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 . Three months ended June 30, 2025 and 2024 The Company realized a loss from operations before income tax expense of $1,522,700 for the three months ended June 30, 2025 compared to a $1,283,600 loss from operations before income tax expense for the three months ended June 30, 2024, primarily due to lower revenues generated during the period, in part resulting from the headwinds created by uncertainty related to the global trade war and reduced research funding. Revenue Net revenues for the three months ended June 30, 2025 decreased $317,400 (12.0%) to $2,329,900 from $2,647,300 for the three months ended June 30, 2024, primarily due to a decrease of $175,700 in Benchtop Laboratory Equipment Operations primarily due to decreased sales of Genie brand products resulting from the headwinds created by uncertainty related to the global trade war which was partially offset by increased Torbal division sales and a $141,700 decrease in the Bioprocessing Systems Operations revenue due to customer delays in finalizing orders and requirements for products not yet available. Gross profit The gross profit percentage for the three months ended June 30, 2025, and 2024, was 43.8% and 48.8%, respectively. The decrease is due primarily to increased material costs due to tariffs, principally for Torbal OEM products and fixed overhead for the Benchtop Laboratory Equipment Operations. . General and administrative General and administrative expenses for the three months ended June 30, 2025, and 2024, were $975,800 and $1,062,000, respectively. The decrease of $86,200 (8.1%) 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 June 30, 2025 and 2024, were $912,300 and $900,600, respectively. The increase of $11,700 (1.3%) is due primarily to increased sales and marketing costs incurred by the Bioprocessing Systems Operations. 16 Table of Contents Research and development Research and development expenses for the three months ended June 30, 2025, and 2024, were $677,200 and $666,000, respectively. The increase of $11,200 (1.7%) is due primarily to increased research and development expenditures in the Bioprocessing Systems Operations related to DOTS new products. Other income, net Total other income (expense), net, for the three months ended June 30, 2025 and 2024, wase $22,700 and $52,600, respectively. The decrease is due primarily to the decrease in interest income resulting from lower investment securities. Income tax Income tax for the three months ended June 30, 2025, and 2024, was $0 and $0, respectively. The Company maintains a full valuation allowance of $12,365,400 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. Six months ended June 30, 2025 and 2024 Results of Operations . The Company realized a loss from operations before income tax expense of $3,302,200 for the six months ended June 30, 2025, as compared to a $3,335,200 loss from continuing operations before income tax expense for the six months ended June 30, 2024, resulting from a combination of decreased revenues offset by lower operating expenses. Revenue Net revenues for the six months ended June 30, 2025 decreased $394,400 (7.7%) to $4,736,400 from $5,130,800 for the six months ended June 30, 2024, primarily due to a $324,300 decrease in the Bioprocessing Systems Operations revenues resulting primarily from inability to close on opportunities which are delayed to future periods for various reasons including customer funding or new product availability, and a decrease of $70,100 in revenues from Benchtop Laboratory Equipment Operations, which resulted primarily from decreased sales of Genie brand products, offset by increased sales of Torbal brand products. Gross profit The gross profit percentage for the six months ended June 30, 2025, and 2024, was 43.0% and 45.5%, respectively. The decrease is due primarily to increased material costs due to tariffs, principally for Torbal OEM products and fixed overhead for the Benchtop Laboratory Equipment Operations. General and administrative General and administrative expenses for the six months ended June 30, 2025, and 2024, were $2,228,200 and $2,583,800, respectively. The decrease of $355,600 (13.8%) 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 six months ended June 30, 2025 and 2024, were $1,836,600 and $1,798,400, respectively. The increase of $38,200 (2.1%) is due primarily to increased sales and marketing expenses incurred by the Bioprocessing Systems Operations. 17 Table of Contents Research and development Research and development expenses for the six months ended June 30, 2025, and 2024, were $1,329,200 and $1,376,700, respectively. The decrease of $47,500 (3.5%) is due primarily to the reduction of research and development expenditures in the Benchtop Laboratory Equipment Operations due to completion of the VIVID Workstation product development. Other income, net Other income/(loss), net, for the six months ended June 30, 2025 and 2024, was $55,300 and $90,500, respectively. The decrease is due primarily to the decrease in interest income from lower investment securities. Income tax Income tax for the six months ended June 30, 2025, and 2024, was $0 and $0, respectively. The Company maintains a full valuation allowance of $12,365,400 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. The following table discloses our cash flows for the periods presented: For the six months ended June 30, 2025 2024 Net cash used in operating activities $ (2,762,900 ) $ (2,436,800 ) Net cash provided in investing activities 1,580,700 1,570,700 Net cash provided in financing activities 1,452,200 645,700 Effect of changes in foreign currency exchange rates 33,500 (15,200 ) Increase / (decrease) in cash and cash equivalents 303,500 (235,600 ) Net cash used in operating activities was $2,762,900 for the six months ended June 30, 2025 compared to $2,436,800 for the six months ended June 30, 2024. The net change of $326,100 is primarily due to a higher inventory and prepaid expenses in June 30, 2025. Net cash provided by investing activities was $1,580,700 for the six months ended June 30, 2025 compared to $1,570,700 provided in the six months ended June 30, 2024. The net increase of $10,000 is primarily due to the net redemption of investment securities in the six months ended June 30, 2025. Net cash provided by financing activities was $1,452,200 for the six months ended June 30, 2025 compared to $645,700 for the six months ended June 30, 2024. The net change of $806,500, is primarily due to the issuance of common stock in the six months ended June 30, 2025. 18 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.