SCIENTIFIC INDUSTRIES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking statements. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024. 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 statements. 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. Throughout this Quarterly Report on Form 10-Q, the terms the “Company,” “Scientific,” “we,” “our” or “us,” refer to Scientific Industries, Inc. and its subsidiaries on a consolidated basis, unless stated or the context implies otherwise. Overview . Scientific Industries, Inc., a Delaware corporation (“SI” and along with its subsidiaries, the “Company”, “we”, “our”), 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. The Company’s results reflect those of the Benchtop Laboratory Equipment Operations and the Bioprocessing Systems Operations and its corporate operation. Results of Operations . The Company realized a loss from continuing operations before income tax expense of $1,778,500 for the three months ended March 31, 2025 compared to a $2,051,600 loss from continuing operations before income tax expense for the three months ended March 31, 2024, primarily due to cost cutting initiatives in the Bioprocessing Systems Operations segment which were initiated at the beginning of the second quarter of the fiscal year ended December 31, 2024 (“fiscal 2024”). Revenue Net revenues for the three months ended March 31, 2025 decreased $77,000 (3.1%) to $2,406,500 from $2,483,500 for the three months ended March 31, 2024, primarily due to a $182,600 decrease in the Bioprocessing Systems Operations revenues, which was offset by an increase of $105,600 in the Benchtop Laboratory Equipment Operations in both sales of Genie and Torbal divisions’ products. Gross profit The gross profit percentage for the three months ended March 31, 2025, and 2024, was 42.2% and 41.9%, respectively. The increase is due primarily to higher gross margin percentage in the Bioprocessing Systems Operations. General and administrative General and administrative expenses for the three months ended March 31, 2025, and 2024, were $1,251,300 and $1,521,800, respectively. The decrease of $270,500 (17.8%) is due primarily to decreased employee-related costs associated with a reduction in force in the Bioprocessing Systems Operations during the second quarter of fiscal 2024. Selling Selling expenses for the three months ended March 31, 2025 and 2024, were $924,200 and $897,800, respectively. The increase of $26,400 (2.9%) is due primarily to commissions incurred by the Laboratory Equipment Operations. 16 Table of Contents Research and development Research and development expenses for the three months ended March 31, 2025, and 2024, were $652,000 and $710,700, respectively. The decrease of $58,700 (8.3%) is due primarily to the reduction of research and development expenditures in the Bioprocessing Systems Operations. Other income, net Other income, net, for the three months ended March 31, 2025 and 2024, were $32,400 and $37,900, respectively. The decrease is due primarily to the decrease in interest income. Income tax Income tax for the three months ended March 31, 2025, and 2024, was $0 and $0, respectively. The Company maintains a full valuation allowance of $10,512,500 against its consolidated net deferred tax asset as the Company determined the net deferred tax assets, which includes net operating loss carry-forwards and other tax credits, are not more likely than not to be realized in the future. Liquidity and Capital Resources . Our primary sources of liquidity are existing cash and cash equivalents, and cash generated from operating activities of the Benchtop Laboratory Equipment Operations. We assess our liquidity in terms of our ability to generate cash to fund our short and long-term cash requirements. For the three months ending March 31, 2025, the Company generated negative cash flows from operations of $1,331,300 and has an accumulated deficit of $35,709,900 as of March 31, 2025. We believe that our operating cash flow derived primarily from the Benchtop Laboratory Operations, our cash and investment securities on hand, the availability of our line of credit and latest financing efforts are not sufficient to fund our cash requirements over the next twelve months. The accompanying unaudited condensed financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The following table discloses our cash flows for the periods presented: For the three months ended March 31, 2025 2024 Net cash used in operating activities $ (1,331,100 ) $ (1,565,100 ) Net cash provided in investing activities 1,204,000 480,600 Net cash provided in financing activities - 645,700 Effect of changes in foreign currency exchange rates 9,300 (5,600 ) Decrease in cash and cash equivalents (117,800 ) (444,400 ) Net cash used in operating activities was $1,331,100 for the three months ended March 31, 2025 compared to $1,565,100 for the three months ended March 31, 2024. The net change of $234,000 is primarily due to a lower net loss in March 31, 2025. Net cash provided by investing activities was $1,204,000 for the three months ended March 31, 2025 compared to $480,600 provided in the three months ended March 31, 2024. The net increase of $723,400 is primarily due to the net redemption of investment securities in the three months ended March 31, 2025. Net cash provided by financing activities was zero for the three months ended March 31, 2025 compared to $645,700 for the three months ended March 31, 2024. The net change of $645,700, is primarily due to the issuance of common stock in the three months ended March 31, 2024. 17 Table of Contents Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. “Note 2-Summary of significant accounting policies” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”) describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Our critical accounting estimates are identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our fiscal 2024 Form 10-K. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the consolidated financial statements, and actual results could differ from our assumptions and estimates, and such differences could be material. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.