,600 439,700 Websites 3-7 yrs. 210,000 210,000 - Customer relationships 4-10 yrs. 372,200 102,400 269,800 Sublicense agreements 10 yrs. 294,000 283,000 11,000 Non-compete agreements 4-5 yrs. 1,060,500 308,600 751,900 In-process research and development 3-5 yrs. 852,100 134,800 717,300 Patents 5-7 yrs. 591,500 225,900 365,600 $ 4,337,300 $ 1,779,500 $ 2,557,800 Total amortization expense was $ 135,000 and $ 16,200 for the three months ended December 31, 2021 and 2020, respectively, and $ 273,900 and $ 32,000 for the six months ended December 31, 2021 and 2020, respectively. As of December 31, 2021, estimated future amortization expense related to intangible assets is $263,200 for the remainder of the fiscal year ending June 30, 2022, $ 520,300 for fiscal 2023, $ 508,800 for fiscal 2024, $ 474,100 for fiscal 2025, $ 272,400 for fiscal 2026 and $ 311,600 thereafter. 13 Table of Contents 7. Loss Per Common Share The Company presents the computation of earnings per share (“EPS”) on a basic basis. Basic EPS is computed by dividing net income, if any, by the weighted average number of shares outstanding during the reported period. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential additional common shares that were dilutive had been issued. Common shares are excluded from the calculation if they are determined to be anti-dilutive; accordingly, no dilution is shown for loss periods. The following table sets forth the weighted average number of common shares outstanding for each period presented. For the Three Month Period Ended December 31, 2021 For the Three Month Period Ended December 31, 2020 For the Six Month Period Ended December 31, 2021 For the Six Month Period Ended December 31, 2020 Weighted average number of common shares outstanding 6,458,143 2,861,263 6,458,143 2,861,263 Effect of dilutive securities - - - - Weighted average number of dilutive common shares outstanding 6,458,143 2,861,263 6,458,143 2,861,263 Basic loss per common share: Continuing operations $ ( .14 ) $ ( .05 ) $ ( .33 ) $ ( .10 ) Discontinued operations $ .00 $ ( .17 ) $ .00 $ ( .21 ) Consolidated operations $ ( .14 ) $ ( .22 ) $ ( .33 ) $ ( .31 ) Approximately 3,288,927 and 3,367,555 shares of the Company’s common stock issuable upon the exercise of options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the three and six months ended December 31, 2021. Approximately, 126,700 and 1,349,850 shares of the Company’s common stock issuable upon the exercise of outstanding options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the three and six months ended December 31, 2020. 14 Table of Contents 8. Leases The Company leases certain properties consisting principally of a facility in Bohemia, New York (headquarters) through October 2028, a facility in Pittsburgh, Pennsylvania for SBI’s Bioprocessing Systems Operations through May 2023, and a facility for sales and administration in Orangeburg, New York through October 2022. There are no renewal options with any of the leases, no residual values or significant restrictions or covenants other than those customary in such arrangements, and no non-cash activities; and any rent escalations incorporated within the leases are included in the calculation of the future minimum lease payments, as further described below. The Company determines whether an agreement contains a lease at inception based on the Company’s right to obtain substantially all of the economic benefits from the use of the identified asset and its right to direct the use of the identified asset. Lease liabilities represent the present value of future lease payments and the Right-Of-Use (“ROU”) assets represent the Company’s right to use the underlying assets for the respective lease terms. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. The ROU asset is further adjusted to account for previously recorded lease expenses such as deferred rent and other lease liabilities. As the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate of 5.0 % as the discount rate to calculate the present value of future lease payments, which was the interest rate that its bank would charge for a similar loan. The Company elected not to recognize a ROU asset and a lease liability for leases with an initial term of twelve months or less. In addition to minimum lease payments, certain leases require payment of a proportionate share of real estate taxes and certain building operating expenses or payments based on an excess of a specified base. These variable lease costs are not included in the measurement of the ROU asset or lease liability due to unpredictability of the payment amount and are recorded as lease expenses in the period incurred. The Company’s lease agreements do not contain residual value guarantees. The Company elected available practical expedients for existing or expired contracts of lessees whereby the Company is not required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. The Company is not utilizing the practical expedient which allows the use of hindsight by lessees and lessors in determining the lease term and in assessing impairment of its ROU assets. The Company utilized the transition method allowing entities to only apply the new lease standard in the year of adoption. As of December 31, 2021, the weighted-average remaining lease term for operating lease liabilities was approximately 6.83 years and the weighted-average discount rate was 5.0 %. Total cash payments under these leases were approximately $ 89,800 and $ 158,100 , for the three and six months ended December 31, 2021 of which $ 81,800 and $ 144,400 was recorded as leases expense, respectively. The Company’s approximate future minimum rental payments under all leases existing at December 31, 2021 through October 2028 are as follows: Fiscal year ending June 30, Amount Remainder of 2022 $ 164,200 2023 311,400 2024 247,600 2025 255,000 2026 262,700 Thereafter 609,600 Total future minimum payments $ 1,850,500 Less imputed interest ( 275,400 ) Total Present Value of Operating Lease Liabilities $ 1,575,100 15 Table of Contents 9. Discontinued Operations Effective November 30, 2020, as part of its strategic shift to becoming a life sciences tool provider, the Company sold its operations relating to the manufacture and marketing of custom-made catalyst research instruments for universities, government laboratories, and chemical petrochemical companies sold on direct basis (the “ Catalyst Research Instruments Operations”) through the sale by Altamira of substantially all of its assets, and inventory to Beijing JWGB Sci. & Tech. Co. Ltd., a corporation formed under the laws of the People’s Republic of China (“JWGB”) for $ 440,000 which was fully paid in cash by January 2021, resulting in a $ 405,400 pre-tax loss. To preserve business continuity for the buyer, Altamira agreed to purchase certain components on behalf of JWGB for which JWGB agreed to reimburse Altamira. The Company retained all its receivables and payables related to sales made prior to November 30, 2020, certain inventory related to two work-in-process orders which have been shipped, product warranty and other miscellaneous liabilities related to certain employee benefits, and expenses related to the closure of the Altamira facility, which was completed at the end of December 2020. As a result of the disposal described above, the operating results of the former Catalyst Research Instruments Operations segment have been presented as discontinued operations in the balance sheets, the statements of operations, and the statements of cash flows, as detailed below. Assets: December 31, 2021 June 30, 2021 Cash $ 1,100 $ - Accounts receivable 9,400 52,000 Inventories - 3,300 Discontinued operations $ 10,500 $ 55,300 Liabilities: December 31, 2021 June 30, 2021 Accrued expenses and taxes $ 5,300 $ 20,700 Contract liabilities 7,900 16,500 $ 13,200 $ 37,200 16 Table of Contents 9. Discontinued Operations (continued) Three Months Ended Six Months Ended December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Revenues $ 19,400 $ 142,700 $ 20,600 $ 279,900 Cost of goods sold 3,400 195,500 3,400 379,700 Gross profit 16,000 ( 52,800 ) 17,200 ( 99,800 ) Selling, general and administrative expenses 1,900 181,300 2,200 269,600 Gain (loss) from operations 14,100 ( 234,100 ) 15,000 ( 369,400 ) Loss on disposal - ( 405,400 ) - ( 405,400 ) Income (loss) from operations before income tax benefit 14,100 (639,500 ) 15,000 ( 774,800 ) Income tax expense, all deferred 4,000 165,300 4,000 179,900 Net income (loss) attributable to discontinued operations $ 10,100 $ (474,200 ) $ 11,000 $ ( 594,900 ) In our Consolidated Statements of Cash Flows, the cash flows from discontinued operations are not separately classified. Cash provided by (used in) operating activities from discontinued operations for six months ended December 31, 2021 and December 30, 2020 was $ 1,100 and $( 335,000 ), respectively. There was no cash provided by or used in investing or financing activities for both periods. 10 . Acquisition of Aquila Biolabs GmbH Effective April 29, 2021, pursuant to a Stock Purchase Agreement (“SPA”) the Company acquired all the outstanding capital stock of Aquila, a German start-up company engaged from its facility in Baesweiler, Germany in the design, production, and sale of bioprocessing systems and products which focus on the control and analysis of bioprocesses in bioreactors and incubation shakers for an aggregate purchase price of $ 7,880,100 in cash upon closing. Aquila’s principal customers are universities, pharmaceutical companies, and industrial companies. Aquila’s products are sold primarily on a direct basis and to a lesser extent, through distributors. The acquisition was accounted for in accordance with ASC 805, Business Combinations (“ASC 805”) in which the Company is treated as the accounting acquirer. Accordingly, the assets acquired and liabilities assumed have been measured at estimated fair value. For purposes of measuring the estimated fair value, where applicable, of the assets acquired and liabilities assumed, as reflected in the unaudited pro forma condensed consolidated financial information, the guidance in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) has been applied, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. 17 Table of Contents 10 . Acquisition of Aquila Biolabs GmbH (continued) Management of the Company allocated the purchase price based on its estimated valuation of the assets acquired and liabilities assumed as follows: Amount Useful life Fair value of assets acquired: Current assets: Cash and cash equivalents $ 201,100 Accounts receivable 159,200 Inventory 187,500 Prepaid expenses and other current assets 25,400 Property, plant and equipment 40,200 Deferred tax asset 800,300 Tradename 452,300 6 years Non-compete agreements 784,500 4 years In-process research and development 742,100 5 years Customer relationships 252,200 9 years Patents and other intangibles 286,200 7 years Total assets acquired $ 3,931,000 Fair value of liabilities assumed: Accounts payable $ ( 39,300 ) Accrued expenses ( 90,300 ) Other current liabilities ( 59,400 ) Total liabilities assumed $ ( 189,000 ) Total identifiable net assets $ 3,742,000 Fair value of consideration transferred 7,880,100 Goodwill $ 4,138,100 11. Paycheck Protection Program Loan The Company received a second $ 433,800 PPP loan in March 2021, pursuant to the PPP loan administered by the U.S. Small Business Administration through its bank. The full amount of this loan was forgiven in December 2021, and is reflected as other income (extinguishment of debt) in the accompanying statements of operations and comprehensive loss. 18 Table of Contents