SCIENTIFIC INDUSTRIES INC 10-K/A

Item 1. Business. General . Incorporated in 1954, Scientific Industries, Inc., a Delaware corporation (“SI” and along with its subsidiaries, the “Company”), is engaged in the design, manufacture, and marketing of standard benchtop laboratory equipment (“Benchtop Laboratory Equipment”), and through its wholly-owned subsidiary, Scientific Bioprocessing Holdings, Inc., a Delaware corporation (“SBHI”), the design, manufacture, and marketing of bioprocessing systems and products (“Bioprocessing Systems”). SBHI has two wholly-owned subsidiaries – Scientific Bioprocessing, Inc., a Delaware corporation (“SBI”), and aquila biolabs GmbH, a German corporation (“Aquila”). The Company’s products are used primarily for research purposes by universities, pharmaceutical companies, pharmacies, national laboratories, medical device manufacturers, and other industries performing laboratory-scale research. Until November 30, 2020, the Company was also engaged in the design, manufacture and marketing of customized catalyst research instruments through its wholly-owned subsidiary, Altamira Instruments, Inc, a Delaware corporation (“Altamira”). On November 30, 2020, the Company sold substantially all of Altamira’s assets and Altamira’s operations were discontinued. Operating Segments . The Company views its operations as two segments: the manufacture and marketing of standard Benchtop Laboratory Equipment which includes various types of equipment used for research and sample preparation in university, pharmacy and industrial laboratories sold primarily through laboratory equipment distributors and online, and weight and measurement products including pill counters and digital scales; and the design, development, manufacture and marketing of bioprocessing products, principally products incorporating smart sensors and state of the art software analytics, sold primarily on a direct basis through the Company’s internal sales force. 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 through the “Genie ™” division, and pharmacy and laboratory balances and scales, force gauges, automated pill counters and moisture analyzers sold through the “Torbal®” division. Sales of the Company’s principal product, the Vortex-Genie® 2 Mixer, excluding accessories, represented approximately 32% and 40% of the Company’s total net revenues for the year ended December 31, 2023 and 2022 (unaudited), 38% and 42% of the six-month periods ended December 31, 2022 and 2021 (unaudited), respectively. 3 Table of Contents 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 cell disruptor, a bead beater, microplate mixers, programmable vortex mixers, two large capacity multi-vessel vortex mixers and a line of various orbital shakers. 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. The Company’s line of magnetic stirrers includes a 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® division line of products includes pharmacy, laboratory, and industrial digital scales, moisture analyzers, mechanical and VIVID® automated pill counters, force gauges and test stands. Bioprocessing Systems . SBHI, through its two wholly-owned subsidiaries, SBI and Aquila, is engaged in the design, development, manufacture and marketing of bioprocessing products, principally products incorporating smart sensors and state of the art software analytics. Products include the Cell Growth Quantifier (“CGQ”) for biomass monitoring in shake flasks, the Liquid Injection System (“LIS”) for automated feeding in shake flasks, and a line of coaster systems and flow-through cells for pH and DO monitoring and analytical software, and the Multi-Parameter Sensor (“MPS”) and Dissolved Oxygen sensor pills which are marketed and will be sold under the Bioprocessing Systems DOTS brand platform. 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 16% and 18% of total net revenues for the years ended December 31, 2023 and 2022 (unaudited), respectively and 32% and 18% of total net revenues for the six-month periods ended December 31, 2022 and 2021 (unaudited), respectively. The three customers also represented 18% and 21% of Benchtop Laboratory Equipment product sales, for the year ended December 31, 2023 and 2022 (unaudited), respectively and 36% and 21% of Benchtop Laboratory Equipment product sales, for the six-month periods ended December 31, 2022 and 2021 (unaudited), respectively. 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 websites, printed catalogs and sales force. 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. The Company’s “Torbal®” brand weighing products are primarily marketed and sold online, and primarily on a direct basis, with only a few distributors. The Company’s VIVID® brand, automated pill counter is sold through two exclusive distributors in North America. The Company markets its products through online and trade publication advertising, brochures and catalogs, the Company’s websites, one sales manager in the U.S., a consultant in Europe and, when practicable, attendance at industry trade shows. Bioprocessing Systems . The Company’s Bioprocessing Systems products are marketed under a newly created marketing category “Digitally Simplified Bioprocessing” through a direct sales force consisting of four sales professionals and four application scientists in the US and Germany, plus a network of 11 distributors that are managed by a distribution manager. Sales are supported via marketing through websites, content creation, application notes, mailings, trade shows, online marketing campaigns, and membership in various public/private research partnerships. 4 Table of Contents Assembly and Production . The Company has facilities in Bohemia, New York and Orangeburg, New York where it conducts the Benchtop Laboratory Equipment operations. The Company also has a shared-office facility in Pittsburgh, Pennsylvania and its primary operating facility in Baesweiller, Germany, where it conducts the Bioprocessing Systems operations. The Company’s production operations principally involve assembly of components supplied by various domestic and international independent suppliers. Patents, Trademarks and Licenses . The Company holds several patents relating to its benchtop laboratory products which include a United States patent that relates to its Vortex-Genie Pulse which expires in January 2036, and a patent relating to Torbal’s VIVID® automated pill counter which expires in March 2039. The Company’s Bioprocessing Systems operations’ Aquila subsidiary holds two US patents relating to bioprocessing which expire in January 2035 and February 2038, respectively. In addition, Aquila holds several European and German patents and Patent Cooperation Treaty (the “PCT”) patents, and has several other patent applications pending in the United States, Europe, and under the PCT. The Company does not anticipate any material adverse effect on sales of its patented products following the expiration on any of its patents resulting in the loss of patent protection. The Company has various proprietary trademarks, including aquila biolabs (in Germany), Bead Genie®, Disruptor Beads™, Disruptor Genie®, DOTS™, Enviro-Genie®, Genie™, Genie Temp-Shaker™, Incubator Genie™, MagStir Genie ® , MegaMag Genie®, MicroPlate Genie®, MultiMagStir Genie®, Multi-MicroPlate Genie®, Orbital Genie®, QuadMag Genie®, Rotator Genie®, Roto-Shake Genie ® , Torbal ®, TurboMix™, VIVID ® , and Vortex-Genie ® , each of which it considers important to the success of the related product. No representation can be made that any application will be granted or as to the protection that any existing or future trademark registration may provide. Foreign Sales . The Company’s sales to overseas customers, principally in Asia and Europe, accounted for approximately 34% and 36% of the Company’s net revenue for the year ended December 31, 2023 and 2022 (unaudited), respectively and 34% and 44% of the Company’s net revenues for six month period ended December 31, 2022 and 2021 (unaudited), respectively. Payments were primarily in United States dollars and were therefore not subject to risks of currency fluctuation, foreign duties and customs. Seasonality . The Company does not consider its business to be materially seasonal. Backlog . The Company had a total backlog in benchtop equipment orders of approximately $563,800 and $745,200 as of December 31, 2023 and 2022, respectively. There was no significant backlog for the Bioprocessing Systems operations. 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 and various other smaller importers (primarily from China). The Company’s main competitors for its Torbal® brand products are Ohaus Corporation, an American company, A&D Company Ltd., a Japanese company, Adam Equipment Co., Ltd., a British company, Avery Weigh-Tronix, an American company, and Capsa Healthcare, an American company for its VIVID® brand automated pill counters. 5 Table of Contents Direct competitors for the Company’s Bioprocessing Systems products are ABER Instruments (United Kingdom) and PreSens GmbH (Germany), indirect (systemic alternatives) competitors include Hamilton Bonaduz AG (Switzerland) and optek-Danulat GmbH (Germany) as well as total solution providers like Sartorius AG (Germany) or Eppendorf SE (Germany). The former direct competitor PyroScience GmbH (Germany) has entered a long-term partnership agreement with aquila. Research and Development . The Company incurred research and development expenses, the majority of which related to its Bioprocessing Systems operations, of $3,566,200 and $2,752,300 for the year ended December 31, 2023 and 2022 (unaudited), respectively and $1,395,800 and $1,516,800 for the six-month periods ended December 31, 2022 and 2021 (unaudited), respectively. The Company expects that research and development expenditures in the fiscal year ending December 31, 2024 will continue to be material reflecting continued product development efforts for the Bioprocessing Systems operations and, to a lesser extent, continued investment in new VIVID pill counting products. 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 governmental authority. 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. Employees . As of March 27, 2024, the Company employed 68 persons (33 for the Benchtop Laboratory Equipment operations, and 35 for the Bioprocessing Systems operations, of whom 27 were located in Germany) of whom 63 were full-time, including its executive officers. The Company augments its internal staff with outside consultants as deemed necessary. None of the Company’s employees are represented by any union. Available Information . 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.