UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-6658
SCIENTIFIC INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 04-2217279
(State of incorporation) (IRS Employer Identification No.)
70 Orville Drive, Bohemia, New York 11716
(Address of principal executive offices)
(516)567-4700
(Issuer s telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer s classes of
common equity, as of the latest practicable date: 826,239 shares, common
stock, $.05 par value per share.
SCIENTIFIC I NDUSTRIES, INC. AND SUBSIDIARY
FORM 10-QSB
The following information of the registrant and its subsidiary are
submitted herewith:
PART I - - Financial Information:
Condensed Consolidated Balance Sheet -
March 31, 1996 1
Condensed Consolidated Statements of Income -
Three and Nine Months Ended March 31, 1996 and 1995 2
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1996 and 1995 3
Notes to Condensed Consolidated Financial
Statements 4
Management s Discussion and Analysis 5-6
PART II -- Other Information:
Items 1 through 6 7
Signatures 8
<PAGE>
SCIENTIFIC INDUSTRIES INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
ASSETS
March 31, 1996
Current assets:
Cash and cash equivalents $ 121,500
Investment securities 755,100
Trade accounts receivable, less allowance
for doubtful accounts of $7,400 262,400
Inventories (Note 2) 297,500
Prepaid expenses and other current assets 51,300
Deferred income taxes 67,900
Total current assets 1,555,700
Property and equipment at cost, less
accumulated depreciation of $68,300 113,000
Intangible assets at cost, less
accumulated amortization of $10,100 57,200
Deferred income taxes 7,100
Other assets 90,900
Total assets $1,823,900
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,500
Accrued expenses and taxes 164,800
Customer advances 6,100
Total current liabilities 215,400
Deferred compensation 50,300
Stockholders equity:
Common stock, $.05 par value 42,300
Additional paid-in capital 842,300
Unrealized holding loss on investment
securities (2,200)
Retained earnings 728,200
1,610,600
Less common stock held in treasury, at cost 52,400
1,558,200
Total stockholders' equity and liabilities $1,823,900
See notes to condensed unaudited consolidated financial statements
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Month For the Nine Month
Periods Ended Periods Ended
March 31, March 31,
1996 1995 1996 1995
Net sales $638,400 $644,900 $1,906,100 $1,966,600
Cost of goods sold 408,500 425,500 1,189,500 1,182,400
Gross profit 229,900 219,400 716,600 784,200
Operating Expenses:
Selling, general
and administrative expenses 203,400 176,100 574,600 539,200
Research and development 24,300 - 32,300 -
227,700 176,100 606,900 539,200
Income from operations 2,200 43,300 109,700 245,000
Interest and other income 7,300 16,800 24,400 30,300
Income before income taxes 9,500 60,100 134,100 275,300
Income taxes 1,000 22,700 39,100 104,200
Net income $ 8,500 $ 37,400 $ 95,000 $ 171,100
Net income per common
share (Note 3): $.01 $.04 $.10 $.18
Weighted average number of
outstanding shares 826,239 826,239 826,239 826,239
See notes to condensed unaudited consolidated financial statements
<PAGE>
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Month Periods
Ended March 31,
1996 1995
Operating activities:
Net income $ 95,000 $171,100
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 42,000 22,100
Changes in assets and liabilities:
Accounts receivable 8,400 44,600
Inventories (25,400) (15,400)
Prepaid expenses and other current
assets (13,500) (9,800)
Other assets 3,400 (14,600)
Accounts payable (42,300) 33,600
Accrued expenses and taxes 1,800 (93,600)
Customer advances ( 9,800) 16,000
Total adjustments (35,400) (17,100)
Net cash provided by
operating activities 59,600 154,000
Investing activities:
Purchase of investments, held to
maturity (891,700) (781,500)
Redemption of investments, principally
held to maturity 732,200 632,200
Capital expenditures (26,900) (9,700)
Purchase of intangible assets (67,300) -
Net cash used in investing
activities (253,700) (158,900)
Net decrease in cash and cash equivalents (194,100) (4,900)
Cash and cash equivalents, beginning
of year 315,600 318,300
Cash and cash equivalents, end of period $ 121,500 $313,400
Supplemental disclosures:
Cash paid during the period for:
Income taxes $ 54,000 $184,200
See notes to condensed unaudited consolidated financial statements
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General: As contemplated by the Securities and Exchange Commission, the
accompanying financial statements and footnotes have been condensed and
therefore do not contain all financial statements and disclosures
required by generally accepted accounting principles. Reference should
be made to the Annual Report to Stockholders for the year ended June
30, 1995 of Scientific Industries, Inc., the Company.
The statements as of and for the nine months ended March 31, 1996 and
1995 are unaudited. In the opinion of management, all adjustments have
been made to present fairly the results of such unaudited interim
periods.
1. Significant accounting policies:
Principles of consolidation:
The accompanying condensed consolidated financial statements include the
accounts of Scientific Industries, Inc. and Scientific Packaging
Industries, Inc. (a 100% owned subsidiary). All intercompany items and
transactions have been eliminated in consolidation.
2. Inventories:
Inventories for interim financial statement purposes are computed by
costing sales made during the applicable periods. Management has
estimated the components of inventory to be as follows:
March 31,
1996
Raw materials $216,300
Work in process 61,700
Finished goods 19,500
$297,500
3. Net income per share:
Net income per share of Common Stock is computed on the basis of the
weighted average number of shares outstanding plus the dilutive effect
of stock options.
SCIENTIFIC INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis
Liquidity and Capital Resources
The Company's working capital increased $35,600 to $1,340,300 at March 31,
1996 from $1,304,700 at June 30, 1995. Management believes that the
Company's working capital will be sufficient to meet the Company's
operational requirements through the next twelve months.
Results of Operations
The Three Months Ended March 31, 1996 Compared With Three Months Ended
March 31, 1995.
Net sales for the three month period ended March 31, 1996 ($638,400) were
just $6,500 lower than the three month period ended March 31, 1995
($644,900). The gross profit margin for the three month period ended March
31, 1996 of 36.0% increased slightly from the gross profit margin for the
comparable period last year (34.0%). Due to increased material and labor
costs as well as other miscellaneous overhead expenses, gross profit
margins decreased from the prior quarter. We do not expect
a significant decrease in the gross profit margin the last quarter of the
year.
Selling, general and administrative expenses for the three month period
ended March 31, 1996 increased $27,300 (15.5%) compared to the same period
last year mainly as a result of approximately $16,000 in market research
expenses pertaining to the new product line and, to a lesser extent,
increases in salaries, insurance, etc. Management expects to incur
additional market research and advertising expenses for the new product line.
Research and development expenses for the three month period ended March 31,
1996 were $24,300 compared to none for the same period last year as a result
of the research and development activities conducted relating to the new
product line. The Company expects to invest a significant amount of its
working capital in research and development activities to further refine the
new product line, develop accessory parts for the Vortex-Genie Mixers and
other potential new products. As a result, there will be a significant
future impact on our profitability.
Income before income taxes for the three month period ended March 31, 1996
($9,500) compared with the three month period ended March 31, 1995 ($60,100)
decreased $50,600 mainly due to the increases in selling, general and
administrative expenses and research and development expenses as discussed
in the paragraphs above.
The Nine Months Ended March 31, 1996 Compared With Nine Months Ended March
31, 1995.
Net sales decreased $60,500 (3.1%) for the nine month period ended March 31,
1996 compared with the nine month period ended March 31, 1995. At this
time, we have no reason to believe that this is a trend for the future.
The gross profit margin for the nine month period ended March 31, 1996
of 37.6% decreased from the gross profit margin for the comparable period
last year (39.9%). The decrease is primarily due to increased material
costs, labor costs, and other miscellaneous overhead expenses and slightly
lower sales volume.
SCIENTIFIC INDUSTRIES, INC.
Management believes that decreased profit margins will probably continue in
the future due to the fact that higher material costs cannot all be totally
absorbed within our pricing structure. This is a result of the demand for
medical cost containment within the industry.
Selling, general and administrative expenses for the nine month period ended
March 31, 1996 compared with the nine month period ended March 31, 1995
increased $35,400 (6.6%) mainly as a result of market research expenses
pertaining to the new product line and, to a lesser extent, increases in
salaries, insurance, etc. Management expects to incur additional market
research and advertising expenses for the new product line.
Research and development expenses for the nine month period ended March 31,
1996 were $32,300 compared to none for the same period last year as a result
of the research and development activities conducted relating to the new
product line. The Company expects to continue investing significantly in
its research and development activities to refine the thermo-electrically
cooled centrifuge products, as well as improvement of existing products
and potential new products. Management now expects shipment of the new
product line to take place during fiscal 1997.
Income before income taxes for the nine month period ended March 31, 1996
($134,100) compared with the nine month period ended March 31, 1995
($275,300) decreased $141,200 resulting from a combination of somewhat
lower sales, higher selling, general and administrative expenses, and
research and development expenses as discussed above.
<PAGE>
SCIENTIFIC INDUSTRIES, INC.
FORM 10-QSB
For the Quarter Ended March 31, 1996
PART II--OTHER INFORMATION
Items 1, 2, 3, 4, 5 and 6 Not Applicable
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Scientific Industries, Inc.
Registrant
________________________________
Lowell A. Kleiman
President and Treasurer
______________________________________
Helena R. Santos
Controller and Assistant Treasurer
Date: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-KSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 315600
<SECURITIES> 606200
<RECEIVABLES> 278200
<ALLOWANCES> 7400
<INVENTORY> 272100
<CURRENT-ASSETS> 1570400
<PP&E> 154400
<DEPRECIATION> 46900
<TOTAL-ASSETS> 1779300
<CURRENT-LIABILITIES> 265700
<BONDS> 0
0
0
<COMMON> 42300
<OTHER-SE> 1421000
<TOTAL-LIABILITY-AND-EQUITY> 1779300
<SALES> 2673200
<TOTAL-REVENUES> 2673200
<CGS> 1716600
<TOTAL-COSTS> 1716600
<OTHER-EXPENSES> 657300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 299300
<INCOME-TAX> 93000
<INCOME-CONTINUING> 206300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206300
<EPS-PRIMARY> .22
<EPS-DILUTED> 0
</TABLE>
