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 March 31, 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 - March 31, 1997 1
Condensed Consolidated Statements of Income - Three and Nine Months
Ended March 31, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows -Nine
Months Ended March 31, 1997 and 1996 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
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
ASSETS
March 31, 1997
--------------
Current Assets:
Cash and cash equivalents $ 34,900
Investment securities 849,900
Trade accounts receivable, less allowance for
doubtful accounts of $7,400 304,900
Inventories (Note 2) 385,600
Prepaid expenses, taxes and other current assets 76,800
Deferred income taxes 28,000
--------------
Total current assets 1,680,100
--------------
Property and equipment at cost, less accumulated
depreciation of $107,900 144,900
Other assets and deferred charges:
Intangible assets, less accumulated amortization
of $17,700 54,400
Deferred income taxes 8,600
Other 108,500
-------------
171,500
-------------
$1,996,500
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 122,000
Accrued expenses 177,900
Customer advances 25,200
-------------
Total current liabilities 325,100
-------------
Deferred compensation 64,700
Shareholders' equity:
Common stock $.05 par value 42,300
Additional paid-in capital 842,300
Unrealized holding loss on investment securities (400)
Retained earnings 774,900
-------------
1,659,100
Less common stock held in treasury, at cost 52,400
-------------
1,606,700
-------------
$1,996,500
See notes to condensed unaudited consolidated financial statements
1
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
For the Three Month For the Nine Month
Periods Ended Periods Ended
March 31, March 31,
1997 1996 1997 1996
-------- -------- ---------- ----------
Net sales $627,700 $638,400 $2,150,800 $1,906,100
Cost of goods sold 396,800 408,500 1,330,200 1,189,500
-------- -------- ---------- ----------
Gross profit 230,900 229,900 820,600 716,600
-------- -------- ---------- ----------
Operating expenses:
General and administrative 177,700 174,300 535,000 514,700
Selling 27,000 29,100 76,900 59,900
Research and development 76,800 24,300 161,100 32,300
-------- ------- ---------- ----------
281,500 227,700 773,000 606,900
-------- ------- ---------- ----------
Income (loss) from operations (50,600) 2,200 47,600 109,700
Interest and other income 7,700 7,300 26,000 24,400
-------- ------- ---------- ----------
Income (loss) before income taxes (42,900) 9,500 73,600 134,100
Income taxes (credit) (23,300) 1,000 13,500 39,100
-------- ------- ---------- ----------
Net income (loss) ($19,600) $ 8,500 $ 60,100 $ 95,000
======== ======== ========== ==========
Net income (loss) per common
share (Note 3): ($ .02) $ .01 $ .06 $.10
Weighted average number of
outstanding shares 826,239 826,239 826,239 826,239
See notes to condensed unaudited consolidated financial statements
2
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Month Periods Ended
March 31, 1997 March 31, 1996
--------------------------------
Operating activities:
Net Income $ 60,100 $ 95,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 54,300 42,000
Change in assets and liabilities:
Accounts receivable (120,500) 8,400
Inventories (91,000) (25,400)
Prepaid expenses, taxes and other
current assets 39,500 (13,500)
Other assets (5,600) 3,400
Accounts payable 77,500 (42,300)
Accrued expenses (2,400) 1,800
Customer advances 20,900 ( 9,800)
--------- ------------
Total adjustments (27,300) (35,400)
--------- ------------
Net cash provided by
operating activities 32,800 59,600
--------- ------------
Investing activities:
Purchase of investment securities,
principally held to maturity (1,110,500) (891,700)
Redemptions of investment securities,
principally held to maturity 1,004,600 732,200
Capital expenditures (60,200) (26,900)
Purchase of intangible assets (1,700) (67,300)
---------- -----------
Net cash used in
investing activities (167,800) (253,700)
---------- -----------
Net decrease in cash and cash equivalents (135,000) (194,100)
Cash and cash equivalents, beginning of year 169,900 315,600
---------- -----------
Cash and cash equivalents, end of period $ 34,900 $ 121,500
========== ===========
Supplemental disclosures:
Cash paid during the period for:
Income Taxes $ 400 $ 54,000
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 is made to the financial
statements contained in the Annual Report to Stockholders for the year ended
June 30, 1996 of Scientific Industries, Inc., and the information under the
heading "the Company."
The statements as of and for the three and nine months ended March 31, 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:
March 31, 1997
Raw Materials $ 318,500
Work in process 32,900
Finished Goods 34,200
------------
$ 385,600
============
3. Net income (loss) per share:
Income (loss) 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, where applicable.
4
SCIENTIFIC INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company's working capital increased to $1,355,000 at March 31, 1997 from
$1,304,400 at June 30, 1996 attributable primarily to an increase in income
from operations. Management believes that funds generated from operations
and existing cash and investment securities balances will be sufficient to
support the Company's operational requirements for at least one year.
Results of Operations
The Three Months Ended March 31, 1997 Compared With Three Months Ended March
31, 1996.
Net sales remained relatively the same for the three month period ended March
31, 1997 compared with the three month period ended March 31, 1996. The gross
profit percentage for the three month period ended March 31, 1997 of 36.8%
approximated the gross profit of 36.0% for the comparable period last year.
Sales for the third quarter were lower than expected as a result of
operational difficulties at two vendors which have been resolved.
Consequently, sales are expected to increase during the fourth quarter based
on the comparatively high sales backlog of $317,600 at the end of the third
quarter.
Research and development expenses for the three month period ended March 31,
1997 were $76,800 compared to $24,300 in the comparable period last year as a
result of the establishment of a Research and Development Department and
increased research and development activity. As previously reported, the
Company is investing a significant portion of its operational income in
research and development activities as part of its overall plan for growth.
The Company anticipates that spending on research and development in the
fourth quarter will continue at approximately the level as that of the third
quarter.
The Company expects to have available for delivery a new laboratory product
accessory by the end of this fiscal year. Another laboratory apparatus within
the laboratory products line is expected to be available in the fall. The new
line of centrifuge products is now expected to be available at the end of
calendar year 1997.
The Company incurred a loss before income tax credit for the three month
period ended March 31, 1997 of $42,900 compared with income before income
taxes of $9,500 for the three month period ended March 31, 1996 mainly due to
increased research and development costs.
The Nine Months Ended March 31, 1997 Compared With Nine Months Ended March 31,
1996.
Net sales increased $244,700 (12.8%) for the nine month period ended March 31,
1997 compared with the nine month period ended March 31, 1996 as a result of
higher sales during the first half of the fiscal year due to increased demand
for existing laboratory products. The gross profit percentage for the nine
month period ended March 31, 1997 of 38.2% approximated the gross profit of
37.6% for the nine month period ended March 31, 1996.
5
SCIENTIFIC INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Selling expenses increased $17,000 (28.4%)to $76,900 for the nine month period
ended March 31, 1997 compared with $59,900 for the same period last year as a
result of market research expenses for the new products and a promotional
rebate program for our existing laboratory products.
Research and development expenses for the nine month period ended March 31,
1997 were $161,100 compared to $32,300 in the comparable period last year as a
result of the establishment of a Research and Development Department and
increased research and development activity. As previously reported, the
Company is investing a significant portion of its operational income in
research and development activities as part of its overall plan for growth.
Income before income taxes for the nine month period ended March 31, 1997 of
$73,600 decreased $60,500 (45.1%) compared with $134,100 for the nine month
period ended March 31, 1996. The decrease was mainly due to research and
development costs, partially offset by higher sales during the first half of
this fiscal year.
6
SCIENTIFIC INDUSTRIES, INC.
FORM 10-QSB
For the Quarter Ended March 31, 1997
Part II -- OTHER INFORMATION
Items 1, 2, 3, 4, 5, and 6. Not applicable
7
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
Chief Executive and Financial Officer
Helena R. Santos
Vice President, Controller
and Assistant Treasurer
Principal Accounting Officer
Date: May 14, 1997
8
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<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-30-1996
<PERIOD-END> MAR-31-1997
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<RECEIVABLES> 302000
<ALLOWANCES> 7400
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<CURRENT-ASSETS> 1533500
<PP&E> 192500
<DEPRECIATION> 76700
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<BONDS> 0
0
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<COMMON> 42300
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<TOTAL-LIABILITY-AND-EQUITY> 1545600
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<CGS> 1574000
<TOTAL-COSTS> 1574000
<OTHER-EXPENSES> 819900
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 123600
<INCOME-TAX> 42100
<INCOME-CONTINUING> 81500
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<NET-INCOME> 81500
<EPS-PRIMARY> .09
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