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, 2025. 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 a variety of benchtop laboratory equipment, weight and measurement products (“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 . On August 7, 2025, the Genie Division of the Benchtop Laboratory Equipment Operations became discontinued due to the sale of the GENIE product line to Troemner LLC. However, the Company continued to produce and market its Torbal and VIVID products within the Benchtop Laboratory Equipment Operations, which operates primarily out of Bohemia, New York . The Company realized a loss from continuing operations before income tax expense of $1,589,300 for the three months ended March 31, 2026, reflecting a $467,800 decrease in the current period, compared to a $2,057,100 loss from continuing operations before income tax expense for the three months ended March 31, 2025, primarily due to increased revenues across both Benchtop Laboratory Equipment and Bioprocessing Systems segments and cost cutting initiatives in the Bioprocessing Systems Operations and Corporate segments. Revenue Net revenues for the three months ended March 31, 2026 increased $284,800 (30.2%) to $1,227,100 from $942,300 for the three months ended March 31, 2025, primarily due to a $227,700 increase in the Bioprocessing Systems Operations revenues as well as an increase of $57,100 in the Benchtop Laboratory Equipment Operations, which, since the August 2025 Genie division sale, is comprised entirely of Torbal and VIVID brand products. Gross profit The gross profit percentage for the three months ended March 31, 2026, and 2025, was 38.3% and 36.5%, respectively. The increase is due primarily to a higher gross margin percentage in the Bioprocessing Systems Operations derived from higher margin new products. General and administrative General and administrative expenses for the three months ended March 31, 2026, and 2025, were $746,900 and $1,028,100, respectively. The decrease of $281,200 (27.4%) is due primarily to decreased employee-related costs associated with a reduction in force in the Bioprocessing Systems Operations. Selling Selling expenses for the three months ended March 31, 2026 and 2025, were $687,000 and $753,700, respectively. The decrease of $66,700 (8.8%) is due primarily to cost savings initiatives including reduction in salesforce and marketing activities by the Bioprocessing Systems Operations. 16 Table of Contents Research and development Research and development expenses for the three months ended March 31, 2026, and 2025, were $703,700 and $652,000, respectively. The increase of $51,700 (7.9%) is due primarily to the increase of research and development expenditures for new products in the Bioprocessing Systems Operations. Other income, net Other income, net, for the three months ended March 31, 2026 and 2025, were $78,400 and $32,400, respectively. The increase is due primarily to the increase in interest income related to investment securities purchased with the proceeds related to sale of the Genie Division in August of 2025. Income tax Income tax for the three months ended March 31, 2026, and 2025, was $0 and $0, respectively. The Company maintains a full valuation allowance of $13,484,039 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 source of liquidity are existing cash and cash equivalents, including investment securities, and cash generated from sales of equity investments, payments related to agreements associated with the sale of the Genie Division in August 2025, and our on-going business operations. In order to continue as a going concern, the Company will need to continue to decrease expenses, materially increase revenues, and/or secure additional external capital resources. Based on management’s current operating plan, the Company believes its cash on hand, including its investments, is sufficient to fund the Company's operations for a period of at least one year subsequent to the issuance of the accompanying condensed consolidated financial statements. However, there is no assurance that management's current operating plan will be successful. The following table discloses our cash flows for the periods presented: For the three months ended March 31, 2026 2025 Net cash used in operating activities $ (993,500 ) $ (1,522,200 ) Net cash provided by investing activities 813,900 1,204,000 Net cash provided by financing activities - - Effect of changes in foreign currency exchange rates (46,800 ) 9,300 Net cash provided by discontinued operations 69,200 191,100 Decrease in cash and cash equivalents (157,200 ) (117,800 ) Net cash used in operating activities was $993,500 for the three months ended March 31, 2026, compared to net cash used of $1,522,200 for the three months ended March 31, 2025. The net change of $528,700 is primarily due to cost reductions related to the Bioprocessing Systems operations and corporate expenses. Net cash provided by investing activities was $813,900 for the three months ended March 31, 2026, compared to $1,204,000 provided in the three months ended March 31, 2025. The net decrease of $390,100 is primarily due to the lower redemption of investment securities during the three months ended March 31, 2026. Net cash provided by financing activities was zero for the three months ended March 31, 2026 and March 31, 2025. 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 condensed consolidated financial statements and accompanying notes. “Note 2-Summary of significant accounting policies” to the Condensed Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 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 2025 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.