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 quarterly period ended September 30, 1997
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 as specified in its charter)
Delaware 04-2217279
(State of incorporation) (I.R.S. 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
SCIENTIFIC INDUSTRIES, 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 - September 30, 1997 1
Condensed Consolidated Statements of Income - Three Months
Ended September 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows - Three
Months Ended September 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis 5
PART II -- Other Information:
Items 1 through 6 6
Signatures 7
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
ASSETS
September 30, 1997
------------------
Current Assets:
Cash and cash equivalents $ 168,700
Investment securities 892,400
Trade accounts receivable, less allowance for
doubtful accounts of $7,400 256,800
Inventories (Note 2) 335,300
Prepaid expenses, taxes and other current assets 58,900
Deferred income taxes 35,000
----------
Total current assets 1,747,100
----------
Property and equipment at cost, less accumulated
depreciation of $109,100 137,800
----------
Other assets and deferred charges:
Intangible assets, less accumulated amortization
of $25,400 56,600
Deferred income taxes 16,100
Other 123,900
196,600
----------
$2,081,500
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 100,700
Accrued expenses 190,400
Customer advances 3,800
----------
Total current liabilities 294,900
----------
Deferred compensation 77,900
----------
Shareholders' equity:
Common stock $.05 par value 42,300
Additional paid-in capital 842,300
Unrealized holding gain on investment securities 500
Retained earnings 876,000
----------
1,761,100
Less common stock held in treasury, at cost 52,400
----------
1,708,700
----------
$2,081,500
==========
See notes to condensed unaudited consolidated financial statements
1
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Month Periods Ended
September 30, 1997 September 30, 1996
------------------ ------------------
Net sales $ 724,400 $ 786,900
Cost of sales 425,800 469,100
---------- ----------
Gross profit 298,600 317,800
---------- ----------
Operating expenses:
General and administrative 183,500 180,800
Selling 29,300 27,300
Research and development 61,600 36,700
---------- ----------
274,400 244,800
---------- ----------
Income from operations 24,200 73,000
Interest and other income 9,500 8,400
---------- ----------
Income before income taxes 33,700 81,400
Income taxes 8,200 30,400
---------- ----------
Net income $ 25,500 $ 51,000
========== ==========
Net income per common share (Note 3) $ .03 $ .05
========== ==========
Weighted average number of outstanding
shares 826,239 826,239
See notes to condensed unaudited consolidated financial statements
2
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Month Periods Ended
September 30, 1997 September 30, 1996
------------------ ------------------
Operating activities:
Net Income $ 25,500 $ 51,000
---------- ----------
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 18,400 17,000
Change in assets and liabilities:
Accounts receivable 24,700 (136,500)
Inventories (5,300) 100
Prepaid expenses, taxes and other
current assets 23,600 32,600
Other assets - (5,500)
Accounts payable 17,900 (6,700)
Accrued expenses (72,100) (10,400)
Customer advances - 18,700
---------- -----------
Total adjustments 7,300 (90,700)
---------- -----------
Net cash provided by (used in)
operating act 32,700 (39,700)
---------- -----------
Investing activities:
Purchase of investment securities,
principally held to maturity (375,600) (434,600)
Redemptions of investment securities,
principally held to maturity 378,000 451,200
Capital expenditures (5,500) (14,200)
Purchase of intangible assets (7,500) -
---------- -----------
Net cash provided by (used in)
investing activities (10,600) 2,400
---------- -----------
Net increase(decrease)in cash and
cash equivalents 22,100 (37,300)
Cash and cash equivalents,
beginning of year 146,600 169,900
---------- -----------
Cash and cash equivalents, end of period $ 168,700 $ 132,600
========== ===========
Supplemental disclosures:
Cash paid during the period for:
Income Taxes $ 59,300 $ 400
See notes to condensed unaudited consolidated financial statements
3
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, 1997 of Scientific
Industries, Inc., the "Company."
The statements as of and for the three months ended September 30, 1997 and
1996 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:
September 30,
1997
-------------
Raw Materials $ 300,500
Work in process 30,500
Finished Goods 4,300
-------------
$ 335,300
============
3. Net income per share:
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.
4
SCIENTIFIC INDUSTRIES, INC.
Item 2. Management's Discussion and Analysis
Liquidity and Capital Resources
The Company had working capital of $1,452,200 at September 30, 1997 which was
slightly higher than the Company's working capital of $1,424,800 at June 30,
1997. Management believes that the Company's working capital will be
sufficient to meet the Company's operational requirements through the current
fiscal year.
Results of Operations
The Three Months Ended September 30, 1997 Compared With Three Months Ended
September 30, 1996.
Net sales decreased $62,500 (7.9%) for the three month period ended September
30, 1997 compared with the three month period ended September 30, 1996 as a
result of a temporary labor shortage which was resolved at the end of the
quarter. Consequently, the Company's sales order backlog was higher than usual
at the end of the quarter. The gross profit percentage for the three month
period ended September 30, 1997 of 41.2% approximated the gross profit
percentage of 40.4% for the three month period ended September 30, 1996.
Research and development expenses for the three month period ended September
30, 1997 were $61,600 compared to $36,700 in the comparable period last year
as a result of the research and development activities conducted related
mainly to the new laboratory mixing device, Roto-Shake Genie (trademark),
which is expected to be available in the second quarter of the current fiscal
year. The TurboMix (trademark), a new accessory for the existing Vortex Genie
2 (registered trademark) Mixer, is also scheduled for production in the next
quarter. The Company's new more sophisticated line of centrifuge products
still requires engineering modifications and may not be available before the
end of fiscal 1998.
Income before income taxes for the three month period ended September 30, 1997
of $33,700 compared with $81,400 for the three month period ended September
30, 1996 decreased $47,700 (58.6%) mainly due to higher research and
development expenses and lower sales as discussed above.
5
SCIENTIFIC INDUSTRIES, INC.
FORM 10-QSB
For the Quarter Ended September 30, 1997
Part II -- OTHER INFORMATION
Not Applicable
6
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
/s/
----------------------------
Lowell A. Kleiman
President and Treasurer
Principal Executive and Financial Officer
/s/
----------------------------
Helena R. Santos
Vice President, Controller and
Assistant Treasurer
Principal Accounting Officer
Date November 14, 1997
7
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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
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<PERIOD-END> SEP-30-1997
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<RECEIVABLES> 288900
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<PP&E> 241500
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0
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<TOTAL-LIABILITY-AND-EQUITY> 2110000
<SALES> 3077100
<TOTAL-REVENUES> 3077100
<CGS> 1865900
<TOTAL-COSTS> 1865900
<OTHER-EXPENSES> 1062000
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<INCOME-TAX> 43800
<INCOME-CONTINUING> 135700
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