UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2014
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6658
SCIENTIFIC INDUSTRIES, INC.
(Exact Name of Registrant in Its Charter)
Delaware 04-2217279
_______________________________ ____________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
70 Orville Drive, Bohemia, New York 11716
________________________________________ __________
(Address of principal executive offices) (Zip Code)
|
Registrant's telephone number, including area code (631) 567-4700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
___________________ _________________________________________
None None
|
Securities registered pursuant to Section 12(g) of the Exchange Act:
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [ x ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ x ]
Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), except for a Report on Form 8-K required to be filed in February with respect to an acquisition and (2) has been subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ x ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (SS 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ x ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [ x ]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes [ ] No [ x ]
The aggregate market value of the voting stock held by non-affiliates computed by reference to the average bid and asked prices of such stock, as of August 29, 2014 is $2,558,100.
The number of shares outstanding of the registrant's common stock, par value $.05 per share ("Common Stock") as of August 29, 2014 is 1,469,112 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
SCIENTIFIC INDUSTRIES, INC.
Table of Contents
PART I
ITEM 1. BUSINESS 4
ITEM 1A. RISK FACTORS 8
ITEM 2. PROPERTIES 11
ITEM 3. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 14
ITEM 9A. CONTROLS AND PROCEDURES 14
ITEM 9B. OTHER INFORMATION 15
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 15
ITEM 11. EXECUTIVE COMPENSATION 16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE 22
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 22
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 24
SIGNATURES 30
EXHIBIT 31.0 CERTIFICATION 31
EXHIBIT 32.0 CERTIFICATION 33
3
|
|
|
Forward Looking Statements. The Company and its representatives may from time to time make written or oral forward-looking statements with respect to the Company's annual or long-term goals, including statements contained in its filings with the Securities and Exchange Commission and in its reports to stockholders.
The words or phrases "will likely result," "will be," "will," "are expected to," "will continue to," "is anticipated," "estimate," "project" or similar expressions identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
PART I
Item 1. Business.
General. Incorporated in 1954, Scientific Industries, Inc., a Delaware corporation (which along with its subsidiaries, the "Company") is engaged in the design, manufacture, and marketing of standard benchtop laboratory equipment ("Benchtop Laboratory Equipment"), and customized catalyst research instruments ("Catalyst Research Instruments"), under its wholly-owned subsidiary, Altamira Instruments, Inc., ("Altamira") and through its wholly-owned subsidiary, Scientific Bioprocessing, Inc., ("SBI"), the design and development of bioprocessing systems and products ("Bioprocessing Systems"). The Company's products are used primarily for research purposes by universities, pharmaceutical companies, pharmacies national laboratories, medical device manufacturers, petrochemical companies and other industries performing laboratory-scale research.
Operating Segments. The Company views its operations as three segments: the manufacture and marketing of standard Benchtop Laboratory Equipment for research in university, pharmacy and industrial laboratories sold primarily through laboratory equipment distributors and online, the manufacture and marketing of custom-made Catalyst Research Instruments for universities, government laboratories, and chemical and petrochemical companies, and the production, marketing and sublicensing of bioprocessing systems and products for research in university and industrial laboratories. For certain financial information regarding the Company's operating segments, see Note 3 to the consolidated financial statements included under Item 8.
Products.
Benchtop Laboratory Equipment. The Company's Benchtop Laboratory Equipment products consist of mixers and shakers, rotators/rockers, refrigerated and shaking incubators, and magnetic stirrers sold under the "Genie (TM)" brand, and pharmacy and laboratory balances under the "Torbal (TM)" brand. Sales of the Company's principal product, the Vortex-Genie(R) 2 Mixer, excluding accessories, represented approximately 41% and 42% of the Company's total net revenues for each of the fiscal years ended June 30, 2014 ("fiscal 2014") and June 30, 2013 ("fiscal 2013"), and 59% and 67%, of the segment's sales for fiscal 2014 and fiscal 2013, respectively.
The vortex mixer is used to mix the contents of test tubes, beakers, and other various containers by placing such containers on a rotating cup or other attachments which cause the contents to be mixed at varying speeds.
The Company's additional mixers and shakers include a high speed touch mixer; a mixer with an integral timer, a patented cell disruptor; microplate mixers, two vortex mixers incorporating digital control and display; a large capacity multi-vessel vortex mixer and shaker, and a large capacity orbital shaker.
The Company also offers various benchtop multi-purpose rotators and rockers, designed to rotate and rock a wide variety of containers, and a refrigerated incubator and an incubator shaker, both of which are multi-functional benchtop environmental chambers designed to perform various shaking and stirring functions under controlled environmental conditions.
Its line of magnetic stirrers include a patented high/low programmable magnetic stirrer; a four-place high/low programmable magnetic stirrer; a large volume magnetic stirrer available in analog and digital versions; and a four-place general purpose stirrer also available in analog and digital versions.
The Company also markets a line of pharmacy, laboratory, and industrial digital scales, mechanical balances, moisture analyzers, and force gauges under its Torbal brand, as a result of an acquisition in February 2014 (described in detail in Note 2 to the consolidated financial statements included under Item 8).
Catalyst Research Instruments. The Catalyst Research Instrument products are offered through the Company's subsidiary, Altamira. Its flagship product is the AMI-200(TM), which is used to perform traditional catalyst characterization experiments on an unattended basis. The product also features a stand-alone personal computer to control the instrument and incorporates proprietary LabVIEW(R)-based software. The Company's AMI-300(TM) Catalyst Characterization Instrument incorporates a sophisticated data handling package and is designed to perform dynamic temperature-programmed catalyst characterization experiments. All AMI model instruments are designed or adapted to a customer's individual requirements.
Its other Catalyst Research Instrument products include reactor systems, high throughput systems and micro-activity reactors, including the Company's BenchCAT(TM) custom reactor systems. They are available with single and multiple reactor paths and with reactor temperatures up to 1200 degrees Celsius. The systems feature multiple gas flows, are available in gas and gas/liquid configurations, and feature one or more stand-alone personal computers with the LabVIEW(R)-based control software.
Bioprocessing Systems. The Company, through SBI, is engaged in the design and development of bioprocessing systems, principally microreactor systems using disposable sensors for vessels with volumes ranging from 250 milliliter to five liters for future sale or licensing. In addition, the Company sublicenses the patents and technology it holds exclusively under a license with the University of Maryland, Baltimore County, ("UMBC"), for which it receives royalties.
Product Development. The Company designs and develops substantially all of its products. Company personnel formulate plans and concepts for new products and improvements or modifications of existing products. The Company engages outside consultants to augment its capabilities in areas such as industrial and electronics design.
Major Customers. Sales, principally of the Vortex-Genie 2 Mixer, to two customers, one of which is one of the two major distributors of laboratory equipment, represented for fiscal 2014 and fiscal 2013, 13% and 14% of total revenues, and 19% and 22% of Benchtop Laboratory Equipment product sales. Sales of Catalyst Research Instrument products are generally pursuant to a few large orders amounting on average to over $100,000 to a limited number of customers. In fiscal 2014, sales to three customers, which represented at least 10% of that segment's sales for each, accounted for 45% of the segment's sales (13% of total revenues). In fiscal 2013, sales to two customers, accounted for an aggregate of 32% of the segment's sales (11% of the total revenues).
Marketing.
Benchtop Laboratory Equipment. The Company's Benchtop Laboratory Equipment products sold under the "Genie" brand are generally distributed and marketed through an established network of domestic and overseas laboratory equipment distributors, who sell the Company's products through printed catalogs, websites and sales force. See "Major Customers". The Company's "Torbal" brand products are marketed primarily online via its websites and sold online and on a direct basis, with
only a few distributors. The Company also markets products through attendance at industry trade shows, trade publication advertising, brochures and catalogs, the Company's websites, one sales manager and one director of marketing in the U.S., and a consultant in Europe.
In general, due to the reliance on sales through the catalog distribution system, it takes two to three years for a new benchtop laboratory equipment product to begin generating meaningful sales.
Catalyst Research Instruments. The Company's Catalyst Research Instruments are sold directly worldwide to universities, government laboratories, and chemical and petrochemical companies through its sales personnel and independent representatives engaged on a commission basis. Its marketing efforts include attendance at various trade shows, Altamira's website, outside sales representatives, and printed materials.
Bioprocessing Systems. The Company's Bioprocessing Systems products, are currently under development, and will be offered both directly and through distribution worldwide to university, industrial, and government laboratories. It is anticipated that the related marketing efforts will mainly comprise attendance at various trade shows, publications, website, and dealer-related activities.
Assembly and Production. The Company has an operating facility in Bohemia, New York from which its Benchtop Laboratory Equipment Operations are conducted and one in Pittsburgh, Pennsylvania from which its Catalyst Research Instruments Operations are conducted. The Company also has a small sales and marketing office in Oradell, New Jersey related to its Torbal division. The Company's production operations principally involve assembly of components supplied by various domestic and international independent suppliers. The Company has not commenced production of bioprocessing products, but anticipates that its current facilities will be adequate for such purpose.
Patents, Trademarks, and Licenses.
The Company holds several United States patents relating to its products, including a patent which expires in September 2015 for the TurboMix(TM); an accessory to the Vortex-Genie 2 Mixer, a patent which expires in July 2016 on the Roto-Shake Genie(R); a patent which expires in November 2022 on the MagStir Genie(R), MultiMagStir Genie(R), and Enviro-Genie(R), and a patent which expires in January 2023 on a biocompatible bag with integral sensors. The Company has several patent applications pending. The Company does not anticipate, although it cannot provide assurance any material adverse effect on its operations following the expiration of the foregoing patents.
The Company has various proprietary trademarks, including AMI(TM),BenchCAT(TM), BioGenie(R), Cellphase(R), Cellstation(R), Disruptor Beads(TM),Disruptor Genie(R), Enviro-Genie(R), Genie(TM), Incubator Genie(TM), MagStir Genie(R), MegaMag Genie(R), MicroPlate Genie(R), MultiMagStir Genie(R), Multi-MicroPlate Genie(R), Orbital-Genie(R), QuadMag Genie(R), Rotator Genie(R), Roto-Shake Genie(R), Torbal(R), TurboMix(TM), and Vortex-Genie(R), each of which it considers important to the success of the related product. The Company also has several trademark applications pending. No representation can be made that any application will be granted or as to the protection that any existing or future trademark may provide.
The Company has several licensing agreements for technology and patents used in the Company's business, including an exclusive license from UMBC with respect to rights and know-how under a patent held by UMBC related to non-disposable sensor technology, which the Company further sublicenses on an exclusive basis to a German company, except for non-exclusive rights held by the Company as it relates to the use of the technology with vessels of sizes ranging from 250 milliliters to 5 liters, and to applications in sub-milliliter volumes licensed to a third party. The Company also holds a license as to the technology related to its patent for the Roto-Shake Genie, and a patent related to its TurboMix attachment for the Vortex-Genie and Disruptor Genie. Total license fees paid by the Company under all its licenses for fiscal 2014 and fiscal 2013 amounted to $107,900 and $117,100, respectively.
Foreign Sales. The Company's sales to overseas customers, principally in Asia and Europe, accounted for approximately 51% and 58% of the Company's net revenues for fiscal 2014 and fiscal 2013, respectively. Payments are in United States dollars and are therefore not subject to risks of currency fluctuation, foreign duties and customs.
Seasonality. The Company does not consider its business to be seasonal.
Backlog. The amount of backlog for Benchtop Laboratory Equipment products is not a significant factor because this line of products is comprised of standard catalog items requiring lead times which usually are not longer than two weeks. There is no backlog for Bioprocessing Systems. The backlog for Catalyst Research Instrument products as of June 30, 2014 was $453,000, all of which is expected to be filled by June 30, 2015, as compared to a backlog of $336,800 as of June 30, 2013, all of which was filled in fiscal 2014.
Competition. Most of the Company's principal competitors are substantially larger and have greater financial, production and marketing resources than the Company. Competition is generally based upon technical specifications, price, and product recognition and acceptance. The Company's main competition for its Benchtop Laboratory Equipment products derives from private label brand mixers offered by laboratory equipment distributors in the United States and Europe. However, the Company believes that despite its smaller size, it is a major market participant in the global vortex mixer market.
The Company's major competitors for its Benchtop Laboratory Equipment are Henry Troemner, Inc. (a private label supplier to the two largest laboratory equipment distributors in the U.S. and Europe), IKA-Werke GmbH & Co. KG, a German company, Benchmark Scientific, Inc., (a United States importer of China-produced products), and Heidolph Instruments GmbH, a German company. The Company's main competitors for its Torbal products are Ohaus Corporation, an American company, A&D Company Ltd., a Japanese company, and Adam Equipment Co., Ltd., a British company.
The primary competition for the Company's Catalyst Research Instrument products is in the form of instruments produced internally by research laboratory staffs of potential customers. Major competitors in the United States include Quantachrome Instruments, and Micromeritics Instrument Corporation, each a privately-held company.
The potential major competitors for the Company's Bioprocessing Systems are Applikon Biotechnology, B.V. (Netherlands), DASGIP Technology GmbH (Germany), and PreSens - Precision Sensing GmbH (Germany).
Research and Development. The Company incurred research and development expenses, the majority of which related to its Benchtop Laboratory Equipment products, of $426,700 during fiscal 2014 compared to $450,500 during fiscal 2013. The Company expects research and development expenditures in the fiscal year ending June 30, 2015 will be at approximately the same level as those in fiscal 2014.
Government and Environmental Regulation. The Company's products and claims with respect thereto have not required approval of the Food and Drug Administration or any other government approval. The Company's manufacturing operations, like those of the industry in general, are subject to numerous existing and proposed, if adopted, federal, state, and local regulations to protect the environment, establish occupational safety and health standards and cover other matters. The Company believes that its operations are in compliance with existing laws and regulations and the cost to comply is not significant to the Company.
Employees. As of August 31, 2014, the Company employed 31 persons (22 for the Benchtop Laboratory Equipment Operations and 9 for the Catalyst Research Instruments Operations) of whom 30 were full-time, including its three executive officers. All activities of the Bioprocessing Systems Operations are being performed by employees of the other two operations and consultants. None of the Company's employees are represented by any union.
Available Information. The Company's Annual Report to
Stockholders for fiscal 2014, includes its Annual Report on Form 10-K.
The Annual Report will be mailed to security holders together
with the Company's proxy material and solicitation as it relates
to the Company's 2013 Annual Meeting of Stockholders. All the
Company's reports, including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and other
information filed with, or furnished to, the Securities and
Exchange Commission (the "SEC" or the "Commission"), including
amendments to such reports, are available on the SEC's website
that contains such reports, proxy and information statements, and
other information regarding companies that file electronically
with the Commission. This information is available at www.sec.gov.
In addition, all the Company's public filings can be accessed
through the Company's website at
http://scientificindustries.com/secfilings.html.
Item 1A. Risk Factors.
In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, important risk factors are identified below that could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to such future periods in any current statements. The Company undertakes no obligation to publicly revise any forward-looking announcements to reflect future events or circumstances.
Dependence on Major Customers
Sales to one customer, a major laboratory equipment distributor in the United States, represented 7.9% and 10.9% of the segment's sales for fiscal 2014 and 2013, respectively. Sales to another customer, an overseas laboratory equipment distributor accounted for 11.2% and 11.5% of the segment's sales for fiscal 2014 and 2013, respectively.
No representation can be made that the Company will be successful in continuing to retain either or both customers, or not suffer a material reduction in sales either which could have an adverse effect on future operating results of the Company.
One Benchtop Laboratory Equipment Product Accounts for a Substantial Portion of Revenues
The Company has a limited number of Benchtop Laboratory Equipment products with one product, the Vortex-Genie 2 Mixer, accounting for approximately 59% and 67% of Benchtop Laboratory Equipment sales, for fiscal 2014 and fiscal 2013, respectively, and 41% and 42% of total revenues for each of fiscal 2014 and fiscal 2013.
The Company is a Small Participant in Each of the Industries in Which It Operates
The Benchtop Laboratory Equipment industry is a highly competitive mature industry. Although the Vortex-Genie 2 Mixer has been widely accepted, the annual sales of the Benchtop Laboratory Equipment products ($4,679,100 for fiscal 2014 and $4,466,000 for fiscal 2013) are significantly lower than the annual sales of many of its competitors in the industry. The principal competitors are substantially larger with much greater financial, production and marketing resources than the Company. There are constant new entrants into the vortex mixer market, including those offering products imported from China, which the Company is unable to compete on price. The Torbal line of products is also a very small unknown brand with significant competition from well known brands.
The production and sale of Catalyst Research Instruments products is highly competitive. Altamira's competitors include several companies with greater resources and many laboratories which produce their own instruments.
The Company's Bioprocessing Systems operation is a participant in the fast-growing laboratory-scale sector of the larger bioprocessing products industry, which is dominated by several large companies with much greater resources than the Company.
The Company's Ability to Grow and Compete Effectively Depends In Part on Its Ability to Develop and Effectively Market New Products
Over the past ten years, the Company has continuously invested in the development and marketing of new Benchtop Laboratory Equipment products with a view to increasing revenues and reducing the Company's dependence on the Vortex-Genie 2 Mixer. Gross revenues derived from such other Benchtop Laboratory Equipment products amounted to $1,909,300 for fiscal 2014 and $1,468,300, for fiscal 2013. The segment's ability to compete will depend upon the Company's success in continuing to develop and market new laboratory equipment as to which no assurance can be given.
The Company relies primarily on distributors and their catalogs to market the majority of its Benchtop Laboratory Equipment products, as is customary in the industry. Accordingly, sales of new products are heavily dependent on the distributors' decision to include and retain a new product in the distributors' catalogs and on their websites. It may be at least 24 to 36 months between the completion of development of a product and the distribution of the catalog in which it is first offered; furthermore, not all distributors feature the Company's products in their catalogs.
The Company's line of Catalyst Research Instruments consists of only a few products. The ability of the Company to compete in this segment and expand the line will depend on its ability to make engineering improvements to existing products and develop and add new products incorporating more current technology. Over the last two fiscal years the Company has introduced two new catalyst research products to increase its product offerings and has continuously sought to expand its outside sales force.
The success of the Company's new Bioprocessing Systems operation will be heavily dependent on its ability to develop and market new products. New products are being or are to be developed by the Company's employees and outside consultants. Such products are of a complex nature of which the Company has limited or no prior experience and are taking longer to develop than previously anticipated. In addition, they will be subject to beta testing by end users, which could result in design and/or production changes which could further delay development time. The sale and marketing of the products, at least initially, will be through the Company's attendance at trade shows, website, and a few select distributors.
No assurance can be given that the amounts allocated by the Company for its new product development and sales and marketing programs will be sufficient to develop additional commercially feasible products which will be accepted by the marketplace, or that any distributor will include or retain any particular product in its catalogs and websites.
The Company May Be Subject to General Economic, Political, and Social Factors
Orders for the Company's products, particularly its Catalyst Research Instruments products, depend in part, on the customer's ability to secure funds to finance purchases, especially government funding. Availability of funds can be affected by budgetary constraints. Factors including a general economic recession, such as the one which commenced in fiscal 2009 and negatively affected the Company in fiscal 2011 and fiscal 2012, the European crisis, or a major terrorist attack would likely have a negative impact on the availability of funding including government or academic grants to potential customers.
The Company's ability to secure new Catalyst Research Instruments orders can also be affected by changes in domestic and international policies pertaining to energy and the environment, which could affect funding of potential customers.
The Company is Heavily Dependent on Outside Suppliers for the Components of Its Products
The Company purchases all its components from outside suppliers and relies on a few single suppliers for some crucial Benchtop Laboratory Equipment components, mostly due to cost considerations. Most of the Company's suppliers, including United States vendors, produce the components directly or indirectly in overseas factories, and orders are subject to long lead times and potential other risks related to production in a foreign country. To minimize the risk of supply shortages, the Company keeps more than normal quantities on hand of the critical components that cannot easily be procured or, where feasible and cost effective, purchases are made from more than one supplier.
However, a shortage of such components could halt production and have a material negative effect on the Company's operations.
The Company's Ability to Compete Depends in Part on Its Ability To Secure and Maintain Proprietary Rights to its Products
The Company has no patent protection for its principal Benchtop Laboratory Equipment product, the Vortex-Genie 2 Mixer, the Torbal balances, or for its Catalyst Research products and limited patent protection on a few other Benchtop Laboratory Equipment products. There are several competitive products available in the marketplace possessing similar technical specifications and design.
As part of the asset purchase by SBI during fiscal 2012, the Company acquired the rights to various patents for bioprocessing products which it licenses from UMBC.
There can be no assurance that any patent issued, licensed or sublicensed to the Company provides or will provide the Company with competitive advantages or will not be challenged by third parties. Furthermore, there can be no assurance that others will not independently develop similar products or design around the patents. Any of the foregoing activities could have a material adverse effect on the Company. Moreover, the enforcement by the Company of its patent or license rights may require substantial litigation costs.
The Company Has Limited Management Resources
The loss of the services of any of Ms. Helena Santos, the Company's Chief Executive and Financial Officer and President, Mr. Robert Nichols, the Company's Executive Vice President, Mr. Brookman March, President of Altamira, and Mr. Karl Nowosielski, Torbal Division President or any material expansion of the Company's operations could place a significant additional strain on the Company's limited management resources and could be materially adverse to the Company's operating results and financial condition.
The Common Stock of the Company is Thinly Traded and is Subject to Volatility
As of August 31, 2014, there were only 1,469,112 shares of Common Stock of the Company outstanding, of which 344,223 shares (23%) were held by the directors and officers of the Company. The Common Stock of the Company is traded on the Over-the-Counter Bulletin Board and, historically, has been thinly traded. There have been a number of trading days during fiscal 2014 on which no trades of the Company's Common Stock were reported. Accordingly, the market price for the Common Stock is subject to great volatility.
Item 2. Properties.
The Company's executive offices and principal manufacturing facility for its Benchtop Laboratory Equipment Operations comprise approximately 25,000 square feet, are located in Bohemia, New York and held pursuant to a lease which was due to expire in January 2015, but will expire earlier upon a move which the Company plans to make to a 19,000 square foot neighboring facility in the same vicinity from the same landlord, at a lower rental rate under a new lease beginning November 1, 2014 with an expiration date in February 2025. The Company's Catalyst Research Instruments Operations are conducted from an approximately 9,000 square foot facility in Pittsburgh, Pennsylvania under a lease expiring in November 2017. The Bioprocessing Systems operation does not occupy a separate physical location. The Company has a 1,200 square foot facility in Oradell, New Jersey from where it conducts its sales and marketing functions, primarily for the Torbal division of the Benchtop Laboratory Equipment Operations. See Note 11 to the Financial Statements in Item 8. The leased facilities are suitable and adequate for each of the Company's operations. In the opinion of management, all properties are adequately covered by insurance.
Item 3. Legal Proceedings.
The Company is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2014.
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Company's Common Stock is traded in the over-the-counter market. The following table sets forth the low and high bid quotations for each quarter of fiscal 2013 and fiscal 2014, as reported by the National Association of Securities Dealers, Inc. Electronic Bulletin Board. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:
For Fiscal Quarter Ended: Low Bid High Bid
__________________________ _______ ________
09/30/12 $ 1.51 $ 2.00
12/31/12 1.62 2.10
03/31/13 1.88 2.68
06/30/13 2.55 3.06
09/30/13 3.21 3.36
12/31/13 3.65 4.00
03/31/14 3.76 4.80
06/30/14 3.10 3.89
|
(a) As of August 31, 2014, there were 359 record holders of the Company's Common Stock.
(b) On November 4, 2013, the Company paid a cash dividend of $.08 per share to stockholders of record on October 11, 2013. On November 1, 2012, the Company paid a cash dividend of $.03 per share to stockholders of record on October 1, 2012. The Company is not subject to any agreement which prohibits or restricts the Company from paying dividends on its Common Stock.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking statements. 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 information. 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. This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's financial statements and the related notes included elsewhere in this report.
Overview. The Company incurred a loss before income tax benefit of $107,000 for fiscal 2014 compared to income before income tax expense of $520,800 for fiscal 2013, primarily as a result of the loss incurred by the Catalyst Research Instruments Operations due to lower sales and gross margins, lower profits derived by the Benchtop Laboratory Equipment Operations as a result of lower sales of Genie brand products and costs associated with the recent acquisition of the Torbal business.
Results of Operations. Net sales for fiscal 2014 decreased $341,300 (4.8%) to $6,793,200 from $7,134,500 for fiscal 2013, reflecting a decrease of $618,200 (24.3%) in net sales of catalyst research instruments, partially offset by increases of $213,100 (4.8%) in benchtop laboratory equipment sales, and $63,800 in the Bioprocessing Systems Operations revenues. The benchtop laboratory equipment sales reflected $412,100 derived by the new Torbal business.
Sales of catalyst research instruments are comprised of a small number of large orders, typically averaging more than $100,000 each. The lower sales of catalyst research instruments resulted from a lesser amount of high value orders. As of June 30, 2014, the order backlog for these products was $453,000 compared to $336,800 as of June 30, 2013.
Revenues derived from the new Bioprocessing Systems Operations consist of net royalties received from sublicensees and an order for bioprocessing product prototypes during the second fiscal quarter. The Company expects that such Operations will also generate future revenues from products currently under development, although no assurance can be given.
The gross profit percentage for fiscal 2014 was 38.5% compared to 41.5% for fiscal 2013 due mainly to higher labor and overhead costs for the catalyst research instruments sales.
General and administrative expenses for fiscal 2014 increased $235,700 (18.4%) to $1,513,400 compared to $1,277,700 for fiscal 2013, primarily due to the acquisition costs and the expenses including amortization expense, related to the new Torbal division of the Benchtop Laboratory Equipment Operations.
Selling expenses for fiscal 2014 increased $69,800 (9.7%) to $792,900 from $723,100 from for fiscal 2013 due to higher expenses incurred by the Benchtop Laboratory Equipment Operations including expenses for the Torbal division.
Research and development expenses decreased by $23,800 (5.6%) to $426,700 compared to $450,500 for fiscal 2013, primarily the result of decreased new product development costs by the Bioprocessing Systems Operations due to the use of lower cost consultants.
Total other income decreased by $1,700 (12.7%) to $11,700 for fiscal 2014 from $13,400 for fiscal 2013, mainly due to lower interest income and other income on lower investments balances.
Income tax benefit for fiscal 2014 was $31,700 compared to tax expense of $124,400 last year primarily due to the current period loss.
As a result of the foregoing, the net loss for fiscal 2014 was $75,300, compared to net income of $396,400 for fiscal 2013.
Liquidity and Capital Resources. Cash and cash equivalents decreased by $433,600 to $493,700 as of June 30, 2014 from $927,300 as of June 30, 2013.
Net cash provided by operating activities decreased by $529,400 to $35,000 for fiscal 2014 as compared to $564,400 for fiscal 2013, primarily due to the loss incurred of $75,300 for fiscal 2014 compared to $396,400 income for fiscal 2013, and increased inventories. Cash used in investing activities increased by $5,300 to $259,000 for fiscal 2014 compared to $253,700 for fiscal 2013, primarily due to the cash used in the asset purchase of the Torbal business during fiscal 2014. Net cash used in financing activities increased $56,900 to $209,600 for fiscal 2014 compared to $152,700 in fiscal 2013 mainly due to the higher dividend paid during fiscal 2014.
The Company's working capital decreased by $682,700 to $3,142,400 as of June 30, 2014 compared to $3,825,100 as of June 30, 2013, mainly due to the asset purchase during fiscal 2014.
The Company has a line of credit with its bank, Bank of America Merrill Lynch which provides for maximum borrowings of up to $700,000, bearing interest at 3.00 percentage points above the LIBOR Index, currently 3.155% and is secured by a pledge of collateral consisting of the inventory, accounts, chattel paper, equipment and fixtures of the Company. Outstanding amounts are due and payable by November 30, 2015 with a requirement that the Company is to reduce the outstanding principal balance to zero during the 30 day period ending on the expiration date of the promissory note. As of August 31, 2014, $150,000 was due under this line.
Management believes that the Company will be able to meet, absent a material capital expenditure not currently anticipated, its cash flow needs during the 12 months ending June 30, 2015 from its available financial resources including its cash and investment securities, and operations.
Capital Expenditures. During fiscal 2014, the Company incurred $49,900 in capital expenditures. The Company expects that based on its current operations, its capital expenditures will not be materially higher for the fiscal year ending June 30, 2015.
Off-Balance Sheet Arrangements. None.
Item 8. Financial Statements and Supplementary Data.
The Financial Statements required by this item are attached hereto on pages F1-F26.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Annual Report on Form 10-K, based on an evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), the Chief Executive and Chief Financial Officer of the Company has concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act reports is recorded, processed, summarized and reported within the applicable time periods specified by the SEC's rules and forms. The Company also concluded that information required to be disclosed in such reports is accumulated and communicated to the Company's management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting, as such term is defined in Securities Exchange Act Rule 13a-15(f) and 15d-15(f). The Company's internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Chief Executive and Financial Officer of the Company conducted an evaluation of the effectiveness of the Company's internal controls over financial reporting as of June 30, 2014 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.
Based on the assessment of the Company's Chief Executive and Financial Officer of the Company, it was concluded that as of June 30, 2014, the Company's internal controls over financial reporting were effective based on these criteria.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting. There was no change in the Company's internal controls over financial reporting that occurred during the most recent fiscal quarter that materially affected or is reasonably likely to materially affect the Company's internal controls over financial reporting.
Inherent Limitations on Effectiveness of Controls. The Company's management, including its Chief Executive and Financial Officer, believes that its disclosure controls and procedures and internal controls over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,
have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors
The Company has the following five Directors:
Joseph G. Cremonese (age 78), a Director since November 2002 and Chairman of the Board since February 2006, has been, through his affiliate, a marketing consultant to the Company since 1996. Mr. Cremonese has been since 1991, President of his affiliate, Laboratory Innovation Company, Ltd., which is a vehicle for technology transfer and consulting services for companies, engaged in the production and sale of products for science and biotechnology. Since March 2003, he has been a director of Proteomics, Inc., a producer of recombinant proteins for medical research. Prior to 1991, he had been employed by Fisher Scientific, the largest U.S. distributor of laboratory equipment.
Roger B. Knowles (age 89), a Director since 1965, has been retired for the last five years.
Grace S. Morin (age 66), a Director since December 4, 2006, had been President, Director and principal stockholder of Altamira Instruments, Inc. from December 2003 until its acquisition in November 2006 by the Company. Ms. Morin had been employed by Altamira to supervise its administrative functions at the Pittsburgh, Pennsylvania facility as a full-time employee through March 31, 2009 and since that date as a part-time consultant. Prior to December 2003, she was a general business consultant for two years, and prior thereto a member of senior management of a designer of gas flow environmental engineered products for approximately four years.
Helena R. Santos (age 50), a Director since 2009, has been employed by the Company since 1994, and has served since August 2002 as its President, Chief Executive Officer and Treasurer. She had served as Vice President, Controller from 1997 and as Secretary from May 2001. Ms. Santos was an internal auditor with a major defense contractor from March 1991 to April 1994. She had been previously employed in public accounting.
James S. Segasture (age 78), a Director since 1991, has been retired for the last five years.
The Directors are elected to three-year staggered terms. The current terms of the Directors expire at the annual meeting of stockholders of the Company following: the fiscal year ended June 30, 2014 - two Directors (Messers. Cremonese and Knowles, Class C), the fiscal year ending June 30, 2015 - two directors (Ms. Santos and Mr. Segasture, Class A), and the fiscal year ending June 30, 2016 - one director (Ms. Morin).
Board Committees
The Company's Stock Option Committee administers the Company's 2012 Stock Option Plan. The members of the committee are non-management Directors of the Company - James S. Segasture and Joseph G. Cremonese. The members of the Committee serve at the discretion of the Board. During fiscal 2014 the Stock Option Committee held one meeting.
Grace S. Morin, and James S. Segasture are the current members of the Company's Compensation Committee serving at the discretion of the Board. The Committee administers the Company's compensation policies. During fiscal 2014, the Compensation Committee held one meeting.
The Board of Directors acts as the Company's Audit Committee, which in its function as the Committee, held five meetings during fiscal 2014. Ms. Santos, who is not "independent" and Ms. Morin are "financial experts" as defined by the Securities and Exchange Commission.
Executive Officers
See above for the employment history of Ms. Santos.
Robert P. Nichols (age 53), employed by the Company since February 1998, has served since August 2002 as Executive Vice President. Previously, he had been since May 2001 Vice President, Engineering. Prior to joining the Company, Mr. Nichols was an Engineer Manager with Bay Side Motion Group, a precision motion equipment manufacturer from January 1996 to February 1998.
Brookman P. March (age 69) has been Director of Sales and Marketing of Altamira, which has conducted the Catalyst Research Instruments operation since November 30, 2006 and its President since July 2008. He had been Vice President and a Director of Altamira from December 2003 until it was acquired by the Company. Mr. March is the husband of Ms. Morin, a Director of the Company.
Karl D. Nowosielski (age 35), is the President of the Torbal division of the Benchtop Laboratory Equipment Operations and Director of Marketing for the Company. He had been until February 2014 Vice President of Fulcrum, Inc. (the seller of the Torbal division assets) since 2004.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that, for fiscal 2014, its officers, directors and 10% stockholders timely complied with all filing requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.
Code of Ethics
The Company has adopted a code of ethics that applies to the Executive Officers and Directors. A copy of the code of ethics can be found on the Company's website at www.scientificindustries.com.
Item 11. Executive Compensation.
Compensation Discussion and Analysis. The Compensation Committee reviews and recommends to the Board of Directors the compensation to be paid to each executive officer. Executive compensation, in all instances except for the compensation for the Chief Executive Officer ("CEO"), is based on recommendations from the CEO. The CEO makes a determination by comparing the performance of each executive being reviewed with objectives established at the beginning of each fiscal year and with objectives established during the business year with regard to the success of the achievement of such objectives and the successful execution of management targets and goals.
With respect to the compensation of the CEO, the Committee considers performance criteria, 50% of which is related to the direction, by the CEO, of the reporting executives, the establishment of executive objectives as components for the successful achievement of Company goals and the successful completion of programs leading to the successful completion of the Business Plan for the Company and 50% is based on the achievement by the Company of its financial and personnel goals tempered by the amount of the income or loss of the Company during the fiscal year.
The compensation at times includes grants of options under its stock option plan to the named executives. Each officer is employed pursuant to a long-term employment agreement, containing terms proposed by the Committee and approved as reasonable by the Board of Directors. The Board is cognizant that as a relatively small company, the Company has limited resources and opportunities with respect to recruiting and retaining key executives. Accordingly, the Company has relied upon long-term employment agreements and grants of stock options to retain qualified personnel.
Compensation for each of its executive officers provided by their employment agreements were based on the foregoing factors and the operating and financial results of the segments under their management.
The following table summarizes all compensation paid by the Company to each of its executive officers for the fiscal years ended June 30, 2014 and 2013.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
Non- Non-
Equity Qualified
Incentive Deferred
Name Plan Comp-
and Stock Option Comp- ensation
|
Robert P. 2014 135,000 0 0 500(5) 0 0 Nichols, 2013 129,100 5,000(1) 0 0 0 0 Exec. V.P. _____________________________________________________________________ Brookman 2013 135,000 0 0 2,500(4) 0 0 P. March, 2012 131,000 5,000(1) 0 1,900(3) 0 0 Director of Sales and Marketing, and President of Altamira _____________________________________________________________________ Karl D. 2014 45,800(7) 0 0 3,900(6) 0 0 |
Changes
in
Pension
Value
and Non-
Qualified All
Name Deferred Other
and Comp- Comp-
Principal Fiscal ensation ensation Total
Position Year Earnings ($) ($)
(a) (b) (i) (j)
_____________________________________________________________________
|
Robert P. 2014 0 5,400(2) 140,900 Nichols, 2013 0 3,900(2) 138,000 Exec. V.P. _____________________________________________________________________ Brookman 2014 0 5,400(2) 142,900 P. March, 2013 0 5,200(2) 143,100 Director of Sales and Marketing, and President of Altamira _____________________________________________________________________ Karl D. 2014 0 0 49,700 Nowosielski President of Torbal Divsion |
(1) Represents amounts earned for fiscal 2013.
(2) The amounts represent the Company's matching contribution under the Company's 401(k) Plans.
(3) The amount represents compensation expense for stock options granted valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service- based vesting considerations. The fiscal 2012 option was valued at a total of $5,700 of which $1,900 was expensed as stock based compensation in each of fiscal 2014 and fiscal 2013.
(4) The amount represents the compensation expense for the 2014 and 2012 stock options granted valued utilizing the Black-Scholes- Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The 2014 option was valued at a total of $3,500 of which $600 was expensed in fiscal 2014. See Note (3) above.
(5) The amount represents compensation expense for a stock option granted in fiscal 2014 valued utilizing the Black- Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The option was valued at a total of $3,500 of which $500 was expensed as stock based compensation in fiscal 2014.
(6) The amount represents compensation expense for a stock option granted in fiscal 2014 as part of his employment agreement, valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The option was valued at a total of $3,900, all of which was expensed as stock based compensation in fiscal 2014.
(7) Represents salary from February 2014 to the end of fiscal 2014.
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR ENDED JUNE 30, 2014
All Other
Estimated Estimated Stock
Future Future Awards:
Payouts Payouts Number
Under Under Of
Non-Equity Equity Shares
Incentive Incentive Of Stock
Grant Plan Plan Or Units
|
Robert P. Nichols 12/04/13 0 0 0
Karl D. Nowosielski 12/04/13 0 0 0
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR ENDED JUNE 30, 2014
(CONTINUED)
All Other
Option Grant
Awards: Date
Number Exercise Fair
Of Or Base Value of
Securities Price Stock
Underlying Of Option And
Options Awards Option
Name # ($/Sh) Awards
(a) (f) (g) (h)
_________________________________________________________
Brookman P. March 2,000 3.50 3,500
Rober P. Nichols 2,000 3.50 3,500
|
Karl D. Nowosielski 2,000 3.67 3,900
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Number Equity
Number of Incentive
of Securities Plan Awards:
Securities Under- Number of
Under- lying Securities
lying Un- Unexercised Underlying Option
exercised Options(#) Unexercised Exercise Option
Options(#) Unexerci- Unearned Price Expiration
Name Exercisable sable Options(#) ($) Date
(a) (b) (c) (d) (e) (f)
_____________________________________________________________________
Brookman P. 9,834 3,666 0 3.07-3.71 11/2014-12/2023
March
Robert P.
Nichols 0 2,000 0 3.50 12/2023
Karl D.
Nowosielski 0 2,000 0 3.67 02/2024
_____________________________________________________________________
|
Employment Agreements
In May 2013, The Company entered into employment agreements with Ms. Helena R. Santos and Robert P. Nichols extending their terms of employment to June 30, 2015. The agreements provide for annual base salaries for the fiscal years ending June 30, 2014 and June 30, 2015, for Ms. Santos of $150,000 and $154,000 respectively; and for Mr. Nichols of $135,000 and $139,000 respectively. Bonuses, if any, are to be awarded at the discretion of the Board of Directors for each of the fiscal years. For the fiscal year ended June 30, 2013 bonuses of $10,000 and $5,000, for Ms. Santos and Mr. Nichols, respectively, were authorized. No bonuses were awarded for fiscal 2014.
In May 2012, the Company entered into an employment agreement with Mr. March extending the term through June 30, 2014, which was further extended by mutual consent through June 30, 2015. The agreement provides for an annual base salary of $135,000 and $140,000 for each of the fiscal years ending June 30, 2014 and 2015. Bonuses, if any, may be awarded at the discretion of the Board of Directors. A bonus of $5,000 was awarded to Mr. March for fiscal 2013. No bonus was awarded for fiscal 2014. Mr. March is the husband of Grace S. Morin, a Director of the Company and of Altamira and a former principal stockholder of Altamira.
In February 2014 in conjunction with the acquisition of the Torbal division assets from Fulcrum, Inc., the Company entered into an employment agreement with Mr. Nowosielski providing for his employment through February 2017, which may be extended by mutual consent for another two years. The agreement provides for an annual base salary of $140,000, subject to increases commencing with the second year based on percentage increases in the Consumer Price Index, plus discretionary bonuses. The agreement also provided for the issuance of 2,000 stock options upon commencement of employment and 4,000, 5,000, and 6,000 stock options in February 2015, 2016, and 2017 subject to his continued employment. No bonuses have been awarded under the agreement.
Each of the foregoing employment agreements contains confidentiality and non-competition covenants. The employment agreements for Ms. Santos, Mr. March, and Mr. Nowosielski contain termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (defined as (i) conviction of a felony or (ii) gross neglect or gross misconduct (including conflict of interest), the Company shall pay severance payments equal to one year's salary at the rate of the compensation at the time of termination, and continue to pay the regular benefits provided by the Company for a period of two years from termination.
Directors' Compensation and Options
DIRECTORS' COMPENSATION
For the Year Ended June 30, 2014
Non-
Equity
Fees Incentive
Earned Plan
or Paid Stock Option Comp-
in Cash Awards Awards ensation
Name ($) ($) ($) ($)
(a) (b) (c) (d) (e)
__________________________________________________________________
Joseph G.
Cremonese 29,000 0 8,700(1) 0
Roger B.
Knowles 14,000 0 0 0
Grace S.
Morin 14,000 0 0 0
James S.
Segasture 14,000 0 0 0
|
DIRECTORS' COMPENSATION (CONTINUED)
Changes
in
Pension
Value and
Non- Non-
qualified qualified
Deferred Deferred All
Compens- Comp- Other
ation ensation Comp-
Earnings Earnings ensation Total
Name ($) ($) ($) ($)
(a) (f) (g) (h) (i)
____________________________________________________________________
Joseph G.
Cremonese 0 0 41,400(2) 79,100
Roger B.
Knowles 0 0 0 14,000
Grace S.
Morin 0 0 5,700(3) 19,700
James S.
Segasture 0 0 0 14,000
|
(1) The amount represents consulting expense recorded in fiscal 2014 for stock options granted in fiscal 2014 utilizing the Black-Scholes- Merton options pricing model (see Items 12 and 13).
(2) Represents amount paid to his affiliate pursuant to a marketing consulting agreement (see Items 12 and 13).
(3) Represents compensation received for her administrative services as a consultant for Altamira (see Items 12 and 13).
The Company pays each Director who is not an employee of the Company or a subsidiary a quarterly retainer fee of $2,000 and $1,400 for each meeting attended. In addition, the Company reimburses each Director for out-of-pocket expenses incurred in connection with attendance at board meetings in the amount of $50 or the Director's itemized expenses, whichever is greater. Mr. Cremonese, as Chairman of the Board receives an additional fee of $1,300 per month. During fiscal 2013, total director compensation to non-employee Directors aggregated $126,800, including the consulting fees paid to Mr. Cremonese's affiliate, and to Ms. Morin.
Under the Company's 2002 Stock Option Plan, none of the Directors existing at the time of the adoption of the plan were eligible to receive option grants thereunder. However, Mr. Joseph G. Cremonese who was elected a Director for the first time at the 2002 Annual Meeting of Stockholders, was granted ten-year options on December 1, 2003 to purchase 5,000 shares of the Company's Common Stock at the exercise price of $1.35 per share; ten-year options on February 20, 2007 to purchase 5,000 shares of the Company's Common Stock at the exercise price of $3.10 per share; and five-year options on September 17, 2009 to purchase 10,000 shares at the exercise price of $1.88 per share. He also received on December 4, 2013 five-year options on January 12, 2012 to purchase 10,000 shares at the exercise price of $3.45 per share, and ten-year options to purchase 5,000 shares at an exercise price of $3.50 per share. The fiscal 2014 option had a total fair value (as determined by the Black-Scholes-Merton option pricing model) of $8,700 all of which was recognized as consulting expense in 2014. He exercised 5,000 options during fiscal 2014.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of June 30, 2014, the number of shares of Common Stock beneficially owned by (i) each person known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each director of the Company, (iii) each named executive officer of the Company, and (iv) all directors and executive officers as a group. Shares not outstanding but deemed beneficially owned by virtue of the right of any individual to acquire shares within 60 days are treated as outstanding only when determining the amount of and percentage of outstanding shares of Common Stock owned by such individual. Each person has sole voting and investment power with respect to the shares shown, except as noted. Except as indicated in the table, the address for each of the following is c/o Scientific Industries, Inc., 70 Orville Drive, Bohemia, New York 11716.
Amount and
Name Nature of Beneficial
Ownership % of Class
________________________________________________________________
Lowell A. Kleiman 139,581 (1) 9.5%
16 Walnut Street
Glen Head, NY 11545
Spectrum Laboratories, Inc. 127,986 (2) 8.7%
18617 Broadwick Street
Rancho Dominquez, CA 90220
Fulcrum, Inc. 126,449 (3) 8.6%
100 Delawanna Avenue
Clifton, NJ 07014
Joseph G. Cremonese 104,597 (4) 6.9%
Roger B. Knowles - -
Grace S. Morin 96,450 (5) 6.5%
James S. Segasture 162,500 (6) 11.1%
Helena R. Santos 15,779 1.1%
Robert P. Nichols 20,397 1.4%
Brookman P. March 96,450 (7) 6.5%
Karl D. Nowosielski 2,000 (8) 0.0%
All directors and executive
|
officers as a group (8 persons) 401,723 (9) 26.3%
(1) Based on information reported in his Schedule 13D filed with the Securities and Exchange Commission on October 30, 2002.
(2) Based on information reported on Form 3 filed with the
Securities and Exchange Commission on June 27, 2011.
(3) Stock issued in connection with the acquisition of the
Torbal division assets from Fulcrum, In. on February 26, 2014.
(4) 57,597 shares are owned jointly with his wife, 7,000
shares are owned by his wife, and 40,000 shares are issuable
upon exercise of options.
(5) Includes 13,500 shares issuable upon exercise of options
held by her husband, Mr. March.
(6) Shares owned jointly with his wife.
(7) Represents 82,950 shares owned by Ms. Morin, his wife and
13,500 shares issuable upon exercise of options.
(8) Represents shares issuable upon exercise of options.
(9) Includes 55,500 shares issuable upon exercise of options.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information with respect to Company options, warrants and rights as of June 30, 2014.
Number of Securities
to be Issued Upon Weighted-Average
Exercise of Exercise Price of
Outstanding Options, Outstanding Options,
Warrants and Rights Warrants and Rights ($)
Plan Category (a) (b)
_________________________________________________________________
Equity
Compensation
plans approved by
security holders 61,000 3.11
Equity
Compensation
plans not approved
by security holders N/A N/A
_________________________________________________________________
Total 61,000 3.11
_________________________________________________________________
|
Number of Securities
Remaining Available
for
Future Issuance
Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a)
Plan Category (c) _________________________________________________________________ Equity Compensation plans approved by security holders 82,000 Equity Compensation plans not approved by security holders N/A _________________________________________________________________ Total 82,000 _________________________________________________________________ |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Mr. Joseph G. Cremonese, a Director since November 2002, through his affiliate, Laboratory Innovation Company, Ltd., has been providing independent marketing consulting services to the Company since January 1, 2003 pursuant to a consulting agreement expiring December 31, 2014. The agreement currently provides that Mr. Cremonese and his affiliate shall render, at the request of the Company, marketing consulting services for a monthly payment of $3,600. The agreement contains confidentiality and non- competition covenants. The Company paid fees of $41,400 and $39,600 pursuant to the agreement for each of fiscal 2014 and fiscal 2013.
Ms. Grace S. Morin, was elected a Director in December 2006 upon the sale of her 90.36% ownership interest in Altamira to the Company in November 2006. Up until March 31, 2009, Ms. Morin had been employed by Altamira as an administrative employee. Since April 1, 2009, she has provided consulting services on a part-time basis pursuant to an agreement expiring March 31, 2014 at the rate of $85 per hour, resulting in payments of $5,700 and $6,100 for fiscal 2014 and fiscal 2013, respectively. The agreement contains confidentiality and non-competition covenants.
Item 14. Principal Accountant Fees and Services.
The following is a description of the fees incurred by the Company for services by the firm of Nussbaum Yates Berg Klein & Wolpow, LLP (the "Firm") during fiscal 2014 and fiscal 2013.
The Company incurred for the services of the Firm fees of approximately $64,000 and $62,000 for fiscal 2014 and 2013, respectively, in connection with the audit of the Company's annual financial statements and quarterly reviews; and $6,000 for each fiscal year for the preparation of the Company's corporate tax returns. The Company also paid $12,600 of other fees to the Firm for fiscal 2014.
In approving the engagement of the independent registered public accounting firm to perform the audit and non-audit services, the Board of Directors as the Company's audit committee evaluates the scope and cost of each of the services to be performed including a determination that the performance of the non-audit services will not affect the independence of the firm in the performance of the audit services.
Part IV
Item 15. Exhibits and Financial Statement Schedules.
Financial Statements. The required financial statements of the Company are attached hereto on pages F1-F26.
Exhibits. The following Exhibits are filed as part of this report on Form 10-K:
Exhibit Number Exhibit
3 Articles of Incorporation and By-Laws:
3(a) Certificate of Incorporation of the Company
|
as amended (filed as Exhibit 1(a-1) to the Company's General Form for Registration of Securities on Form 10 dated February 14, 1973 and incorporated by reference thereto.)
3(b) Certificate of Amendment of the Company's Certificate of Incorporation, as filed on January 28, 1985 (filed as Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1985 and incorporated by reference thereto.)
3(c) By-Laws of the Company, as restated and amended (filed as Exhibit 3(ii) to the Company's Current Report on Form 8-K filed on January 6, 2003 and Exhibit 3(ii) to the Company's Current Report on Form 8-K filed on December 5, 2007 and incorporated by reference thereto).
4 Instruments defining the rights of security
holders:
4(a) 2002 Stock Option Plan (filed as Exhibit
|
99-1 to the Company's Current Report on Form 8-K filed on November 25, 2002 and incorporated by reference thereto).
4(b) 2012 Stock Option Plan (filed as Exhibit 10 to the Company's Current Report on Form 8-K filed on January 23, 2012 and incorporated by reference thereto).
10 Material Contracts:
10(a) Lease between Registrant and AIP Associates, predecessor-in-interest of current lessor, dated October, 1989 with respect to Company's offices and facilities in Bohemia, New York (filed as Exhibit 10(a) to the Company's Annual Report on Form 10-KSB filed on September 28, 2005 and incorporated by reference thereto).
10(a)-1 Amendment to lease between Registrant and REP A10 LLC, successor in interest of AIP Associates, dated September 1, 2004 (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on September 2, 2004, and incorporated by reference thereto).
10(a)-2 Second amendment to lease between Registrant and REP A10 LLC dated November 5, 2007 (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on November 8, 2007, and incorporated by reference thereto).
10(a)-3 Lease agreement dated August 8, 2014 by and between the Company and 80 Orvile Drive Associates LLC.
10(b) Employment Agreement dated January 1, 2003, by and between the Company and Ms. Santos (filed as Exhibit 10(a) to the Company's Current Report on Form 8-K filed on January 22, 2003, and incorporated by reference thereto).
10(b)-1 Employment Agreement dated September 1, 2004, by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on September 1, 2004, and incorporated by reference thereto).
10(b)-2 Employment Agreement dated December 29, 2006, by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on December 29, 2006, and incorporated by reference thereto).
10(b)-3 Employment Agreement dated July 31, 2009 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on August 7, 2009, and incorporated by reference thereto).
10(b)-4 Employment Agreement dated May 14, 2010 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on May 18, 2010, and incorporated by reference thereto).
10(b)-5 Employment Agreement dated September 13,
2011 by and between the Company and Ms. Santos (filed as exhibit
10(b)-5 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2011, and incorporated by reference thereto).
10(b)-6 Amended Employment Agreement dated May 20, 2013 by and between the Company and Ms. Santos (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on May 20, 2013, and incorporated by reference thereto).
10(c) Employment Agreement dated January 1, 2003, by and between the Company and Mr. Robert P. Nichols (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on January 22, 2003, and incorporated by reference thereto).
10(c)-1 Employment Agreement dated September 1, 2004, by and between the Company and Mr. Nichols (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on September 1, 2004, and incorporated by reference thereto).
10(c)-2 Employment Agreement dated December 29, 2006, by and between the Company and Mr. Nichols (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on December 29, 2006, and incorporated by reference thereto).
10(c)-3 Employment Agreement dated July 31, 2009 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company's Current Report on Form 8-K filed on August 7, 2009, and incorporated by reference thereto).
10(c)-4 Employment Agreement dated May 14, 2010 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company's Current Report on Form 8-K filed on May 18, 2010, and incorporated by reference thereto).
10(c)-5 Employment Agreement dated September 13, 2011 by and between the Company and Mr. Nichols (filed as Exhibit 10(c)-5 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2011, and incorporated by reference thereto).
10(c)-6 Amended Employment Agreement dated May 20, 2013 by and between the Company and Mr. Nichols (filed as Exhibit 10A-2 to the Company's current Report on Form 8-K filed on May 20, 2013, and incorporated by reference thereto).
10(d) Consulting Agreement dated January 1, 2003 by and between the Company and Mr. Cremonese and his affiliate, Laboratory Innovation Company, Ltd. (filed as Exhibit 10(b) to the Company's Current Report on Form 8-K filed on January 6, 2003, and incorporated by reference thereto).
10(d)-1 Amended and Restated Consulting Agreement dated March 22, 2005, by and between the Company and Mr. Cremonese and Laboratory Innovation Company, Ltd. (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on March 23, 2005, and incorporated by reference thereto).
10(d)-2 Second Amended and Restated Consulting Agreement dated March 15, 2007, by and between the Company and Mr. Cremonese and Laboratory Innovation Company Ltd. (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on March 16, 2007, and incorporated by reference thereto).
10(d)-3 Third Amended and Restated Consulting Agreement dated September 23, 2009, by and between the Company and Mr. Cremonese and Laboratory Innovation Company, Ltd. (filed as Exhibit 10 to the Company's Annual Report on Form 10-K field on September 24, 2009, and incorporated by reference thereto).
10(d)-4 Fourth Amended and Restated Consulting Agreement dated January 7, 2011 (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K (filed on January 18, 2011, and incorporated by reference thereto).
10(d)-5 Fifth Amendment and Restated Consulting Agreement dated January 20, 2012 (filed as Exhibit 10 to the Company's Current Report on Form 8-K (filed on January 23, 2012, and incorporated by reference thereto).
10(d)-6 Agreement extension dated November 29, 2012 to Amended and Restated Consulting Agreement (filed as Exhibit 10 to the Company's Current Report on Form 8-K filed on December 4, 2012, and incorporated by reference thereto).
10(d)-7 Agreement extension dated December 12, 2013 to Amended and Restated Consulting Agreement (filed as Exhibit 10 to the Company's Current Report on Form 8-K filed on December 12, 3013, and incorporated by reference thereto).
10(e) Sublicense from Fluorometrix Corporation (filed as Exhibit 10(a)1 to the Company's Current Report on Form 8-K filed on June 14, 2006, and incorporated by reference thereto).
10(f) Stock Purchase Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
10(g) Escrow Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(a) to the Company's Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
10(h) Registration Rights Agreement, dated as of November 30, 2006, by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(b) to the Company's Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
10(i) Employment Agreement, dated as of November 30, 2006, between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10(c) to the Company's Current Report on Form 8-K filed on December 5, 2006, and incorporated by reference thereto).
10(i)-1 Employment Agreement, dated as of October 30, 2008, between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10A-2 to the Company's Current Report on Form 8-K filed on October 30, 2008, and incorporated by reference thereto).
10(i)-2 Employment Agreement, dated as of October 1, 2010, between Altamira Instruments, Inc., and Brookman P. March (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on October 13, 2010, and incorporated by reference thereto).
10(i)-3 Employment Agreement, dated as of May 18, 2012 between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10(i)-3 to the Company's Annual Report on Form 10-K filed on September 27, 2012, and incorporated by reference thereto).
10(i)-4 Agreement Extension, dated as of May 21, 2014 between Altamira Instruments, Inc. and Brookman P. March (filed as Exhibit 10 to the Company's Current Report on Form 8-K filed on May 21, 2014, and incorporated by reference thereto).
10(j) Indemnity Agreement, dated as of April 13, 2007 by and among the Company and Grace Morin, Heather H. Haught and William D. Chandler (filed as Exhibit 10(j) to the Company's Annual Report on Form 10-KSB filed on September 28, 2007 and incorporated by reference thereto).
10(k) Lease between Altamira Instruments, Inc. and Allegheny Homes, LLC, with respect to the Company's Pittsburgh, Pennsylvania facilities (filed as Exhibit 10(k) to the Company's Annual Report on Form 10-KSB filed on September 28, 2007 and incorporated by reference thereto).
10(k)-1 Lease between Altamira Instruments, Inc. and Allegheny Homes, LLC, with respect to the Company's Pittsburgh, Pennsylvania facilities (filed as Exhibit 10(k)-1 to the Company's Quarterly Report on Form 10-Q filed on February 14, 2013, and incorporated by reference thereto).
10(l) Line of Credit Agreements dated October 30, 2008, by and among the Company and Capital One, N.A. (filed as Exhibits 10-A1(a) through (f) to the Company's Current Report on Form 8-K filed on October 30, 2008, and incorporated by reference thereto).
10(l)-1 Restated Promissory Note Agreement dated January 20, 2010 by and among the Company and Capital One N.A. (filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on January 20, 2010, and incorporated by reference thereto).
10(l)-2 Restated Promissory Note Agreement dated January 5, 2011 by and among the Company and Capital One N.A. (filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on January 6, 2011, and incorporated by reference thereto).
10(m) Consulting Agreement dated April 1, 2009 by and between the Company and Grace Morin (filed as Exhibit 10A-1 to the Company's Current Report on Form 8-K filed on April 1, 2009, and incorporated by reference thereto).
10(n) Line of Credit Agreements dated June 14, 2011, by and among the Company and JPMorgan Chase Bank, N.A. (filed as Exhibits 99.1 through 99.3 to the Company's Current Report on Form 8-K filed on June 16, 2011, and incorporated by reference thereto).
10(n)-1 Promissory Note dated June 5, 2013 by and among the Company and JP Morgan Chase Bank, N.A. (filed as Exhibit 99 to the Company's Current Report on Form 8-K filed on June 7, 2013, and incorporated by reference thereto).
10(o) Purchase Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Fluorometrix Corporation (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
10(p) Escrow Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Fluorometrix Corporation (filed as Exhibit 10(A) to the Company's Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
10(q) Research and Development Agreement dated as of November 14, 2011, by and between Scientific Bioprocessing, Inc. and Biodox R&D Corporation (filed as Exhibit 10(B) to the Company's Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
10(q)-1 Notice of termination of Research and Development Agreement dated June 12, 2013 (filed as Exhibit 99 to the Company's Current Report on Form 8-K filed on June 27, 2013, and incorporated by reference thereto).
10(r) Non-Competition Agreement, dated as of November 14, 2011, by and among the Company, Scientific Bioprocessing, Inc., and Joseph E. Qualitz (filed as Exhibit 10(D) to the Company's Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
10(s) Promissory Note, dated as of November 14, 2011, by and between the Company and the University of Maryland, Baltimore County (filed as Exhibit 10(c) to the Company's Current Report on Form 8-K filed on November 17, 2011, and incorporated by reference thereto).
10(t) License Agreement, dated as of January 31, 2001 by and between University of Maryland, Baltimore County and Fluorometrix Corporation (filed as Exhibit 10(E) to the Company's Current Report on Form 8-K filed on November 21, 2011, and incorporated by reference thereto).
10(u) Line of Credit Agreements dated June 25, 2014, by and among the Company and Bank of America Merrill Lynch (filed as Exhibits 99.1 through 99.2 (to the Company's Current Report on Form 8-K filed on July 2, 2014, and incorporated by reference thereto).
10(v) Asset Purchase Agreement, dated as of February 26, 2014, by and among the Company and Fulcrum, Inc. (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
10(v)-1 Escrow Agreement, dated as of February 26, 2014, by and among the Company, and Fulcrum, Inc. (filed as Exhibit 10(e) to the Company's Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
10(v)-2 Non-Competition Agreements, dated as of February 26, 2014, by and among the Company, and James Maloy and Karl Nowosielski (filed as Exhibits 10(b) and 10(c) to the Company's Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
10(v)-3 Registration Rights Agreement, dated as of February 26, 2014, by and among the Company, and Fulcrum, Inc. (filed as Exhibit 10(d) to the Company's Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
10(v)-4 Supply Agreement, dated as of February 20, 2014, by and among the Company, and Axis Sp 3.O.O. (filed as Exhibit 10(g) to the Company's Current Report on Form 8-K filed on February 28, 2014, and incorporated by reference thereto).
14 Code of Ethics (filed as Exhibit 14 to the Company's Annual Report on Form 10-KSB filed on September 28, 2007 and incorporated by reference thereto).
21 Subsidiaries of the Registrant
Altamira Instruments, Inc., a Delaware Corporation, is a wholly-owned subsidiary of the Company.
Scientific Bioprocessing, Inc., a Delaware Corporation, is a wholly-owned subsidiary of the Company since November 2011.
Scientific Packaging Industries, Inc., a New York corporation, is a wholly-owned inactive subsidiary of the Company.
31.01 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.01 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SCIENTIFIC INDUSTRIES, INC.
(Registrant)
/s/ Helena R. Santos
____________________
Helena R. Santos
President, Chief Executive
Officer, Treasurer
Chief Financial and Principal
Accounting Officer
Date: September 26, 2014
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Helena R. Santos President and Treasurer (Chief September 26, 2014
Helena R. Santos Executive Officer and Financial
Officer) and Director
/s/ Joseph G. Cremonese Chairman of the Board September 26, 2014
Joseph G. Cremonese
/s/ Roger B. Knowles Director September 26, 2014
Roger B. Knowles
/s/ Grace S. Morin Director September 26, 2014
Grace S. Morin
/s/ James S. Segasture Director September 26, 2014
James S. Segasture
|
SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AS OF AND FOR THE
YEARS ENDED JUNE 30, 2014 AND 2013
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
AS OF AND FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
CONTENTS
Page
----
Report of independent registered public accounting firm F-1
Consolidated financial statements:
Balance sheets F-2
Statements of operations F-3
Statements of comprehensive income (loss) F-4
Statements of shareholders' equity F-5
Statements of cash flows F-6 - F-7
Notes to financial statements F-8 - F-26
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Scientific Industries, Inc.
Bohemia, New York
We have audited the accompanying consolidated balance sheets of Scientific Industries, Inc. and subsidiaries (the "Company") as of June 30, 2014 and 2013, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Scientific Industries, Inc. and subsidiaries as of June 30, 2014 and 2013, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ Nussbaum Yates Berg klein & Wolpow, LLP Nussbaum Yates Berg Klein & Wolpow, LLP Melville, New York September 26, 2014 |
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIDARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2014 AND 2013
ASSETS
2014 2013
_________ _________
Current assets
Cash and cash equivalents $ 493,700 $ 927,300
Investment securities 415,400 908,400
Trade accounts receivable, less
allowance for doubtful accounts
of $11,600 in 2014 and 2013 756,700 815,900
Inventories 2,309,200 1,705,600
Prepaid and other current assets 123,100 59,000
Deferred taxes 86,000 86,600
__________ __________
Total current assets 4,184,100 4,502,800
Property and equipment, net 252,100 156,500
Intangible assets, net 1,795,900 773,500
Goodwill 705,300 589,900
Other assets 28,200 24,100
Deferred taxes 146,200 106,200
__________ __________
Total assets $7,111,800 $6,153,000
========== ==========
|
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 373,700 $ 156,800
Customer advances 89,500 15,900
Accrued expenses and taxes 442,800 407,700
Contingent consideration,
current portion 109,000 19,000
Notes payable, current portion 26,700 78,300
__________ __________
Total current liabilities 1,041,000 677,700
Contingent consideration payable,
less current portion 391,000 51,600
Notes payable, less current portion - 26,700
__________ __________
Total liabilities 1,432,700 756,000
__________ __________
Shareholders' equity:
Common stock, $.05 par value;
authorized 7,000,000 shares;
issued 1,488,914 shares in 2014
and 1,357,465 in 2013 74,400 67,900
Additional paid-in capital 2,420,700 1,977,100
Accumulated other comprehensive gain
(loss), unrealized holding gain
(loss) on investment securities 1,100 (13,600)
Retained earnings 3,235,300 3,418,000
__________ __________
5,731,500 5,449,400
Less common stock held in treasury at
cost, 19,802 shares 52,400 52,400
__________ __________
Total shareholders' equity 5,679,100 5,397,000
__________ __________
Total liabilities and
shareholders' equity $7,111,800 $6,153,000
========== ==========
|
See notes to consolidated financial statements.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIDARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
2014 2013
__________ ____________
Revenues $6,793,200 $7,134,500
Cost of sales 4,178,900 4,175,800
__________ __________
Gross profit 2,614,300 2,958,700
__________ __________
Operating expenses:
General and administrative 1,513,400 1,277,700
Selling 792,900 723,100
Research and development 426,700 450,500
__________ __________
Total operating expenses 2,733,000 2,451,300
__________ __________
Income (loss) from operations (118,700) 507,400
__________ __________
Other income (expense):
Interest income - 6,800
Other income 14,800 11,400
Interest expense (3,100) (4,800)
__________ __________
Total other income 11,700 13,400
__________ __________
Income (loss) before income tax
expense (benefit) (107,000) 520,800
__________ __________
Income tax expense (benefit):
Current 400 106,800
Deferred ( 32,100) 17,600
__________ __________
Total income tax expense
(benefit) ( 31,700) 124,400
__________ __________
Net income (loss) $ ( 75,300) $ 396,400
========== ==========
Basic earnings (loss) per common share $ (.05) $ .30
======= =====
Diluted earnings (loss) per common share $ (.05) $ .30
======= =====
Weighted average common shares
outstanding, basic 1,385,054 1,337,048
========= =========
Weighted average common shares
outstanding, assuming dilution 1,385,054 1,342,212
========= =========
|
See notes to consolidated financial statements.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIDARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
2014 2013
__________ __________
Net income (loss) $ ( 75,300) $ 396,400
Other comprehensive income (loss):
Unrealized holding gain (loss)
arising during period,
net of tax 14,700 ( 1,000)
__________ __________
Comprehensive income (loss) $ (60,600) $ 395,400
========== =========
|
See notes to consolidated financial statements.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
Common Stock Additional Accumulated
______________ Paid-in Other Compr-
Shares Amount Capital ehensive Gain
(Loss)
_______ _______ __________ _____________
Balance, July 1, 2012 1,355,514 $67,800 $1,968,700 $ (12,600)
Net income - - - -
Unrealized holding loss
on investment securities,
net of tax - - - (1,000)
Exercise of stock options 5,000 250 (250) -
Tender of common stock (3,049) ( 150) 150 -
Stock-based compensation - - 8,500 -
Cash dividend declared
and paid, $.03 per share - - - -
_________ _______ _________ ___________
Balance, June 30, 2013 1,357,465 67,900 1,977,100 (13,600)
Net income - - - -
Unrealized holding gain
on investment securities,
net of tax - - - 14,700
Exercise of stock options 5,000 200 6,500 -
Issuance of common stock 126,449 6,300 421,100 -
Stock-based compensation - - 16,000 -
Cash dividend declared
and paid, $.08 per share - - - -
_________ _______ __________ ___________
Balance, June 30, 2014 1,488,914 $74,400 $2,420,700 $ 1,100
========= ======= ========== ===========
|
See notes to consolidated financial statements.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
YEARS ENDED JUNE 30, 2014 AND 2013
Retained Treasury Stock Shareholders'
______________
Earnings Shares Amount Equity
__________ ______ _______ ____________
Balance, July 1, 2012 $3,061,700 19,802 $52,400 $5,033,200
Net income 396,400 - - 396,400
|
Unrealized holding loss
on investment securities,
net of tax - - - (1,000)
Exercise of stock options - - - -
Tender of common stock - - - -
Stock-based compensation - - - 8,500
Cash dividend declared
and paid, $.03 per share (40,100) - - (40,100)
__________ _______ _______ ___________
Balance, June 30, 2013 3,418,000 19,802 52,400 5,397,000
Net loss (75,300) - - (75,300)
Unrealized holding gain
on investment securities,
net of tax - - - 14,700
Exercise of stock options - - - 6,700
Issuance of common stock - - - 427,400
Stock-based compensation - - - 16,000
Cash dividend paid, $.08
per share (107,400) - - (107,400)
__________ _______ ________ ___________
Balance, June 30, 2014 $3,235,300 19,802 $52,400 $5,679,100
========== ======= ======= ===========
|
See notes to consolidated financial statements.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
2014 2013
__________ __________
Operating activities:
Net income (loss) $ ( 75,300) $ 396,400
__________ __________
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 262,800 178,800
Deferred income tax expense (benefit) (32,100) 17,600
Loss on sale of investment securities 19,500 7,600
Stock-based compensation 16,000 8,500
Changes in operating assets and
liabilities, net of effect of
acquisition:
Trade accounts receivable 59,200 (192,400)
Inventories (459,600) ( 91,900)
Prepaid and other current assets ( 64,100) 108,800
Other assets ( 4,100) 1,600
Accounts payable 216,900 42,000
Customer advances 73,600 ( 82,600)
Accrued expenses and taxes 22,200 170,000
__________ __________
Total adjustments 110,300 168,000
__________ __________
Net cash provided by
operating activities 35,000 564,400
__________ __________
Investing activities, net of effect
of acquisition:
Payment for intangible assets acquired
in acquisition (Note 2) (700,000) -
Purchase of investment securities,
available for sale ( 25,000) (920,500)
Redemption of investment securities,
available for sale 518,800 717,600
Capital expenditures (49,900) (37,500)
Purchase of other intangible assets ( 2,900) (13,300)
_________ _________
Net cash used in investing activities (259,000) (253,700)
_________ _________
Financing activities:
Line of credit proceeds 150,000 -
Line of credit repayments (150,000) -
Payment of contingent consideration (30,600) (36,800)
Proceeds from exercise of stock options 6,700 -
Cash dividend declared and paid (107,400) (40,100)
Principal payments on note payable (78,300) (75,800)
__________ _________
Net cash used in financing activities (209,600) (152,700)
__________ _________
|
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
2014 2013
__________ __________
Net increase (decrease) in cash and
cash equivalents (433,600) 158,000
Cash and cash equivalents, beginning
of year 927,300 769,300
_________ __________
Cash and cash equivalents, end of year $ 493,700 $ 927,300
========= ==========
Supplemental disclosures:
Cash paid during the period for:
Income taxes $ 152,100 $ -
Interest 3,100 4,800
|
Non-cash investing and financing activities (Note 2)
See notes to consolidated financial statements.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
1. Summary of Significant Accounting Policies
Nature of Operations
Scientific Industries, Inc. and its subsidiaries (the "Company") design, manufacture, and market a variety of benchtop laboratory equipment, bioprocessing products and catalyst research instruments. The Company is headquartered in Bohemia, New York where it produces benchtop laboratory equipment for research and has another location in Pittsburgh, Pennsylvania, where it produces a variety of custom-made catalyst research instruments and designs bioprocessing products, and a small facility in Oradell, New Jersey related to benchtop laboratory equipment. The equipment sold by the Company includes mixers, shakers, stirrers, refrigerated incubators, pharmacy balances and scales, catalyst characterization instruments, reactor systems and high throughput systems. The Company also sublicenses certain patents and technology under a license with the University of Maryland, Baltimore County, and receives royalty fees from the sublicenses.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Scientific Industries, Inc., Scientific Packaging Industries, Inc., an inactive wholly-owned subsidiary, Altamira Instruments, Inc. ("Altamira"), a Delaware corporation and wholly-owned subsidiary, and Scientific Bioprocessing, Inc. ("SBI"), a Delaware corporation and wholly-owned subsidiary, (all collectively referred to as the "Company"). All material intercompany balances and transactions have been eliminated.
Revenue Recognition
Revenue from product sales is recognized when all the following criteria are met:
* Receipt of a written purchase order agreement which is
binding on the customer.
* Goods are shipped and title passes.
* Prices are fixed.
* Collectability is reasonably assured.
* All material obligations under the agreement have been
substantially performed.
Substantially all orders are F.O.B. shipping point, all sales are final without right of return or payment contingencies, and there are no special sales arrangements or agreements with any customers.
Royalty revenue received under the Company's sublicenses is recorded net of payments due to its licensors.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a maturity of 90 days or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation ("FDIC") insurance limit. As of June 30, 2014 and 2013, $52,800 and $256,200, respectively of cash balances were in excess of such limit.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
1. Summary of Significant Accounting Policies (Continued)
Accounts Receivable
In order to record the Company's accounts receivable at their net realizable value, the Company must assess their collectability. A considerable amount of judgment is required in order to make this assessment, including an analysis of historical bad debts and other adjustments, a review of the aging of the Company's receivables, and the current creditworthiness of the Company's customers. The Company has recorded allowances for receivables which it considered uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices, customer satisfaction claims and pricing discrepancies. However, depending on how such potential issues are resolved, or if the financial condition of any of the Company's customers was to deteriorate and its ability to make required payments became impaired, increases in these allowances may be required. The Company actively manages its accounts receivable to minimize credit risk. The Company does not obtain collateral for its accounts receivable.
Customer Advances
In the ordinary course of business, customers may make advance payments for purchase orders. Such amounts, when received, are categorized as liabilities under the caption customer advances.
Investment Securities
Securities available for sale are carried at fair value with unrealized gains or losses reported in a separate component of shareholders' equity. Realized gains or losses are determined based on the specific identification method.
Inventories
Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or market value, and have been reduced by an allowance for excess and obsolete inventories. The estimate is based on management's review of inventories on hand compared to estimated future usage and sales. Cost of work-in-process and finished goods inventories include material, labor and manufacturing overhead.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is provided for primarily by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized by the straight-line method over the term of the related lease or the estimated useful lives of the assets, whichever is shorter.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
1. Summary of Significant Accounting Policies (Continued)
Intangible Assets
Intangible assets consist primarily of acquired technology, customer relationships, non-compete agreements, patents, licenses, websites, intellectual property and research and development ("IPR&D"), trademarks and trade names. All intangible assets are amortized on a straight-line basis over the estimated useful lives of the respective assets, generally 3 to 10 years. The Company continually evaluates the remaining estimated useful lives of intangible assets that are being amortized to determine whether events or circumstances warrant a revision to the remaining period of amortization.
Goodwill and Long-Lived Assets
Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill and long-lived intangible assets are tested for impairment at least annually in accordance with the provisions of ASC No. 350, "Intangibles-Goodwill and Other" ("ASC No. 350"). ASC No. 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The Company tests goodwill and long-lived assets annually as of June 30, the last day of its fiscal year, unless an event occurs that would cause the Company to believe the value is impaired at an interim date.
Impairment of Long-Lived Assets
The Company follows the provisions of ASC No. 360-10, "Property, Plant and Equipment - Impairment or Disposal of Long-Lived Assets ("ASC No. 360-10"). ASC No. 360-10 which requires evaluation of the need for an impairment charge relating to long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation for impairment is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write down to a new depreciable basis is required. If required, an impairment charge is recorded based on an estimate of future discounted cash flows. No impairment change has been recorded for the years ended June 30, 2014 and 2013.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
1. Summary of Significant Accounting Policies (Continued)
Income Taxes
The Company and its subsidiaries file a consolidated U.S. federal income tax return. Income taxes are accounted for under the asset and liability method. The Company provides for federal, and state income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributed to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Advertising
Advertising costs are expensed as incurred. Advertising expense amounted to $53,200 and $30,000 for the years ended June 30, 2014 and 2013, respectively.
Shipping and Handling
The Company classifies costs associated with shipping and handling fees as a component of cost of goods sold.
Stock Compensation Plan
The Company has a ten-year stock option plan (the "2012 Plan") which provides for the grant of options to purchase up to 100,000 shares of the Company's Common Stock, par value $.05 per share ("Common Stock"), plus 57,000 shares under options previously granted under the 2002 Stock Option Plan of the Company (the "Prior Plan"). The 2012 Plan provides for the granting of incentive or non-incentive stock options as defined in the 2012 Plan and options under the 2012 Plan may be granted until 2022. Incentive stock options may be granted to employees at an exercise price equal to 100% (or 110% if the optionee owns directly or indirectly more than 10% of the outstanding voting stock) of the fair market value of the shares of Common Stock on the date of the grant which shall not be less than the book value per share of Common Stock as of the end of the most recent fiscal quarter. Non-incentive stock options shall not be granted at less than the fair market value of the shares of Common Stock on the date of grant, and the per share book value. At June 30, 2014 and 2013, 82,000 and 93,000 shares respectively, of Common Stock were available for grant of options under the 2012 Plan.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
1. Summary of Significant Accounting Policies (Continued)
Stock Compensation Plan (Continued)
Stock-based compensation is accounted for in accordance with ASC No. 718 "Compensation-Stock Compensation" ("ASC No. 718") which requires compensation costs related to stock-based payment transactions to be recognized. With limited exceptions, the amount of compensation cost is measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards are measured at each reporting period. Compensation costs are recognized over the period that an employee provides service in exchange for the award. During the year ended June 30, 2014, the Company granted 11,000 options to employees and the Chairman of the Board of Directors that had a fair value of $19,500. The fair value of the options granted during fiscal year 2014 was determined using the Black-Scholes-Merton option-pricing model. The weighted average assumptions used for fiscal 2014, was an expected life of 10 years; risk free interest rate of 2.75%; volatility of 62%, and dividend yield of 2.92%. The weighted-average value per share of the options granted in 2014 was $1.78, and stock-based compensation costs were $16,000 and $8,500 for the years ended June 30, 2014 and 2013. Stock-based compensation costs related to nonvested awards to be recognized in the future are $9,000 and $3,700 as of June 30, 2014 and 2013, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The actual results experienced by the Company may differ materially from management's estimates.
Earnings (Loss) Per Common Share
Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares outstanding. Diluted earnings per common share includes the dilutive effect of stock options.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
1. Summary of Significant Accounting Policies (Continued)
New Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board ("FASB") issued ASU 2013-11, Income Taxes (Topic 740), which clarifies the presentation requirements of unrecognized tax benefits when a net operating loss carries forward, a similar tax loss, or a tax credit carry forward exists at the reporting date. The amendments in this ASU are effective for the fiscal years, and interim periods within those years, beginning after December 15, 2013 and should be applied prospectively. The adoption of this ASU did not have a material impact to the Company's consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from
Contracts with Customers amending revenue recognition
requirements for multiple-deliverable revenue arrangements.
This update provides guidance on how revenue is recognized
to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for the
goods or services. This determination is made in five steps:
(i) identity the contract with the customer: (ii) identify the
performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize
revenue when (or as) the entity satisfies a performance
obligation. The update is effective for the Company beginning
July 1, 2017. Early adoption is not permitted. The Company is
currently evaluating the impact this guidance may have on
its financial condition and results of operations.
In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved After the Requisite Service Period. This update affects reporting entities that grant their employee's targets that affects vesting could be achieved after the requisite service period. The new standard requires that a performance target that affects vesting and that could be achieved after the requisite services priod be treated as a performance condition. The new standard will be effective for the Company beginning July 1, 2015, and early adoption is permitted. The Company expects the adoption will not have a material impact on its financial condition, results of operations or cash flows.
2. Acquisition
On February 26, 2014, the Company acquired substantially all the assets of a privately owned company consisting principally of inventory, fixed assets, and intangible assets related to the production and sale of a variety of laboratory and pharmacy balances and scales. The acquisition was pursuant to an asset purchase agreement whereby the Company paid the sellers $700,000 in cash, 126,449 shares of Common Stock valued at $427,500 (of which 31,612 are held in escrow for one year) and agreed to make additional cash payments based on a percentage of net sales of the business acquired equal to 8% for the period ending June 30, 2014 annualized, 9% for the year ending June 30, 2015, 10% for the year ending June 30, 2016 and 11% for the year ending June 30, 2017, estimated at a present value of $460,000 on the date of acquisition. Payments related to this contingent consideration for each period are due in September following the fiscal year.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
2. Acquisition (Continued)
The products, which are similar to the Company's other Benchtop Laboratory Equipment, and in many cases used by the same customers, are marketed under the Torbal(R) brand. The principal customers are pharmacies, pharmacy schools, universities, government laboratories, and industries utilizing a precision scale. The products are sold primarily on a direct basis, including through the Company's e-commerce site.
Management of the Company allocated the purchase price based on its valuation of the assets acquired, as follows:
Current assets $ 144,000
Property and equipment 118,100
Goodwill* 115,400
Other intangible assets 1,210,000
___________
Total Purchase Price $ 1,587,500
===========
|
*See Note 7, "Goodwill and Other Intangible Assets".
Of the $1,210,000 of the acquired other intangible assets, $570,000 was assigned to technology and websites with a useful life of 5 years, $120,000 was assigned to customer relationships with an estimated useful life of 9 years, $140,000 was assigned to the trade name with an estimated useful life of 6 years, $110,000 was assigned to the IPR&D with an estimated useful life of 3 years, and $270,000 was assigned to non-compete agreements with an estimated useful life of 5 years.
In connection with the acquisition, the Company entered into a three-year employment agreement with the previous Chief Operating Officer of the acquired business as President of the Company's new Torbal Division and Director of Marketing for the Company. The agreement may be extended by mutual consent for an additional two years.
The Company was unable to obtain audited financial statements of the business acquired in connection with the acquisition. The inability to include the related audited financial statements as required by the Securities Exchange Act of 1934 in the related Report on Form 8-K filing resulted in the inability of the Company to register under the Securities Act of 1933, as amended, offerings of the Company's securities during the one year period ending February 2015.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
2. Acquisition (Continued)
Pro forma results
The unaudited pro forma condensed consolidated financial information in the table below summarizes the consolidated results of operations of the Company including its new Torbal Division, on a pro forma basis, as though the companies had been consolidated as of the beginning of the fiscal year ended June 30, 2013. The unaudited pro forma condensed financial information presented below is for informational purposes only and is not intended to represent or be indicative of the consolidated results of the operations that would have been achieved if the acquisition had been completed as of the commencement of the fiscal year presented. In addition, the Company was unable to obtain audited historical information and, therefore the information presented is based on management's best judgment and the effects of the acquisition including amortization expense and excluding total acquisition related costs incurred of $79,500 for the year ended June 30, 2014:
2014 2013
Revenues
$7,623,200 $8,384,500
Net income (loss) $ (69,300) $ 307,600
Net income (loss) per
share - basic $ (.05) $ .21
Net income (loss) per
share - diluted $ (.05) $ .21
|
3. Segment Information and Concentrations
The Company views its operations as three segments: the manufacture and marketing of standard benchtop laboratory equipment for research in university, hospital and industrial laboratories sold primarily through laboratory equipment distributors and laboratory and pharmacy balances and scales ("Benchtop Laboratory Equipment Operations"), the manufacture and marketing of custom-made catalyst research instruments for universities, government laboratories, and chemical and petrochemical companies sold on a direct basis ("Catalyst Research Instruments Operations") and the design of bioprocessing systems and products and related royalty income ("Bioprocessing Systems").
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
3. Segment Information and Concentrations (Continued)
Segment information is reported as follows:
Benchtop Catalyst Bio- Corporate
Laboratory Research processing and Conso-
Equipment Instruments Systems Other lidated
__________ ___________ __________ _________ __________
June 30, 2014:
Revenues $4,679,100 $1,923,300 $ 190,800 $ - $6,793,200
Foreign Sales 2,617,300 866,900 2,000 - 3,486,200
Income (Loss)
|
From Operations 156,000 ( 145,700) ( 49,500) ( 79,500) (118,700)
Assets 4,129,100 1,535,300 799,800 647,600 7,111,800
Long-Lived Asset
Expenditures 1,476,500 11,300 8,500 - 1,496,300
Depreciation and
Amortization 130,900 35,000 96,900 - 262,800
Benchtop Catalyst Bio- Corporate
Laboratory Research processing and Conso-
Equipment Instruments Systems Other lidated
__________ ___________ __________ _________ __________
June 30, 2013:
Revenues $4,466,000 $2,541,500 $ 127,000 $ - $7,134,500
Foreign Sales 2,549,100 1,603,800 - - 4,152,900
Income (Loss)
From Operations 525,900 151,400 ( 169,900) - 507,400
Assets 2,501,600 1,646,600 903,600 1,101,200 6,153,000
Long-Lived Asset
Expenditures 18,300 23,300 9,200 - 50,800
Depreciation and
Amortization 43,300 35,300 100,200 - 178,800
F-16
|
|
|
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
4. Fair Value of Financial Instruments
The Financial Accounting Standards Board defines the fair value of financial instruments as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements do not include transaction costs.
The accounting guidance also expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are described below:
Level 1 Inputs that are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 Prices or valuation that require inputs that are both significant to the fair value measurement and unobservable.
The following tables set forth by level within the fair value hierarchy the Company's financial assets that were accounted for at fair value on a recurring basis at June 30, 2014 and 2013 according to the valuation techniques the Company used to determine their fair values:
Fair Value Measurements Using Inputs
Considered as
Assets:
Fair Value at
June 30, 2014 Level 1 Level 2 Level 3
______________ __________ _______ ________
Cash and cash equivalents $ 493,700 $ 493,700 $ - $ -
Available for sale securities 415,400 415,400 - -
__________ __________ _______ ________
Total $ 909,100 $ 909,100 $ - $ -
========== ========== ======= ========
Liabilities:
Contingent consideration $ 500,000 $ - $ - $500,000
========== ========== ======= ========
|
Fair Value Measurements Using Inputs
Considered as
Assets:
Fair Value at
June 30, 2013 Level 1 Level 2 Level 3
______________ __________ _______ ________
Cash and cash equivalents $ 927,300 $ 927,300 $ - $ -
Available for sale securities 908,400 908,400 - -
__________ __________ _______ ________
Total $1,835,700 $1,835,700 $ - $ -
========== ========== ======= ========
Liabilities:
Contingent consideration $ 70,600 $ - $ - $ 70,600
========== ========== ======= ========
|
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
4. Fair Value of Financial Instruments (Continued)
Investments in marketable securities classified as available-for-sale by security type at June 30, 2014 and 2013 consisted of the following:
Unrealized
Fair Holding Gain
Cost Value (Loss)
____________ _________ ____________
At June 30, 2014:
Available for sale:
Equity securities $ 29,300 $ 38,500 $ 9,200
Mutual funds 385,000 376,900 ( 8,100)
__________ _________ __________
$ 414,300 $ 415,400 $ 1,100
========== ========= ==========
Unrealized
Fair Holding Gain
Cost Value (Loss)
____________ _________ ____________
At June 30, 2013:
Available for sale:
Equity securities $ 29,300 $ 33,200 $ 3,900
Mutual funds 892,700 875,200 (17,500)
__________ _________ __________
$ 922,000 $ 908,400 $ (13,600)
========== ========= ==========
|
5. Inventories
2014 2013
__________ __________
Raw materials $1,617,100 $1,336,800
Work-in-process 366,200 254,000
Finished goods 325,900 114,800
__________ __________
$2,309,200 $1,705,600
========== ==========
|
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
6. Property and Equipment
Useful Lives
(Years) 2014 2013
____________ __________ __________
Automobiles 5 $ 14,900 $ 14,900
Computer equipment 3-5 155,800 132,100
Machinery and equipment 3-7 744,800 627,500
Furniture and fixtures 4-10 206,900 181,000
Leasehold improvements 3-5 72,800 71,700
_________ _________
1,195,200 1,027,200
Less accumulated depreciation
and amortization 943,100 870,700
_________ _________
$ 252,100 $ 156,500
========= =========
|
Depreciation expense was $71,900 and $61,700 for the years ended June 30, 2014 and 2013, respectively.
7. Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in connection with the Company's acquisitions. Goodwill amounted to $705,300 and $589,900 at June 30, 2014 and 2013 respectively, all of which is expected to be deductible for tax purposes.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
7. Goodwill and Other Intangible Assets (Continued)
The components of other intangible assets are as follows:
Useful Accumulated Lives Cost Amortization Net ______ ________ ____________ _________ |
At June 30, 2014:
Technology, trademarks 5/10 yrs. $1,226,800 $ 489,100 $ 737,700
Trade names 6 yrs. 140,000 7,800 132,200
Websites 5 yrs. 210,000 14,000 196,000
Customer relationships 9/10 yrs. 357,000 215,800 141,200
Sublicense agreements 10 yrs. 294,000 77,200 216,800
Non-compete agreements 5 yrs. 384,000 126,300 257,700
IPR&D 3 yrs. 110,000 12,200 97,800
Other intangible assets 5 yrs. 157,400 140,900 16,500
__________ _________ _________
$2,879,200 $1,083,300 $1,795,900
========== ========= =========
Useful Accumulated
Lives Cost Amortization Net
______ ________ ____________ _________
At June 30, 2013:
Technology, trademarks 5/10 yrs. $ 865,400 $ 402,100 $ 463,300
Customer relationships 10 yrs. 237,000 203,200 33,800
Sublicense agreements 10 yrs. 294,000 47,800 246,200
Non-compete agreements 5 yrs. 114,000 105,900 8,100
Other intangible assets 5 yrs. 156,000 133,900 22,100
__________ _________ _________
$1,666,400 $ 892,900 $ 773,500
========== ========= =========
|
Total amortization expense was $190,900 and $117,100 in 2014 and 2013, respectively.
Estimated future amortization expense of intangible assets is as follows:
Fiscal Years
____________
2015 $ 348,300
2016 352,400
2017 337,100
2018 323,300
2019 244,800
Thereafter 190,000
_______________
$ 1,795,900
===============
|
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
8. Loan Payable, Bank
In June 2014, the Company obtained a line of credit with Bank of America Merrill Lynch which provides for maximum borrowings of up to $700,000, bearing interest currently at 3.155% per annum (based on 3.00 percentage points over the LIBOR Index) and secured by a pledge of collateral consisting of the inventory, accounts, chattel paper, and equipment and fixtures of the Company. Outstanding amounts are due and payable by November 30, 2015 with a requirement that the Company is to reduce the outstanding principal balance to zero during the 30 day period ending on the anniversary date of the Note. This line of credit replaced a $700,000 line of credit with JP Morgan Chase Bank, N.A. The Company did not have any amounts outstanding under the lines at June 30, 2014 and 2013.
9. Notes Payable
The Company has a $230,000 36-month note payable through October 2014, to University of Maryland, Baltimore County, which was part of the consideration paid for the acquisition of the bioprocessing products business in November 2011, with monthly payments of $6,714 bearing interest at 3.25%. Amounts due under the note was $26,700 and $105,000 at June 30, 2014 and 2013, respectively.
10. Employee Benefit Plans
During the fiscal year ended June 30, 2013, the Company adopted a single 401(k) profit sharing plan covering all its employees, which provides for voluntary employee salary contributions not to exceed the statutory limitations provided by the Internal Revenue Code. The plan provides for Company matching contribution equal to 100% of employee's deferral up to 3% of pay, plus 50% of employee's deferral over 3% of pay up to 5%. Previously, the Company had two separate plans. Total matching contributions amounted to $49,600 and $42,800 for the years ended June 30, 2014 and 2013, respectively.
11. Commitments and Contingencies
The Company's current lease for its existing Bohemia, New York premises expires in January 2015, but will terminate upon the Company's move to a smaller neighboring facility in the same vicinity from the same landlord, at a lower rental rate under a new lease through February 2025, which requires minimum annual rental payments plus other expenses, including real estate taxes and insurance. The future minimum annual rental expense, computed on a straight-line basis, is approximately $177,600 under the terms of the new lease. Rental expense for the Bohemia facility under its current lease amounted to approximately $239,800 in 2014 and $233,500 in 2013. Accrued rent, payable in future years, amounted to $18,700 and $44,200 at June 30, 2014 and 2013, respectively.
The Company is also obligated under an operating lease for its facility in Pittsburgh, Pennsylvania, through November 2017, which requires monthly minimum rental payments through November 2017, plus common area expenses. Total rental expenses for the Pittsburgh facility was $95,000 and $77,200 for the fiscal years ended June 30, 2014 and 2013.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
11. Commitments and Contingencies (Continued)
In addition, the Company's new Torbal division was operating from a Clifton, New Jersey facility and as of mid-July 2014 moved to a significantly smaller office facility in Oradell, New Jersey from which it performs its sales and marketing functions. The Company was obligated under a previous agreement to pay $24,000 for an early lease termination for the Clifton facility. Total rental expenses for the New Jersey facilities, including the fee, was $47,900 for the fiscal year ended June 30, 2014.
The Company's approximate future minimum rental payments under all operating leases are as follows:
Fiscal Years
____________
2015 $ 251,700
2016 255,600
2017 264,000
2018 205,000
2019 174,000
Thereafter 841,600
___________
$ 1,991,900
===========
|
The Company has employment contracts with its President providing for an annual base salary of $154,000 and $150,000 for the fiscal years ending June 30, 2015 and 2014 and with its Executive Vice President providing for an annual base salary of $139,000 and $135,000 for the fiscal years ending June 30, 2015 and 2014. Both contracts also provide for discretionary performance bonuses. Bonuses of $10,000 and $5,000 were awarded to the President and Executive Vice President, respectively, for the year ended June 30, 2013. No bonuses were awarded for the fiscal year ended June 30, 2014 to either executive except for a stock option granted to the Executive Vice President during the year ended June 30, 2014, valued at $3,500 using the Black-Scholes- Merton option pricing model.
The Company has an employment contract with the President of Altamira through June 30, 2015, which may be extended by mutual consent for an additional year. The contract provides for an annual base salary of $140,000 and $135,000 for each of the fiscal years ending June 30, 2015 and 2014, respectively, plus discretionary bonuses. A bonus of $5,000 was awarded for the fiscal year ended June 30, 2013. No bonus was awarded for the fiscal year ended June 30, 2014, except for a stock option granted during the year ended June 30, 2014, valued at $3,500 using the Black-Scholes-Merton option pricing model.
The Company has a consulting agreement which expires on December 31, 2014 with an affiliate of the Chairman of the Board of Directors for marketing consulting services. The agreement provides that the consultant be paid a monthly fee of $3,600 for a certain number of consulting days as defined in the agreement. Stock options were granted to the Chairman of the Board of Directors valued at $8,700 during the year ended June 30, 2014. Consulting expense related to this agreement amounted to $50,100 and $44,600 for the years ended June 30, 2014 and 2013, respectively.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
11. Commitments and Contingencies (Continued)
The Company has an employment agreement dated February 2014 with the President of its Torbal Division which expires in February 2017, which may be extended by mutual consent for another two years. The contract provides for an annual base salary of $140,000 subject to increases commencing with the second year based on percentage increases in the Consumer Price Index from the end of the immediately preceding year's CPI plus discretionary bonuses. No bonuses were awarded during the fiscal year ended June 30, 2014, however as part of the employment agreement, he was awarded a 2,000 share stock option upon commencement of his employment with the Company valued at $3,900 using the Black-Scholes-Merton option pricing model. In addition, he is to be granted, subject to his continued employment in February 2015, 2016 and 2017 options for 4,000 shares, 5,000 shares and 6,000 shares, respectively.
The Company had a consulting agreement which expired March 31, 2014 with another member of its Board of Directors for administrative services providing that the consultant be paid at the rate of $85 per hour. Consulting expense related to this agreement amounted to $5,700 and $6,100 for the fiscal years ended June 30, 2014 and 2013, respectively.
12. Income Taxes
The reconciliation of the provision for income taxes at the federal statutory rate of 35% to the actual tax expense or benefit for the applicable fiscal year was as follows:
2014 2013
__________________ _________________
% of % of
Pre-tax Pre-tax
Amount Income Amount Income
_______ _______ ________ _______
Computed "expected" income tax $(37,500) (35.0%) $182,300 35.0%
Research and development
credits ( 1,600) ( 1.5) (30,700) ( 5.9)
Other, net 7,400 6.9 (27,200) ( 5.2)
_________ _______ _________ ______
Income tax expense (benefit) $(31,700) (29.6%) $124,400 23.9%
========= ======= ========= ======
|
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
12. Income Taxes (Continued)
Deferred tax assets and liabilities consist of the following:
2014 2013
__________ __________
Deferred tax assets:
Amortization of intangible assets $ 153,300 $ 146,100
Various accruals 75,100 49,600
Other 48,100 53,400
_________ _________
276,500 249,100
Deferred tax liability:
Depreciation of property
and amortization of goodwill (44,300) (56,300)
__________ __________
Net deferred tax assets $ 232,200 $ 192,800
========== ==========
|
The breakdown between current and long-term deferred tax assets and liabilities is as follows:
2014 2013
__________ __________
Current deferred tax assets $ 86,000 $ 86,600
_________ _________
Long-term deferred tax assets 190,500 162,500
Long-term deferred tax liabilities (44,300) (56,300)
__________ __________
Net long-term deferred tax asset 146,200 106,200
__________ __________
Net deferred tax assets $ 232,200 $ 192,800
========== ==========
|
ASC No. 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC No. 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As of June 30, 2014 and 2013, the Company did not have any unrecognized tax benefits related to various federal and state income tax matters.
The Company's policy is to recognize interest and penalties on any unrecognized tax benefits as a component of income tax expense. The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits. The Company is subject to U.S. federal income tax, as well as various state jurisdictions. The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ending June 30, 2011 through 2013. The Company does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
13. Stock Options
Option activity is summarized as follows:
Fiscal 2014 Fiscal 2013
_________________ __________________
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
_______ _______ _______ ________
Shares under option:
Outstanding, beginning of year 55,000 $ 2.86 60,000 $ 2.73
Granted 11,000 3.53 - -
Exercised (5,000) 1.35 (5,000) 1.25
________ ________
Outstanding, end of year 61,000 3.11 55,000 2.86
________ _______ ________ ________
Options exercisable at year-end 48,300 $ 2.82 51,000 $ 2.81
________ _______ ________ ________
Weighted average fair value per
share of options granted
during fiscal 2014 $1.78
_____
As of June 30, 2014 As of June 30, 2014
Options Outstanding Exercisable
_______________________________________________ ______________________
Weighted-
Average Weighted- Weighted-
Range Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Years) Price Outstanding Price
_________ ___________ ____________ _________ ___________ _________
$1.88 10,000 .2 $ 1.88 10,000 $ 1.88
$3.07-$3.71 51,000 4.17 $ 3.35 38,300 $ 3.28
________ ________
61,000 48,300
________ ________
|
As of June 30, 2013 As of June 30, 2013
Options Outstanding Exercisable
_______________________________________________ ______________________
Weighted-
Average Weighted- Weighted-
Range Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Years) Price Outstanding Price
_________ ___________ ____________ _________ ___________ _________
$1.35-$1.88 15,000 .94 $ 1.70 15,000 $ 1.70
$3.07-$3.71 40,000 3.72 $ 3.30 36,000 $ 3.27
________ ________
55,000 51,000
________ ________
|
SCIENTIFIC INDUSTRIES, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
14. Earnings (Loss) Per Common Share
Earnings (loss) per common share data was computed as follows:
2014 2013
__________ __________
Net income (loss) $ ( 75,300) $ 396,400
__________ __________
Weighted average common shares
outstanding 1,385,054 1,337,048
Effect of dilutive securities - 5,164
__________ __________
Weighted average dilutive common
shares outstanding 1,385,054 1,342,212
__________ __________
Basic earnings (loss) per common share $ (.05) $ .30
========== ==========
Diluted earnings (loss) per common share $ (.05) $ .30
========== ==========
|
Approximately 59,000 shares of the Company's common stock issuable upon the exercise of outstanding options were excluded from the calculation of diluted loss per common share, for the fiscal year ended June, 2014, because the effect would be anti-dilutive due to the loss for the period.
Approximately 40,000 shares of the Company's common stock issuable upon the exercise of outstanding options were excluded from the calculation of diluted earnings per common share for the year ended June 30, 2013, because the effect would be anti-dilutive.
Exhibit 32.0
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
I, Helena R. Santos, the Chief Executive Officer and Chief Financial Officer of Scientific Industries, Inc. (the "Company"), certify, to the best of my knowledge that:
1. I have reviewed this Annual Report on Form 10-K of the Company for the year ended June 30, 2014 (the "Annual Report");
2. the Annual Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
3. the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of Scientific Industries, Inc.
Date: September 26, 2014
By: /s/ Helena R. Santos
Helena R. Santos
Chief Executive Officer and
Chief Financial Officer
|
Exhibit 31.0
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT
I, Helena R. Santos, certify that:
(1) I have reviewed this Annual Report on Form 10-K of Scientific Industries, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting (that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter) that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and
(5) I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions);
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant?s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant?s internal control over financial reporting.
Date: September 26, 2014 By: /s/ Helena R. Santos Helena R. Santos |
Chief Executive Officer and
Chief Financial Officer
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
7/04
Agreement of Lease, made as of this 8th day of August in the year 2014, betweeen 80 ORVILLE DRIVE ASSOCIATES LLC, a Delaware limited liability company, having an address c/o Rechler Equity Partners, 85 South Service Road, Plainview, New York, party of the first part, hereinafter reerred to as OWNER, and SCIENTIFIC INDUSTRIES, INC., a Delaware corporation, having its principal business address at 70 Orville Drive, Bohemia, New York 11716, party of th second part, hereinafter referred to as Tenant,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner that certain 18,950 square foot space (designated as Suite 102), substantially as shown on the Rental Plan annexed hereto as Exhibit "A", located in the building 80 Orville Drive, Bohemia, New York
(or until such term shall sooner cease and expire as hereinafter provided) to commence on * and to end on * and both dates inclusive at the annual rental rate of "
* As set forth in the rider annexed hereto
which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private. at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any setoff or deduction whatsoever, except that Tenant shall pay the first full monthly installment(s) on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner's predecessor in interest, Owner may at Owner's option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributes, executors, administrators, legal representative, successors and assigns, hereby covenant as follows:
Rent: l. Tenant shall pay the rent as above and
as hereinafter provided.
Occupancy: 2. Tenant shall use and occupy the demised
premises for light assembly and warehousing of laboratory
products and offices ancillary threto.
provided such use is in accordance with the certificate of occupancy for the building, if any, and for no other purpose.
Alterations: 3. Subject to the terms of Par. 45 of the Rider, Tenant shall make no changes in or to the demised premises of any nature without Owner's prior written consent of Owner, and to the provisions of this article, Tenant, at Tenant's expense, may make alterations, installations.addirions or improvements which are nonstructural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises, using contractors or mechanics first approved in each instance by Owner (such approval not to be unreasonably withheld, conditioned or delayed). Tenant sha1l at its expense, before making any alterations, additions, installations or improvements obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon comp1etion) certificates of final approval thereof, if required, and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner. Tenant agrees to carry, and will cause Tenant's contractors and sub-contractors to carry, such worker's compensation. commercial general hability, personal and property damage insurance as Owner may reasonably require. If any mechanic's lien is filed against tbe demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenani within thirty (30) days thereafter, at Tenant's expense, by payment or filing a bond as permitted by law. All fixtures and all paneling, partitions, railings and like installations,installed in the demised premises at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty (20) days prior to the date fixed as the termination of this lease, elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the demised premises by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in this article shall be construed to give Owner title to, or to prevent Tenant's removal of trade fixtures, moveable office furniture and equipment, but upon removal of same from the demised premises, or upon removal of other installations as may be required by Owner. Tenant shall promptly, and at its expense, repair and restore the demised premises to the condition existing prior to any such installations (reasonable wear and tear and casualty excepted), and repair any damage to the demised premises of the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the demised premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be reatined as Owner's property of removed from the demised premises by Owner, at Tenant's expense.
Repairs: 4. Owner shall maintain and repair the exterior of and the public portions of the building and make all structural repairs (as defined in Par. 48 of the Rider). Tenant shall, throughout the term of this lease, take good care of the demised premises, including the bathrooms and lavatory facilities contained therein, if any, the windows, and window frames, and the fixtures and appurtenances therein (reasonable wear and tear excepted) and at Tenant's sole cost and expense promptly make all repairs thereto and to the building, whether structureal or non-structural in nature, cause by, or resulting from, the carelessnesss, omission, neglect or improper conduct of Tenant, Tenant's servants, employees, invitees, or licensees, and whether or not arising from Tenant's conduct or omission, when required by other provisions of this lease, including article 6. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant's fixtures, furniture, or equipment. All the aforesaid repairs shall be of quality or class equal to the original work or construction. If Tenant fails, after ten (10) days notice, to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by Owner at the expense of Tenant, and the expenses thereof incurred by Owner sha1l be collectible, as additional rent, after rendition of a bill or statement therefore. Owner agrees that in making such repairs, Owner shall use commercially reasonable efforts to minimize interference with Tenant's use and occupancy of the demised premises and its access thereto. Owner further agrees to perform all such repairs in a good and workmanlike manner with due diligence. If the demised premises be or become infested with vermin, Tenant shall at its expense, cause the same to be exterminated. Tenant shall give Owner prompt notice of any defective condition in any plumbing, heating system or elecmcal lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence, but at the expense of Tenant, if repairs are necessitated by damage or injury attributable to Tenant, Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner. Tenant or others making or failing to make any repairs, alterations, addinons or improvements in or to any portion of the building or the demised premises, or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any setoff or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of an action for damages for breach of contract. The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply.
Window S. Tenant will not clean nor require. permit, suffer Cleaning: or allow any window in the demised premises to
be cleaned from the outside in violatioa of Section 202 of the New York State Labor Law or any other applicable law, or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction.
Requirements
of Law
Fire Insurance,
Flood Loads:
6. Prior to the commencement of the lease term, if Tenant is then in possession, and at all times thereafter, Tenant shall at Tenant's sole cost and expense, promptly comply with all present and future laws, orders and regulations of all state, federal. municipal and local governments, departments, comissions and boards and any direction of any public officer pursuant to law, and all orders, and regulations of the New Yor kBoard of Fire Underwriters, Insurance Services Office, or any similar body which shall impose any violation. order or duty upon Owner or Tenant with respect to the demised premises, arising out of Tenant's use or manner of use thereof, or, with respect to the building, if arising out of Tenant's use or manner of use of the demised premises of the building (including the use permitted under the lease). Except as providedin Article 30 hereof, or in Paragraphs 45 or 48 of the Rider, nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulatious or requirements with respect thereto. In the event that there are alterations required to be performed to the demised premises to comply with applicable law that are not Tenant's responsibility hereunder, Owner shall perform such alternations. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner,or which shall or might subject Owner to any liability or responsibility to any person, or for property damage. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization and other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the demised premises in a manner which will increase the insurnnce rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. If by reason of failure to comply with the foregoing the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner; as addinonal rent for that ponion of all fire insurance premiums thereafter paid by Owner which shall have been changed because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up"or rate for the building or demised premises issued by a body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said parties. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines, and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient in Owner's judgment to absorb and prevent vibration, noise, and annoyance.
Subordination: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which the demised premises are a part, and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real propeny of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may reasonably request.
Tenant's 8. Owner or its agents shall not be liable
Liability Insurance for any damage to property of Tenant or of
Property others entrusted to employees of the building,
Loss, nor for the loss of, or damage to, any property
Damage, of Tenant by theft or otherwise, nor for any
Indemnity: injury or damage to persons or property resulting
from any cause of whatsoever nature, unless
caused by, or due to, the negligence willful
coduct of Owner,its agents, servants or
employees; Owner or its ageors shall not be
liable for any damage caused by other tenants
|
or persons in, upon or about said building or caused by operations, in connection of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law), for any reason whatsoever including, but not limited to, Owner's own acts, Owner shall not be liable for any damage Tenant may sustain thereby, and Tenant shall not be entitled to any compensation therefore nor abatement or diminution of rent, nor shall the same release Tenant from its obligations hereunder nor constitute an eviction.
Destruction
Fire, and
Other
Casualty:
9. (a) If the demised premises or any part thereof shall be damaged
by fire or other casualty, Tenant shall give immediate notice thereof
to Owner and this lease shall continue in full force and effect
except as hereinafter set forth. (b) If the demised premises are
partially damaged or rendered partially unusable by fire or other
casualty, the damages thereto shall be repaired by, and at the expense
of Owner, and the rent and other items of additional rent, until such
repair shall be substantially completed as defined in Paragraph 42(b)
of the Rider, shall be apportioned from the day following the casualty
according to the part of the demised premises which is usable. If a
substantial portion of the demised premises is damaged, and Tenant
cannot operate any part of its business previously operated in the
balance of the demised premises in an economically feasible manner,
fixed rent and additional rent will abate for the entire demised
premises. (c) If the demised premises are totally damaged
or rendered wholly unusable by fire or other casualty, then the
rent and other items of additional rent as hereinafter expressly
provided shall be proportionately paid up to the time of the casualty
and thenceforth shall cease until the date when the demised
premises shall have been repaired and restored by Owner (or sooner
reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owenr's right to elect
not to restore the same as hereinafter provided. (d) If the demised
premises are rendered wholly unusable or (whether or not the demised
premises are damaged in whole or in part) if the building shall be
so damaged that Owner shall decide to demolish it or to rebuild it,
then, in any of such events, Owner may elect to terminate this lease
by written notice to Tenant, given within sixty (60) days after
such fire or casulaty, or thirty (30) days after adjustment of the
insurance claim for such fire or casualty, whichever is
sooner, specifying a date for the expiration of the lease, which
date shall not be more than thirty (30) days after giving of such
notice, and upon the date specified in such notice the term of this
lease shall expire as fully and completely as if such date were the
date set forth above for the termination oft his lease, and Tenant
shall forthwith quit, surrender and vacate the demised premises
without prejudice however to Owner's rights and remedies against
Tenant under the lease provisions in effect prior to such
termination, and any rent owign shall be paid up to such date,
and any payments of rent made by Tenant which were on account of
any period subsequent to such date shall be returned to Tenant.
Unless Owner shall serve a termination notice as provided for
herein, Owner shall make the repairs and restorations under the
conditions of (b) and (c) hereof, with all reasonable expedition,
subject to delays due to adjustment of insurance claims, labor
troubles and causes beyond Owner's control. After any such
casualty, Tenant shall cooperate with Owner's restoration by
removing from the damaged portion of demised premises as promptly
as reasonably possible, all of Tenant's salvageable inventory
and movable equipment, furniture, and other property.
Tenant's liability fur rent shall resume five (5) days after
written notice from Owner that the demised premises are
substantially complete (as defined in the Rider) for Tenant's
occupancy. (e) Nothing contained hereinabove shall
relieve Tenant from liability that may exist as a result of damage
from fire or other casualty. Norwiths1anding anything contained
to the contrary in subdivisions (a) through (e) hereof,
including Owner's obligation to restore under subparagraph
(b) and (c) above, each party shall look first to any insurance
in its favor before making any claim against the other party
for recovery for loss or damage resulting from fire or other
casualty, and to the extent that such insurance is in force and
collectible. and to the extent permitted by law, Owne rand
Tenant eac hhereby releases and waives all right of recovery
with respect tO subbparagraphs (b), (d) and (e) above, against
the other or any one claiming through or under each of them by
way of subrogation or otherwise. The release and waiver herein
referred to shall be deemed to include any loss or damage to
the demised premises and/or tO any personal property,
equipment, trade fixtures, goods and merchandise located
therin. The foregoing release and waiver shall be in force
only if both releasors' insurance policies contain a clause
providing that such a release or waiver shall not unvalidate
the insurnnce. If, and to the extent that such waiver can
be obtained only by the payment of additiooal premiums, then the
party benefiting from the waiver shall pay such premium
within ten (l0) days after written demand or shall be deemed to
have agreed that the party obtaining insurance coverage
shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant
acknowledges that Owner will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment,
or appurtenances removable by Tenant, and agrees that Owner
will not be obligated to repair any damage thereto or replace
the same.(f)Tenant hereby waives the provisions of Section 227
of the Real Property Law and agrees that the provisions of this
article shall govern and control in lieu thereof.
Eminent
demised
Domain:
10. If the whole or any material part of the by premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, thenand in that event, the term of this lease shall cease and terminate from the date of title vesting in such procccding and Tenant shall have no claim for the value of a ny unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant's moving expenses and personal property, trade fixtures and equipment. provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term, and provided further such claim does not reduce Owner's award.
Assignment,
Mortgage,
Etc.:
11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority interest in any partnership or other legal entity which is Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied fby anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, undertenant or occupant, and apply the net amounts collected to the rent herein reserved, but no such assignment, underletting, occupancy, or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, undertenant or occupant as tenant, or a release of Tenant from the furhter performance of Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting. See Par. 54 of Rider.
Electric Current:
12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto, Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation, and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no way make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain.
Access to
Premises:
13. Owner or Owner's agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times upon reasonable advance notice to Tenant (except in the event of an emergency) to examine the same and to make such repairs, replacements and improvements as owner may deem necessary and reasonably desirable to any portion of the building, or which Owner may elect to perform in the demised premises after Tenant's failure to make repairs, or perform any work which Tenant is obligated to perform under this lease, or for the purpose of complying with laws, regulations and other directions of governmental authorities. Tenant shall permit Owner to use, maintain and replace pipes, ducts, and conduits in and through the demised premises, and to erect new pipes, ducts, and conduits therein provided, wherever possible, that they are within walls or otherwise concealed. Owner may during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction, nor shall Tenant be entitled to any abatement of rent while such work is in progress, nor to any damages by reason of loss or interruption of business or otherwise. Notwithstanding the foregoing, Owner will be liable for any damage caused by the negligence or willful misconduct of Owner or Owner's agents or employees, throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours upon reasonable advance notice to Tenant, for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last twelve (12) months of the term for the purpose of showing the same to prospective tenants, and may, during said twelve (12) months period, place upon the demised premises the usual notices "To Let" and "For Sale" which notices Tenant shall permit to remain thereon without molestation. If Tenant is not present to open and permit an entry into the demised premises, Owner or Owner's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly, and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefore, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom, Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation, adn such act shall have no effect on this lease or Tenant's obligation hereunder. When exercising Owenr's rights hereunder, Owner agrees that Owner shall use commercially reasonable efforts to minimize interference with Tenant's use and occupancy of the demised premises and its access thereto, and Owner agrees to perform all such work with due diligence.
Vault,
Vault Space,
Area:
14. No vaults, valut space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder, anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area to be diminished or required by any federal, state or municipal authority or public utility, Owner shall not be subject to any liability, nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant, if used by Tenant, whether or not specifically leased hereunder.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in violation of tbe certificate of occupancy issued for the building of which the demised premises are a part. Tenant bas inspected the demised premises and accepts them as is, subject to the rider annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the demised premises and Tenant agrees to accept the same subject to violations, whether or not of record. lf any governmental license or pemiit shall be required for the proper and lawful conduct of Tenant's business, Tenant shall be responsible for, and shall procure and maintain, such license or permit. Owner represents and warrants that, to the best of Owner's knowledge, the demised premises are free from Asbestos Containing Materials. Owner agrees to defend, indemnify and hold harmless Tenant from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses, arising out of a breach of the foregoing representation and warranty by Owner.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by
sending of a written notice to Tenant within a reasonable
time after the happening of any one or more of the following
events: (1 )the commencement of a case in bankruptcy or under
the laws of any state naming Tenant(or a guarantor of any of
Tenant'sobligations under this lease) as the debtor; which, in the
case of an involuntary bankruptcy, is not dismissed within sixty
(60) days of the commencement thereof or (2) the making by Tenant
(or a guarantor of any of Tenant's obligations under this lease)
of an assignment or any other arrangement for the benefit of
creditors under any state stature. Neither Tenant nor any person
claiming through or under Tenant, or by reason of any statute or
order of court, shall thereafter be entitled to possession of the
premises demised, but shall forthwith quit and surrender the
demised premises. If this lease shall be assigned in accordance
with its terms, the provisions of this Article 16 shall be applicable
only to the party then owning Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the termination
of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisioas of this lease to the contrary,
to the extent permitted by law, be entitled to recover from
Tenant, as and for liquidated damages, an amount equal to the
difference between the rental reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental
value of the demised premises for the same period. In the
computation of such damages the difference between any installment
of rent becoming due hereunder after the date of termination and
the fair and reasonable rental value of the demised premises
for the period for whicb such installment was payable shall be
discounted to the date of ternination at the rate of four percent
(4%) per annum. If the demised premises or any part thereof be
relet by Owner for the unexpired term of said lease, or any part
thereof before presentation of proof of such liquidated damages
to any court, commission or tribunal, the amouct of rent
reserved upon such reletting shall be deemed to be the fair and
reasonable rental value for the part or the whole of the demised
premises so re-let during the term of tbe re-letting. Nothing herein
contained shall limit or preJUdice the right of the Owner to
prove for and obtain as liquidated damages by reason of such
termination an amount equal to the maximum allowed by any
statute or rule of law in effect at the time wben, and
governing the proceedings in which, such damages are to be proved
whether or not such amount be greater, equal to, or less than
the amount of the difference referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the
covenants of this lease other than the covenants for the payment
of rent or additional rent; or if the demised premises becomes
vacant or deserted, or if this lease be rejected under SS365
of Title 11 of the U.S. Code (Bankruptcy Code); or if any
execution or attachment shall be issued against Tenant ar any
of Tenant's property whereupon the demised premises shall
be taken or occupied by someone Other than Tenant; or if
Tenant shall be in default after the expiration of all applicable
notice and cure periods with respect to any other lease between
Owner and Tenant; or if Tenant shall have failed, after five
(5) days written notice to redeposit with owner any portion
of the security deposited hereunder which Owner has applied to
the payment of any rent and additional rent due and payable
hereunder; or if Tenant fails to move into or take possessionof the
demised premises withm thirty (30) days after the commencement of
the term of this lease, of which fact Owner shall be the sole
judge; then in any one or more of such events, upon
Owner serving a written fifteen (15) days notice upon Tenant
specifying the nature of said default, and upon the expiration of
said fifteen (15) days, if Tenant shall have tailed to comply
with or remedy such default, or if the said default or omission
complained of shall be of a nature that the same cannot be
completely cured or remedied within said fifteen (15) day period,
and if Tenant shall not have diligently commenced during such
default within such fifteen (15) day period, and shall not
thereafter with reasonable diligence and in good faith, proceed
to remedy or cure such default, then Owner may serve a written
five (5) days notice of cancellation of this lease upon Tenant,
and upon the expiration of said five (5) days this lease and
the term thereunder shall end and expire as fully and completely
as if the expiration of such five (5) day period were the day
herein definitely fixed for the end and expiration of this
lease and the term thereof, and Tenant shall thenq uit and
surrender the demised premises to Owner, but Tenant shall
remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall be in default in the payment of the rent reserved herein or any item of additional rent herein mentioned, or any part of either, or in making any other payment herein rqeuired and such payment default has not been cured within five (5) days after notice hereof; then, and in any of such events, owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of the demises premises, and remove their effects and hold the demised premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice.
Remedies of
Owner and
Waiver of
Redemption:
18. In case of any such default, re-entry, expiration and/or disposes by summary proceedings or otherwise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time of such re-entry, disposess and/or expiration, (b) Owner may re-let the demised premises or any part of parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner's option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease. (c) Tenant or the legal representatives of Tenant shall also pay to Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant's covenants herein contained, any deficiency between the rent hereby reserved and or convenanted to be paid and the net amount if any, of the rents collected on account of the subsequent lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the demised premises or any part or parts thereof shall not release or affect Tenant's liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting such as reasonable attorney's fees, brokerage, advertising, and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be apid in monthly installments by Tenant on the rent day specified in this lease, and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner's option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner's sole judgement, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demises premises, or in the event that the demised premises are re-let for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over teh sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have teh right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws.
Fees and
Expenses:
19. If Tenanl shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under, or by virtue of, any of the terms or provisions in any article of this lease, after notice if requried, and upon expiration of the applicable grace period, if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately, or at any time thereafter, and without notice, perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing, or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money; including but not limited to reasonable attorneys' fees, in instituting, prosecuting or defending any action or proceeding, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owenr within ten (10) days of rendition of any bill or statement to Tenant therefore. If Tenant's lease term shall have expired at the time of making such expenditures or incurring of such obligations such sums shall be recoverable by Owner as damages.
Building
Alterations and
Management:
20. Owner shall have the right at any time, without the same constituting an eviction and without incurring liability to Tenant therefore, to change the arrangement and or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or othe rpublic parts of the building, and to change the name, number or designation by which the building may be known upon reasonable written notice to Tenant, provided any such change does not materially adversely affect Tenant's access to, or use and enjoyment of, the demised premises or in any way diminish Tenant's usable square footage. Owner shall use all reasonable efforts to perform all work or other business in the demised premises in a manner designed to minimize interference with Tenant's normal business operations. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenant making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of imposition of any controls of the manner of access to the building by Tenant's social or business visitors, as Owner may deem necessary, for the security of the building and its occupants.
No Repre-
sentations
by Owner:
21. Neither Owner nor Owner's agents have made any representations or promises with respect to the physical condition of the building, the land upon which is erected, the demised premises, the rents, leases, expenses of operation, or any other matter or thing affecting or related to the demised premises or the building, except as herein expressly set forth, and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant bas inspected or has waived the right to inspect the building and the demised premises, and is thoroughly acquainted with their condition and agrees to take the same "as-is" on the date possession is tendered subject to Owner's completion in a good and workmanlike manner of Landlord's WOrk (as defined in the Rider), and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that1 the said premises, and the building of which the same form a part, were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant, and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandomnent of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom eenforcement of the change, modification, discharge orabandonment is sought.
End of
Term:
22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner 1he demised premises, "broom-clean" in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewherein this lease excepted, and Tenant shall remove all its property from the demised premises. Tenant'sobligation to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this lease, or any renewal thereof falls on Sunday, this lease shall expire at noon on the preceding Saturday, unless it be a legal holiday, in which case it shall expire at noon on the preceding business day.
Quiet
Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and additional rent and observing and performing all the terms, covenants and conditions.on Tenant's part to be observed and performed, Tenant may peaceably and quietly eojoy the premises hereby demised' subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 34 hereof. and to the ground leases, underlying leases and mortgages bereinbefore mentioned.
Failure to
Give
Possession:
24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof because of the tenant, undertenant or occupants, of if the demised premises are located in a building being construed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured, or if Owner has not completed any work required to be performed by Owner, or for any other reason. Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any way to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession or complete any work required) until after Owner shall have given Tenant notice that Owner is able to deliver possession in the condition required by this lease. If permission is given to Tenant to enter into possession of the demised premises, or to occupy premises other than the demised premises, prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such possession and/or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except the obligation to pay the fixed annual rent set forth in page one of this lease. The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223 of the New York Real Property Law.
No Waiver:
25. The failure of Owner or Tenant to seek redress for violation of. or to insist upon the strict performance of, any covenant or condition of this lease, or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenantof this lease shall not be deemed a waiver of such breach, and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant, or receipt by Owner, of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided All checks tendered to Owner as and for the rent of the demised premises shall be deemed payments fur the account of Tenant. Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the payor of such rent, or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or as a modification of the provisions of this lease. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises, and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No Employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease, and the delivery of keys to any such agent or employee shall not operate as a termination of the lease, and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the demised premises.
Waiver of
Trial by Jury:
26. It is mutually agreedby and between Owner and Tenant that the respective parties hereto shall, and they hereby do,waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of demised premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceedings or action for possession, including a summary proceeding for possession of the demised premises, Tenant will not interpose any counterclaim, of whatever nature or description, in any such proceeding, including a counterclaim under Article 4, except for statutory mandatory counterclaims.
Inability to
27. This lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no way be affected, impaired or excused because Owneris unableto fulfill any of its obligations under this lease,or to supply, or is delayedin supplying, any service expressly or impliedly to be supplied, or is unable to make. or is delayedinmaking, any repairs,additions, alterations or decorations,or is unable to supply, or is delayed in supplying, any equipment, fixtures or other materials, if Owner is prevented or delayed from doing so by reason of strike or labor troubles,or any cause whatsoever beyond Owner's sole control including, bur not limited to, government preemption or restrictions, or by reason of any rule, orderor regulationof any department or subdivision thereof of any government agency, or by reason of the conditions which have been or are affected, either directlyor indirectly, by war or other emergency.
Bills and
any
Notices:
28. Except as otherwisein this lease provided, any notice, statement,
demand or other commumcation required or permittedto be given, rendered
or made by either party to the other, pursuant to this lease or
pursuant to any applicable law or requirement of public authority,
shall be in writing (whether or not so stated elsewhere in this lease)
and shall be deemed to have been properly given, rendered or made, if
sent by registered or certified mail (expressmail, if available),return
receipt requested, or by courier guaranteeing overnight delivery and
furnishing a receipt in evidence thereof, addressed to the other
party at the address hereinaboveset forth (except that after the date
specified as the commencement of the term of this lease, Tenant's
address, unless Tenant shall give notice to the contrary, shall be
the building), and shall be deemed to have been given, rendered
or made 9a) o the date delivered, if delivered to Tenant personally,
(b) on the date delivered, if delivered by overnight courier or
(c) on the date which is two (2) days after being mailed.
Either party may, by notice as aforesaid, designate a different
address or addresses for notices statements, demand or other
communications intended for it. Notices given by Owner's managing
agent shall be deemed a valid notice if addressed and set in
accordance with the provisions of this Article. At Owner's option,
notices and bills to Tenant may be sent by hand delivery.
Water Charges:
29. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory purposes (of which fact Owner shall be the sole judge) Owner may install a wate rmeter and thereby measure Teaant's water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of tae installation. Throughout the duration of Tenant's occupancyT, enant shall keep said meter and installation equipmentin good working order and repair at Tenant's own cost and expense. In the event Tenant fails to maintain the meter and installation equipment in good worrking order and repair (of which fact Owner shall be the solejudge) Owner may cause such meterand equipment.to be replaced or repaired, and collect the cost thereoffrom Tenant as additional rent Tenant agrees to pay for water consumed,as shownon said meteras and when bills are rendered, and in the eventTenant defaults in the making of such payment, Owner may pay such charges and collect the same from Tenant as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge or any other taX, rent or levy which now or hereafter is assessed, imposed or a lien upon the demised premises,or the realty of which they are a part, pursuant to any law, order or regulation made or issued in connection with the use, consumption, maintenance or supply of water, the water system or sewage or sewage connection or system. If the building, the demised premises, or any part thereof,is supplied with water through a meter through which water is also supplied to other premises, Tenanr shall pay to Owner, as additional rent, r"""'~ on the first day of each month. * % $ XXXXXXX) of the total meter charges as Tenant's portion. Independentlyof, and in addition to, any of the remedies reserved to Owner herein above or elsewhere in this lease, Owner may sue forand collect any monies to be paid by Tenant, or paid by Owner, for any of the reasons or purposes herein aboveset forth.
Sprinklers:
30. Anything elsewhere in this lease to the contrary notwithstanding, if the New York Board of Fire Underwriter; or the New York Fire Insurance Exchange or any bureau, department or official of the federal, state or city government recommend or require, as a result of Tenant's specific use of the demised premises, the installation of a sprinkler system, or that any changes, modifications, alterations, or additional sprinkler heads or other equipment be made or supplied in an existing sprinkler system by reason of Tenant's business, the location of partitions, trade fixtures, or other contents of the demised premises, or if any such sprinkler system installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary, by reason of Tenant's specific use of the demised premises or the location of partitions, trade fixtures or other contents of the demised premises, to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rate set by said Exchange or any otherbody making fire insurance rates, or by any fire insurance company, Tenant shall, at Tenant's expense, promptly make such sprinkler system installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required, whether the work involved shall be structural or non-structural in nature. Tenant shall pay to Owner as additional rent *, on the first day of each month during the term of this lease of the contract perice for sprinkler supervisory service.
Elevators, Heat,
Cleaning:
31. Tenant shall, at Tenant's expense, keep the demised premises, including the windows, clean and in order, to the reasonable satisfaction of owner, and for that purpose shall employ person or persons, or corpororations approved by Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse and rubbish from teh building. Bills for the same shall be rendered by Owner to Tenant at such time as Owner may elect, and shall be due and payable hereunder, and the amount of such bills shall be deemed to be, and be paid as additional rent. Tenant shall, however, have the option of independently contracting for the removal of such rubbish and refuse in the event that Tenant does not wish to have same done by employees of owner Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations as, in the judgment of Owner, are necessary for the proper operation of the building. Owner reserves the right to stop service of the heating, elevator, plumbing and electric systems, when necessary by reason of accident or emergency, or for repairs, alterations, replacements or improvements, which in the judgement of Owner are desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. If the building of which the demised premises are a part supplies manually operated elevator service, Owner may proceed diligently with alterations necessary to substitute automatic control elevator service without in any way affecting teh obligations of Tenant hereunder.
* - Tenant's proportionate Share
Captions:
33. The Captions are inserted only as a matter of convenience and for reference, and in no way define, limit or descibe the scope of this lease nor the intent of any provision thereof.
Definitions:
34. The term"Owner"as used in this lease means only the owner of the fee or of the leasehold of the building, or the mortgagee in possession for the time being, of the land and building (or the owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales or conveyance, assignment or transfer of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest; or between the parties and the purchaser, grantee, assignee or transferee at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner hereunder. The words "re-enter"and "re-entry" as used in this lease are not restricted to their technical lega1 meaning. The term "rent" includes the annual rental rate whether so expressed or expressed in monthhly installments, and "additional rent," "Additional rent" means all sums which shall be due to Owner from Tenant under this lease, in addition to the annual rental rate. The term "business days'' as used in this lease, shall exclude Saturdays, Sundays and all days observed by the State or Federal Government as legal holidays, and those designated as holidays by the applicable building service union employees service contract, or by the applicable Operating Engineers contract with respect to HVAC service. Wherever it is expressly provided in this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed.
Adjacent
Excavation-
Shoring:
35. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, a license to enter upon the demised premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building, of which demised premises form a part, from injury or damage, and to support the same by proper foundations, without any claim for damages or indemnity against Owner, or diminution or abatement of rent.
Rules and
Regulations:
36. Tenant and Tenant's servants, employees, agetns, visitors and licensees, shall observe faithfully, and comply strictly with, the Rules and Regulations annexed hereto and such other and further reasonable Rules and Regulations as owner or Owner's agents may from time to time adopt. Notice of any additional Rules or Regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rules, or Regulations hereafter made or adopted by Owner or Owner's agents, the parties hereto agree to submit the question of the reasonableness of any additional Rules, or Regulations upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice, in writing, upon Owner, within fifteen (15) days after the giving of notice thereof. Nothing in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce Rules and Regulations or terms, covenants or conditions, in any other lease, as against any other tenant, and Owner shall not be liable to Tenant for violation of the same by an other tenant, its servants, employees, agents, visitors or licensees.
Glass:
37. Owner shall replace, at the expense of Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the demised premises. Owner may insure and keep insured. ar Tenant's expense, all plate and other glass in the demised premises for and in the name of Owner. Bills for the premiums therefore shall be rendered by Owner to Tenant at such times as Owner may elect, and shall be due from, and payable by Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, additional rent.
Estoppel Certificate:
38. Tenant, at any time, and from time to rime, upon at least ten (10) days prior notice by Owner, shall execute, acknowledge and deliverto Owner, and/or to any other person, firm or corporation specified by Owner, a statemenf c ertifying that this lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, stating whether or not to Tenant's knowledge, there exists any default by Owner under this lease, and, if so, specifying each such default and such other informationas sball be reasonably required of Tenant.
Successors
and Assigns:
40. The covenants, conditions and agrcemems comamed in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees. executors, administrators, successors, and except as otherwise provided in this lease, their assigns, Tenant shall look only to Owner's estate and interest in the land and building for the satisfaction of Tenant's remedies for the collection of a judgement (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner (or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under, or with respect to, this lease, the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of the premises.
SEE RIDER ANNEXED HERETO AND MADE A PART HEREOF
In Witness Whereof, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written.
80 ORVILLE DRIVE ASSOCIATES LLC
By: Rechler Equity I LLC, its managing member
By: Rechler Equity MM I LLC, its managing member
By: Rechler Equity LLC, its managing member
By: /s/ Mitchell Rechler Name:_______________ Title:______________ |
SCIENTIFIC INDUSTRIES, INC.
By: /s/ Helena Santos _____________________ Name: Title: |
ACKNOWLEDGEMENT
STATE OF NEW YORK,
SS.:
COUNTY OF
On the day of
in the year before me, the undersigned,
|
a Notary Public in and for said State, personally appeared __________________________________personally known to me or proved to me on the basis of satisfactory evidence to be the inclividual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/sbe/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A PART oF THIS
LEASE
IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances. driveways, passages, courts, elevators, vestibules, stairways, corridors or halls shall not, be obstructed or encumbered by Tenant or used for any purpose other than for ingress or egress from the demised premises and for delivery of merchandise and equipment in a prompt and efficient manner, using elevators and passageways designated for such delivery by Owner. There shall not be used many space, or in the public hall of the building, either by Tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and sideguards. If said premises are situated on the ground floor of the building. Tenant shall further, at Tenant's expense. keep the sidewalk and curb in fron1 of said premises clean and me from see. snow,din and rubbish.
2. The water and wash closest and plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed, and no sweepings, rubbish, rags, acids or other substance shall be deposited therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by Tenant, whether or not caused by Tenant, its clerks, agents, employees or visitors.
3. No carpet, rug or other article shall be hnng or shaken out of any window of the building; and Tenant shall nor sweep or throw. or permit to be swept or lhrc:wn substances from the demised premises, any dirt or other substance into any of the corridors of halls, elevators, or out of the doors or windows or stairways of the building, and Tenant shall not use, keep, or permit to be used or kept, any foul or noxious gas or substance in the demised premises, or permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to Owner or other occupant of the buildings by reason of noise, odors, and or vibrations, or interfere in any way, with other tenants or those having business therein, nor shall any bicycles, vehicles, animals, fish or birds be kept in or about the building. Smoking or carrying lighted cigars or cigarettes in the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of the building without the prior written consent of Owner.
_ 5. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by Tenant on any part of the outside of the demised premises or the building, or on the inside of the demised premises if the same is visible from the outside of the demised premises, withou the prior written consent of Owner, except that the name of Tenant may appear on the entrance door of the demised premises. In the event of the violation of the foregoing by Tenant, Owner may removes ame without any liability, and may charge the expense incurred by such removal to Tenant. Interior signs on doors and directory tablet shall be inscribed, painted, or affixed for Tenant by Owner at the expense of Tenant, and shall be of a size, color and style acceptable to Owner.
6. Tenant shall not mark, paint, drill into, or in any way deface any part of the demised premises or the building of which they form a part. No boring, cutting, or stringing of wires shall be permitted, except with the prior written consent of Owner and as Owner may direct. Tenant shall not lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised premises, and, if linoleum or other similar floor covering is desired to be used, an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by Tenant, nor shall any changes be made in existing locks or mechanism thereof, Tenant must, upon the termination of his tenancy, restore to Owner all keys of stores, offices and toiler rooms either furnished to, or otherwise procured by, Tenant, and in the event of the loss of any keys, so furnished. Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the demised premises only on the freight elevators and through the service entrances and corridors, and only during hours, and in a manner approved by Owner, Owner reserve sthe right to inspect all freight to be brought into the building, and to exclude from the building all freight which violates any of these Rules and Regulations of the lease, of which these Rules and Regulations are a part.
9: Tenant shall not obtain for use upon the demised premises ice, drinking water, towel and other similar services, or accept barbering or bootblacking services in the demised premises, except from persons authorized by Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting and peddling to the building is prohibited and Tenant shall cooperate to prevent the same.
ll. Owner shall have the right to prohibit any advertising by Tenant which in Owner's opinion, tends to impair the reputation of the building or its desirability as a loft building, and upon written notice from Owner. Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept, in or on the demised premises, any inflammable, combustible, explosive or hazardous fluid, material, chemical or substance. or cause or permit any odors of cooking or other processes, or any unusual or other objectionable odors, to permeate in, or emanate from, the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs or interferes with other tenants in the beneficial use of their premises.
41. Definitions. For purposes of this lease, the term "Building" shall mean the building located at 80 Orville Drive, Bohemia, New York of which the Demised Premises form a part, and the term "Real Property" shall mean the Building and the land and improvements appurtenant to and used in connection with the Building. The parties hereby stipulate and agree that the Demised Premises (herein referred to as the "Demised Premises" or the "demised premises") contains 18,950 rentable square feet of space (designated at Suite 102) in the Building containing 92,742 rentable square feet which constitutes 20.43 percent of the area of the Building ("Tenant's Proportionate Share"). For the purposes of this rider, all references to the term "Landlord" shall mean and refer to Owner.
42. Term.
(a) The term ("Term", "term" or "Demised Term") of this
lease, Tenant's right to occupy the Demised Premises and Tenant's
obligation to pay Rent (as defined in Paragraph 43 hereof) and all
items of additional rent shall commence on the later to occur of (i)
Substantial Completion (as hereinafter defined) of Landlord's Work
(as hereinafter defined), and (ii) November 1, 2014 (the "Commencement
Date"); provided, however, that, subject to the terms of Paragraph 64
hereof, if Substantial Completion has not occurred on or prior to
January 31, 2015, then Tenant shall have the right to holdover under
the 70 Orville Lease (as hereinafter defined), without penalty,
until Substantial Completion of Landlord's Work and delivery of
possession of the Demised Premises to Tenant in the condition required
hereunder have occurred. Upon the occurrence of the Commencement
Date, the 70 Orville Lease shall terminate. The Term of this lease
shall expire on the day preceding the day which is ten (10) years and
three (3) months after (x) the Commencement Date (but only if the
Commencement Date occurred on the first day of a calendar month) or
(y) the first day of the first full calendar month following the
Commencement Date (if the Commencement Date did not occur on the
first day of a calendar month) (the "Expiration Date").
(b) The terms "Substantial Completion" and "Substantially
Completed" (or other variations thereof), as used herein, are defined
to mean when the only items of Landlord?s Work needed to be completed
are punchlist items, the non-completion of which would not delay
occupancy, including, without limitation, such details of construction,
decoration, mechanical adjustment or installation which do not hinder
or impede the use or occupancy of the Demised Premises for its
intended use; but if Landlord shall be delayed in such "Substantial
Completion" as a result of (i) Tenant's changes to the plans or
specifications attached hereto as Exhibit A; (ii) Tenant's request
for materials, finishes or installations other than Landlord's
standard; (iii) the performance or completion of any work, labor or
services by a party employed by Tenant; (vi) Tenant's interference
or failure to reasonably cooperate with the performance of
Landlord's Work (including without limitation the execution of
documents required by the local municipality); (v) Tenant's
failure to approve, or approve subject to adjustments required to
reflect the Rental Plan annexed hereto as Exhibit A, final
construction documents within five (5) business days after
submission thereof to Tenant for approval; (vi) Tenant's failure
to provide Landlord with finish specifications for Landlord's
Work within seven (7) days of Landlord's delivery to Tenant of a
fully-executed original of this lease; or (vii) Tenant's failure
to pay the initial installment of Rent and/or the other monies
to be paid to Landlord as required hereunder (it being understood
and agreed that Landlord shall not be required to commence the
performance of Landlord?s Work until all such deliveries and
payments have been made) (all such delays being hereinafter
referred to as ?Tenant Delay?); then the Commencement Date
shall be accelerated by the number of days of such Tenant Delay
(however, Landlord shall not be obligated to deliver the Demised
Premises to Tenant and Tenant shall not have the right to occupy
the Demised Premises until Landlord?s Work is ?Substantially
Completed?). Moreover, in the event of an accumulation of
Tenant Delays in excess of forty-five (45) days in the aggregate,
the Commencement Date shall automatically be deemed to be the
date that is ten weeks following the effective date of this
lease. Tenant waives any right to rescind this lease under
Section 223-a of the New York Real Property Law or any successor
statute of similar import then in force and further waives the
right to recover any damages which may result from Landlord's
failure to deliver possession of the Demised Premises on the
Commencement Date set forth in Paragraph 42(a) above. Landlord
will obtain a Certificate of Occupancy or Certificate of
Completion for the Demised Premises after the Commencement Date.
Notwithstanding anything to the contrary contained herein,
Landlord shall use commercially reasonable efforts to complete
any punchlist items within thirty (30) days of Substantial
Completion, provided same shall be reasonably capable of
completion within such timeframe.
(c) A "Lease Year" shall be comprised of a period of twelve (12) consecutive months (except the eleventh Lease Year, which shall consist of three (3) consecutive months). The first Lease Year shall commence on the Commencement Date but, notwithstanding the first sentence of this paragraph, if the Commencement Date is not the first day of a month, then the first Lease Year shall include the additional period from the Commencement Date to the end of the then current month. Each succeeding Lease Year shall end on the anniversary date of the last day of the preceding Lease Year (except the eleventh Lease Year). For example, if the Commencement Date is December 1, 2014, the first Lease Year would begin on December 1, 2014, and end on November 30, 2015, and each succeeding Lease Year would end on November 30th (except the eleventh Lease Year, which would end on February 28, 2025). If, however, the Commencement Date is December 2, 2014 the first Lease Year would end on December 31, 2015, the second Lease Year would commence on January 1, 2016, and each succeeding Lease Year would end on December 31st (except the eleventh Lease Year, which would end on March 31, 2025).
(d) If, within five (5) business days after Landlord's delivery to Tenant of a notice (which may be via fax or email or via written notice) confirming the Commencement Date under this lease and, if applicable, the date of substantial completion, Tenant does not object to the accuracy of the dates set forth in such notice, Tenant shall be deemed to have approved the dates set forth in said notice.
(e) Tenant shall be provided access to the Demised
Premises (i) three (3) weeks prior to the Commencement Date for
the setting up and installation of telephone, computer and
internet connections, compression lines and an alarm system,
and (ii) two (2) weeks prior to the Commencement Date in order
to place inventory and personal property and for installation
of furniture, fixtures and equipment, provided, however, that
(a) in no event shall Tenant install any racks in the Demised
Premises in the event Substantial Completion has not occurred
and (b) in no event shall Tenant materially interfere with
Landlord?s Work during such early access periods. If Tenant
or its agents and/or contractors enter the Demised Premises
prior to the Commencement Date in order for Tenant to install
its telephone, internet and computer lines, alarm system, or
furniture, or for the performance of any Alterations (as
hereinafter defined) or installations in preparation for Tenant's
occupancy thereof, all of the provisions of this lease,
except Tenant's obligation to pay Rent, shall govern such entry
(including without limitation, Tenant's insurance and
indemnification obligations). Any such entry shall be subject
to Landlord?s prior written consent. Prior to entering the
Demised Premises Tenant shall deliver to Landlord (a) evidence
of all insurance policies required to be maintained by Tenant
under this lease, and (b) evidence of insurance satisfactory
to Landlord maintained by the contractors or vendors entering
the Demised Premises. Tenant shall coordinate Tenant?s (and/or
Tenant's contractors and/or Tenant?s employees) entry upon the
Demised Premises and the performance of the above-referenced
installations (and the timing thereof) with Landlord, and Tenant
(and Tenant's contractors and employees) shall not interfere with
Landlord's performance of Landlord's Work (hereinafter defined),
if any, in entering upon the Demised Premises and/or in performing
such installations. In the event that Tenant (and/or Tenant's
contractors and/or Tenant's employees) interferes with Landlord's
performance of Landlord's Work, such interference shall
be deemed a Tenant Delay (in addition to those delineated herein).
43. Rent.
(a) During the term of this lease, Tenant shall pay minimum annual rent ("Rent?) as follows:
During the first Lease Year, the Rent shall be $176,866.62, payable $37,899.99 for the first month and $12,633.33 for each of the second through twelfth months.
During the second Lease Year, the Rent shall be $156,147.96, payable in equal monthly installments of $13,012.33.
During the third Lease Year, the Rent shall be $160,832.40, payable in equal monthly installments of $13,402.70.
During the fourth Lease Year, the Rent shall be $165,657.36, payable in equal monthly installments of $13,804.78.
During the fifth Lease Year, the Rent shall be $170,627.16, payable in equal monthly installments of $14,218.93.
During the sixth Lease Year, the Rent shall be $175,746.00, payable in equal monthly installments of $14,645.50.
During the seventh Lease Year, the Rent shall be $181,018.32, payable in equal monthly installments of $15,084.86.
During the eighth Lease Year, the Rent shall be $186,448.92, payable in equal monthly installments of $15,537.41.
During the ninth Lease Year, the Rent shall be $192,042.36, payable in equal monthly installments of $16,003.53.
During the tenth Lease Year, the Rent shall be $197,803.56, payable in equal monthly installments of $16,483.63.
During the eleventh Lease Year (which shall consist of three (3) months only), the Rent shall be $25,667.76, payable $16,978.14 for the first month and $4,344.81 for each of the second and third months.
(b) Additionally, should the Commencement Date be a date other than the first day of a calendar month, Tenant shall pay a pro rata portion of the Rent on a per diem basis, based upon the second full calendar month of the first Lease Year, from such date to and including the last day of that current calendar month, and the first Lease Year shall include said partial month. The rent payable for such partial month shall be in addition to the Rent payable pursuant to the Rent schedule set forth above. Tenant will pay any partial month's Rent within ten (10) days of Landlord's delivery of an invoice therefor.
(c) The minimum annual rent hereinabove provided for shall be in addition to all other payments to be made by Tenant as herein provided except as set forth to the contrary in this lease. It is the purpose and intent of the parties hereto that the minimum annual rent shall be absolutely net to Landlord, except as set forth to the contrary in this lease, so that this lease shall yield, net to the Landlord, the minimum annual rent, and that all costs, expenses and obligations of every kind and nature whatsoever relating to the Demised Premises which may arise or become due during the term of this lease shall be paid by Tenant and that Landlord shall be indemnified and saved harmless by Tenant from and against the same, except as otherwise expressly provided in this lease.
(d) Any sums of money required to be paid by Tenant to Landlord in addition to the rent reserved under this Paragraph 43, shall be deemed additional rent, shall be paid within ten (10) days after written demand therefor (unless another time period is provided herein) without deduction or offset, and in the event Tenant fails to pay such additional rent, Landlord shall be entitled to the same remedies under this lease or by law, as are available to Landlord for the nonpayment of rent, including, without limitation, summary dispossess proceedings.
(e) Notwithstanding the Rent schedule set forth in Paragraph 43(a) above, provided Tenant is not in monetary default of any of its obligations under this lease beyond the expiration of any applicable notice and cure period, Tenant shall receive a Rent credit in the total amount of $34,346.85 to be applied in three (3) installments of $11,448.95 toward the Rent due with respect to each of the second and third full calendar months of the first Lease Year and the first full calendar month of the second Lease Year.
44. Utilities.
(a) Tenant shall furnish and pay for, at its sole cost and expense, all utilities supplied to the Demised Premises (with the exception of water) by any utility company, whether public or private, including but not limited to gas, electricity, fuel oil and telephone. Tenant shall open an account in its own name on or before the Commencement Date. Notwithstanding the foregoing, if as of the Commencement Date, the electric and/or natural gas service is not separately metered for the Demised Premises Tenant shall pay to Landlord, as additional rent, within ten (10) days of Landlord?s invoice thereof, a prorata share of the electricity and/or natural gas charges as measured by the meter servicing the Demised Premises (such prorata share to be calculated based upon the portion of the area served by such meters represented by the Demised Premises). In the event Tenant fails to open an account in its own name with the electric and/or natural gas utility company as of the Commencement Date (or as of the date that the Demised Premises becomes separately metered, if later than the Commencement Date), Tenant shall reimburse Landlord for the utility charges incurred by Landlord in providing service to the Demised Premises prior to the date the accounts have been transferred and shall pay Landlord's administrative fee of seven and one-half (7.5%) percent of the amount so due. Such sums shall be paid by Tenant as additional rent, within ten (10) days of Landlord's invoice therefor. Nothing in the foregoing shall be deemed to relieve Tenant from the obligation to transfer the accounts to its name or to prevent Landlord from terminating the utility service account in its name effective as of the Commencement Date or any date thereafter.
(b) The parties hereby acknowledge and agree that the Demised Premises are not separately metered for water or for sprinkler supervisory service. In addition to the additional rent payable under Paragraph 47 below, Tenant shall pay to Landlord, as additional rent, within ten (10) days of Landlord's invoice therefor, Tenant's Proportionate Share of Landlord's cost for water consumed at the Building and/or Real Property, for sprinkler supervisory service and for sewer charges, if any, assessed or imposed against the Building and/or Real Property. Tenant shall not use water for other than normal lavatory purposes.
45. Alterations.
(a) Supplementing Paragraph 3 of the printed form portion of this lease, any amount billed by Landlord's construction affiliate in connection with any work performed by such affiliate on behalf of Tenant shall be deemed to be additional rent for purposes of this lease. Further supplementing Paragraph 3 of the printed form portion of this lease, with respect to any and all alterations, installations, additions and improvements (each, an "Alteration") permitted by Landlord to be performed by or on behalf of Tenant in the Demised Premises (other than Landlord?s Work), Tenant will deliver to Landlord certificates evidencing Worker's Compensation Insurance and Contractor's General Liability Insurance in the amount reasonably satisfactory to Landlord (but in no event less than the amounts set forth in paragraph 59 herein) prior to the commencement of such work. Any and all Alterations and any and all structures or fixtures, except movable trade fixtures not attached to the realty, installed by or on behalf of Tenant shall be deemed attached to the freehold and automatically become the property of Landlord upon installation, unless Landlord shall elect otherwise. If Landlord elects to have Tenant remove same at the expiration of the term of this lease, Tenant shall, prior to the expiration or sooner termination of the term of this lease, perform such removal and repair, at its own cost and expense, any damage to the Demised Premises caused by said removal. Notwithstanding the foregoing, Landlord may, at its option, in lieu of requiring Tenant to perform such removal and restoration, invoice Tenant for the reasonable estimated cost for performing such work and Tenant shall pay such invoice, as additional rent, within thirty (30) days of such invoice. All Alterations (other than those performed by Landlord or its construction affiliate) made to the Demised Premises shall be subject to Landlord's construction inspection fee of 8% of the cost thereof which shall be payable, as additional rent, to Landlord's construction affiliate. Such 8% fee shall not be charged in connection with Tenant?s initial setup of the Demised Premises in order to prepare the Demised Premises for Tenant's initial occupancy thereof. In receiving such fee, Landlord assumes no responsibility for the quality or manner in which any Alterations are performed (except for those Alterations performed by Landlord or Landlord's construction affiliate). Tenant shall not, without the express written consent of Landlord, enter upon the roof or attach or install anything thereon or make any Alterations thereto. With respect to any mechanic?s lien for which Tenant is responsible for removing or bonding hereunder, Tenant shall reimburse Landlord for all costs and expenses incurred by Landlord in connection therewith (including, without limitation, reasonable attorneys' fees and disbursements of Landlord and any sums payable to Landlord's lender in connection therewith). Notwithstanding anything contained herein to the contrary, Landlord shall not unreasonably withhold, condition or delay its consent to any proposed non- structural and interior Alteration, provided that, Landlord shall have the right to require Tenant to employ Landlord or its construction affiliate to perform any Material Alteration (as hereinafter defined). The term "Material Alteration", as used herein, means any Alteration which may, in the reasonable opinion of Landlord (i) be structural in nature; (ii) affect the exterior or any structural portions or components of the Building; (iii) be visible from outside of the Demised Premises; (iv) affect the usage or proper functioning of any of the Building systems (including, without limitation, the heating, ventilation, air conditioning, plumbing, electrical, sprinkler or security systems serving the Building); (v) jeopardize health safety or life safety; (vi) require a change to the certificate of occupancy for the Building; (vii) require the issuance of a building permit or other authorization by any governmental or quasi-governmental entity exercising jurisdiction over the Building; (viii) require the consent of any mortgagee or ground lessor of the Building and/or the Real Property; (ix) cause any previously non-mandatory legal requirement to become a mandatory legal requirement with regard to the Building (including, without limitation, any such legal requirement set forth in the Americans with Disabilities Act); or (x) have a cost of completion in excess of $10,000.00. With respect to any such Material Alterations performed by Landlord or Landlord?s construction affiliate, Landlord or Landlord's construction affiliate shall charge Tenant for such work at rates that are comparable to those of other general contractors in the local market (i.e., Suffolk County, New York). Landlord hereby agrees that Tenant shall be permitted to install a kitchenette and compressor lines within the Demised Premises provided that such installation does not materially interfere with or delay Landlord's Work.
(b) Tenant shall not be permitted to make, or to engage a contractor or artist to make, any Alterations, decorations, installations, additions or other improvements ("Visual Alteration?) which may be considered a work of visual art of any kind, and/or which might fall within the protections of the Visual Artists Rights Act of 1990 ("VARA") unless: (i) Tenant obtains, from each artist and/or contractor who will be involved in said Visual Alteration, valid written waivers of such artist's and/or contractor's rights under VARA in form and content reasonably acceptable to Landlord; and (ii) Landlord consents to such Visual Alteration in writing. In the event that \a claim is brought under VARA with respect to any Visual Alteration performed in or about the Building by or at the request of Tenant or Tenant's agents or employees, Tenant shall indemnify and hold harmless Landlord against and from any and all such claims. If any action or proceeding shall be brought against Landlord by reason of such claim under VARA, Tenant agrees that Tenant, at its expense, will resist and defend such action or proceeding and will employ counsel reasonably satisfactory to Landlord therefor. Tenant shall also pay any and all damages sustained by Landlord as a result of such claim, including, without limitation, reasonable attorney?s fees and the cost to Landlord of complying with VARA protections (which shall include damages sustained as a result of Landlord's inability to remove Visual Alterations from the Demised Premises). Failure of Tenant to strictly comply with the provisions of this Paragraph 45(b) shall be deemed a default under this lease, and Landlord shall be entitled to pursue all appropriate remedies provided herein, as well as at law or in equity. The provisions of this Paragraph 45(b) shall survive the expiration or sooner termination of this lease.
46. Sewer/Sanitary. It is understood and agreed that in the event that sewer lines are installed or brought to the Building, Landlord shall have no obligation to connect the Demised Premises to such sewer lines; however, the Tenant may, at its own cost and expense, request Landlord to connect to such sewer lines. In the event Landlord is required to connect the Building to such sewer lines, Tenant shall reimburse Landlord, as additional rent, within ten (10) days of Landlord's demand therefor, Tenant's Proportionate Share of all costs and expenses incurred by the Landlord, directly or indirectly, in connection with the Landlord's compliance with such requirement.
47. Common Area Maintenance. Tenant agrees to pay, upon Landlord's demand therefor, as additional rent, an amount equal to Tenant's Proportionate Share of "Landlord's Cost" of maintenance and repair of the Building and the landscaped, parking and other common areas thereof. The term "Landlord's Cost", as used herein, shall be deemed to include, without limiting the generality of the foregoing, gardening, landscaping, planting, replanting and replacement of flowers, shrubbery, trees and grass, striping, the cost of electricity and maintenance and replacement of exterior fixtures and bulbs, with respect to the parking areas, repair of paving, curbs and walkways, repair and cleaning of drainage facilities, trash, rubbish and garbage removal with respect to the exterior of the Real Property, snow and ice removal, exterminating, exterior lighting, maintenance repair and replacement of the sanitary system, maintenance and repair of the roof, rental of machinery and equipment, cost of personnel to implement all of the foregoing, security and security guard service, if any, and other similar costs of the type incurred in the operation of comparable properties plus Landlord's administrative fee of seven and one-half percent on any amounts exceeding the Base CAM Charge. Landlord and Tenant stipulate and agree that Tenant?s Proportionate Share of Landlord?s Cost shall be initially $852.75 per month (the "Base CAM Charge"). The parties hereby agree that the Base CAM Charge is included in the rent set forth in Paragraph 43 hereof. In the event that Tenant?s Proportionate Share of Landlord's Cost increases over the Base CAM Charge at any time during the term of this lease, Landlord shall have the right to bill such increase to Tenant monthly or otherwise and Tenant shall pay such increase as additional rent within ten (10) days of Landlord's written demand therefor. Notwithstanding the foregoing, in the event that maintenance and repair of the Building, any building systems or the landscaped, parking and other common areas thereof are occasioned by the negligence or willful misconduct of Tenant, its agents, contractors, employees or invitees, Landlord shall perform the repair, at Tenant?s sole cost and expense.
48. Repairs.
(a) Subject to the provisions of Paragraphs 9 and 58 of this Lease, during the full term of this lease, Landlord shall make all structural repairs to the Demised Premises, except those which shall have been occasioned by the negligence or willful misconduct of Tenant, its agents, contractors, employees or invitees, which repairs Landlord shall make at Tenant?s sole cost and expense. Structural repairs are hereby defined to be repairs to the roof (but subject to the terms of Paragraph 47 hereof), the roof supports, the bearing walls, foundation, the structural steel and the exterior of the Building (except for windows, doors and plate glass). Except for Landlord's obligations specifically set forth in this Paragraph 48, Tenant shall, at its own cost and expense, keep the Demised Premises in good condition, repair and appearance at all times throughout the term of this lease including, without limitation, (i) maintenance, repair and replacement of the electrical, plumbing, sprinkler (but only to the extent that such sprinkler system is in the Demised Premises or exclusively services the Demised Premises), heating, air conditioning, ventilation, life safety and all other mechanical systems (but only to the extent that such life safety and other mechanical systems are in the Demised Premises or exclusively service the Demised Premises) servicing the Demised Premises; (ii) regularly- scheduled cleaning and maintenance of the interior of the Demised Premises; and (iii) the maintenance, repair and replacement of all windows, doors and plate glass. Notwithstanding anything to the contrary contained herein, upon the expiration or sooner termination of this lease, the Building systems shall be delivered to Landlord in working order. Tenant shall at all times obtain and keep in full force and effect for the benefit of Landlord and Tenant with a responsible company doing business in Suffolk County reasonably approved by Landlord a service, repair and maintenance contract with respect to the heating, ventilating and air conditioning systems servicing the Demised Premises. A copy of such contract and renewals thereof shall, upon issuance and thereafter not later than ten (10) days prior to expiration, be furnished to Landlord together with evidence of payment. Notwithstanding anything to the contrary contained herein, Tenant shall not be required to make any repairs (whether structural or non-structural) to the extent same are necessitated by the gross negligence or willful misconduct of Landlord or its agents, employees or contractors.
(b) If the Demised Premises shall be totally
damaged or rendered wholly untenantable by fire or other
casualty, and Landlord has not terminated this lease
pursuant to subsection (c) of Article 9 hereof, then
Landlord shall, as soon as reasonably practicable following
the occurrence of the subject fire or other casualty,
deliver to Tenant written notice of Landlord?s independent
architect?s estimated time for restoration of the Premises.
If the estimated date of completion of such restoration work
(the "Estimated Date of Completion") is more than twelve
(12) months, then Tenant shall have the right to
terminate this lease by written notice delivered to Landlord
within thirty (30) days following receipt of such written
notice by Landlord. In addition, if Landlord has not
completed the making of the required repairs and restored
and rebuilt the Premises and/or access thereto prior to the
Estimated Date of Completion, Tenant may serve notice on
Landlord of its intention to terminate this lease and, if
within thirty (30) days thereafter Landlord shall not have
completed the making of the required repairs and restored
and rebuilt the Premises, this lease shall terminate on the
expiration of such thirty (30) day period as if such
termination date were the Expiration Date. In the event
of the occurrence of a casualty described in the first
sentence of this Paragraph 48(b), provided that Landlord
does not terminate this lease pursuant to subsection
(c) of Article 9 hereof, Landlord shall use commercially
reasonable efforts to relocate Tenant to temporary space
in a building owned by Landlord or Landlord?s affiliate,
subject to availability.
49. Taxes.
(a) As used in and for the purposes of this Paragraph 49, the following definitions shall apply:
(i) "Taxes" shall be the real estate taxes, assessments, special or otherwise, sewer rents, rates and charges, and any other governmental charges, general, specific, ordinary or extraordinary, foreseen or unforeseen, levied on a calendar year or fiscal year basis against the Real Property or any interest therein. Notwithstanding the foregoing, any tax benefit granted to, or for the exclusive benefit of another tenant of the Building shall be disregarded for the purposes of calculating "Taxes" so that the ?Taxes? shall be all payments that would have been payable by Landlord with respect to the Real Property if not for such additional benefit, it being understood and agreed that Landlord shall not have the right to collect more in Taxes than Landlord is obligated to pay. If at any time during the Term the method of taxation prevailing at the date hereof shall be altered so that there shall be levied, assessed or imposed in lieu of, or as in addition to, or as a substitute for, the whole or any part of the taxes, levies, impositions or charges now levied, assessed or imposed on all or any part of the Real Property (w) a tax, assessment, levy, imposition or charge based upon the rents received by Landlord, whether or not wholly or partially as a capital levy or otherwise, or (x) a tax, assessment, levy, imposition or charge measured by or based in whole or in part upon all or any part of the Real Property and imposed on Landlord, or (y) a license fee measured by the rent payable by Tenant to Landlord, or (z) any other tax, levy, imposition, charge or license fee however described or imposed; then all such taxes, levies, impositions, charges or license fees or any part thereof, so measured or based, shall be deemed to be Taxes; provided, however, in no event shall Taxes include any income taxes imposed on Landlord as the owner of the Real Property (unless imposed as a substitute or in lieu of other Taxes).
(ii) "Base Year Taxes" shall be the Taxes actually due and payable with respect to the 2014/2015 tax year.
(iii) "Escalation Year" shall mean each calendar year which shall include any part of the Term.
(b) Tenant shall pay Landlord increases
in Taxes levied against the Real Property as follows:
If the Taxes actually due and payable with respect
to the Real Property in any Escalation Year shall be
increased above the Base Year Taxes, then the Tenant
shall pay to the Landlord, as additional rent for
such Escalation Year, a sum equal to Tenant's
Proportionate Share of said increase ("Tenant's Tax
Payment" or "Tax Payment").
(c) Landlord shall render to Tenant a
statement containing a computation of Tenant's Tax
Payment ("Landlord's Statement"). Within fifteen
(15) days after the rendition of the Landlord's
Statement, Tenant shall pay to Landlord the amount
of Tenant?s Tax Payment. At Landlord's option, on
the first day of each month following the rendition
of each Landlord?s Statement, Tenant shall pay to
Landlord, on account of Tenant?s next Tax Payment,
a sum equal to one-twelfth (1/12th) of Tenant's last
Tax Payment due hereunder, which sum shall be subject
to adjustment for subsequent increases in Taxes.
(d) Intentionally omitted.
(e) Only Landlord shall have the right to institute tax reduction or other proceedings for the purpose of changing the Taxes (a "Tax Contest"). Tenant shall not institute or maintain any Tax Contest. If, as a result of a Tax Contest, Landlord receives a refund of Taxes attributable to any tax year or tax years occurring during the Term (including the Base Year Taxes), then, Landlord shall recalculate each affected Tenant?s Tax Payment based upon the finally determined Taxes for each affected Escalation Year and deliver a revised Landlord?s Statement to Tenant. If the Tenant?s Tax Payment on the revised Landlord's Statement exceeds the amount paid by Tenant for the original Tenant?s Tax Payment, then Tenant shall pay to Landlord such excess, as additional rent, within fifteen (15) days of the delivery of the revised Landlord's Statement. In the event that the amount paid by Tenant for the original Tenant's Tax Payment exceeds the amount of the revised Tenant's Tax Payment, then, provided Tenant had made full payment of Tenant's Tax Payment for all affected Escalation Years, Landlord, at its option, shall either refund such excess to Tenant, or credit such excess to Tenant towards a future payment of Taxes. Landlord shall have the right to include in the calculation of Taxes (for a subsequent tax year), or to deduct from any refund that may become due to Tenant as a result of the Tax Contest, the reasonable costs and expenses incurred by Landlord in instituting and prosecuting a Tax Contest hereunder. If at the end of the Term of this lease there remains a balance relating to any overpayments made by Tenant with respect to Taxes, such balance shall be refunded to Tenant.
(f) Landlord's failure to render a Landlord's Statement with respect to any Escalation Year shall not prejudice Landlord's right to render a Landlord's Statement with respect to any Escalation Year. The obligations of Tenant under the provisions of this Article with respect to any additional rent for any Escalation Year shall survive the expiration or any sooner termination of the Demised Term.
(g) Notwithstanding anything contained to
the contrary in this Paragraph 49, if any increase
in Taxes shall be due to improvements made or performed
by or on behalf of Tenant, such increases shall be paid
in full by Tenant each year without apportionment.
(h) If the Taxes for any Escalation Year
shall equal or be less than the Base Year Taxes,
Tenant shall not be obligated to make any payments to
Landlord pursuant to this Section 49 in respect of
a Tenant's Tax Payment for such Escalation Year, but
in no event shall Tenant be entitled to any refund
or reduction in the Rent by reason of such fact.
50. Landlord's Financing. At the request of Landlord, Tenant agrees to furnish Landlord with a current financial statement prepared by a certified public accountant or any other instrument which may be needed by Landlord for purposes of financing or selling the Real Property. If, in connection with obtaining financing for the Real Property, a banking, insurance or other recognized institutional lender shall request reasonable modifications in this lease as a condition to such financing, Tenant will enter into an agreement reflecting such modifications provided that such modifications do not increase the obligations of Tenant hereunder (other than to a de minimus extent) or materially adversely affect the leasehold interest hereby created.
51. Use.
(a) Tenant covenants that the Demised Premises will not be used so as to materially and adversely interfere with other tenants in the Building. Tenant also covenants that no noise or noxious fumes or odors will be created by Tenant so as to materially and adversely interfere with the quiet enjoyment of the other tenants of their respective demised portions of the Building. Landlord shall be the sole judge on the question of noise, noxious fumes and odors.
(b) Tenant shall provide and maintain, at its expense, the hand-held fire extinguishers that are required to be maintained in Demised Premises by the governmental agency having jurisdiction over this matter.
(c) Tenant shall not obstruct or encumber, or cause to be obstructed or encumbered, the sidewalks, area ways or other public portions of the Real Property, without limitation, the parking area, driveways and access areas adjacent to the Demised Premises and used in conjunction therewith; nor shall Tenant use same nor permit same to be used for any purpose other than ingress and egress to and from the Demised Premises. However, Tenant may use the loading area appurtenant to the Demised Premises for loading and unloading. Tenant shall not store any materials, goods or other items outside the building or the Demised Premises including, without limitation, inventory, furniture or equipment.
(d) Tenant shall, at its own cost and expense, procure all necessary certificates, permits, orders or licenses which may be required for the conduct of its business by any governmental statute, regulation, ordinance or agency and that all governmental requirements relating to the use or uses of the Demised Premises by the Tenant shall be complied with by the Tenant at its own cost and expense.
(e) Tenant agrees that the value of the Demised Premises and the reputation of the Landlord will be seriously injured if the Demised Premises are used for any obscene or pornographic purposes or if any obscene or pornographic material is permitted in the Demised Premises. Tenant further agrees that Tenant will not permit any of these uses by Tenant or a sublessee or assignee of the Demised Premises. This Paragraph shall directly bind any successors in interest to Tenant. Tenant agrees that if at any time Tenant violates any of the provisions of this Paragraph, such violation shall be deemed a breach of a substantial obligation of the terms of this lease and objectionable conduct. Pornographic material is defined for purposes of this Paragraph as any written or pictorial matter with prurient appeal or any objects or instruments that are primarily concerned with lewd or prurient sexual activity. Obscene material is defined here as it is in Penal Law ?235.00.
52. End of Term. In the event Tenant fails to surrender the Demised Premises to Landlord in the condition required by the terms of this lease on or before the expiration or earlier termination of this lease, Tenant shall: one hundred fifty (150%) percent of the Rent payable by Tenant for the third month prior to the Expiration Date, with respect to the first two months of holdover only, and two hundred (200%) percent of the Rent payable by Tenant for the third month prior to the Expiration Date of the term of this lease with respect to any further holdover, and otherwise observe, fulfill and perform all of its obligations under this lease, including, but not limited to, those pertaining to additional rent, in accordance with its terms; (ii) be liable to Landlord for any payment or rent concession which Landlord may be required to make to any tenant in order to induce such tenant not to terminate an executed lease covering all or any portion of the Demised Premises by reason of the holdover by Tenant; and (iii) be liable to Landlord for any actual damages suffered by Landlord (including any reasonable attorneys? fees and disbursements) as the result of Tenant?s failure to surrender the Demised Premises. Notwithstanding anything contained in this Paragraph to the contrary, the acceptance of any Rent or use and occupancy paid by Tenant pursuant to this Paragraph 52, shall not preclude Landlord from commencing and prosecuting a holdover or eviction action or proceeding or any action or proceeding in the nature thereof. The provisions of this Paragraph 52 shall be deemed to be an "agreement expressly providing otherwise" within the meaning of Section 232-c of the Real Property Law of the State of New York and any successor law of like import. Tenant expressly waives, for itself and for any person claiming through or under Tenant, any rights which Tenant or any such person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any successor law of like import then in force, in connection with any holdover or summary proceeding which Landlord may institute to regain possession of the Demised Premises. No holding over by Tenant after the Term shall operate to extend the Term. The holdover, with respect to all or any part of the Demised Premises, of a person deriving an interest in the Demised Premises from or through Tenant, including, but not limited to, an assignee or subtenant, shall be deemed a holdover by Tenant in the entire Demised Premises. If at any time during the last month of the Term Tenant shall have removed all or substantially all of Tenant's property from the Demised Premises, Landlord may, and Tenant hereby irrevocably grants to Landlord a license to, immediately enter and alter, renovate and redecorate the Demised Premises, without elimination, diminution or abatement of Rent, or incurring liability to Tenant for any compensation, and such acts shall have no effect upon this lease.
53. Landlord's Work. Tenant hereby accepts the Demised Premises in its current ?as is? condition and agrees that Landlord shall not be obligated to perform any work, make any installation or incur any expense in order to prepare the Demised Premises for Tenant?s occupancy, except that Landlord shall deliver possession of the Demised Premises with all building mechanical equipment the plumbing, electrical and heating, ventilating and air conditioning systems, sprinkler, the lights, man doors and garage doors operational and in good working order and condition and operational for its purpose, and Landlord, at its expense, will perform the work and make the installations, as set forth on the Rental Plan annexed hereto as Exhibit A, which work is sometimes hereinafter referred to as the "Landlord's Work". In the event that there is a conflict or inconsistency between the provisions of this lease (including the exhibits annexed hereto) and the work set forth on the final construction documents to be prepared by Landlord for Landlord?s Work and approved by Landlord and Tenant after the date hereof, such final construction documents shall be controlling.
54. Assignment/Subletting.
(a) Tenant covenants that it shall not assign this lease nor sublet the Demised Premises or any part thereof without the prior written consent of Landlord in each instance. Tenant may assign this lease or sublet the Demised Premises with Landlord's written consent provided:
(i) That such assignment or sublease is for a use which is in compliance with the terms of this lease, the then existing zoning regulations and the Certificate of Occupancy;
(ii) That at the time of such assignment or subletting, there is no default under the terms of this lease on Tenant's part which has not been cured prior to the expiration of all applicable grace periods;
(iii) That in the event of an assignment, the assignee assumes in writing the performance of all of the terms and obligations to be performed by Tenant under this lease from and after the date of such assignment;
(iv) That a fully-executed copy of said
assignment or sublease be delivered by certified mail to
Landlord at the address herein set forth within ten (10)
days from the said assignment or sublease and within ninety
(90) days of the date that Tenant first provides Landlord
with the information required under Paragraph 54(f) below;
(v) That, in the event Tenant shall request Landlord?s consent to a proposed assignment of this lease or proposed sublease of all or a portion of the Demised Premises, Tenant shall pay or reimburse to Landlord the reasonable attorney fees and disbursements incurred by Landlord in processing such request not to exceed $1,000.00 for the review of the proposed sublease and the initial preparation of the consent document;
(vi) Such assignment or subletting shall not, however, release Tenant from its liability for the full and faithful performance of all of the terms and conditions of this lease;
(vii) If this lease be assigned, or if the Demised Premises or any part thereof be sublet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect Rent and additional rent from the assignee, subtenant or occupant, and apply the net amount collected to the Rent and additional rent herein reserved;
(b) Notwithstanding anything contained in this Paragraph 54 to the contrary, no assignment or subletting shall be made by Tenant in any event until Tenant has offered to terminate this lease as of the last day of any calendar month during the term hereof and to vacate and surrender the Demised Premises to Landlord on the date fixed in the notice served by Tenant upon Landlord (which date shall be no sooner than forty-five (45) days after receipt by Landlord of the offer to terminate and no later than the date of such proposed assignment or the commencement date of such proposed sublease), and Landlord, within fifteen (15) days after the receipt thereof, has not accepted in writing the offer by Tenant to cancel and terminate this lease and to vacate and surrender the Demised Premises.
(c) Notwithstanding anything contained to the contrary in this lease, in no event shall Tenant have the right to enter into more than one sublease at any time.
(d) Tenant shall not mortgage, pledge, hypothecate or otherwise encumber its interest under this lease without Landlord's prior written consent.
(e) Without affecting any of its other obligations under this lease, Tenant will pay Landlord as additional rent fifty (50%) percent of any sums or other economic consideration, which (i) are payable to Tenant as a result of an assignment or subletting whether or not referred to as rentals under the assignment or sublease (after deducting therefrom the reasonable costs and expenses incurred by Tenant in connection with the assignment or subletting in question, including, without limitation, broker commissions, reasonable attorneys? fees and tenant improvement costs); and (ii) exceed in total the sums which Tenant is obligated to pay Landlord under this lease (prorated to reflect obligations allocable to that portion of the Demised Premises subject to such sublease), it being the express intention of the parties that Landlord and Tenant shall share in any profit by reason of such sublease or assignment. The failure or inability of the assignee or subtenant to pay rent pursuant to the assignment or sublease will not relieve Tenant from its obligations to Landlord under this Paragraph 54(e). Tenant will not amend the assignment or sublease in such a way as to reduce or delay payment of amounts which are provided in the assignment or sublease approved by Landlord. Any amendment or modification of an assignment or sublease shall be deemed to be a new assignment or sublease and shall require the prior written consent of Landlord.
(f) Prior to any proposed subletting or assignment,
Tenant shall submit to Landlord a written notice of the proposed
subletting or assignment, which notice shall contain or be
accompanied by the following information: (i) the name and
address of the proposed subtenant or assignee; (ii) the nature
and character of the business of the proposed subtenant or
assignee and its proposed use of the premises to be demised;
(iii) the most recent three (3) years of balance sheets and
profit and loss statements of the proposed subtenant or assignee
or other financial information reasonably satisfactory to Landlord;
and (iv) such shall be accompanied by a copy of the proposed
sublease or assignment of lease.
(g) The listing of an assignee's or subtenant's name on the door or Building directory shall not be deemed Landlord's consent hereunder.
(h) Tenant may, without the consent of Landlord, assign this lease, or sublet all or a portion of the Demised Premises, to an affiliated entity (i.e., an entity 20% or more of whose ownership interest is owned by the same owners owning 20% or more of Tenant's ownership interest), parent or subsidiary corporation of Tenant, provided that: (i) in the case of an assignment, Tenant shall deliver to Landlord a fully-executed assignment and assumption agreement pursuant to which such assignee agrees to assume and perform all of the obligations of Tenant under this lease, and (ii) Tenant shall not be released or discharged from any liability under this lease by reason of such assignment. In addition, Landlord shall grant its consent to a request by Tenant to assign this lease to an entity to which it sells its business as a going concern (either by selling or assigning all or substantially all of its assets or stock) or with which it may be consolidated or merged, provided that the assignee has the same net worth (as calculated under generally accepted accounting principals consistently applied, as the Tenant prior to the proposed sale and/or assignment and further provided that assignee shall, in writing, assume and agree to perform all of the obligations of Tenant under this lease and it shall deliver such assumption with a copy of such assignment to Landlord within ten (10) days thereafter, and that Tenant shall not be released or discharged from any liability under this lease by reason of such assignment.
(i) Landlord agrees that it shall not unreasonably withhold, condition or delay its consent to a subletting or assignment in accordance with the terms of this Paragraph 54. In determining reasonableness, there shall be taken into account the character and reputation of the proposed subtenant or assignee, the specific nature of the proposed subtenant's or assignee's business and whether same is in keeping with other tenancies in the building; the financial standing of the proposed subtenant or assignee; and the impact of all of the foregoing upon the Building and the other tenants of Landlord therein. Landlord shall not be deemed to have unreasonably withheld its consent if it refuses to consent to a subletting or assignment to an existing tenant in any building which is owned by Landlord or its affiliate or to a proposed subtenant or assignee with whom Landlord is negotiating a lease or if at the time of Tenant's request, Tenant is in default, beyond applicable grace and notice periods provided herein for the cure thereof, of any of the terms, covenants and conditions of this lease to be performed by Tenant, or, if Landlord's lender's consent to such transaction is required and same is not granted.
55. Parking. The parking areas available for the use of the Tenant herein and the other tenants of the Building of which the Demised Premises form a part are to be used by Tenant, its servants, employees, agents, business invitees and patrons on a first come first served basis, subject to the rules and regulations of Landlord. However, in no event shall Tenant use more than Tenant's Proportionate Share of the total number of spaces at the Building. It is also understood and agreed that Landlord shall have the right at any time to modify or alter the parking layout and traffic pattern in the parking areas and to diminish the available parking areas without any liability to Tenant or any diminution or abatement of rent or additional rent; provided, however, that Landlord agrees to use commercially reasonable efforts to minimize interference with Tenant's use and occupancy of the Demised Premises and its access thereto when modifying or altering such parking layout and/or traffic pattern.
56. Cleaning and Rubbish Removal.
(a) All cleaning and janitorial work at the Demised Premises shall be done by Tenant at the sole cost and expense of Tenant. Tenant shall provide for its own trash, rubbish and garbage removal at its own expense and all rubbish, trash and garbage shall be kept at and removed from the Demised Premises subject to the rules and regulations of the appropriate municipal authorities having jurisdiction thereof, and shall at all times be kept in closed dumpsters to be provided by Tenant at its sole cost and expense in locations determined by Landlord.
(b) Tenant shall pay directly to the applicable
governmental municipalities any waste generation fee(s)
(including any service charges imposed in connection therewith)
which are charged by such governmental municipalities in
connection with Tenant?s use of Tenant?s designated dumpster
at the Building (collectively, the "Waste Generation Fees").
Within fifteen (15) days of Landlord?s demand for official
receipts stamped paid by the applicable governmental
authorities, Tenant shall provide Landlord with copies of
such receipts or other proof satisfactory to Landlord
evidencing such payment. If Tenant fails to pay the Waste
Generation Fees when due, Landlord may, but is not obligated
to, pay such Waste Generation Fees and all such Waste
Generation Fees paid by Landlord, plus any and all additional
costs and expenses incurred by Landlord in connection therewith,
including reasonable attorney?s fees, shall be deemed
additional rent and shall be payable by Tenant upon demand.
Tenant's payment of the Waste Generation Fees shall be in
addition to (and not in lieu of) any amounts which Tenant may
pay in connection with its removal of trash, rubbish and
garbage from its Demised Premises.
57. Hazardous Materials. Tenant shall keep or cause
the Demised Premises to be kept free of Hazardous Materials
(hereinafter defined). Notwithstanding the foregoing,
Tenant shall be entitled to keep and use, in compliance
with all applicable laws and subject to the further
provisions of this Paragraph 57, the materials set forth
on Schedule "A" (the "Permitted Materials") in the quantities
set forth therein. Without limiting the foregoing,
Tenant shall not cause or permit the Demised Premises to
be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer, produce or
process Hazardous Materials (other than Permitted
Materials) nor shall Tenant cause or permit, as a result
of any intentional or unintentional act or omission
on the part of Tenant or any person or entity claiming
through or under Tenant or any of their employees,
contractors, agents, visitors or licensees (collectively,
?Related Parties?), a release of Hazardous Materials
onto the Demised Premises or onto any other property.
Tenant shall comply with and ensure compliance by all
Related Parties with all applicable Federal, State and
Local laws, ordinances, rules and regulations, whenever
and by whomever triggered, and shall obtain and comply
with, and ensure that all Related Parties obtain and
comply with, any and all approvals, registrations or
permits required thereunder. Tenant shall (i) conduct
and complete all investigations, studies, samplings, and
testing, and all remedial removal and other actions
necessary to clean up and remove such Hazardous Materials,
on, from, or affecting the Demised Premises (a) in
accordance with all applicable Federal, State and Local
laws, ordinances, rules, regulations, policies, orders
and directives, and (b) to the satisfaction of Landlord,
and (ii) defend, indemnify, and hold harmless Landlord,
its employees, agents, officers, members, partners, principals
and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs,
or expenses of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of, or in any way
related to, (a) the presence, disposal, release, or
threatened release of such Hazardous Materials which are on,
from, or affecting the soil, water, vegetation, buildings,
personal property, persons, animals, or otherwise;
(b) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or
related to such Hazardous Materials; (c) any lawsuit
brought or threatened, settlement reached, or government
order relating to such Hazardous Materials; and/or (d)
any violation of laws, orders, regulations, requirements,
or demands of government authorities, or any policies or
requirements of Landlord, which are based upon or in any
way related to such Hazardous Materials, including, without
limitation, reasonable attorney and consultant fees,
investigation and laboratory fees, court costs, and
litigation expenses. Tenant shall immediately notify
Landlord in writing of any actual or threatened release
of any Hazardous Materials on, in or about the Demised
Premises, including notification to Landlord if Tenant
receives any notice or requests for inspection or
information from any Federal, State or local official or
agency which pertains to Hazardous Materials. Copies of
all reports, notices, correspondence, and other documents
received from or submitted to governmental authorities,
and of all technical data, test results, expert opinions
and other materials generated in connection with the
contamination or other response or remedial activities,
shall be provided to Landlord. At the expiration
or earlier termination of this lease or in the event
this lease is terminated, or Tenant is dispossessed,
Tenant shall deliver the Demised Premises to Landlord
free of any and all Hazardous Materials so that the
conditions of the Demised Premises shall conform with
all applicable Federal, State and Local laws, ordinances,
rules or regulations affecting the Demised Premises for
which Tenant is responsible hereunder. In the event that
Landlord has a good faith belief that there has been a
release of Hazardous Materials for which Tenant is
responsible hereunder, Landlord shall have the right to
engage an environmental engineering or consulting firm
to conduct an inspection of the Real Property and Demised
Premises at Tenant?s sole cost and expense. Tenant shall
reimburse Landlord for the cost of any such inspection
as well as the cost of any clean-up and testing performed
pursuant thereto with respect to Hazardous Materials for
which Tenant is responsible hereunder. In no event shall
Tenant be responsible for or with respect to any Hazardous
Materials in existence, arising or located on, at or under
the Demised Premises prior to the Commencement Date. For
purposes of this paragraph, "Hazardous Materials" includes,
without limitation, any flammable explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous
or toxic substances, or related materials defined in the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Sections
9601, et seq.), the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801 et seq.), the
Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 9601, et seq.), and in the regulations
adopted and publications promulgated pursuant thereto, or
any other Federal, State or Local environmental law,
ordinance, rule, or regulation. Tenant's obligations
under this Paragraph 57 shall survive the expiration or
earlier termination of the term of this lease.
58. Default.
(a) In addition to the rights and remedies
set forth in Paragraphs 17 and 18 hereof, Landlord
shall have the right to cancel this lease in the manner
therein provided in the event that (i) Tenant shall
have failed to pay any installment of Rent provided
herein within five (5) days after written notice and
demand for payment thereof or (ii) shall have defaulted
in payment of additional rent set forth herein for a
period of five (5) days after written notice and demand
for payment of same, or (iii) Tenant has not, within three
(3) days of notice from Landlord, commenced and diligently
prosecuted the cure of a default, the continuation of
which, is a threat to the safety or welfare of the
Building occupants or public.
(b) In any case in which the Rent or additional rent is not paid within five (5) days of the day when same is due, Tenant shall pay a late charge equal to 8-1/2 cents for each dollar so due, and in addition thereto. Tenant further agrees that the late charge imposed is fair and reasonable, complies with all laws, regulations and statutes, and constitutes an agreement between Landlord and Tenant as to the estimated compensation for costs and administrative expenses incurred by Landlord due to the late payment of rent by Tenant. Tenant further agrees that the late charge assessed pursuant to this lease is not interest, and the late charge does not create a borrower/lender or borrower/creditor relationship between Landlord and Tenant. The demand and collection of the aforesaid late charges shall in no way be deemed a waiver of any and all remedies that the Landlord may have under the terms of this lease by summary proceedings or otherwise in the event of a default in payment of rent or additional rent. Notwithstanding the foregoing, the late charge set forth above shall not apply with respect to the first late payment in any twelve (12) month period by Tenant provided such late payment is eventually made within thirty (30) days of notice that same is overdue) and is not then otherwise in default under this lease.
(c) In the event that Landlord shall bring any proceeding against Tenant for recovery of money damages, or for possession of the Demised Premises by reason of nonpayment of Rent or additional rent, or if Landlord shall otherwise engage an attorney in connection with the enforcement of any provision of this Lease or, after the expiration of all applicable notice and cure periods, for nonperformance by Tenant of the terms and conditions of this lease, or for breach of lease or if Landlord shall successfully defend an action by Tenant relating in any way to this Lease, and Landlord shall incur costs and expenses by reason thereof or by reason of such default, such charges, including reasonable legal fees, shall be due and payable from Tenant as additional rent and shall become immediately due and payable upon the incurrence of same. Said amount may be included in the petition and shall be deemed additional rent. This provision shall expressly apply following the expiration or early termination of this Lease where the Tenant, subtenant or assignee continues in possession of the Demised Premises.
(d) Tenant agrees to give Landlord written notice of any proposed change in the ownership of the majority of the outstanding capital stock of Tenant or any change in the ownership of the majority of the assets of Tenant. Failure of Tenant to give the notice provided for in the preceding sentence shall be deemed a non-curable default by Tenant pursuant to this lease (that is, a default which has already extended beyond the applicable grace period, if any, following notice from Landlord), giving Landlord the right, at its option, to cancel and terminate this lease or to exercise any and all other remedies available to Landlord hereunder or as shall exist at law or in equity.
(e) At any time after this Lease is terminated or the Term shall have expired and come to an end or Landlord shall have re-entered upon the Demised Premises, as the case may be, whether or not Landlord shall have collected any monthly deficiencies pursuant to Paragraph 18 of the preprinted portion of this lease, Landlord, at its sole discretion, shall be entitled to recover from Tenant, and Tenant shall pay to Landlord, on demand, as and for liquidated and agreed final damages, a sum equal to the amount by which the Rent and additional rent reserved in this lease for the period which otherwise would have constituted the unexpired portion of the Term exceeds the then fair and reasonable rental value of the Demised Premises for the same period, both discounted to present worth at the rate of four (4%) per cent per annum. If, before presentation of proof of such liquidated damages to any court, commission, or tribunal, the Demised Premises, or any part thereof, shall have been relet by Landlord for the period which otherwise would have constituted the unexpired portion of the Demised Term, or any part thereof, the amount of Rent and additional rent reserved upon such reletting shall be deemed, prima facie, to be the fair and reasonable rental value for the part or the whole of the Demised Premises so relet during the term of the reletting.
(f) Nothing contained in this Lease shall be construed as limiting or precluding the recovery by Landlord against Tenant of any sums or damages to which, in addition to the damages particularly provided above, Landlord may lawfully be entitled by reason of any default hereunder on the part of the Tenant. Anything in this Lease to the contrary notwithstanding, during the continuation of any default by Tenant, Tenant shall not be entitled to exercise any rights or options, or to receive any funds or proceeds being held, under or pursuant to this Lease.
(g) The specified remedies to which Landlord may resort hereunder are cumulative and are not intended to be exclusive of any other remedies or means of redress to which Landlord may lawfully be entitled, and Landlord may invoke any remedy allowed at law or in equity as if specific remedies were not herein provided for.
59. Insurance.
(a) Tenant shall obtain and keep in full force
and effect during the Term, at its own cost and expense,
(i) Commercial General Liability Insurance, on an occurrence
basis, such insurance to afford protection in an amount of
not less than One Million ($1,000,000) Dollars coverage for
bodily injury, death and property damage arising out of any
one occurrence and Two Million ($2,000,000) Dollars in
the aggregate (such limit to apply on a "per location basis"),
protecting Tenant as the insured and Landlord and its
construction affiliate and management company, as well as
any other parties whose names have been provided by Landlord
to Tenant from time to time, as additional insureds (in a
blanket endorsement form satisfactory to Landlord in its
reasonable discretion) against any and all claims for
personal injury, death or property damage, such insurance
to provide primary coverage without contribution from any
other insurance carried by or for the benefit of Landlord or
any other party named as an additional insured; Such insurance
shall include coverage for a blanket contractual liability
covering the indemnification requirements of this lease and
shall also include Products/Completed Operations (ii)
"All Risk" Property Insurance on Tenant?s property including
improvements and betterments made by or on the behalf of
Tenant, (and including, without limitation, Business
Interruption coverage providing for the payment of all
rent and additional rent payable under this lease for a
period of twelve (12) months including ?Extra Expense? and
Equipment Breakdown Insurance) insuring Tenant?s property and
equipment for the full insurable value thereof or replacement
cost value thereof, whichever is greater; (iii) Workers
Compensation Coverage and Employers Liability Coverage as
required by law; (iv) New York DBL Coverage, as required
by law; (v) Business Automobile Coverage in an amount of
not less than One Million ($1,000,000) Dollars combined
single limit per accident for bodily injury or property damage
(which policy form shall include coverage for "Any Auto"
which includes autos owned, hired and non-owned); (vi)
Umbrella Liability Coverage with limits of liability of
not less than Three Million ($3,000,000) Dollars per
occurrence and general aggregate per location; and (vii)
any other insurance required by law. All deductibles
shall be paid by Tenant and shall not exceed $10,000.00.
None of Tenant's insurance policies may provide for a self-
insured retention. Landlord may require Tenant to
increase the limits of the liability coverage described in
(i) above or obtain additional coverage, from time
to time, to that amount of insurance which in Landlord's
reasonable judgment is then being customarily
required by landlords for similar space in buildings in
the municipality in which the Building is located.
(b) All insurance required to be carried by Tenant pursuant to the terms of this lease (i) shall be written in form and substance reasonably satisfactory to Landlord by a good and solvent insurance company of recognized standing, admitted to do business in the State of New York, which shall be reasonably satisfactory to Landlord and shall be rated in Best's Insurance Guide or any successor thereto as having a Best?s Rating of not less than "A" and a "Financial Size Category" of not less than "X", or if such ratings are not then in effect, the generally accepted equivalent thereof or such other financial rating as Landlord may at any time consider appropriate; and (ii) shall contain a provision that no act or omission of Tenant shall affect or limit the obligations of the insurance company to pay the amount of any loss sustained. Tenant shall procure, maintain and place such insurance and pay all premiums and charges therefor and upon failure to do so (after the expiration of all applicable notice and cure periods) Landlord or any other additional insured party referred to above may, but shall not be obligated to, procure, maintain and place such insurance or make such payments, and in such event the Tenant agrees to pay the amount thereof, plus interest at the maximum rate permitted by law, to Landlord on demand and said sum shall be in each instance collectible as additional rent on the first day of the month following the date of payment by Landlord. Tenant shall cause to be included in all such insurance policies a provision to the effect that the same will be non-cancelable and that no material change in coverage shall be made thereto unless Landlord and all additional insureds referred to above shall have received at least thirty (30) days prior written notice thereof by certified mail, return receipt requested. The original insurance policies or appropriate certificates (on the form currently designated "Acord Form 27" or its equivalent) shall be deposited with Landlord on or prior to the commencement of the Term hereof. Any renewals, replacements or endorsements thereto shall also be deposited with Landlord to the end that said insurance shall be in full force and effect during the Term.
(c) Tenant shall cause each insurance policy carried by it and insuring its fixtures and contents, or the betterments and improvements made by Tenant, against loss by fire and other hazards to be written in a manner so as to provide that the insurer waives all right of recovery by way of subrogation against Landlord in connection with any loss or damage covered by any such policy or policies. Landlord shall not be liable to the Tenant for any loss or damage caused by fire or other hazards.
(d) Landlord will cause each insurance policy carried by Landlord and insuring the Building and Demised Premises against loss by fire and other hazards to be written in such a manner so as to provide that the insurer waives all right of recovery by way of subrogation against Tenant in connection with any loss or damage covered by such policy or policies. Tenant shall not be liable to Landlord for any loss or damage caused by fire or other hazard.
(e) If Tenant shall at any time fail to maintain insurance as, and to the extent, required hereunder, Tenant hereby releases Landlord from all loss or damage which could have been covered by such insurance if Tenant had maintained such insurance, including the deductible and/or uninsured portion thereof. In no event, however, shall the foregoing clause increase the liability Landlord may otherwise have under this lease for such loss or damage.
(f) All insurance coverage shall be provided in compliance with the requirements herein and shall contain no non-standard, special, and/or unusual exclusions or restrictive endorsements without the prior written consent of Landlord.
(g) Tenant shall reimburse Landlord, as additional rent (the ?Insurance Cost?), for Tenant's Proportionate Share of all premiums for insurance carried by Landlord on or with respect to the Building (including, without limitation, Landlord's All-risk property insurance upon the Building and Real Property, as well as environmental, Commercial General Liability, Umbrella/Excess Liability, Auto Liability and workman?s compensation insurance). Landlord and Tenant stipulate and agree that Tenant's Proportionate Share of the Insurance Cost shall be initially $331.63 per month (the "Base Insurance Charge"). The parties hereby agree that the Base Insurance Charge is included in the rent set forth in Paragraph 43 hereof. In the event that Tenant's Proportionate Share of the Insurance Cost increases over the Base Insurance Charge at any time during the term of this lease, Landlord shall have the right to bill such increase to Tenant monthly or otherwise and Tenant shall pay such increase as additional rent within ten (10) days of Landlord's demand therefor.
60. Broker. Each of Landlord and Tenant represents that this lease was brought about by Corporate Commercial Realty LLC (the "Broker") as broker and all negotiations with respect to this lease were conducted exclusively with the Broker. Each of Landlord and Tenant agrees that if any claim is made for commissions by any other broker through or on account of any acts of Landlord or Tenant, such party will indemnify, defend and hold the other party free and harmless from any and all liabilities and expenses in connection therewith, including such other party's reasonable attorney?s fees. With respect to the foregoing, in the event Tenant elects to use any broker (the "New Broker") other than or together with the Broker in connection with the extension of this lease (whether by way of a renewal option or a separate extension agreement), Tenant shall be responsible for (and indemnify Landlord against) the commission claimed by the New Broker and any liabilities and expenses, including reasonable attorney fees, incurred by Landlord with respect thereto. Landlord shall be responsible for and shall pay Broker pursuant to a separate written agreement between Landlord and Broker on a form issued by Landlord?s office.
61. Conditions of Landlord?s Liability. Landlord and Landlord's agents and employees shall not be liable for, and Tenant waives all claims for, loss or damage to Tenant's business or damage to person or property sustained by Tenant resulting from any accident or occurrence (unless caused by or resulting from the negligence of Landlord or Landlord's agents, employees, contractors or representatives other than accidents or occurrences against which Tenant is insured and except to the extent Tenant is contributorily negligent) in or upon the Demised Premises or the Building, including, but not limited to, claims for damage resulting from: (i) any equipment or appurtenances becoming out of repair; (ii) injury done or occasioned by wind; (iii) any defect in or failure of plumbing, heating or air conditioning equipment, electric wiring or installation thereof, gas, water, or steam pipes, stairs, porches, railings or walks; (iv) broken glass; (v) the backing up of any sewer pipe or downspout; (vi) the bursting, leaking or running of any tank, tub, washstand, water closet, waste pipe, drain or other pipe or tank in, upon or about the Building or the Demised Premises; (vii) the escape of steam or hot water; (viii) water, snow or ice being upon or coming through the roof, skylight, trapdoor, stairs, doorways, show windows, walks or any other place upon or near the Building or the Demised Premises or otherwise; (ix) the falling of any fixture, plaster, tile or stucco; and (x) any act, omission or negligence of other tenants, licensees or of any other persons or occupants of the Building or of adjoining or contiguous buildings or of owners of adjacent or contiguous property. Whenever Tenant shall claim under this lease that Landlord has unreasonably withheld or delayed its consent to some request of Tenant for which Landlord is specifically obligated to be reasonable under this lease, Tenant shall have no claim for damages by reason of such alleged withholding or delay, and Tenant's sole remedy thereof shall be a right to obtain specific performance or injunction but in no event with recovery of damages.
62. Partnership Tenant. If Tenant is a partnership (or
is comprised of two (2) or more persons, individually or as
co-partners of a partnership) or if Tenant?s interest in this
lease shall be assigned to a partnership (or to two (2) or
more persons, individually or as co-partners of a partnership)
pursuant to Paragraph 54 (any such partnership and such persons
are referred to in this Paragraph as "Partnership Tenant"),
the following provisions of this Section shall apply to such
Partnership Tenant: (a) the liability of each of the parties
comprising Partnership Tenant shall be joint and several, and
(b) each of the parties comprising Partnership Tenant hereby
consents in advance to, and agrees to be bound by, any
modifications of this lease which may hereafter be made, and
by any notices, demands, requests or other communications
which may hereafter be given, by Partnership Tenant or by any
of the parties comprising Partnership Tenant, and (c) any
bills, statements, notices, demands, requests and other
communications given or rendered to Partnership Tenant or
to any of the parties comprising Partnership Tenant shall be
deemed given or rendered to Partnership Tenant and to all
such parties and shall be binding upon Partnership Tenant
and all such parties, and (d) if Partnership Tenant shall
admit new partners, all of such new partners shall, by their
admission to Partnership Tenant, be deemed to have assumed
performance of all of the terms, covenants and conditions
of this lease on Tenant?s part to be observed and performed,
and (e) Partnership Tenant shall give prompt notice to
Landlord of the admission of any such new partners, and
upon demand of Landlord, shall cause each such new partner
to execute and deliver to Landlord an agreement in form
satisfactory to Landlord, wherein each such new partner
shall assume performance of all of the terms, covenants
and conditions of this lease on Tenant?s part to be observed
and performed (but neither Landlord?s failure to request
any such agreement nor the failure of any such new partner
to execute or deliver any such agreement to Landlord shall
vitiate the provisions of subdivision (d) of this Paragraph).
63. Miscellaneous.
(a) This lease shall not be recorded. No memorandum of this lease shall be recorded without the express written consent of Landlord.
(b) The invalidity or unenforceability of any provision of this lease shall in no way affect the validity or enforceability of any of the other provisions contained in this lease. Landlord and Tenant understand, agree and acknowledge that this lease has been freely negotiated by both parties and that, in the event of any controversy, dispute, or contest over the meaning, interpretation, validity, or enforceability of this lease or any of its terms and conditions, there shall be no inference, presumption or conclusion drawn whatsoever against either party by virtue of that party having drafted this lease or any portion hereof.
(c) There are no oral agreements between the parties hereto affecting this lease and this lease supersedes and cancels any and all previous representations, negotiations, arrangements and understandings, if any, between the parties hereto with respect to the subject matter hereof, and shall not be used to interpret or construe this lease.
(d) Wherever in this lease there is any conflict between the provisions of any of the preprinted portions of the lease and the non-preprinted portions of the lease (e.g. typewritten or handwritten changes to the pre-printed form and the provisions of this rider), the non-preprinted provisions shall be deemed to supersede the preprinted provisions.
(e) Any references in the printed portions of this lease to the City of New York and the Administrative Code of the City of New York are deemed deleted, and where applicable the town in which the Demised Premises is located and other local governmental authorities and their ordinances shall be substituted in lieu thereof.
(f) This lease may not be changed, modified or
discharged, in whole or in part, orally, and no executory
agreement shall be effective to change, modify or discharge,
in whole or in part, this lease or any obligations under this
lease, unless such agreement is set forth in a written
instrument executed by the party against whom enforcement of
the change, modification or discharge is sought.
(g) The mailing or delivery of this lease by the
Landlord to Tenant, its agent or attorney, shall not be
deemed an offer nor shall any obligation or liability be
created on the part of Landlord or Tenant until such time
as this lease, duly executed by the Landlord and Tenant, is
delivered to each other or their agents or attorneys.
(h) Tenant shall give notice to Landlord, promptly after Tenant learns thereof, of (i) any accident in or about the Demised Premises, (ii) all fires and other casualties within the Demised Premises, (iii) all damages to or defects in the Demised Premises, including the fixtures, equipment and appurtenances thereof for the repair of which Landlord might be responsible, and (iv) all damage to or defects in any parts or appurtenances of the Building's sanitary, electrical, heating, ventilating, air conditioning, elevator and other systems located in or passing through the Demised Premises or any part thereof.
(i) Landlord agrees to install, repair and maintain, at its sole cost and expense, Landlord's Building standard identification sign for Tenant at the main entrance to the Building. Any changes to such sign shall be at Tenant's sole cost and expense.
(j) In the event that Tenant is not an individual, Tenant represents that the officer or officers, partner or partners, member or members or manager or managers executing this lease have the requisite authority to do so.
(k) Tenant hereby acknowledges that Landlord makes no representations as to the compatibility of the Building systems with Tenant's equipment.
(l) Tenant shall indemnify, hold harmless and defend Landlord, its affiliates, managing agents, construction company, subsidiaries, directors, officers, employees and agents from and against any and all liabilities, claims, demands, damages, costs, expenses (including reasonable attorney fees) suits, judgments whether actual or alleged, including such for bodily injury or wrongful death to any person (including tenant employees and invitees) and property damage to any property, arising out of or in connection with the operations or business of the Tenant at the demised premises or real property; the acts or omissions of the Tenant, its sub-tenants, its employees, invitees, contractors or agents; or any breach of this lease or improper conduct. Upon notification by the Landlord of an indemnifiable event, Tenant at its own expense shall arrange for Landlord's defense (at Landlord?s option) and confirm indemnification. Tenants will still be responsible to fulfill its obligations under this Article in the event Tenant or Tenants insurance company does not accept a tender of claim by the Landlord. These indemnification provisions are to continue after lease expiration and are not limited by the amount of available insurance in place.
(m) This lease shall be construed in accordance with and governed by the internal laws (without reference to choice or conflict of laws) of the State of New York. In respect of any dispute between the parties regarding the subject matter hereof, the parties hereby irrevocably consent and submit to in personam jurisdiction in the courts of New York, located in the county in which the Building is located, including the United States courts located in said county, and to all proceedings in such courts. The parties hereby agree that such courts shall be the venue and exclusive and proper forum in which to adjudicate any case or controversy arising either, directly or indirectly, under or in connection with this lease and that they will not contest or challenge the jurisdiction or venue of these courts.
(n) Notwithstanding anything contained to the contrary in this lease, Tenant hereby waives any right to recover against Landlord any indirect, consequential, special, punitive or incidental damages against Landlord in any cause of action, proceeding or claim arising out of, or in connection with, this lease.
64. Tenant's Current Premises. Landlord hereby agrees that, in the event that the Commencement Date does not occur on February 1, 2015, provided that Tenant is not then in monetary default under the terms of the 70 Orville Lease (as hereinafter defined), Tenant shall be permitted to continue to occupy its current premises at 70 Orville Drive, Bohemia, New York (the "70 Orville Premises") from the period commencing on February 1, 2015 and continuing through and including the Commencement Date. During any such period, Tenant shall continue to pay to Landlord basic rent at the rate set forth in that certain Agreement of Lease dated as of October __, 1989 between Landlord's predecessor-in-interest, as landlord, and Tenant, as tenant, for certain premises at the building owned by Landlord's affiliate and located at 70 Orville Drive, Bohemia, New York (as amended, the "70 Orville Lease") as of the expiration of the 70 Orville Lease (pro rated for any partial month), as well as any amounts of additional rent currently payable under the 70 Orville Lease.
65. Awning. Notwithstanding anything to the contrary contained herein, upon prior written consent from Landlord, which consent shall not be unreasonably withheld, conditioned or delayed, Tenant shall be permitted, to the extent permitted under applicable law and provided that Tenant obtains all necessary approvals and permits for same, to place an awning over the rear entrance loading dock to protect against inclement weather. The size, design and exact location of such awning shall be subject to the approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Any work performed by Tenant or Tenant?s contractor with respect to any such awning shall be performed in strict accordance with Article 3 and Paragraph 45 hereof, provided that there shall be no Landlord construction affiliate fee due and payable in connection therewith. Landlord makes no representations that Tenant will receive any necessary approvals and/or permits for such awning and Tenant?s failure to obtain same shall not affect the validity of this lease.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed this lease as of the day and year first above written.
Landlord: 80 ORVILLE DRIVE ASSOCIATES LLC
By: Rechler Equity I LLC, its managing member
By: Rechler Equity MM I LLC, its managing member
By: Rechler Equity LLC, its managing member
By: /s/ Mitchell Rechler
________________________
Name:
|
Title:
Tenant: SCIENTIFIC INDUSTRIES, INC.
By: /S/Helena R. Santos
_______________________
Name: Helena R. Santos
Title: President
|
SCHEDULE A
PERMITTED MATERIALS
"Permitted Materials" means those normally utilized in an office environment, including, without limitation, Hazardous Materials which may be contained in cleaning solutions or products utilized in photostatic copying and other office machines in commercially reasonable amounts.
EXHIBIT A
RENTAL PLAN DATED AS OF JULY __, 2014