UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
 
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the fiscal year ended June 30, 2021
 
 
☐ 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 incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
80 Orville Drive, Suite 102, Bohemia, New York
11716
(Address of principal executive offices)
(Zip Code)
 
(631) 567-4700
(Registrant’s telephone number, including area code)
 
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:
 
 
Title of Class
Common stock, $.05 par value
 
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 ☐Yes ☒ 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 (§ 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 ☐ No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 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. ☒ Yes ☐ No
 
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 ☐ (Do not check if a smaller reporting company)
Smaller reporting company ☒
Emerging Growth ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) ☐ Yes ☒ No
 
 
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 October 8, 2021 is $20,813,900.
 
The number of shares outstanding of the registrant’s common stock, par value $.05 per share (“Common Stock”) as of October 8, 2021 is 6,458,143 shares.
 
 
 
 
 
DOCUMENTS INCORPORATED BY REFERENCE
 
None.
 
 
 
 
 
    
 
 
SCIENTIFIC INDUSTRIES, INC.
 
Table of Contents
 
 
PART I
 
 
 
 
BUSINESS
4
 
 
 
RISK FACTORS
7
 
 
 
PROPERTIES
11
 
 
 
LEGAL PROCEEDINGS
11
 
 
 
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
11
 
 
 
PART II
 
 
 
 
 
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
11
 
 
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
12
 
 
 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
14
 
 
 
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
14
 
 
 
CONTROLS AND PROCEDURES
14
 
 
 
OTHER INFORMATION
14
 
 
 
PART III
 
 
 
 
 
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
15
 
 
 
EXECUTIVE COMPENSATION
16
 
 
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
22
 
 
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
24
 
 
 
PRINCIPAL ACCOUNTANT FEES AND SERVICES
24
 
 
 
PART IV
 
 
 
 
 
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
 
 
 
 
 
 
 
 
CERTIFICATION
 
 
 
 
CERTIFICATION
 
 
 
 
 
 
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 through its wholly-owned subsidiary, Scientific Bioprocessing Holdings, Inc. (“SBHI”), the licensing, design, manufacture, and marketing of bioprocessing systems and products (“Bioprocessing Systems”). SBHI has two wholly-owned subsidiaries – Scientific Bioprocessing, Inc., a Delaware corporation (“SBI”) and aquila biolabs GmbH (“Aquila”), a German corporation. The Company’s products are used primarily for research purposes by universities, pharmaceutical companies, pharmacies, national laboratories, medical device manufacturers, and other industries performing laboratory-scale research. Until November 30, 2020, the Company was also engaged in the design, manufacture and marketing of customized catalyst research instruments through its wholly-owned subsidiary, Altamira Instruments, Inc, a Delaware corporation (“Altamira”). On November 30, 2020, the Company sold significantly all of Altamira’s assets and Altamira’s operations were discontinued.
 
Operating Segments. The Company views its operations as two segments: the manufacture and marketing of standard Benchtop Laboratory Equipment which includes various types of equipment used for research and sample preparation in university, pharmacy and industrial laboratories sold primarily through laboratory equipment distributors and online; and the development, manufacture, and sublicensing of bioprocessing products. For certain financial information regarding the Company’s operating segments, see Note 2 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 ™” brand, and pharmacy and laboratory balances and scales, force gauges, and moisture analyzers under the “Torbal®” brand. Sales of the Company’s principal product, the Vortex-Genie® 2 Mixer, excluding accessories, represented approximately 47% and 39% of the Company’s total net revenues for each of the fiscal years ended June 30, 2021 (“fiscal 2021”) and June 30, 2020 (“fiscal 2020”) respectively,and 51% and 45% of the segment’s sales for fiscal 2021 and fiscal 2020, respectively.
 
The Company’s 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 a line of various orbital shakers.
 
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 incubated shakers, which are multi-functional benchtop environmental chambers designed to perform various shaking and stirring functions under controlled environmental conditions.
 
The Company’s line of magnetic stirrers includes a patented high/low programmable magnetic stirrer, a four-place high/low programmable magnetic stirrer, a large volume magnetic stirrer, and a four-place general purpose stirrer.
 
The Company’s Torbal brand line of products includes pharmacy, laboratory, and industrial digital scales, mechanical balances, moisture analyzers, mechanical and automated pill counters, and force gauges and test stands.
 
 
 
 

 4
 
 
 
Bioprocessing Systems. The Company, through SBHI, sublicenses certain patents and technology it holds relating to bioprocessing products exclusively under a license with the University of Maryland, Baltimore County (“UMBC”), for which it receives royalties for patents expiring in August 2021 and December 2023. SBHI through its two wholly-owned subsidiaries, SBI and Aquila, is also engaged in the design, development, manufacture and marketing of bioprocessing products, principally products incorporating smart sensors and state of the art software analytics. Products offered for sale include the Cell Growth Quantifier (“CGQ”) for Biomass monitoring in shake flasks, the Liquid Injection System (“LIS”) for automated feeding in shake flasks, and a line of coaster systems and flow-through cells for pH and DO monitoring.
 
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 internal engineering capabilities in areas such as industrial and electronics design.
 
Major Customers. Sales to three customers, principally of the Vortex-Genie 2 Mixer, represented 21% and 11% of total net revenues for fiscal 2021 and fiscal 2020, respectively, and 23% and 13% of Benchtop Laboratory Equipment product sales, for fiscal 2021 and fiscal 2020, respectively.
 
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 websites, printed catalogs and sales force.
 
The Company’s “Torbal” brand products are primarily marketed and sold online, and primarily on a direct basis, with only a few distributors. The Company’s VIVID automated pill counter is sold through two exclusive distributors in North America. The Company markets its products through trade publication advertising, brochures and catalogs, the Company’s website, one sales manager in the U.S., a consultant in Europe and, when practicable, attendance at industry trade shows.
 
In general, due to the reliance on sales through distribution, it takes two to three years for a new Genie brand Benchtop Laboratory Equipment product to begin generating meaningful sales.
 
Bioprocessing Systems. The Company’s Bioprocessing Systems products are marketed under a newly created marketing category “Digitally Simplified Bioprocessing” through a direct sales force consisting of ten sales professionals and application scientists plus one distributor.  Sales are supported via marketing through websites, content creation, application notes, mailings, trade shows, online marketing campaigns, and membership in various public/private research partnerships.
 
Assembly and Production. The Company has facilities in Bohemia, New York and Orangeburg, New York where is conducts its Benchtop Laboratory Equipment operations. The Company also has an operating facility in Pittsburgh, Pennsylvania where it conducts sales, marketing, shipping, and administrative functions; and, beginning on April 29, 2021, as a result of the Company’s acquisition of Aquila, the Company operates a facility in Baesweiller, Germany where it conducts product development, manufacturing, sales, marketing and administration. The Company’s production operations principally involve assembly of components supplied by various domestic and international independent suppliers.
 
   
 5
 
  
 
 
Patents, Trademarks and Licenses.
 
The Company holds several patents relating to its benchtop laboratory products which include a United States patent expiring in November 2022 on the MagStir Genie® and on the MultiMagStir Genie®, another patent that relates to its Vortex-Genie Pulse expiring in January 2036, and a patent relating to Torbal’s VIVID® automated pill counter which expires in March 2039.
 
Two patents held by the Company relating to Bioprocessing Systems, for a biocompatible bag with integral sensors, expire in January 2029. Another patent on an apparatus for detecting PH and dissolved oxygen will expire in 2036. The Company has several patent applications pending with the US Patent and Trademark Office (the “USPTO”), most of which relate to bioprocessing technology.
 
Aquila holds two US patents relating to bioprocessing which will expire in January 2035 and February 2038, respectively. In addition, Aquila holds several European and German patents and Patent Cooperation Treaty (the “PCT”) patents, and has several other patent applications pending in the United States, Europe, and under the PCT.
 
The Company does not anticipate any material adverse effect on its operations following the expiration of any of its patents.
 
The Company has various proprietary trademarks, including aquila biolabs (in Germany), Bead Genie®, BioGenie ®, Cellphase®, Cellstation®, Disruptor Beads™, Disruptor Genie®, Enviro-Genie®, Genie™, Genie Temp-Shaker™, ID.Developer’s Kit™, Incubator Genie™, MagStir Genie®, MegaMag Genie®, MicroPlate Genie®, MultiMagStir Genie®, Multi-MicroPlate Genie®, Orbital Genie®, QuadMag Genie®, Rotator Genie®, SBI®, Roto-Shake Genie®, Torbal®, TurboMix™, VIVID®, and Vortex-Genie®, each of which it considers important to the success of the related product. The Company also has several trademark applications pending with the USPTO. 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 an exclusive license from UMBC with respect to rights and know-how under a United States patent held by UMBC related to disposable sensor technology, which the Company further sublicenses on an exclusive basis to a German company, and 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. Net total license fees paid or owed to the Company under this license for fiscal 2021 and fiscal 2020 amounted to $560,000 and $1,286,800, respectively. This patent and the related license expire in December 2023.
 
Foreign Sales. The Company’s sales to overseas customers, principally in Asia and Europe, accounted for approximately 43% and 46% of the Company’s net revenues for fiscal 2021 and 2020, 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 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.
 
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 and products exported from China.
 
The Company's major competitors for its Genie brand 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 brand products are Ohaus Corporation, an American company, A&D Company Ltd., a Japanese company, Adam Equipment Co., Ltd., a British company, and Avery Weigh-Tronix, an American company.
 
The potential major competitors for the Company’s Bioprocessing Systems are Applikon Biotechnology, B.V. (Netherlands), PreSens GmbH (Germany), Eppendorf AG GmbH (Germany), and PyroScience (Germany).
 
 
 6
 
 
  
 
Research and Development. The Company incurred research and development expenses, the majority of which related to its Bioprocessing Systems operations, of $1,623,800 during fiscal 2021 compared to $1,139,700 during fiscal 2020. The Company expects that research and development expenditures in the fiscal year ending June 30, 2022 will continue to increase due to increased product development efforts for Bioprocessing Systems.
 
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 governmental authority. 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 September 24, 2021, the Company employed 59 persons (28 for the Benchtop Laboratory Equipment operations, and 31 for the Bioprocessing Systems operations, of which 19 were located in Germany) of whom 55 were full-time, including its executive officers. The Company augments its internal staff with outside consultants as deemed necessary. None of the Company's employees are represented by any union.
 
Available Information. The Company’s Annual Report to Stockholders for fiscal 2021, 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 2021 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 https://www.scientificindustries.com/sec-filings.
 
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
 
Although the Company does not depend on any one single major customer, sales to the top three Benchtop Laboratory Equipment operations customers accounted for a combined aggregate of 23% and 13% of the segment’s total sales for each of fiscal 2021 and 2020 (21% and 11% of its total net revenues for fiscal 2021 and 2020, respectively).
 
No representation can be made that the Company will be successful in retaining any of these customers, or not suffer a material reduction in sales, either of 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 51% and 45% of Benchtop Laboratory Equipment sales, for fiscal 2021 and fiscal 2020 (47% and 39% of total net revenues for fiscal 2021 and fiscal 2020, respectively).
 
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 ($9,043,600 for fiscal 2021 and $6,783,600 for fiscal 2020) 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 with on price. The Torbal line of products is also a small market participant in its industry with significant competition from well-known brands.
 
 7
 

 
 
The Company’s Bioprocessing Systems operations is a participant in the laboratory-scale sector of the larger bioprocessing products industry, which is dominated by several companies that are significantly larger, and the operation is still in its start-up phase of operations. In the fourth quarter of fiscal 2021, the Company consummated its acquisition of Aquila to accelerate the Bioprocessing Operations, however there is no assurance that the Company will be successful in integrating Aquila into its Bioprocessing Operations or that it will be successful in competing with its larger competitors.
 
The Company’s Ability to Grow and Compete Effectively Depends In Part on Its Ability to Develop and Effectively Market New Products
 
The Company continuously invests in the development and marketing of new Benchtop Laboratory Equipment products with a view to increase revenues and reduce the Company’s dependence on the Vortex-Genie 2 Mixer, including the Torbal line of products. However, gross revenues derived from non-Vortex-Genie Benchtop Laboratory Equipment products including Torbal products only amounted to $4,419,100 (49% of the segment’s sales and 45% of total revenues) for fiscal 2021; and $3,712,800 (55% of the segment’s sales and 48% of total revenues) for fiscal 2020. 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 heavily 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 their 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 success of the Company’s Bioprocessing Systems operations will depend heavily on its ability to successfully develop, produce, and market new products. Commencing in the last quarter of fiscal year ended June 30, 2019, the Company began to commit substantial resources to its Bioprocessing Systems operations in the form of employees, materials, supplies, marketing, and facilities to accelerate its product development efforts and marketing activities. Bioprocessing products are of a complex nature in an industry that the Company has not traditionally operated in and have taken much 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. On April 29, 2021, the Company acquired Aquila in an effort to further accelerate product development of its bioprocessing products. The Company is incurring substantial product development costs related to its Bioprocessing Operations.
 
No assurance can be given that the Company will be successful with its new product development or that its 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 such products in its catalogs and websites.
 
Integration — The Company May Face Challenges with Integrating Acquisitions and Achieving the Financial and Other Results Anticipated at the Time of Acquisition
 
The Company may face challenges integrating its recent acquisition of Aquila or future acquisitions with its existing operations. These challenges could include difficulty in integrating or consolidating business processes and systems and challenges with integrating the business cultures, especially since Aquila is located in Germany. In addition, the process of integrating operations could result in an interruption of normal business operations.
 
Exchange Rates — The Company is Exposed to Foreign Exchange Rate Risk
 
Substantially all of the Company’s sales are in US dollars. As a result of the acquisition of Aquila, the Company is now subject to foreign exchange rate risk, both transactional and translational, which may negatively affect our financial performance. Transactional foreign exchange exposures result from exchange rate fluctuations, including in respect of the U.S. dollar and the Euro. Translational foreign exchange exposures result from exchange rate fluctuations in the conversion of the entity’s functional currency to U.S. dollars, consistent with the Company’s reporting currency, and may affect the reported value of the Company’s assets and liabilities and its income and expenses. In particular, the Company’s translational exposure may be impacted by movements in the exchange rate between the Euro against the U.S. dollar.
 
The Company May Be Subject to General Economic, Political and Social Factors
 
Orders for the Company’s products depend in part, on the customer’s ability to secure funds to finance purchases, especially government funding for research activities. Availability of funds can be affected by budgetary constraints. Factors including a general economic recession, a European crisis, slowdown in Asian economies, or a major terrorist attack may have a negative impact on the availability of funding including government or academic grants to potential customers. Please also see the separate COVID-19 pandemic related discussion in this “Risk Factors” section below.
 

 8
 
 
 
 
As discussed in Item 1, sales to overseas customers, including sales in China, account for approximately 43% of the Company’s net revenues. The high value of the U.S. dollar relative to foreign currencies can have a negative impact on sales because the Company’s products, which are paid in U.S. dollars, become more expensive to overseas customers.
 
The ongoing tariffs have not had a material impact on the Company, other than slightly higher component costs which the Company has been able to manage through alternative sources and passing on some of the increases through price increases. The current situation with inflationary pressures and higher transportation costs is resulting in significantly higher costs for some of the Company’s components. Continuation of tariffs and/or increased trade tensions and inflationary pressures could have a negative effect on the Company’s future gross margins, if the Company is unable to pass such cost increases to its customers.
 
The Company Has Been Adversely Affected and Could Be Materially Adversely Impacted in the Future by the COVID-19 pandemic
 
The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impact the Company’s operations at the end of the third quarter of the year ended June 30, 2020. At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from home, social distancing in the workplace, requiring self-quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. The Bioprocessing Systems Operations’ SBI facility was shut down temporarily due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of two loans under the Federal Government’s Paycheck Protection Program (“PPP”). The Company received $563,800 and $433,800 in April 2020 and March 2021, respectively, under this program administered by the U.S. Small Business Administration through its bank. The first loan was forgiven in June 2021 except for $32,700 which was repaid. The remaining loan bears interest at 1% per annum and matures in March 2026 and contains no collateral or guarantee requirements. The Company expects to apply and receive forgiveness for the majority of the second loan. The Bioprocessing Systems Operations’ German operation, which was acquired on April 29, 2021, was negatively impacted in its ability to secure new orders because Aquila had historically relied on face-to-face meetings at trade shows for its sales opportunities. While it has participated in virtual trade shows, management believes that certain sales opportunities are lost as a result. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies which have benefitted from the Pandemic due to the nature of the products and have the ability to pay. However, there is a delay in the receipt of a receivable related to the Company’s discontinued operations due to the delay to complete the related installation as a result of the pandemic. The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, or delivery and distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. The Company is currently experiencing some delays from its supply chain which is having an impact on delayed delivery of some products, however this is deemed temporary and does not affect the Company’s major product – the Vortex-Genie 2. In addition, due to the travel restrictions imposed by the United States and other governments worldwide, Company personnel may be restricted from traveling to conduct its operations including site visits, customer visits and installations, vendor facility visits, and other sales and marketing related travel that can negatively impact the Company.
 
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 suppliers for some components, mostly due to cost considerations. Most of the Company’s suppliers, including its U.S. 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, such as current and potential future tariffs, and the COVID-19 pandemic. 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. The Company is currently experiencing some delays in delivery of electronic components due to shortages of underlying raw materials, however these shortages pertain to low volume Benchtop Laboratory Equipment products and to the Company’s knowledge are not expected to have a material impact on the Company’s revenues. The Company also seeks to mitigate the effect of the tariffs on its component costs through supplier negotiations, however, alternate suppliers are not always feasible for various reasons including complexity and cost of toolings. A shortage of components beyond what it is currently experiencing or vendor inability to deliver due to shipping and cargo issues could halt production and have a material negative effect on the Company’s operations.
 
 

 
 9
 
 
 
 
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, or the Torbal products other than the VIVID pill counter, and it has 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.
 
The Company’s patents related to its Bioprocessing Systems Operations pertaining to non-invasive sensor technology, which it licenses from University of Maryland Baltimore County, expired in August 2021 and December 2023, and as a result, the Company expects a material reduction in license fees during calendar year 2021 and none past December 2023. The Company has some patent protection on certain of its products under development and other applications pending.
 
The Company’s Bioprocessing Operations through its newly acquired Aquila division holds several patents primarily in Germany and across Europe related to its products and underlying technology, and has several patent applications pending in Germany, the European Union, and the United States of America.
 
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 Company’s patents. Any of the foregoing activities could have a material adverse effect on the Company. Moreover, enforcement by the Company of its patent or license rights may require substantial litigation costs.
 
The Company Has Limited Management Resources
 
The loss of services from any of Ms. Helena Santos, the Company’s President, Chief Executive, Financial Officer and Treasurer, Mr. Robert Nichols, the President of the Company’s Genie Products Division of the Benchtop Laboratory operations, Mr. Karl Nowosielski, the President of the Torbal Products Division of the Benchtop Laboratory operations, Mr. Daniel Grunes, the Vice-President of Operations and Product Development of SBHI, or Mr. John A. Moore, President of SBI, 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  October 8, 2021, there were 6,458,143 shares of Common Stock of the Company outstanding, of which 3,820,130 (59%) were held by affiliates or 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 2021 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.
 
 10
 
  
 
 
 
Item 2. Properties.
 
The Company’s executive office and principal manufacturing facility for its Benchtop Laboratory Equipment operations comprises approximately 19,000 square feet. This facility is located in Bohemia, New York and is held under a lease which expired in February 2025, and was amended in September 2021 for an additional 5,000 square feet adjoining facility and increased term through October 2028. The Company’s Bioprocessing Systems operations are conducted from an approximately a 2,100 square foot laboratory facility in Pittsburgh Pennsylvania under a lease which expires in May 2023. The Company has a 1,200 square foot facility in Orangeburg, New York from where it conducts its sales and marketing functions, primarily for the Torbal Products Division of the Benchtop Laboratory Equipment operations expiring in October 2022. As a result of its acquisition of Aquila, the Company also has a 480 square foot facility in Baesweiller, Germany comprised of manufacturing, engineering, and administrative space. See Note 11 to the consolidated 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 2021.
 
 
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 at the end of each quarter of fiscal 2020 and fiscal 2021, 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($)
 
09/30/19
  4.00 
  6.88 
12/31/19
  6.01 
  9.10 
03/31/20
  6.56 
  10.20 
06/30/20
  5.55 
  10.61 
09/30/20
  7.05 
  9.00 
12/31/20
  7.26 
  8.10 
03/31/21
  7.66 
  11.00 
06/30/21
  9.31 
  10.51 
 
As of September 24, 2021, there were 289 record holders of the Company's Common Stock.
 
 
 
 
 
 
 
 11
 
 
 
 
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’s results reflect the results from the Benchtop Laboratory Equipment Operations and the Bioprocessing Systems Operations, which includes two months of results for Aquila, following its acquisition on April 29, 2021. The Company realized a loss from continuing operations before income tax benefit of $4,055,000 for fiscal 2021 compared to a loss of $667,400 for fiscal 2020, primarily due to increased operating expenses of its Bioprocessing Systems Operations, which included significant amounts for product development, sales and marketing, costs related to the acquisition of Aquila, and non-cash compensation expense related to stock options, partially offset by the profits generated by increased sales of the Benchtop Laboratory Equipment Operations. The results also reflected a loss before income tax benefit for discontinued operations of $769,900 compared to $472,500 in fiscal 2020. On November 30, 2020, the Company sold substantially all of the assets of its Catalyst Research Instruments Operations which was operated through its wholly-owned subsidiary, Altamira Instruments, Inc.
 
The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impact the Company’s operations at the end of the third quarter of the year ended June 30, 2020. At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from home, social distancing in the workplace, requiring self-quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. The Bioprocessing Systems Operations’ SBI facility was shut down temporarily due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of two loans under the Federal Government’s Paycheck Protection Program (“PPP”). The Company received $563,800 and $433,800 in April 2020 and March 2021, respectively, under this program administered by the U.S. Small Business Administration through its bank. The first loan was forgiven in June 2021 except for $32,700 which was repaid. The remaining loan bears interest at 1% per annum and matures in March 2026 and contains no collateral or guarantee requirements. The Company expects to apply for and receive forgiveness for the majority of the second loan. The Bioprocessing Systems Operations’ German operation, which was acquired on April 29, 2021 ,was negatively impacted in its ability to secure new orders because Aquila had historically relied on face-to-face meetings at trade shows for its sales opportunities. While it has participated in virtual trade shows, management believes that certain sales opportunities are lost as a result. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies which have benefitted from the Pandemic due to the nature of the products and have the ability to pay. However, there is a delay in the receipt of a receivable from a customer related to the Company’s discontinued operations due to a delay in the Company’s ability to complete the installation of equipment purchased by the customer, as a result of the Pandemic. The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, or delivery and distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. The Company is currently experiencing some delays from its supply chain which is having an impact on delayed delivery of some products, however this is deemed temporary and does not affect the Company’s major product – the Vortex-Genie 2. In addition, due to the travel restrictions imposed by the United States and other governments worldwide, Company personnel may be restricted from traveling to conduct its operations including site visits, customer visits and installations, vendor facility visits, and other sales and marketing related travel that can negatively impact the Company.
 
Results of Operations. Net revenues for fiscal 2021 increased $1,990,800 (25.6%) to $9,775,200 from $7,784,400 for fiscal 2020, reflecting an increase of $2,260,000 in net sales of Benchtop Laboratory Equipment Operations, in part related to its products being used in COVID-19 related research and testing, and a decrease of $269,200 in net revenues of the Bioprocessing Systems Operations, primarily due to decreased royalties earned during the current year period due to expiring patents.
 
        The gross profit percentage for fiscal 2021 of 50.9% approximated fiscal 2020’s gross profit percentage of 50.6%.
 
 12
 
 
General and administrative expenses for fiscal 2021 increased by approximately $1,753,100 (77.0%) to $4,028,500 compared to $2,275,400 for fiscal 2020 due primarily to compensation-related costs resulting from stock option grants and increased costs from the Bioprocessing Systems Operations in part due to the acquisition of Aquila in the fourth quarter of fiscal 2021.
 
Selling expenses for fiscal 2021 increased approximately $2,846,100 (240.0%) to $4,031,900 from $1,185,800 for fiscal 2020, primarily due to increased sales and marketing expenses incurred by the Bioprocessing Systems operations for sales and marketing personnel, sales and marketing activities, and compensation-related costs resulting from stock option grants.
 
Research and development expenses increased $484,100 (42.5%) to $1,623,800 for fiscal 2021 compared to $1,139,700 for fiscal 2020, due to increased product development expenditures by the Bioprocessing Systems operations, including such expenditures incurred by Aquila since its acquisition in the fourth quarter of fiscal 2021, partially offset by decreased product development expenditures incurred by the Benchtop Laboratory Equipment Operations.
 
Total other income (loss), net was $653,800 for fiscal 2021 compared to $(3,900) in fiscal 2020. This increase was due primarily to the $531,100 forgiveness of the first PPP loan received by the Company, and increased interest income resulting from increased investment securities balances.
 
The Company reflected income tax benefit for continuing operations of $945,000 for fiscal 2021 compared to income tax benefit of $214,000 for fiscal 2020, primarily due to the loss incurred.
 
As a result of the foregoing, the Company recorded a net loss from continuing operations of $3,110,000 for fiscal 2021 compared to a net loss from continuing operations of $453,400 for fiscal 2020.
 
The Company reflected a net loss from discontinued operations of $562,500 for fiscal 2021, compared to a $249,900 loss for fiscal 2020, primarily due to loss on the sale of the majority of the operation’s assets during the current fiscal year.
 
As a result of the above, the Company recorded a net loss of $3,672,500 for fiscal 2021 compared to a net loss of $703,300 for fiscal 2020.
 
Liquidity and Capital Resources. Cash and cash equivalents increased by $2,115,500 to $9,675,200 as of June 30, 2021 from $7,559,700 as of June 30, 2020. The Company received $563,800 and $433,800 in April 2020 and March 2021, respectively, under the Payroll Protection Program administered by the U.S. Small Business Administration through its bank. The first loan was forgiven in June 2021 except for $32,700 which was repaid. The remaining loan bears interest at 1% per annum and matures in March 2026 and contains no collateral or guarantee requirements. The Company expects to apply for and receive forgiveness for the majority of the second loan. In April and June of 2021, the Company received a total of $16,074,000, net of issuance costs, from the sale of its Common Stock as further described in Note 15 of the financial statements in Item 8. The Company expects that it will be able to meet its cash flow needs during the next 12 months from cash derived from its operations and cash on-hand.
 
Net cash used in operating activities was $3,301,500 for fiscal 2021 compared to net cash used in operating activities of $168,100 for fiscal 2020, primarily due to the net loss for the current year. Net cash used in investing activities was $10,884,000 for fiscal 2021 compared to $84,100 for fiscal 2020 due mainly to acquisition of Aquila in the current year and purchase of investment securities. Net cash provided by financing activities was $16,310,200 for fiscal 2021 compared to $6,209,400 during fiscal 2020 due mainly to proceeds from issuance of stock and the proceeds from the Payroll Protection Program loan.
 
The Company's working capital increased by $5,595,800 to $16,144,300 as of June 30, 2021 compared to $10,548,500, as of June 30, 2020, primarily due to the cash received from the equity financings.
 
 
 13
 
   
 
 
Item 8. Financial Statements and Supplementary Data.
 
The consolidated Financial Statements required by this item are attached hereto on pages F1-F28.
 
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 Officer 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 Officer and Chief Financial Officer of the Company conducted an evaluation of the effectiveness of the Company’s internal controls over financial reporting as of June 30, 2021 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.
 
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. Except as otherwise discussed above, 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 Officer and Chief Financial Officer, believes that its disclosure on 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 on 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.
 

 14
 
 
 
 
PART III
 
Item 10. Directors, Executive Officers and Corporate Governance.
 
Directors
 
The Company has the following seven Directors:
 
Christopher Cox (age 57), a director since February 2021, has been a Senior Vice President of Population Health Investment Co., Inc. since September 2020 and a Co-Founder and Managing Partner of Population Health Partners LLC since May 2020. Mr. Cox has been a corporate attorney for over 25 years, most recently at Cadwalader, Wickersham & Taft LLP, which he joined as a partner in January 2012 and where he served a co-chair of the global corporate group and a member of the firm’s management committee until February 2016. From February 2016 to March 2019, Mr. Cox was Executive Vice President and Chief Corporation Development Officer of Medicines Company. Prior to January 2012, Mr. Cox was a partner at Chill Gordon & Reindel.
 
Joseph G. Cremonese (age 86), a Director since November 2002 and Chairman of the Board from February 2006 to January 2020, has been, through his affiliate, a 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 the consulting services for the Company.
 
Marcus Frampton (age 41), a Director since March 2019 is the Chief Investment Officer of the Alaska Permanent Fund Corporation and serves on the Board of Directors of Managed Funds Association and Nyrada, Inc., a drug development company. He served as Director of Investments, Real Assets and Absolute Return of the Alaska Permanent Fund from 2016 to 2018 and Director of Investments, Private Markets of the Alaska Permanent Fund from 2012 to 2016.
 
John A. Moore (age 56), a Director since January 2019 and Chairman of the Board since January 2020, is also the President of SBI since January 2020 and had been providing consulting services to SBI since March 2019. Mr. Moore serves as Chairman of Nyrada, Inc., a drug development company since July 2019 and prior to that served as a director with Noxopharm Limited, a drug development company, and is also the Chairman of Trialogics, a clinical trial software provider. Mr. Moore was President, Chief Executive Officer and director of Acorn Energy, Inc. from 2006 to 2016.
 
Helena R. Santos (age 57), a Director since 2009, has been employed by the Company since 1994, and has served since August 2002 as its President, Chief Executive Officer, Chief Financial Officer and Treasurer. She had served as Vice President, Controller from 1997 and as Secretary from May 2001.
 
Reinhard Vogt (age 65), a Director since August 2020, is the Chairman of SBI and a business development consultant to SBI and Aquila. He served as Executive Vice President and on the Executive Board of Sartorius Stedim Biotech GmbH for the 10 years prior to his retirement in July 2019.
 
Jurgen Schumacher (age 68), a Director since May 2021, is currently a private investor in various startups and growth phase technology companies.
 
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 as follows: the fiscal year ending June 30, 2021 - three directors (Ms. Santos, Mr. Schumacher, and Mr. Vogt, Class A), the fiscal year ending June 30, 2022 – two directors (Mr. Frampton and Mr. Moore, Class B), and the fiscal year ending June 30, 2023 – two directors (Mr. Cremonese and Mr. Cox, Class C.)
 
Board Committees
 
The Company has two committees – The Compensation Committee and the Audit Committee which are comprised of the entire Board of Directors.
 
 
 15
 
 
  
Executive Officers
 
See above for the employment history of Ms. Santos and Mr. Moore.
 
Robert P. Nichols (age 60), is the President of the Genie Products Division of the Benchtop Laboratory Equipment operations and Corporate Secretary and has been employed by the Company since February 1998. Previously, he had been since May 2001, the Company’s Vice President of Engineering.
 
Karl D. Nowosielski (age 43), is the President of the Torbal Products Division of the Benchtop Laboratory Equipment operations and Director of Marketing for the Company. He was Vice President of Fulcrum, Inc. (the seller of the Torbal Products Division assets) from 2004 until February 2014.
 
Daniel Grunes (age 33), is the Vice President of Research and Development and Operations of the Company’s Bioprocessing Operations. Prior to the Company’s acquisition of Aquila, he was the Chief Executive Officer of aquila biolabs GmbH.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
The Company believes that, for fiscal 2021, 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.
 
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 Compensation 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, 2021 and 2020.
 
 
  
 
  16
 
 
SUMMARY COMPENSATION TABLE
 
 
 
Name and Principal Position
(a)
 
 
             Salary
($)
(c)
  
Bonus
($)
(d)
 
 
Stock Awards
($)
(e)
 
 
Option Awards
($)
(f)
 
 
Non- Equity Incentive Plan Compensation
($)
(g)
 
 
Non- Qualified
Deferred
Compensation
 Earnings
($)
(h)
 
 
Changes in Pension Value and Non-Qualified Deferred Compensation Earnings
 
 
All Other Compensation
($)
(i)
 
 
Total
($)
(j)
 
Helena R. Santos,
CEO, President, CFO
  191,200 
  100,000 
  0 
  553,600(1)
  0 
  0 
  0 
  9,600(6)
  854,400 
Helena R. Santos,
CEO, President, CFO
  185,700 
  50,000 
  0 
  13,100(1)
  0 
  0 
  0 
  9,400(6)
  258,200 
 
    
    
    
    
    
    
    
    
    
John A. Moore,
President of
SBI
  175,000 
  100,000 
  0 
  553,600(2)
  0 
  0 
  0 
  7,000(6)
  835,600 
John A. Moore,
President of
SBI
  145,000 
  50,000 
  0 
  36,000 
  0 
  0 
  0 
  28,900(7)
  259,900 
 
    
    
    
    
    
    
    
    
    
Daniel Grunes,
Vice President of R&D and Operations of Bioprocessig Operations
  30,200(3)
  20,000 
  0 
  23,200(3)
  0 
  0 
  0 
  10,000(3)
  83,400 
Daniel Grunes,
Vice President of R&D and Operations of Bioprocessig Operations
  N/A 
  N/A 
  N/A 
  N/A 
  N/A 
  N/A 
  N/A 
  N/A 
  N/A 
 
    
    
    
    
    
    
    
    
    
Robert P. Nichols,
President of Genie Division
  167,200 
  0 
  0 
  0 
  0 
  0 
  0 
  6,700(6)
  173,900 
Robert P. Nichols,
President of Genie Division
  162,300 
  5,000 
  0 
  3,900(4)
  0 
  0 
  0 
  6,700(6)
  177,900 
 
    
    
    
    
    
    
    
    
    
Karl D. Nowosielski
President of Torbal Division and Director of Marketing
  176,600 
  0 
  0 
  0 
  0 
  0 
  0 
  7,100(6)
  183,700 
Karl D. Nowosielski
President of Torbal Division and Director of Marketing
  169,800 
  10,000 
  0 
  6,300(5)
  0 
  0 
  0 
  7,200(6)
  193,300 
 
 
 17
 
 
    
 
(1)
The amount for 2021 represents compensation expense for stock options granted on June 23, 2020 valued utilizing the Black-Scholes-Merton options pricing model disregarding estimates of forfeitures related to service-based vesting considerations, which were valued at a total of $1,625,000 of which $553,600 was expensed in fiscal 2021 and none in 2020. The amounts for 2020 represent compensation expense for the stock options granted on July 1, 2017 which were valued at a total of $39,200 of which $13,100 was expensed in fiscal 2020. No expense was necessary in 2021.
 
(2)
The amount for 2021 represents compensation expense for stock options granted on June 23, 2020 valued utilizing the Black-Scholes-Merton options pricing model disregarding estimates of forfeitures related to service-based vesting considerations, which were valued at a total of $1,625,000 of which $553,600 was expensed in fiscal 2021 and none in 2020. The amounts for 2020 represent compensation expense for the stock options granted from March 2019 through June 2020 valued at $3,000 per month utilizing the Black-Scholes-Merton options pricing model, of which $36,000 was expensed in fiscal 2020. No expense was necessary in 2021.
 
(3)
Upon the acquisition of Aquila in April 2021, Mr. Grunes, who was Aquila’s CEO, became the VP of R&D and Operations for the Bioprocessing Operations. The Option Awards amounts represent the fiscal year 2021 compensation expense for stock options granted at the time of acquisition which were valued utilizing the Black-Scholes-Merton options pricing model disregarding estimates for forfeitures related to service-based vesting considerations, which were valued at a total of $409,300 of which $23,200 was expensed in fiscal 2021 and none in fiscal 2020. Other compensation represents retention bonus paid in accordance with his employment agreement upon consummation of acquisition.
 
 
 
 
(4)
The amounts represent compensation expense for the July 1, 2017 stock options granted valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The options were valued at a total of $11,800, of which $3,900 was expensed in fiscal 2020. No expense was necessary in 2021.
 
 
(5)
The amounts represent compensation expense for the stock options granted on July 1, 2017, and February 26, 2017, valued utilizing the Black-Scholes-Merton options pricing model, disregarding estimates of forfeitures related to service-based vesting considerations. The stock options were granted as part of his employment agreement. The options were valued at a total of $11,800, and $10,500, respectively, of which $6,300 was expensed in fiscal 2020. No expense was necessary in 2021.
 
 
(6)
The amounts represent the Company’s matching contribution under the Company’s 401(k).
 
 
(7)
The amounts represent director and chairman fees paid to Mr. Moore through June 30, 2020. On July 1, 2020 Mr. Moore became an employee of the Company and thereafter was not paid any director fees.
 
 
 
 
  
 
  18
 
 
 
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR ENDED JUNE 30, 2021
 
Name
(a)
Grant
Date
(b)
 
Estimate
Future Payouts
Under Non-Equity
Incentive
Plan
$
(c)
 
 
Estimated Future Payouts Under
Equity
Incentive
Plan
$
(d)
 
 
All Other
Stock Awards Number
 of Shares of Stock
or
Units
(#)
(e)
 
 
All Other
Option
Awards:
Number
of
Securities
Underlying
Options (#)
(f)
 
 
Exercise
Or
Base Price
of
Option
Awards
($/Sh)
(g)
 
 
Grant Date
Fair Value
of
Stock
and
Option
Awards
(h)
 
Daniel Grunes
4/30/2021
  0 
  0 
  0 
  56,000 
  10.00 
  409,300 
John A. Moore
6/23/2020(*)
  0 
  0 
  0 
  215,366 
  7.50-9.00 
  1,625,000 
Helena R. Santos
6/23/2020(*)
  0 
  0 
  0 
  215,366 
  7.50-9.00 
  1,625,000 
 
* Although the grants were communicated on June 23, 2020, the awards were formally issued on February 23, 2021 upon shareholder approval of an increase in the number of shares available under the Company’s 2012 Stock Option Plan.
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
 
Option Awards
 
Name
(a)
 
Number
Of
Securities Underlying Unexercised Options(#) Exercisable
(b)
 
 
Number
 Of
Securities
Underlying Unexercised Options(#)
Unexercisable
(c)
 
 
 Equity
Incentive Plan
Awards
Number of
Securities Underlying Unexercised Unearned Options (#)
(d)
 
 
 Option
Exercise
Price
($)
(e)
 
Option
Expiration
Date
(f)
Helena Santos
  88,788 
  143,578 
  0 
  3.08-9.00 
07/2027-06/2031
John A. Moore
  78,220 
  149,732 
  0 
  4.50-11.30 
03/2029-06/2031
Robert Nichols
  7,500 
  0 
  0 
  3.08 
12/2023-07/2027
Karl Nowosielski
  24,500 
  0 
  0 
  2.91-4.05 
02/2024-07/2027
Daniel Grunes
  0 
  56,000 
  0 
  10.00 
04/30/2031
 
Employment Agreements
 
The Company has a three-year employment contract with its President, effective July 1, 2017, which was extended by mutual agreement for each one-year periods ending June 30, 2021 and 2022. The agreement provided for an annual base salary of $175,000 for the year ended June 30, 2018, with subsequent annual increases of 3% or percentage increase in Consumer Price Index (“CPI”), whichever is higher, plus $25,000 cash bonus for the year ended June 30, 2018, and a discretionary bonus for subsequent years. Bonuses totaling $100,000 were awarded for the year ended June 30, 2021 and $50,000 in 2020. The agreement also provided for a grant of options to purchase 25,000 shares of the Company’s stock, which were granted during the year ended June 30, 2018. No shares were granted during the year ended June 30, 2021, and 215,366 shares were authorized to be granted by the Board of Directors during the year ended June 30, 2020, which shares were not available and subject to amendment to the Company’s 2012 Stock Option Plan which was approved in February 2021. The agreement also contains a provision that within one year of a change of control, if either the Company terminates the employment for any reason other than for "cause" or the Presidents terminates her employment for "good reason", the President will have the right to receive a lump sum payment equal to three times the average of her total annual compensation paid for the last five years preceding such termination.
 
The Company has a three-year employment contract with its President of the Genie Products Division of the Benchtop Laboratory Equipment Operations and Corporate Secretary effective July 1, 2017, which was extended by mutual agreement for each one-year periods ending June 30, 2021 and 2022. The agreement provides for an annual base salary of $153,000 for the year ended June 30, 2018, with subsequent annual increases of 3% or percentage increase in the CPI, whichever is higher, plus $10,000 cash bonus for the year ended June 30, 2018, and a discretionary bonus for subsequent years. No bonus was awarded for the year ended June 30, 2021 and a $5,000 bonus was awarded in 2020. The agreement also provides for a grant of options to purchase 7,500 shares of the Company’s stock, which were granted during the year ended June 30, 2018. No options were granted during the year ended June 30, 2021 or 2020.
 
 19
 
 
  
 
 
    The Company has a three-year employment contract with its President of Torbal Products Division of the Benchtop Laboratory Equipment Operations and Director of Marketing effective July 1, 2017, which was extended by mutual agreement for each one-year periods ending June 30, 2021 and 2022. The agreement provides for an annual base salary of $157,000 for the year ended June 30, 2018, with subsequent annual increases of 4% or percentage increase in the CPI, whichever is higher, plus $10,000 cash bonus for the year ended June 30, 2018 and subsequent years, subject to a minimum increase of 5% in the division’s EBITDA for the related year. The agreement also provides for a grant of options to purchase 7,500 shares of the Company’s stock, which were granted during the year ended June 30, 2018. No options were granted during the year ended June 30, 2021 or 2020. A performance-based bonus of $10,000 was awarded for the year ended June 30, 2020. No bonus was awarded for the year ended June 30, 2021.
 
The Company has a three-year employment contract with its President of Scientific Bioprocessing, Inc., effective July 1, 2020. The agreement provides for an annual base salary of $175,000 for the year ended June 30, 2021, with subsequent annual increases of 3% or percentage increase in the CPI, whichever is higher, plus discretionary bonuses. The agreement also provides for a grant of options to purchase 215,366 shares which were authorized to be granted by the Board of Directors during the year ended June 30, 2020 and issued on February 23, 2021, which shares were not available and subject to amendment to the Company’s 2012 Stock Option Plan which was approved in February 2021.  Prior to July 1, 2020, the officer had a consulting agreement, which terminated upon becoming an employee of the Company. Consulting fees paid under this agreement amounted to $145,000 for the year ended June 30, 2020, plus stock options valued at $36,000 which were granted as part of the total compensation.  Bonuses amounting to $100,000 were awarded during the year ended June 30, 2021 and a bonus of $50,000 was awarded in during the year ended June 30, 2020. The employment agreement contains termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if employee resigns for "good reason" (as such term is defined there), the Company shall pay severance payments equal to either one year's salary at the rate of the compensation at the time of termination is employee is terminated within 12 months of the date of the agreement or six months' salary is the employee is terminated after 12 months of the date of the agreement, continue to pay the regular benefits provided by the Company for the period equal to the length of the severance payments and pay a pro rata portion of any bonus achieved prior to such termination of employment.
 
On April 30, 2021, the Company entered into an employment agreement with each of the four managing directors and sellers of Aquila for an indefinite term, which can be terminated by either party upon six months’ written notice in accordance with German law. The agreements, which are identical, stipulate that in calendar year 2021, the employees will receive a salary of 105,000 euros, as well as a guaranteed bonus of 45,000 euros for a total of 150,000 euros per year on a pro-rata basis, and in calendar year 2022, they will receive a salary of 105,000 euros and a bonus of  45,000 euros, subject to the achievement by Aquila of certain targets. In addition, the employment agreements included a one time retention bonus of  10,000 euros upon closing of the acquisition which was paid in May 2021 by Aquila, and a retention bonus of  25,000 euros if the Employee does not terminate his employment with the Company within two years after the agreement date or the Company does not terminate his employment for good cause.
 
All of the employment agreements contain confidentiality and non-competition covenants. The employment agreements for Ms. Santos, Mr. Nichols and Mr. Nowosielski, contain termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if the relevant employee resigns for “good reason” (as such term is defined therein), 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 one year from termination. The employment agreement for Mr. Moore contains termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if Mr. Moore resigns for “good reason” (as such term is defined therein), the Company shall pay severance payments equal to either one year’s salary at the rate of the compensation at the time of termination if Mr. Moore is terminated within 12 months of the date of his agreement or six months’ salary if Mr. Moore is terminated after 12 months of the date of his agreement, and the Company will continue to pay the regular benefits provided by the Company for the period equal to the length of the severance payments and pay a pro rata portion of any bonus achieved prior to such termination of employment. Ms. Santos’ employment agreement also contains a provision that within one year of a change of control, if either the Company terminates her employment for any reason other than for “cause” or she terminates her employment for “good reason”, she will have the right to receive a lump sum payment equal to three times the average of her total annual compensation paid for the last five years immediately preceding such termination.
 

 
 
  20
 
 
   
 
Directors’ Compensation and Options
 
DIRECTORS’ COMPENSATION
For the Year Ended June 30, 2021
 
 
Name
(a)
 
Fees
Earned or Paid in Cash
($)
(b)
 
 
Stock Awards
($)
(c)
 
 
Option Awards
($)
(d)
 
 
Non-Equity Incentive Plan Comp-ensation
($)
(e)
 
 
Changes in Pension Value and Non-qualified Deferred Compensation Earnings($) (f)
 
 
Non-qualified Deferred Comp-ensation Earnings ($)
 (g)
 
 
All
Other Comp- ensation ($)
 (h)
 
 
Total
($)
(i)
 
Christopher Cox
  6,200 
  0 
  0 
  0 
  0 
  0 
  0 
  6,200 
Joseph G. Cremonese
  18,800 
  0 
  0 
  0 
  0 
  0 
  108,000(1)
  126,800 
Marcus Frampton
  18,800 
  0 
  0 
  0 
  0 
  0 
  0 
  18,800 
Jurgen Schumacher
  0 
  0 
  0 
  0 
  0 
  0 
  0 
  0 
Reinhard Vogt
  14,400 
  0 
  758,700(4)
  0 
  0 
  0 
  207,900(2)
  981,000 
John F.F. Watkins (3)
  10,400 
  0 
  0 
  0 
  0 
  0 
  0 
  10,400 
 
 
(1) Represents amount paid to him and his affiliate pursuant to a consulting agreement (see Items 12 and 13).
 
(2) Represents amount paid to him and his affiliate pursuant to a consulting agreement (see Items 12 and 13).
 
(3) Mr. Watkins resigned from the Board during fiscal 2021.
 
(4) Represents the grant date aggregate fair value of 125,000 option shares granted in connection with his consulting agreement.
 
The Company paid each Director who is not an employee of the Company or a subsidiary a quarterly retainer fee of $2,200 and a meeting fee of $2,000 for each meeting attended for each of fiscal 2021 and fiscal 2020. In addition, the Company reimburses each Director for out-of-pocket expenses incurred in connection with attendance at board meetings. During fiscal 2021, total director compensation to non-employee Directors aggregated $388,900, including the consulting fees paid to Mr. Cremonese and his affiliate and Mr. Vogt and his affiliate.
 
On June 23, 2020, Mr. Cremonese was awarded 20,000 options in connection with his consulting agreement with an aggregate grant date fair value of $108,500, all of which remain outstanding. Prior to that, Mr. Cremonese had been awarded a total of 45,000 stock options under the Company's 2002 and 2012 Stock Option Plans of which 5,000 remain unexercised.
 
On July 20, 2020, Mr. Vogt was awarded 125,000 options in connection with his consulting agreement with an aggregate grant date fair value of $758,700, all of which remain unexercised. None of the other directors have options outstanding.
 
  
 
  21
 
 
 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
The following table sets forth, as of June 30, 2021, 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., 80 Orville Drive, Bohemia, New York 11716.
 
Name
 
Amount and Nature of Beneficial Ownership
 
 
% of Class
 
Roy T. Eddleman, Trustee, Roy T. Eddleman Trust UAD 8-7-2000
Troy Gould PC
1801 Century Park East Suite 1600
Los Angeles, CA 900067
  2,127,264(1)
  28.9%
 
    
    
Veradace Capital Management LLC
  953,717(2)
  14.1%
 
    
    
Bleichroeder LP
  836,842(3)
  12.4%
 
    
    
Brian Pessin
  710,525(4)
  10.6%
 
    
    
Christopher Cox
One World Financial Center
New York, NY 10281
  444,000(5)
  6.6%
 
    
    
Lyon Polk
1585 Broadway 22ndFloor
New York, NY 10036
  444,000(6)
  6.6%
 
    
    
Joseph G. Cremonese
  134,412(7)
  2.1%
 
    
    
Marcus Frampton
  8,135(8)
  (*) 
 
    
    
John A. Moore
  281,730(9)
  4.2%
 
    
    
Helena R. Santos
  255,196(10)
  3.8%
 
    
    
Jurgen Schumacher
  37,893(11)
  (*) 
 
    
    
Reinhard Vogt
  132,893(12)
  2.0%
 
    
    
Daniel Grunes
  59,789(13)
  (*) 
 
    
    
Karl D. Nowosielski
  40,498(14)
  (*) 
 
    
    
Robert P. Nichols
  30,241(15)
  1.0%
 
    
    
All directors and executive officers as a group (10 persons)
  951,052(16)
  19.2%
 
 
 22
 
 
 
 
(1) Based upon form Schedule 13D filed with the Securities and Exchange Commission (“SEC”) on July 14, 2021. Includes 894,376 shares issuable upon exercise of warrants.
 
(2) Based upon form Schedule 13G filed with the SEC on May 7, 2021. Includes 315,789 shares issuable upon exercise of warrants.
 
(3) Based upon form Schedule 13G filed with the SEC on June 25, 2021. Includes 278,947 shares issuable upon exercise of warrants.
 
(4) Based upon form Schedule 13D filed with the SEC on July 13, 2021. Includes 210,526 shares issuable upon exercise of warrants.
 
(5) Based upon form Schedule 13D filed with the SEC on June 29, 2020.
 
(6) Based upon form Schedule 13G filed with the SEC on July 9, 2020.
 
(7) 102,412 shares are owned jointly with his wife, 7,000 shares are owned by his wife, and 25,000 shares are issuable upon exercise of options.
 
(8) Based upon SEC form 4 filed with the SEC on June 29, 2021.
 
(9) Includes 238,478 shares issuable upon exercise of options and warrants.
 
(10) Includes 232,892 shares issuable upon exercise of options and warrants.
 
(11) Includes 12,631 shares issuable upon exercise of warrants.
 
(12) Includes 127,631 shares issuable upon exercise of options and warrants.
 
(13) Includes 57,263 shares issuable upon exercise of options and warrants.
 
(14) Includes (i) 9,683 shares of common stock issued in connection with the acquisition of the Torbal Division in February 2014 and (ii) 26,605 shares issuable upon exercise of options and warrants.
 
(15) Includes 8,552 shares issuable upon exercise of options and warrants.
 
(16) Includes 951,052 shares issuable upon exercise of options and warrants.
 
(*) - % of Class is less than 1%.
 
    
 
EQUITY COMPENSATION PLAN INFORMATION
 
The following table sets forth information with respect to Company options, warrants and rights as of June 30, 2021.
 
Plan Category
 
Number of Securities
 to be Issued Upon Exercise of Outstanding Options, Warrants
 and Rights
 (a)
 
 
Weighted-Average
 Exercise Price
 Of
 Outstanding Options, Warrants and Rights
 (b)
 
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column
(a)) (c)
 
Equity Compensation plans
approved by security holders
  1,180,800 
 $8.73 
  5,243 
Equity Compensation plans
not approved by security holders
  N/A 
  N/A 
  N/A 
Total
  1,180,800 
 $8.73 
  5,243 
 
 
  
 
  23
 
 
 
 
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., provides consulting services to the Company under a consulting agreement expiring on December 31, 2021 at a monthly retainer of $9,000. The agreement contains confidentiality and non-competition covenants. The Company paid fees of $108,000 and $76,200 for fiscal 2021 and fiscal 2020, respectively.
 
Mr. Reinhard Vogt, a Director since July 2020, through his affiliate, Societät Reinhard and Noah Vogt AG GmbH, provides consulting services to the Company under a consulting agreement expiring on July 20, 2022 at a monthly retainer of 12,500 euros. The agreement contains confidentiality and non-competition covenants. The Company paid fees of $207,900 in fiscal 2021 and none in fiscal 2020, and granted him a 125,000 share stock option valued at $758,700 on the grant date using the Black-Scholes-Merton option pricing model.
 
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 Berg Klein & Wolpow, CPAs LLP (the “Firm”) during fiscal 2021 and fiscal 2020.
 
The Company incurred for the services of the Firm fees of approximately $85,200 and $77,500 for fiscal 2021 and fiscal 2020, respectively, in connection with the audit of the Company’s annual consolidated financial statements and quarterly reviews; $5,000 for additional audit related fees for fiscal 2021 and none for fiscal 2020, $7,850 and $7,500 for the preparation of the Company’s corporate tax returns for fiscal 2021 and fiscal 2020, respectively, and $2,750 in fiscal 2021 for other services related to tax services.
 
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-F-28.
 
  

 
24
 
 
Exhibits. The following Exhibits are filed as part of this report on Form 10-K:
 
Exhibit Number
Exhibit
 
       
3
 
Certificate 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).
 
 
   
3(d)
 
Second Amended and Restated By-Laws of Scientific Industries, Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on August 10, 2020 and incorporated by reference thereto).
 
 
   
3(e)
 
Certificate of Amendment of Certificate of Incorporation of Scientific Industries, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 1, 2021 and incorporated by reference thereto).
 
 
   
 
Certificate of Amendment of Certificate of Incorporation of Scientific Industries, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 21, 2021 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).
 
 
   
4(c)
 
Amendment to the Company’s 2012 Stock Option Plan (Filed as Exhibit 4(c) to the Company’s Quarterly Report on Form 10-Q filed on May 12, 2016 and incorporated by reference thereto).
 
 
   
 
 
Form of Warrant issued by the Company to Investors (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020, and incorporated by reference thereto).
4(d)
 
   
 
 
   
4(e)
 
Amendment No. 2 to Scientific Industries, Inc. 2012 Stock Option Plan (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 1, 2021 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 Orville Drive Associates LLC. (filed as Exhibit 10 to the Company's Form 10-K filed on September 26, 2014, and incorporated by reference thereto).
 
 
   
 
   
   
 
   
   
 First amendment to lease dated September 20, 2021 by and betweeen the Company and REP 2035 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).
 
 
   
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
Agreement extension dated June 9, 2015 to amend employment agreement 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 June 9, 2015, and incorporated by reference thereto)
 
 
 
Agreement extension dated May 25, 2016 to amend employment agreement 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 31, 2016, and incorporated by reference thereto).
 
 
 
Employment agreement dated July 1, 2017 by and between the Company and Ms. Santos (filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
Agreement extension dated June 9, 2015 to amend employment agreement with Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto).
 
 
 
Agreement e Agreement extension dated May 25, 2016 to amend employment agreement with Mr. Nichols (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
 
 
 
Employment agreement dated July 1, 2017 by and between the Company and Mr. Nichols (filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, and incorporated by reference thereto).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
  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).
 
 
 
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).
 
 
 
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, 2013, and incorporated by reference thereto).
 
 
 
Agreement extension dated January 14, 2015 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 15, 2015, and incorporated with reference thereto).
 
 
 
Agreement extension dated January 7, 2016 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on January 26, 2016, and incorporated with reference thereto).
 
 
 
Agreement extension dated February 16, 2018 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10-A1 to the Company’s Current Report on Form 8-K filed on March 9, 2018, and incorporated with reference thereto).
 
 
 
Agreement extension dated January 23, 2019 to Amended and Restated Consulting Agreement by and between the Company and Mr. Cremonese and affiliates (filed as Exhibit 10-1 to the Company’s Current Report on Form 8-K filed on January 25, 2019, and incorporated with reference thereto).
 
 
10(d)-12
 
Monthly Retainer Agreement between Scientific Bioprocessing, Inc. and Mr. Cremonese and affiliates (filed as Exhibit 10(d)-12 to the Company’s Quarterly Report on Form 10-Q on February 13, 2020, and incorporated by reference thereto).
 
 
10(d)-13
Extension of Monthly Retainer Agreement between Scientific Bioprocessing, Inc. and Mr. Cremonese and affiliates (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 8, 2021, and incorporated with reference thereto).
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
 
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).
 
 
Agreement extension dated June 9, 2015 to amend employment agreement (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on June 9, 2015, and incorporated by reference thereto).
 
 
Agreement extension dated May 25, 2016 to amend employment agreement (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on May 31, 2016, and incorporated by reference thereto).
 
 
Employment agreement dated July 1, 2017 by and between the Company and Mr. March (filed as an exhibit to the Company's Annual Report on Form 10-K filed on June 30, 2017, and incorporated by reference thereto).
 
 
10(i)-8
Termination notice dated February 14, 2020 to Mr. March (filed as Exhibit 10(I-8) to the Company’s Current Report on Form 8-K filed on February 18, 2020, and incorporated by reference thereto).
 
 
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).
 
 
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).
 
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).
 
 
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.
 
 
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).
 
 
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).
 
 
Agreement dated January 12, 2015 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on January 15, 2015, and incorporated by reference thereto).
 
 
Agreement dated January 7, 2016 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on January 26, 2016, and incorporated by reference thereto).
 
 
Agreement dated February 16, 2018 to extend Consulting Agreement (filed as Exhibit 10A-2 to the Company’s Current Report on Form 8-K filed on March 9, 2018, and incorporated by reference thereto).
 
 
Agreement dated January 23, 2019 to extend Consulting Agreement (filed as Exhibit 10-2 to the Company’s Current Report on Form 8-K filed on January 25, 2019, and incorporated by reference thereto).
 
 
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).
 
 
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).
 
 
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).
 
 
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).
 
 
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).
 
 
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)
 
 
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).
 
 
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).
 
 
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).
 
 
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).
 
 
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).
 
 
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).
 
 
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).
 
 
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).
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).
 
 
Line of Credit Agreements dated June 26, 2015, by and among the Company and First National Bank of Pennsylvania (filed as Exhibit 10.1 through 10.4 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
 
 
Commercial Security Agreement dated July 5, 2016 by and among the Company, and First National Bank of Pennsylvania.
 
 
Note Purchase Agreements with James Maloy dated May 7, 2015 (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
 
 
Note Purchase Agreements with Grace March dated May 19, 2015 (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 30, 2015, and incorporated by reference thereto).
 
 
Consulting Agreement dated March 1, 2019 between the Company and Mr. John A. Moore (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 6, 2019, and incorporated by reference thereto).
 
 
10(aa)-1
Amendment to Consulting Agreement dated November 7, 2019 between the Company and Mr. John A. Moore (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 11, 2019, and incorporated by reference thereto).
 
 
10(aa)-2
Employment Agreement dated July 1, 2020 between Scientific Bioprocessing, Inc. and John A. Moore (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2020, and incorporated by reference thereto).
 
 
 
Consulting Agreement dated July 20, 2020 between the Company and Mr. Reinhard Vogt and his affiliate Societat Reinhard and Noah Vogt AG (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on July 22, 2020, and incorporated by reference thereto.)
 
 
10(bb)-1
Amendment to Consulting Agreement between the Company and Societät Reinhard and Noah Vogt AG GmbH and Reinhard Vogt (filed as Exhibit 10A-1 to the Company’s Current Report on Form 8-K filed on March 8, 2021, and incorporated by reference thereto.
 
 
10(cc)
Employment Agreement dated July 1, 2020 between Scientific Bioprocessing, Inc. and James Polk (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 25, 2020, and incorporated by reference thereto).
 
 
10(dd)
Securities Purchase Agreement dated June 18, 2020 between the Company and Investors (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020, and incorporated by reference thereto).
 
 
10(dd)-1
Form of Amendment of Securities Purchase Agreement, by and between the Company and Investors (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 13, 2021, and incorporated by reference thereto).
 
 
10(ee)
Loan Agreement under the U.S. Small Business Administration Paycheck Protection Program dated April 14, 2020 between the Company and First National Bank (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 21, 2020, and incorporated by reference thereto).
 
 
10(ff)
Asset Purchase Agreement dated November 30, 2020 between Altamira Instruments, Inc. and Beijing JWGB Sci. & Tech. Co., Ltd (filed as Exhibit 2 to the Company’s Current Report on Form 8-K filed on December 1, 2020, and incorporated by reference thereto).
 
 
10(gg)
Asset Purchase Agreement dated April 28, 2021 between the Company and the sellers of aquila biolabs GmbH (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2021, and incorporate by reference thereto).
 
 
10(gg)-1
Directors’ Service Contract dated April 29, 2021 between the Company and the sellers of aquila biolabs GmbH (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2021, and incorporate by reference thereto).
 
 
10(hh)
Securities Purchase Agreement dated April 29, 2021 between the Company and Investors (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 30, 2021, and incorporated by reference thereto).
 
 
10(hh)-1
Registration Rights Agreement dated April 29, 2021 between the Company and Investors (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on April 30, 2021, and incorporated by reference thereto).
 
 
Amendment No. 1 to Registration Rights Agreement dated April 29, 2021 between the Company and Investors (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 21, 2021, and incorporated by reference thereto).
 
 
Securities Purchase Agreement dated June 18, 2021 between the Company and Investors (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 21, 2021, and incorporated by reference thereto).
 
 

 
 
 
  25
 
 
 
 
 
 
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.
 
 
 
Date: October 14, 2021
 
 
SCIENTIFIC INDUSTRIES, INC.
(Registrant)
 
/s/Helena R. Santos
 
Helena R. Santos
President, Chief Executive Officer,
Chief Financial Officer and Treasurer
 
 
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.
 
 
Name
 
Title
 
Date
 
 
 
 
Helena R. Santos
 
President, Chief Executive Officer, Chief Financial Officer and Treasurer
 
October 14, 2021
 
Christopher Cox
Director
October 14, 2021
 
 
 
 
Joseph G. Cremonese
 
Director
 
October 14, 2021
 
 
 
 
Marcus Frampton
 
Director
 
October 14, 2021
 
 
 
 
John A. Moore
 
Chairman of the Board
 
October 14, 2021
 
 
 
 
Jurgen Schumacher
 
Director
 
October 14, 2021
 
 
 
 
Reinhard Vogt
 
Director
 
October 14, 2021
 
 
 
 
 
 
 26
 
  
  
 
 
 
SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
 
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
AS OF AND FOR THE YEARS ENDED
JUNE 30, 2021 AND 2020 
  
 

 
 
 
 
 
  
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
CONTENTS
 
 
 
 
Page
 
 
Report of independent registered public accounting firm
F-1
 
 
Consolidated financial statements:
 
 
 
Balance sheets
F-2
 
 
Statements of comprehensive loss
F-3
 
 
Statements of changes in stockholders’ equity
F-4
 
 
Statements of cash flows
F-5
 
 
Notes to financial statements
F-6 – F-28
 
 
 
 
 
 
 
  
 
 
 
SCIENTIFIC INDUSTRIES, INC.
AND SUBSIDIARIES
 
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
AS OF AND FOR THE YEARS ENDED
JUNE 30, 2021 AND 2020
 
 
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders’
Scientific Industries, Inc.
Bohemia, New York
 
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Scientific Industries, Inc. and its subsidiaries (the “Company”) as of June 30, 2021 and 2020, the related consolidated statements of comprehensive loss, changes in stockholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements and schedules (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to those charged with governance and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
 
Business Combination
 
As described in Note 16 to the financial statements, the Company completed its acquisition of Aquila biolabs GmbH (“Aquila”) on April 29, 2021, for a total purchase price of $7,880,100, resulting in the addition of $6,655,415 of intangible assets. The acquisition was accounted for as a business combination.
 
The principal considerations for our determination that the valuation of acquired intangible assets is a critical audit matter is that the valuation of the acquired intangible assets was considered especially challenging and required significant auditor judgment due to the complex determination by management of the appropriate assumptions, such as discount rates, revenue projections, and projected profit margins, for the valuation of the acquired intangible assets. The Company, utilizing third-party specialists, used income valuation models including Relief from Royalty Method and the Multi-Period Excess Earning Method (MPEEM) to measure the identified intangible assets. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals having expertise in the valuation of acquired intangible assets, when performing audit procedures to evaluate management’s judgments and conclusions related to the valuation of the intangible assets.
 
To test the estimated fair values of the identified intangible assets, our audit procedures included, among others, reading the underlying agreements, testing management’s application of the relevant accounting guidance, and involving a specialist to assist us in the evaluation of the Company’s valuation methodology and testing of the significant assumptions used by the Company to develop forecasted results for Aquila, including projected revenue growth and operating margins. For example, we compared the significant assumptions to current industry, market and economic trends. Additionally, we tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.
 
 
 
/s/ Nussbaum Berg Klein & Wolpow, CPAs LLP 
 
We have served as the Company’s auditor since 1991.
 
Melville, New York
October 14, 2021
 
 
 

 
 
 
 
   
 
 


 F-1
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
BALANCE SHEETS
 
AS OF JUNE 30, 2021 AND 2020
 
ASSETS
 
 
 
 
2021
 
 
2020
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $9,675,200 
 $7,559,700 
Investment securities
  3,744,600 
  331,800 
Trade accounts receivable, less allowance for doubtful accounts of $15,600 and $11,600, respectively
  1,294,700 
  1,064,000 
Inventories
  2,977,100 
  2,541,000 
Income tax receivable
  333,300 
  334,800 
    Prepaid expenses and other current assets
  350,900 
  112,400 
   Assets of discontinued operations
  55,300 
  793,000 
 
    
    
Total current assets
  18,431,100 
  12,736,700 
 
    
    
Property and equipment, net
  412,600 
  278,300 
 
    
    
Intangible assets, net
  2,557,800 
  128,700 
 
    
    
Goodwill
  4,395,400 
  257,300 
 
    
    
Operating lease right-of-use assets
  665,300 
  803,300 
 
    
    
Other assets
  54,300 
  56,000 
 
    
    
Deferred taxes
  2,489,900 
  537,100 
 
    
    
Total assets
 $29,006,400 
 $14,797,400 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable
 $453,500 
 $334,600 
Accrued expenses and taxes
  633,500 
  679,000 
Contract liabilities
  - 
  20,000 
Contingent consideration, current portion
  136,600 
  111,000 
Bank overdraft
  321,700 
  43,100 
Lease liabilities, current portion
  270,500 
  195,800 
PPP Loan Payable
  433,800 
  563,800 
    Liabilities of discontinued operations
  37,200  
  240,900  
 
    
    
Total current liabilities
  2,286,800 
  2,188,200 
 
    
    
Lease liabilities, less current portion
  460,500 
  640,800 
Contingent consideration payable, less current portion
  23,400 
  247,000 
Other long-term liabilities
  10,900 
  - 
 
    
    
Total liabilities
  2,781,600 
  3,076,000 
 
    
    
Stockholders’ equity:
    
    
Common stock, $.05 par value; 15,000,000 shares authorized; 6,477,945 and 2,881,065 shares issued; 6,458,143 and 2,861,263 shares outstanding in 2021 and 2020, respectively
  324,000 
  144,100 
Additional paid-in capital
  26,613,500 
  8,608,300 
Accumulated other comprehensive loss
  (9,200)
  - 
Retained earnings ( accumulated deficit)
  (651,100)
  3,021,400 
 
  26,277,200 
  11,773,800 
Less common stock held in treasury at cost, 19,802 shares
  52,400 
  52,400 
 
    
    
Total stockholders’ equity
  26,224,800 
  11,721,400 
 
    
    
Total liabilities and stockholders’ equity
 $29,006,400 
 $14,797,400 
 
 
See notes to consolidated financial statements.
 

 
 
 
  F-2
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE  LOSS
 
FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
Revenues
 $9,775,200 
 $7,784,400 
 
    
    
Cost of revenues
  4,799,800 
  3,847,000 
 
    
    
Gross profit
  4,975,400 
  3,937,400 
 
    
    
Operating expenses:
    
    
General and administrative
  4,028,500 
  2,275,400 
Selling
  4,031,900 
  1,185,800 
Research and development
  1,623,800 
  1,139,700 
 
    
    
Total operating expenses
  9,684,200 
  4,600,900 
 
    
    
Loss from operations
  (4,708,800)
  (663,500)
 
    
    
Other income (expense):
    
    
Interest income
  82,200 
  12,600 
Other income (expense), net
  571,600 
  (16,500)
 
    
    
Total other income (expense), net
  653,800 
  (3,900)
 
    
    
Loss from continuing operations before income tax benefit
  (4,055,000)
  (667,400)
 
    
    
Income tax benefit, deferred
  (945,000)
  (214,000)
 
    
    
Net loss from continuing operations
  (3,110,000)
  (453,400)
 
    
    
Discontinued operations (Note 17):
    
    
 
    
    
Loss from discontinued operations, net of tax
  (562,500)
  (249,900)
 
    
    
Net loss
  (3,672,500)
  (703,300)
Other comprehensive loss:
    
    
Foreign currency translation adjustment
  (9,200)
  - 
Comprehensive loss
 $(3,681,700)
 $(703,300)
 
Basic and diluted loss per common share:
    
    
Continuing operations
 $(0.97)
 $(.30)
Discontinued operations
 $(0.18)
 $(.16)
Consolidated operations
 $(1.15)
 $(.46)
 
    
    
 
 
See notes to consolidated financial statements.
 

 F-3
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 
FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
 
 
 
 
Additional
 
 
Accumulated Other
 
 
 
 
 
 
 
 
Total
 
 
 
Common Stock
 
 
Paid-in
 
 
Comprehensive
 
 
Retained
 
 
Treasury Stock
 
 
Stockholders’
 
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Income (Loss)
 
 
Earnings
 
 
Shares
 
 
Amount
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 1, 2019
  1,513,914 
  75,700 
  2,592,700 
  - 
  3,724,700 
  19,802 
  52,400 
  6,340,700 
 
    
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  - 
  (703,300)
  - 
  - 
  (703,300)
 
    
    
    
    
    
    
    
    
Issuance of Common Stock and Warrants, net of issuance costs (Note 15)
  1,349,850 
  67,500 
  5,936,900 
  - 
  - 
  - 
  - 
  6,004,400 
 
    
    
    
    
    
    
    
    
Stock options exercised
  17,301 
  900 
  12,900 
  - 
  - 
  - 
  - 
  13,800 
 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  65,800 
  - 
  - 
  - 
  - 
  65,800 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2020
  2,881,065 
 $144,100 
 $8,608,300 
  - 
 $3,021,400 
  19,802 
 $52,400 
 $11,721,400 
 
Net loss
  - 
  - 
  - 
  - 
  (3,672,500)
  - 
  - 
  (3,672,500)
 
    
    
    
    
    
    
    
    
Foreign currecy translation adjustment
  - 
  - 
  - 
  (9,200)
  - 
  - 
  - 
  (9,200)

    
    
    
    
    
    
    
    
Issuance of Common Stock and Warrants, net of issuance costs (Note 15)
  3,595,880 
  179,800 
  15,894,200 
  - 
  - 
  - 
  - 
  16,074,000 
 
    
    
    
    
    
    
    
    
Stock options exercised
  1,000 
  100 
  3,000 
  - 
  - 
  - 
  - 
  3,100 
 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  2,108,000 
  - 
  - 
  - 
  - 
  2,108,000 
 
    
    
    
    
    
    
    
    
Balance, June 30, 2021
  6,477,945 
 $324,000 
 $26,613,500 
 $(9,200)
 $(651,100)
  19,802 
 $52,400 
 $26,224,800 
 
See notes to consolidated financial statements.
 

 
 
 
  F-4
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
 
2021
 
 
2020
 
Operating activities:
 
 
 
 
 
 
Net loss
 $(3,672,500)
 $(703,300)
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Gain on sale of investment securities
  (35,600)
  (4,400)
Depreciation and amortization
  251,500 
  160,900 
Deferred income tax benefit
  (1,152,500)
  (106,000)
Unrealized holding loss on investment securities
  10,400 
  12,400 
Loss on disposal of subsidiary
  405,400 
  - 
Provision for bad debt
  4,000 
  3,400 
Extinguishment of debt
  (531,100)
  - 
Gain on sale of fixed assets
  - 
  (300)
Stock-based compensation
  2,108,000 
  65,800 
Change in fair value of contingent consideration
  (30,000)
  112,600 
Changes in operating assets and liabilities:
    
    
Trade accounts receivable
  (75,500)
  906,800 
Inventories
  (560,000)
  (292,400)
Income tax receivable
  1,500 
  (334,800)
Prepaid expenses and other assets
  (211,400)
  (22,400)
Right-of-use assets
  138,000 
  (803,300)
Accounts payable
  79,600 
  (214,400)
Lease liabilities
  (105,600)
  867,700 
Accrued expenses
  (195,200)
  191,500 
Contract liabilities
  (20,000)
  89,000 
Other long-term liabilities
  10,900 
  - 
Bank overdraft
  278,600 
  (96,900)
 
    
    
Total adjustments
  371,000 
  535,200 
 
    
    
Net cash used in operating activities
  (3,301,500)
  (168,100)
 
    
    
Investing activities:
    
    
Purchase of investment securities
  (9,569,000)
  (63,400)
Redemption of investment securities
  6,181,400 
  55,000 
Proceeds from sale of fixed assets
  - 
  1,000 
Capital expenditures
  (198,700)
  (50,900)
Proceeds from sale of Altamira
  440,000 
  - 
Purchase of Aquila, net of cash acquired
  (7,679,000)
  - 
Purchase of intangible assets
  (58,700)
  (25,800)
 
    
    
Net cash used in investing activities
  (10,884,000)
  (84,100)
 
    
    
Financing activities:
    
    
Repayment of 1st Payroll Protection Plan loan
  (32,700)
  - 
Proceeds from 2nd Payroll Protection Plan loan
  433,800 
  563,800 
Proceeds from issuance of common stock and warrants
  17,080,400 
  6,004,400 
Issuance costs - common stock and warrants
  (1,006,400) 
  -  
Proceeds from exercise of stock options
  3,100 
  13,800 
Payments for contingent consideration
  (168,000)
  (372,600)
 
    
    
Net cash provided by financing activities
  16,310,200 
  6,209,400 
 
    
    
Effect of changes in foreign currency exchange rates on cash and cash eqivalents 
  (9,200)  
  - 
 
    
    
Net increase in cash and cash equivalents
  2,115,500 
  5,957,200 
 
    
    
Cash and cash equivalents, beginning of year
  7,559,700 
  1,602,500 
 
    
    
Cash and cash equivalents, end of year
 $9,675,200 
 $7,559,700 
 
    
    
Supplemental disclosures:
    
    
Cash paid during the period for:
    
    
Income taxes
 $2,500 
 $40,900 
 
 
 
See notes to consolidated financial statements.
 
 
 
  F-5
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
 
1.
Summary of Significant Accounting Policies
 
Nature of Business
 
Scientific Industries, Inc. and its subsidiaries (the “Company”) design, manufacture, and market a variety of benchtop laboratory equipment and bioprocessing products. The Company is headquartered in Bohemia, New York where it produces benchtop laboratory equipment. Additionally, the Company has two other locations in Pittsburgh, Pennsylvania and Baesweiller, Germany, where it designs and produces a variety of bioprocessing products, and an administrative facility in Orangeburg, New York related to sales and marketing. The products, which are sold to customers worldwide, include mixers, shakers, stirrers, refrigerated incubators, pharmacy balances and scales, force gauges, bioprocessing sensors and analytical tools.  The Company also sublicenses certain patents and technology under a license agreement with the University of Maryland, Baltimore County, and receives royalty fees from sublicenses (see Note 1- Revenue Recognition).
 
 
COVID-19 Pandemic
 
The challenges posed by the COVID-19 pandemic on the global economy began to take effect and impacted the Company’s operations at the end of the third quarter of the year ended June 30, 2020. At that time, the Company took appropriate action and put plans in place to diminish the effects of COVID-19 on its operations, enabling the Company to continue to operate with minor or temporary disruptions to its operations. The Company took immediate action as it pertains to COVID-19 preparedness by implementing the Center for Disease Control’s guidelines for employers in order to protect the Company’s employees’ health and safety, with actions such as implementing work from home, social distancing in the workplace, requiring self-quarantine for any employee showing symptoms, wearing face coverings, and training employees on maintaining a healthy work environment. The Bioprocessing Systems Operations’ SBI facility was shut down temporarily due to state mandates, however, the impact on operations was immaterial, and the Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of two loans under the Federal Government’s Small Business Administration Paycheck Protection Program. The Company received $563,800 and $433,800 in Payroll Protection Program loans in April 2020 and March 2021, respectively. The first loan was forgiven in June 2021 except for $32,700 which was repaid by the Company. The Company expects to apply and receive forgiveness for the second loan.  The operations of aquila biolabs GmbH ("Aquila") which was acquired on April 29, 2021 was negatively impacted in its ability to secure new orders because Aquila had historically relied on face-to-face meetings at trade shows for its sales opportunities. While it has participated in virtual trade shows, management believes that certain sales opportunities are lost as a result. The Company has not experienced and does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributors of laboratory equipment and supplies which have benefitted from the Pandemic due to the nature of the products and have the ability to pay.  The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, or delivery and distribution of its products as a result of COVID-19, however the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration or worsening of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. The Company is currently experiencing some delays from its supply chain which is having an impact on delayed delivery of some products, however this is deemed temporary and does not affect the Company’s major product – the Vortex-Genie 2. In addition, due to the travel restrictions imposed by the United States and other governments worldwide, Company personnel may be restricted from traveling to conduct its operations including site visits, customer visits and installations, vendor facility visits, and other sales and marketing related travel that can negatively impact the Company.
 
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 (discontinued operation as of November 30, 2020), and Scientific Bioprocessing Holdings, Inc. (“SBHI”), a newly incorporated Delaware corporation and its wholly-owned subsidiaries,  Scientific Bioprocessing, Inc. (“SBI”), a Delaware corporation, and Aquila, a German corporation, which was aquired on April 29, 2021, (all collectively referred to as the “Company”).  On April 30, 2021 Scientific Industries, Inc. contributed 100% of the stock of Scientific Bioprpcessing, Inc. to its wholly owned subsidiary Scientific Bioprocessing Holdings, Inc.  All material intercompany balances and transactions have been eliminated in consolidation.
  


 
 F-6
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
1.
Summary of Significant Accounting Policies (Continued)
 
 
Revenue Recognition
 
The company recognizes revenue in accordance with Financial Accounting Standards Board ('FASB") Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers,  (“ASC 606”),  In accordance with ASC 606, the Company accounts for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.
 
All of the Company's contracts have a single performance obligation. As permitted by ASC 606, the Company does not disclose the amount of unsatisfied performance obligations for client contracts with an original expected length of one year or less.
  
The Company determines revenue recognition through the following steps:
 
●
Identification of the contract, or contracts, with a customer
 
●
Identification of the performance obligations in the contract
 
●
Determination of the transaction price
 
●
Allocation of the transaction price to the performance obligations in the contract
 
●
Recognition of revenue when, or as, a performance obligation is satisfied
 
    
Nature of Products and Services
 
We generate revenues from the following sources: (1) Benchtop Laboratory Equipment and (2) Bioprocessing Systems.
 
 
 
 
Benchtop Laboratory Equipment
 
 
Bioprocessing Systems
 
 
Consolidated
 
June 30, 2021:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $9,043,600 
  731,600 
 $9,775,200 
 
    
    
    
Foreign Sales
  3,483,700 
  684,600 
  4,168,300 
 
 
 
 
Benchtop Laboratory Equipment
 
 
Bioprocessing Systems
 
 
Consolidated
 
June 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $6,783,600 
 $1,000,800 
 $7,784,400 
 
    
    
    
Foreign Sales
  2,589,800 
  1,000,400 
  3,590,200 
 
 
 F-7
 
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
1.
Summary of Significant Accounting Policies (Continued)
 
 
Revenue Recognition (Continued)
 
Nature of Products and Services (Continued)
 
Benchtop laboratory equipment sales comprise primarily of standard benchtop laboratory equipment to laboratory equipment distributors, or to end users primarily via e-commerce. The sales cycle from time of receipt of order to shipment is very short varying from a day to a few weeks. Customers either pay by credit card (online sales) or Net 30-90, depending on the customer. Once the item is shipped under the FOB terms specified in the order, which is primarily “FOB Factory”, other than a standard warranty, there are no other obligations to the customer. Warranty usually comprises of one to two year parts and labor and is deemed immaterial.  Revenue is recognized at a point in time when the risks and rewards of ownership have tranferred to the customer, which is generally upon shipment.
 
Bioprocessing revenues consist of royalty revenues generated through SBI and product revenues generated primarily through Aquila. Royalty revenues are earned by the Company under a licensing agreement from a single licensee and its sublicenses.  The license agreement includes two United States patents and a European Union patent (through December 2019). In January 2020, the European Union patent which was due to expire in August 2020,was terminated and the Company will only receive royalties under the United States patents through December 2023, which will result in a material reduction in total royalties expected to be received. The Company is obligated to pay 50% of all royalties earned to the entity that licenses the intellectual property to the Company.  Royalty revenue requires significant judgement in estimating royalty revenue to be recognized during the year.
 
The Company has made the following accounting policy elections and elected to use certain practical expedients, as permitted by the FASB, in applying ASC 606: 1) All revenues are recorded net of returns, allowances, customer discounts, and incentives; 2) Although sales and other taxes are immaterial, the Company accounts for amounts collected from customers for sales and other taxes, if any, net of related amounts remitted to tax authorities; 3) the Company expenses costs to obtain a contract as they are incurred if the expected period of benefit, and therefore the amortization period, is one year or less; 4) the Company accounts for shipping and handling activities that occur after control transfers to the customer as a fulfillment cost rather than an additional promised service and these fulfillment costs fall within selling expenses; 5) the Company is always considered the principal and never an agent, because it has full control and responsibility until title is transferred to the customer; 6) the Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer such as is the case with catalyst instruments.
 
 
 
 F-8
 
 
  

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
1.
Summary of Significant Accounting Policies (Continued)
 
Cash and Cash Equivalents
 
The Company considers all highly liquid debt instruments purchased with original maturities 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, 2021, and 2020, $8,922,800 and $6,729,300 respectively of cash balances were in excess of such limit.
 
           Reclasses
 
Certain amounts on the balance sheet as of June 30, 2021 and 2020 pertaining to inventories, property and equipment, goodwill, accounts payable, accrued expenses, contract liabilities, and operating leases liabilities were reclassed as assets and liabilities of discontinued operations due to the sale of the Company's wholly owned subsidiary, Altamira Instruments, Inc. on November 30, 2020.
 
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 and customer satisfaction claims.  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. Based on its assessment, the Company concluded that there are no collection issues related to the COVID-19 Pandemic.
 
Contract Liabilities
 
Contract liabilities consists of billings or payments received in advance of revenue recognition and is recognized as the revenue recognition criteria are met. Amounts that have been invoiced are initially recorded in accounts receivable and contract liabilities. The Company invoices its customers in accordance with the terms of the underlying contract. Accordingly, the contract liabilities balance does not represent the total contract value of outstanding arrangements. Contract liabilities that are expected to be recognized during the subsequent 12-month period are recorded as current and the remaining portion as noncurrent.  Contract liabilities were not significant at June 30, 2021 and 2020, respectively.
 
Investment Securities
 
Investment securities consist of equity securities and mutual funds with realized gains and losses recorded using the specific identification method. Changes in fair value are recorded as unrealized holding gains or losses in other income (loss), net on the statement of comprehensive loss. The Company determines the cost of the investment sold based on an average cost basis at the individual security level, and records the interest income and realized gains or losses on the sale of these investments in other income (loss), net.
 
Inventories
 
Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or net realizable 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.
 
 
 
  F-9
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
1.
Summary of Significant Accounting Policies (Continued)
 
 
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 remaining term of the related lease or the estimated useful lives of the assets, whichever is shorter.
 
Research and Development Expenses
 
Research and development expenses are expensed as incurred and consist principally of internal and external costs which includes the cost of patent licenses, contract research services, laboratory supplies, in-process research and development acquired, as well as product developments and enhancements.
  
Finite Lived Intangible Assets
 
Intangible assets consist primarily of acquired technology, customer relationships, non-compete agreements, patents, licenses, websites, and in process research and development (“IPR&D”), trademarks and trade names. All finite lived 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 Indefinite Lived Intangible Assets
 
Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill and indefinite lived intangible assets are tested for impairment at least annually in accordance with the provisions of ASC 350, “Intangibles-Goodwill and Other” (“ASC 350”). ASC 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. The Company concluded as of June 30, 2021 and 2020, there was no impairment of goodwill or indefinite lived intangible assets.
 
Impairment of Long-Lived Assets
 
The Company follows the provisions of ASC No. 360, “Property, Plant and Equipment - Impairment or Disposal of Long-Lived Assets (“ASC 360"). ASC 360 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. The Company concluded as of June 30, 2021 and 2020, there was no impairment of long-lived assets.
 

 
 
  F-10
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
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 $399,700 and $218,700 for the years ended June 30, 2021 and 2020, respectively.

           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 1,193,000 shares of the Company’s Common Stock, par value $.05 per share (“Common Stock”), plus up to 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 through 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. Non-incentive stock options shall be granted at the fair market value of the shares of Common Stock on the date of grant. At June 30, 2021 and 2020, 5,243 and 147,414 shares respectively, of Common Stock were available for grant of options under the 2012 Plan.
 
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. The amount of compensation cost is measured based on the grant-date fair value of the equity issued and expensed ratably over the requisite service period.


 
  F-11
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2019
 
 
 
1.
Summary of Significant Accounting Policies (Continued)
 
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for, but not limited to, the allowance for doubtful accounts, slow-moving inventory reserves, depreciation and amortization, assumptions made in valuing equity instruments, fair value of stock options, the fair values of intangibles and goodwill, and provision or benefit for income taxes. The actual results experienced by the Company may differ materially from management’s estimates.
 
Earnings (Loss) Per Common Share
 
Basic earnings or 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, if any.  Since the Company was in a loss position during the years ended June 30, 2021 and 2020, respectively, basic net loss per share is the same as dilutive net loss per share as the inclusion of the weighted-average number of all potential dilutive common shares which consists of stock options and warrants are anti-dilutive.
  
Recent Accounting Pronouncements
 
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which is designed to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU No. 2020-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years; this ASU allows for early adoption in any interim period after issuance of the update. The Company is currently evaluating the impact of adopting this guidance.
 
Adopted Accounting Pronouncement
 
In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement", which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify, and add certain disclosure requirements related to fair value measurements covered in Topic 820, "Fair Value Measurement." The new standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements applied prospectively, and all other requirements applied retrospectively to all periods presented
 
In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces previous lease guidance in its entirety with ASC 842 and requires lessees to recognize lease assets and lease liabilities for those arrangements classified as operating leases under previous guidance, with the exception of leases with a term of twelve months or less. The Company adopted ASU No. 2016-02 on July 1, 2019 using the additional transition method, which allows prior periods to be presented under previous lease accounting guidance. Refer to Note 11, "Leases", for related disclosures.
 


 
  F-12
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
2.
Segment Information
 
 
The Company views its operations as two 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”), and the design and marketing of bioprocessing systems and products and related royalty income (“Bioprocessing Systems”).
 
 
Segment information is reported as follows:
 
 
 
 
Benchtop Laboratory Equipment
 
 
Bioprocessing Systems
 
 
Corporate and Other
 
 
Consolidated
 
June 30, 2021:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $9,043,600 
 $731,600 
 $- 
 $9,775,200 
 
    
    
    
    
Foreign Sales
  3,483,700 
  684,600 
 
_
 
  4,168,300 
 
    
    
    
    
Income (Loss) From Operations
  1,461,300 
  (4,828,600)
  (1,341,400)
  (4,708,800)
 
    
    
    
    
Assets
  14,783,000 
  8,735,100 
  5,488,300 
  29,006,400 
 
    
    
    
    
Long-Lived Asset Expenditures
  60,500 
  196,900 
  - 
  257,400 
 
    
    
    
    
Depreciation and Amortization
  103,100 
  148,400 
  - 
  251,500 
 
 
 
 
Benchtop Laboratory Equipment
 
 
Bioprocessing Systems
 
 
Corporate and Other
 
 
Consolidated
 
June 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 $6,783,600 
 $1,000,800 
 $- 
 $7,784,400 
 
    
    
    
    
Foreign Sales
  2,589,800 
  1,000,400 
  - 
  3,590,200 
 
    
    
    
    
Income (Loss) From Operations
  449,700 
  (727,500)
  (385,700)
  (663,500)
 
    
    
    
    
Assets
  12,232,600 
  546,100 
  2,018,700 
  14,797,400 
 
    
    
    
    
Long-Lived Asset Expenditures
  36,000 
  40,700 
  - 
  76,700 
 
    
    
    
    
Depreciation and Amortization
  116,900 
  42,700 
  - 
  159,600 
 
 

 F-13
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
3.
Fair Value of Financial Instruments
 
The FASB 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.
 
In valuing assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company calculated the fair value of its Level 1 and 2 instruments based on the exchange traded price of similar or identical instruments where available or based on other observable instruments. These calculations take into consideration the credit risk of both the Company and its counterparties. The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the period.
 
The fair value of the contingent consideration obligations is based on a probability weighted approach derived from the estimates of earn-out criteria and the probability assessment with respect to the likelihood of achieving those criteria. The measurement is based on significant inputs that are not observable in the market, therefore, the Company classifies this liability as Level 3 in the following table.
 
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, 2021 and 2020 according to the valuation techniques the Company used to determine their fair values:
 
 
 
 
 
 
Fair Value Measurements Using Inputs Considered as
 
 
 
Fair Value at June 30, 2021
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $9,675,200 
 $9,675,200 
 $- 
 $- 
Investment securities
  3,744,600 
  2,920,600 
  824,000 
  - 
 
    
    
    
    
 
    
    
    
    
Total
 $13,419,800 
 $12,595,800 
 $824,000 
 $- 
 
    
    
    
    
Liabilities:
    
    
    
    
Contingent consideration
 $160,000 
 $- 
 $  
 $160,000 
 
 
 
 
 
 
 
 
 
Fair Value Measurements Using Inputs Considered as
 
 
 
Fair Value at June 30, 2020
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $7,559,700 
 $7,559,700 
 $- 
 $- 
Investment securities
  331,800 
  331,800 
  - 
  - 
 
    
    
    
    
 
    
    
    
    
Total
 $7,891,500 
 $7,891,500 
 $- 
 $- 
 
    
    
    
    
Liabilities:
    
    
    
    
Contingent consideration
 $358,000 
 $- 
 $  
 $358,000 
 
 
  
F- 14
 
  
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
3.
Fair Value of Financial Instruments (Continued)
 
The following table sets forth an analysis of changes during the years ended June 30, 2021 and 2020, respectively, in Level 3 financial liabilities of the Company:
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
Beginning balance
 $358,000 
 $618,000 
Increase (decrease) in contingent consideration liability
  (30,000)
  112,600 
Payments
  (168,000)
  (372,600)
 
    
    
Ending balance
 $160,000 
 $358,000 
 
The Company’s contingent obligations require cash payments to the sellers of certain acquired operations based on royalty payments received or operating results achieved. These contingent considerations are classified as liabilities and the liabilities are remeasured to an estimated fair value at each reporting date. During the years ended June 30, 2021 and 2020, the Company recorded an increase (decrease) in the estimated fair value of contingent liabilities of approximately ($30,000) and $112,600, respectively related to its Bioprocessing Systems Operations segment.
 
Investments in marketable securities by security type at June 30, 2021 and 2020 consisted of the following:
 
 
 
Cost
 
 
Fair Value
 
 
Unrealized Holding Gain (Loss)
 
At June 30, 2021:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 $102,200 
 $154,100 
 $51,900 
Mutual funds
  2,752,400 
  2,766,500 
  14,100 
Debt securities
  832,700 
  824,000 
  (8,700)
 
    
    
    
 
 $3,687,300 
 $3,744,600 
 $57,300 
 
 
 
Cost
 
 
Fair Value
 
 
Unrealized Holding Gain (Loss)
 
At June 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 $77,600 
 $101,900 
 $24,300 
Mutual funds
  250,300 
  229,900 
  (20,400)
 
    
    
    
 
 $327,900 
 $331,800 
 $3,900 
 

 F-15
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
4.
Inventories
 
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
Raw materials
 $2,170,400 
 $1,726,400 
Work-in-process
  39,600 
  35,700 
Finished goods
  767,100 
  778,900 
 
    
    
 
 $2,977,100 
 $2,541,000 
 
 
5.
Property and Equipment
 
 
 
Useful Lives
 
 
 
 
 
 
 
 
 
(Years)
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
 
 
 
Automobiles
  5 
 $22,000 
 $22,000 
Computer equipment
  3-5 
  233,500 
  215,300 
Machinery and equipment
  3-7 
  1,047,600 
  847,500 
Furniture and fixtures
  4-10 
  148,800 
  142,300 
Leasehold improvements
  3-10 
  64,400 
  50,300 
 
    
    
    
 
    
  1,516,300 
  1,277,400 
Less accumulated depreciation and amortization
    
  1,103,700 
  999,100 
 
    
    
    
 
    
 $412,600 
 $278,300 
 
Depreciation expense was $104,600 and $88,700 for the years ended June 30, 2021 and 2020, respectively.
 
 
6.
Goodwill and Finite Lived 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 $4,395,400 at June 30, 2021 and 257,300 at June 30, 2020, all of which is expected to be deductible for tax purposes.
 
The components of finite lived intangible assets are as follows:
 
 
Useful
Lives
 
Cost
 
 
Accumulated Amortization
 
 
Net
 
At June 30, 2021:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Technology, trademarks
5-10 yrs.
 $364,700 
 $362,200 
 $2,500 
Trade names
3-6 yrs.
  592,300 
  152,600 
  439,700 
Websites
3-7 yrs.
  210,000 
  210,000 
  - 
Customer relationships
4-10 yrs.
  372,200 
  102,400 
  269,800 
Sublicense agreements
10 yrs.
  294,000 
  283,000 
  11,000 
Non-compete agreements
4-5 yrs.
  1,060,500 
  308,600 
  751,900 
IPR&D
3-5 yrs.
  852,100 
  134,800 
  717,300 
Patents
5-7 yrs.
  591,500 
  225,900 
  365,600 
 
    
    
    
 
 $4,337,300 
 $1,779,500 
 $2,557,800 

 
  F-16
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
6.
Goodwill and Finite Lived Intangible Assets (Continued)
 
 
 
Useful
Lives
 
Cost
 
 
Accumulated Amortization
 
 
Net
 
At June 30, 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Technology, trademarks
5/10 yrs.
 $664,700 
 $662,000 
 $2,700 
Trade names
6 yrs.
  140,000 
  140,000 
  - 
Websites
5 yrs.
  210,000 
  210,000 
  - 
Customer relationships
9/10 yrs.
  357,000 
  321,400 
  35,600 
Sublicense agreements
10 yrs.
  294,000 
  253,600 
  40,400 
Non-compete agreements
5 yrs.
  384,000 
  384,000 
  - 
IPR&D
3 yrs.
  110,000 
  110,000 
  - 
Patents
5 yrs.
  246,600 
  196,600 
  50,000 
 
    
    
    
 
 $2,406,300 
 $2,277,600 
 $128,700 
 
Total amortization expense was $146,900 and $72,000 in 2021 and 2020, respectively.
 
Estimated future amortization expense of intangible assets as of June 30, 2021 is as follows:
 
 
Year Ended June 30,
 
 
 
 
 
 
 
2022
 $525,700 
2023
  520,000 
2024
  508,800 
2025
  473,100 
2026
  530,200 
 
    
Total
 $2,557,800 
 
7.
Line of Credit
 
The Company has a Demand Line of Credit through December 2021 with First National Bank of Pennsylvania which provides for borrowings of up to $300,000 for regular working capital needs, bearing interest at prime, currently 3.25%. The agreement does not contain financial covenants and borrowings are secured  by a pledge of substantially all of the assets of the Company.  As of June 30, 2021 and 2020, there were no borrowings outstanding under the line.
 
8.
Payroll Protection Program Loan
 
The Company received $563,800 and $433,800 in Payroll Protection Program loans in April 2020 and March 2021, respectively, pursuant to the Paycheck Protection Program loan (“PPP”) administered by the U.S. Small Business Administration through its bank. The first loan was forgiven in June 2021, and reflected as other income in the accompanying statements of comprehensive loss , except for $32,700 which was repaid by the Company. The remaining loan bears interest at 1% per annum and matures in March 2026 and contains no collateral or guarantee requirements. The Company expects to apply and receive forgiveness for the second loan.
 
 

 F-17
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
9.
Employee Benefit Plans
 
The Company has a 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%. Total matching contributions amounted to $90,700 and $84,100 for the years ended June 30, 2021 and 2020, respectively.
 
 
10.
Commitments and Contingencies
 
The Company has a three-year employment contract with its President, effective July 1, 2017, which was extended by mutual agreement for each one year periods ending June 30, 2021 and 2022. The agreement provided for an annual base salary of $175,000 for the year ended June 30, 2018, with subsequent annual increases of 3% or the percentage increase in Consumer Price Index (“CPI”), whichever is higher, plus $25,000 cash bonus for the year ended June 30, 2018, and a discretionary bonus for subsequent years. Bonuses totaling $100,000 and $50,000 were awarded for the years ended June 30, 2021 and 2020, respectively. The agreement also provided for a grant of options to purchase 25,000 shares of the Company’s stock, which were granted during the year ended June 30, 2018.
 
No shares were granted during the year ended June 30, 2021, and 215,366 shares were authorized to be granted by the Board of Directors during the year ended June 30, 2020, which shares were not available and subject to amendment to the Company’s 2012 Stock Option Plan which was approved in February 2021. The agreement also contains a provision that within one year of a change of control, if either the Company terminates the employment for any reason other than for "cause" or the Presidents terminates her employment for "good reason", the President will have the right to receive a lump sum payment equal to three times the average of her total annual compensation paid for the last five years preceding such termination.
 
The Company has a three-year employment contract with its President of the Genie Products Division of the Benchtop Laboratory Equipment Operations and Corporate Secretary effective July 1, 2017, which was extended by mutual agreement for each one year period ending June 30, 2021 and 2022. The agreement provides for an annual base salary of $153,000 for the year ended June 30, 2018, with subsequent annual increases of 3% or percentage increase in the CPI, whichever is higher, plus $10,000 cash bonus for the year ended June 30, 2018, and a discretionary bonus for subsequent years. No bonus was awarded for the year ended June 30, 2021 and a $5,000 bonus was awarded in 2020. The agreement also provides for a grant of options to purchase 7,500 shares of the Company’s stock, which were granted during the year ended June 30, 2018. No options were granted during the year ended June 30, 2021 or 2020.
 
The Company has a three-year employment contract with its President and Director of Marketing of Torbal Products Division of the Benchtop Laboratory Equipment Operations and Director of Marketing effective July 1, 2017, which was extended by mutual agreement for each one year periods ending June 30, 2021 and 2022. The agreement provides for an annual base salary of $157,000 for the year ended June 30, 2018, with subsequent annual increases of 4% or percentage increase in the CPI, whichever is higher, plus $10,000 cash bonus for the year ended June 30, 2018 and subsequent years, subject to a minimum increase of 5% in the divisions’ EBITDA for the related year. The agreement also provides for a grant of options to purchase 7,500 shares of the Company’s stock, which were granted during the year ended June 30, 2018. No options were granted during the year ended June 30, 2021 or 2020. A performance-based bonus of $10,000 was awarded the years ended June 30, 2020. No bonus was awarded for the year ended June 30, 2021.
 
  
 
 
 F-18
 
 
 
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
10.
Commitments and Contingencies (Continued)
 
The Company has a three-year employment contract with its President of Scientific Bioprocessing, Inc., effective July 1, 2020. The agreement provides for an annual base salary of $175,000, with subsequent annual increases of 3% or percentage increase in Consumer Price Index (“CPI”), whichever is higher, plus discretionary bonuses. The agreement also provides for a grant of options to purchase 215,366 shares which were authorized to be granted by the Board of Directors during the year ended June 30, 2020, which shares were not available and subject to amendment to the Company’s 2012 Stock Option Plan which was approved in February 2021.  Prior to July 1, 2020, the officer had a consulting agreement, which terminated upon becoming an employee of the Company. Consulting fees paid under this agreement amounted to $145,000 for the year ended June 30, 2020, respectively plus stock options valued at $36,000 were granted as part of the total compensation under the consulting agreement, for the year ended June 30, 2020.  Bonuses amounting to $100,000 were awarded during the year ended June 30, 2021 and $50,000 in 2020. The employment agreement contains termination provisions stipulating that if the Company terminates the employment other than for death, disability, or cause (as such term is defined therein), or if employee resigns for "good reason"(as such term is defined in the agreement) , the Company shall pay severance payments equal to either one year's salary at the rate of the compensation at the time of termination is employee is terminated within 12 months of the date of the agreement or six months' salary is the employee is terminated after 12 months of the date of the agreement, continue to pay the regular benefits provided by the Company for the period equal to the length of the severance payments and pay a pro rata portion of any bonus achieved prior to such termination of employment.
 
On April 30, 2021, the Company entered into an employment agreement with each of the four managing directors and sellers of Aquila for an indefinite term, which can be terminated by either party upon six months’ written notice in accordance with German law. The agreements, which are identical, stipulate that in calendar year 2021, the employees will receive a salary of 105,000 euros, and a guaranteed bonus of 45,000 euros for a total of 150,000 euros per year on a pro-rata basis, and in calendar year 2022, they will receive a salary of 105,000 euros and a bonus of 45,000 euros, subject to the achievement by aquila of certain targets. In addition, the employment agreements included a one time retention bonus of 10,000 euros upon closing of the acquisition which was paid in May 2021 by Aquila, and a retention bonus of 25,000 euros if the employee does not terminate his employment with the Company within two years after the agreement date or the Company does not terminate his employment for good cause.
 
The Company has a consulting agreement, which expires on December 31, 2021, with a Director of the Company and his affiliate for product development consulting services. The agreement provides that the consultant be paid a monthly retainer fee of $9,000, plus a grant of 20,000 options which were awarded during the year ended June 30, 2020. Consulting expense related to this agreement amounted to $108,000 and $76,200 for the years ended June 30, 2021 and 2020, respectively.
 
On July 20, 2020, the Company entered into a two-year consulting agreement with a Director and Chairman of the Board of SBI for consulting on strategic matters of the Company’s Bioprocessing Systems Operations. The agreement provided that the consultant be paid a monthly retainer of 5,000 euros which was increased to 12,500 euros effective March 2021 plus the issuance of 125,000 stock options of the Company which were awarded during the year ended June 30, 2021. Consulting expense related to this agreement amounted to $207,900 for the year ended June 30, 2021 and none in 2020, respectively.
 
The Company is required to make payments of 30% of the net royalties received from the license and sublicense acquired in the SBI acquisition in fiscal 2014 through December 2023, at which time the related patents will expire. Total contingent consideration payments made for this acquisition amounted to $168,000 and $372,600 for the years ended June 30, 2021 and 2020, respectively.
 
 
 F-19
 

 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
10.
Commitments and Contingencies (Continued)
 
The fair value of contingent consideration estimated to be paid as of June 30, 2021 is as follows:
 
Year ended June 30,
 
Amount
 
 
 
 
 
2022
 $136,600 
2023
  12,000 
2024
  11,400 
 
    
 
  160,000 
 
 
11.
Leases
 
 
 
On July 1, 2019, the Company adopted the new accounting pronouncement as it relates to its leases which requires a lessee to recognize all long-term leases on its balance sheet as a liability for its lease obligation, measured at the present value of lease payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the lease term and expands disclosure of key information about leasing arrangements.
 
The Company leases certain properties consisting principally of a facility in Bohemia, New York (headquarters) through January 2025 which was amended in September 2021 to increase the space by approximately 25% and lease term through approximately October 2028, a facility in Pittsburgh, Pennsylvania for its Bioprocessing Systems Operations through May 2023, and a facility for sales and administration in Orangeburg, New York through October 2022. The Company had a lease for its discontinued operations through November 2020. There are no renewal options with any of the leases, no residual values or significant restrictions or covenants other than those customary in such arrangements, and no non-cash activities, and any rent escalations incorporated within the leases are included in the calculation of the future minimum lease payments, as further described below. All of the Company’s leases are deemed operating leases.
 
The Company determines whether an agreement contains a lease at inception based on the Company’s right to obtain substantially all of the economic benefits from the use of the identified asset and its right to direct the use of the identified asset. Lease liabilities represent the present value of future lease payments and the Right-Of-Use (“ROU”) assets represent the Company’s right to use the underlying assets for the respective lease terms. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. The ROU asset is further adjusted to account for previously recorded lease expenses such as deferred rent and other lease liabilities. As the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate of 5.0% as the discount rate to calculate the present value of future lease payments, which was the interest rate that its bank would charge for a similar loan.
 
   

 
 
 F-20
 
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
11.
Leases (Continued)
 
The Company elected not to recognize a ROU asset and a lease liability for leases with an initial term of twelve months or less. In addition to minimum lease payments, certain leases require payment of a proportionate share of real estate taxes and certain building operating expenses or payments based on an excess of a specified base. These variable lease costs are not included in the measurement of the ROU asset or lease liability due to unpredictability of the payment amount and are recorded as lease expenses in the period incurred. The Company’s lease agreements do not contain residual value guarantees.
 
The Company elected available practical expedients for existing or expired contracts of lessees wherein the Company is not required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. The Company is not utilizing the practical expedient which allows the use of hindsight by lessees and lessors in determining the lease term and in assessing impairment of its ROU assets. The Company utilized the transition method allowing entities to only apply the new lease standard in the year of adoption.
 
As of June 30, 2021, the weighted-average remaining lease term for operating lease liabilities was approximately 2.68 years and the weighted-average discount rate was 5.0%. Total cash payments under these leases were $289,100 for the year ended June 30, 2021, of which $277,300 was recorded as lease expense.
 
The Company’s approximate future minimum rental payments under all leases existing at June 30, 2021, through January 2025 are as follows:
Year ended June 30,
 
Amount
 
 
 
 
 
2022
 $260,300 
2023
  245,300 
2024
  195,900 
2025
  91,600 
 
    
Total future minimum payments
 $793,100 
Less: Imputed interest
  (62,100)
Total Present Value of Operating Lease Liabilities
 $731,000 
 
 
 
12.
Income Taxes
 
The reconciliation of the provision for income taxes at the federal statutory rate of 21% to the actual tax benefit for the applicable fiscal year was as follows:
 
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
Computed “expected” income tax benefit
 $(1,014,300)
 $(239,400)
Research and development credits
  (93,900)
  (89,400)
Rate changes and NOL carrybacks
  - 
  (122,600)
Incentive Stock Option Expense
  59,500 
  13,800  
PPP Loan Foregivness
  (111,700) 
  0  
Other, net
  (7,900)
  1,000 
 
    
    
Income tax benefit
 $(1,152,500)
 $(436,600)
 
 
 
 F-21
 
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
12.
Income Taxes (Continued)
 
 
Deferred tax assets and liabilities consist of the following:
 
 
 
2021
 
 
2020
 
Deferred tax assets:
 
 
 
 
 
 
Amortization of intangible assets, including goodwill
 $374,000 
 $329,700 
Research and development credits
  164,600 
  89,400 
Various accruals
  64,600 
  150,700 
Stock options expense
  383,200 
  - 
Net operating loss
  1,515,800 
  - 
Other
  24,900 
  19,400 
 
  2,527,100 
  589,200 
Deferred tax liability:
    
    
Depreciation of property and amortization of goodwill
  (37,200)
  (52,100)
 
    
    
Net deferred tax assets
 $2,489,900 
 $537,100 
 
 
The company has incurred cumulatively $715,800 of US net operating losses and $800,300 of German net operating losses as of June 30, 2021. These will be carried forward indefinitely without expiration, until fully utilized.  The company expects to fully utilize these losses to offset taxable income in future years.
 
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, 2021 and 2020, 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 ended June 30, 2018 and after. The Company does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
 
 
13.
Stock Options
 
 
Equity 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 years ended June 30, 2021 and 2020, the Company granted 1,094,171 and 25,881 options, respectively, to employees that had a fair value of $7,929,600 and $144,500, respectively. The fair value of the options granted during the years ended June 30, 2021 and 2020, were determined using the Black-Scholes-Merton option-pricing model. The weighted average assumptions used for the years ended June 30, 2021 and 2020, was an expected life of 10 years; risk free interest rate of 1.40% and .89%; volatility of 66% and 74%, and dividend yield of 0% and .08%, respectively. The Company declared no dividends for the years ending June 30, 2021 or 2020. The weighted-average fair value per share of the options granted during the years ended June 30, 2021 and 2020, was $7.25 and $5.58, respectively, and total stock-based compensation costs were $2,108,000 and $65,800 for the years ended June 30, 2021 and 2020, respectively. Stock-based compensation costs related to nonvested awards expected to be recognized in the future are $5,935,000 and $113,400 as of June 30, 2021 and 2020, respectively.
 
The stockholders approved an amendment to the Company’s 2012 Stock Option Plan (“Plan”) to increase the number of shares available under the Plan by 943,000 shares, from 307,000 to 1,250,000 shares, which, together with 150,000 shares that were added to the Plan in 2020, were registered by the Company on a Form S-8 Registration Statement with the Securities and Exchange Commission on March 15, 2021. The Company’s Board of Directors authorized and approved the grant of Stock Options in June 2020 and July 2020 to three key officers, subject to availability of option shares. In February 2021, upon availability, the Company issued these stock options to the Company’s Chairman of the Board, its Chief Executive Officer and President, and the Vice President of Sales-Americas of Company’s Bioprocessing Systems.
 
 
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
13.
Stock Options (Continued)
 
  Option activity is summarized as follows:
 
 
June 30, 2021
 
 
June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
 
 
 
 
Average
 
 
 
 
 
Average
 
 
 
 
 
 
Exercise
 
 
 
 
 
Exercise
 
 
 
Shares
 
 
Price
 
 
Shares
 
 
Price
 
Shares under option:
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding, beginning of year
  96,586 
 $4.35 
  97,205 
 $3.24 
Granted
  1,094,171 
  9.07 
  25,881 
  7.47 
Exercised
  (1,000)
  3.05 
  (24,000)
  3.35 
Forfeited
  (9,000)
  3.11 
  (2,500)
  3.08 
 
    
    
    
    
Outstanding, end of year
  1,180,757 
 $8.73 
  96,586 
 $4.35 
 
    
    
    
    
Options exercisable at year-end
  296,821 
 $7.69 
  49,236 
 $3.29 
 
    
    
    
    
Weighted average fair value per share of options granted during the fiscal year
    
 $7.25 
    
 $5.58 
 
 
 F-22
 
 
   
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
13.
Stock Options (Continued)
 
 
 
As of June 30, 2021 Options Outstanding
 
 
As of June 30, 2021 Exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
Range
 
 
 
 
 
Remaining
 
 
Average
 
 
 
 
 
Average
 
 
Exercise
 
 
Number
 
 
Contractual
 
 
Exercise
 
 
Number
 
 
Exercise
 
 
Prices
 
 
Outstanding
 
 
Life (Years)
 
 
Price
 
 
Outstanding
 
 
Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 $5.35 - $ 11.30 
  1,120,052 
  9.35 
 $9.03 
  238,351 
 $8.76 
    
    
    
    
    
    
 $2.91 - $ 4.65 
  60,705 
  5.28 
 $3.36 
  58,470 
 $3.32 
    
    
    
    
    
    
    
  1,180,757 
    
    
  296,821 
    
 
 
 
 
As of June 30, 2020 Options Outstanding
 
 
As of June 30, 2020 Exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
 
 
Weighted-
 
 
 
 
 
Weighted-
 
 
Range
 
 
 
 
 
Remaining
 
 
Average
 
 
 
 
 
Average
 
 
Exercise
 
 
Number
 
 
Contractual
 
 
Exercise
 
 
Number
 
 
Exercise
 
 
Prices
 
 
Outstanding
 
 
Life (Years)
 
 
Price
 
 
Outstanding
 
 
Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 $5.35 - $ 11.30 
  25,881 
  9.87 
 $7.47 
  - 
 $0.00 
    
    
    
    
    
    
 $2.91 - $ 4.65 
  70,705 
  6.46 
 $3.33 
  49,236 
 $3.29 
    
    
    
    
    
    
 
  96,586 
    
    
  49,236 
    
 
 
 
 F-23
 
 
  
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
 
14.
Earnings (Loss) Per Common Share
 
The Company presents the computation of earnings per share (“EPS”) on a basic basis. Basic EPS is computed by dividing net income or loss by the weighted average number of shares outstanding during the reported period. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential additional common shares that were dilutive had been issued. Common shares are excluded from the calculation if they are determined to be anti-dilutive. The following table sets forth the weighted average number of common shares outstanding for each period presented.
 
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding
  3,189,602 
  1,515,103 
Effect of dilutive securities:
  - 
  - 
Weighted average number of dilutive common shares outstanding
  3,189,602 
  1,515,103 
 
    
    
Basic and diluted loss per common share:
    
    
 
    
    
Continuing operations
 $(0.97)
 $(.30)
Discontinued operations
 $(0.18)
 $(.16)
Consolidated operations
 $(1.15)
 $(.46)
 
 
Approximately 88,691 and 2,481,783 shares of the Company's common stock issuable upon the exercise of stock options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the year ended June 30, 2021. Approximately 54,513 and 1,349,850 shares of the Company's common stock issuable upon the exercise of stock options and warrants, respectively, were excluded from the calculation because the effect would be anti-dilutive due to the loss for the year ended June 30, 2020.
 
 
 F-24
 
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
15.
Equity
 
At the 2020 Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the Certificate of Incorporation of the Company to increase the number of authorized shares of the Company’s Common stock by 3,000,000 shares from 7,000,000 to 10,000,000 shares, and a further amendment was approved by a majority of the Company’s shareholders on June 17, 2021 increasing the authorized shares to 15,000,000.
 
On June 18, 2020, the Company entered into a securities purchases agreement in the amount of $6,074,400 with several accredited investors for the sale and issuance of 1,349,850 shares of the Company’s Common Stock at an offering price of $4.50 per share and warrants to purchase up to 1,349,850 shares of the Company’s Common Stock exerciseable at $9.00 per share. The issuance cost realated to this stock issuance amounted to approximately $70,000.  The proceeds were used to fund the operations of the Company’s Bioprocessing Systems Operations. The warrants were immediately exercisable and expire five years from the date of issuance. If at any time commencing twelve months from the date of the agreement, but before the expiration of the warrant, the volume weighted average price of the Company’s Common Stock exceeds $18 per share for each of thirty consecutive days, the Company may at any time in its sole discretion, call for the exercise of the Warrants, in their entirety.
 
On April 29, 2021, the Company received proceeds of approximately $7,580,400 from the sale of its securities to private investors upon the issuance of 1,595,880 shares of the Company’s Common Stock at an offering price of $4.75 per share which included warrants to purchase up to 797,940 shares of the Company’s Common Stock exercisable at $9.50 per share.  The issuance costs related to this stock issuance amounted to approximately $581,000.  In June 2021, the Company received an additional $9.5 million through the sale of an additional 2,000,000 shares of the Company’s Common Stock at $4.75 per share which also included warrants to purchase up to 999,993 of the Company's Common Stock exercisable at $9.50 per share. The issuance costs related to this stock issuance amounted to approximately $425,400.   These warrants are exercisable immediately and expire five years from date of issuance. The Company utilized the services of brokers for both transactions and incurred a total of approximately $1.0 million in issuance related costs for broker and legal fees. The Company was required under a registration rights agreement to register the shares, which it did through an S-1 Registration Statement filed with the Securities and Exchange Commission, which became effective on August 13, 2021. The proceeds were used for the Aquila acquisition with the remainder being used to fund the Bioprocessing Systems Operations.
  
 
 F-25
 

  
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
16. Acquisition of Aquila Biolabs GmbH
 
Effective April 29, 2021, pursuant to a Stock Purchase Agreement ("SPA") the Company acquired all the outstanding capital stock of Aquila biolabs GmbH, a German start-up company engaged from its facility in Baesweiler, Germany in the design, production, and sale of bioprocessing systems and products which focus on the control and analysis of bioprocesses in bioreactors and incubation shakers for an aggregate purchase price of $7,880,100 in cash upon closing. Aquila’s principal customers are universities, pharmaceutical companies, and industrial companies. The products are sold primarily on a direct basis and to a lesser extent, through distributors.
 
The acquisition was accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) in which the Company is treated as the accounting acquirer. In accordance with ASC 805, the assets acquired and liabilities assumed have been measured at fair value.
 
 For purposes of measuring the estimated fair value, where applicable, of the assets acquired and liabilities assumed, as reflected in the unaudited pro forma condensed consolidated financial information, the guidance in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) has been applied, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined as “the price 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.” Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.
 
Management of the Company allocated the purchase price based on its valuation of the assets acquired and liabilities assumed as follows:
 
 
 
Amount
 
Useful life
Fair value of assets acquired
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $201,100 
 
Accounts receivable
  159,200 
 
Inventory
  187,500 
 
Prepaid expenses and other current assets
  25,400 
 
    Property, plant and equipment
  40,200 
 
    Deferred tax asset
  800,300 
 
    Tradename
  452,300 
           6 years
Non-compete agreements
  784,500 
4 years
IPR&D
  742,100 
5 years
Customer relationships
  252,200 
9 years
Patents and other intangibles
  286,200 
7 years
Total assets acquired
 $3,931,000 
 
 
    
 
Fair value of liabilities assumed:
    
 
 
    
 
Accounts payable
 $(39,300)
 
Accrued expenses
  (90,300)
 
Other current liabilities
  (59,400)
 
Total liabilities assumed
  (189,000)
 
 
    
 
Total identifiable net assets
  3,742,000 
 
Fair value of consideration transferred
  7,880,100 
 
Goodwill
 $4,138,100 
 
 
 
 
 F-26
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
16. Acquisition of Aquila Biolabs GmbH (continued)
 
Accounting Periods Presented
 
Aquila’s fiscal year ended on December 31. Its historical results have been aligned to more closely conform to the Company’s June 30 fiscal year end by taking Aquila’s interim financial results for six months ended December 31, 2019 and for the six months ended June 30, 2020. In addition, certain historical Aquila balances have been reclassified to conform to the pro forma consolidated presentation. There were no transactions between the two companies during the period presented. No pro forma adjustments were made to conform Aquila’s accounting policies which follow Germany’s generally accepted accounting principles (“German GAAP”) to the Company’s accounting principles, as any differences were deemed immaterial.
 
Unaudited Pro forma information is as follows:
 
(In $000’s)
 
 
6/30/2020
 
 
Revenues
 
 $9,346 
Net loss
 
  (1,650)
Earnings per share
 
    
Diluted
 
 $(0.37)
Basic
 
  (0.37)
 
    
 
These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on July 1, 2019, nor are they intended to be a projection of future results. For additional information, please refer to the Company’s current report on Form 8-KA, filed on July12, 2021.
 
 
17. Discontinued Operations
 
Effective November 30, 2020, the Company, as part of its strategic shift to becoming a life sciences tool provider, sold its Catalyst Research Instruments Operations reporting segment through the sale by Altamira of substantially all of its assets, which comprised of fixed assets, and inventory to Beijing JWGB Sci. & Tech. Co. Ltd., a corporation formed under the laws of the People’s Republic of China (“JWGB”) for $440,000 payable in cash through January 2021, resulting in a $405,400 pre-tax loss. In order to preserve business continuity for the buyer, Altamira agreed to purchase certain components on behalf of JWGB for which JWGB agreed to reimburse Altamira. At March 31, 2021, JWGB paid the full $440,000 purchase price and $28,500 for component purchases made on its behalf. The Company retained all its receivables and payables related to sales made prior to November 30, 2020, certain inventory related to two work-in-process orders which will be shipped by the end of the fiscal year ending June 30, 2021, product warranty and other miscellaneous liabilities related to certain employee benefits, and expenses related to the closure of the Altamira facility, which was substantially completed at the end of December 2020.
 
As a result of the disposal described above, the operating results of the former Catalyst Research Instruments Operations segment have been presented as discontinued operations in the balance sheets, the statements of operations, and the statements of cash flows, as detailed below.
 
Assets:
 
June 30, 2021
 
 
June 30, 2020
 
Accounts receivable
 $52,000 
 $- 
Inventories
  3,300 
  343,700 
Property and equipment, net
  - 
  1,400 
Goodwill
  - 
  447,900 
 
    
    
Discontinued operations
 $55,300 
 $793,000 
 

 
 
 F-27
 
 
 
SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
AS OF AND FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
 
 
 
  17. Discontinued Operations (continued)
 
 
 
Liabilities:
 
June 30, 2021
 
 
June 30, 2020
 
Accounts payable
 $- 
 $20,100 
Accrued expenses and taxes
  20,700 
  120,700 
Contract liabilities
  16,500 
  69,000 
Operating lease liabilities, current portion
  - 
  31,100 
 
    
    
 
 $37,200 
 $240,900 
 
 
 
 
 
Twelve Months Ended
 
 
 
June 30, 2021
 
 
June 30, 2020
 
Revenues
 $387,700 
 $785,900 
Cost of goods sold
  471,800 
  869,900 
Gross profit
  (84,100)
  (84,000)
Selling, general and administrative expenses
  280,400 
  388,500 
Loss from operations
  (364,500)
  (472,500)
Loss on disposal
  (405,400)
  -- 
Loss before income tax benefit
  (769,900)
  (472,500)
Income tax benefit, all deferred
  (207,400)
  (222,600)
Net income (loss) attributable to discontinued operations
 $(562,500)
 $(249,900)
 
 
In our Consolidated Statements of Cash Flows, the cash flows from discontinued operations are not separately classified. Cash (used) and provided by operating activities from discontinued operations for twelve months ended June 30, 2021 and June 30, 2020 was ($75,000) and $66,100, respectively. Cash provided by investing activities from discontinued operations for the twelve months ended June 30, 2021 was $440,000 and $2,200 for the twelve months ended June 30, 2020. There was no cash provided or used by the discontinued operations for financing activities for both the current and prior year periods.
 
 
  
 
 
F-28
 
 
 
 
 
 
   Exhibit 31.
 
 
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.
 
 
 
 
 
Scientific Industries, Inc.
 
 
 
 
 
 
 
 
Date: October 14, 2021
By:
/s/ Helena R. Santos
 
 
 
Helena R. Santos
 
 
 
Chief Executive Officer and
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Exhibit 32
 
 
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, 2021 (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.
 
 
 
 
Scientific Industries, Inc.
 
 
 
 
 
 
 
 
Date: October 14, 2021
By:
/s/ Helena R. Santos
 
 
 
Helena R. Santos
 
 
 
Chief Executive Officer and
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
FIRST AMENDMENT TO LEASE
 
This FIRST AMENDMENT TO LEASE (this “Agreement”), made as of the _____ day of September, 2021 (the “Effective Date”), by and between REP 2035 LLC, a Delaware limited liability company (“Landlord”), having its principal office c/o Rechler Equity Partners, 85 S. Service Road, Plainview, New York 11803, and SCIENTIFIC INDUSTRIES, INC., a Delaware corporation (“Tenant”), having an address at 80 Orville Drive, Bohemia, New York 11716.
 
RECITALS
 
WHEREAS, 80 Orville Drive Associates LLC, predecessor-in-interest to Landlord, and Tenant entered into an Agreement of Lease, made as of August 5, 2014 (the “Original Lease”), for the lease of 18,950 square feet of space (the “Original Premises”) in the building located at 80 Orville Drive, Bohemia, New York (the “Building”); and
 
WHEREAS, Landlord and Tenant desire to amend the Original Lease so as to, among other things, provide for (a) Tenant to lease from Landlord that certain 5,003 square feet of additional space located adjacent to the Original Premises (the “5,003 Expansion Premises”); such 5,003 Expansion Premises being substantially as shown and marked as “Expansion Space” on the Floor Plan annexed hereto as Exhibit “A”, and (b) an extension of the Term of the Lease, as it relates to the entire Demised Premises (as hereinafter defined), to and including October 31, 2028; subject to and in accordance with the terms and conditions of this Agreement.
 
NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which being hereby acknowledged, the parties agree as follows:
ARTICLE I
Definitions
 
1.1           The recitals are specifically incorporated into the body of this Agreement and shall be binding upon the parties hereto.
 
1.2           Unless expressly set forth to the contrary and except as modified by this Agreement, all capitalized or defined terms shall have the meanings ascribed to them in the Original Lease.
 
1.3           The term “Lease” shall mean and refer to the Original Lease, as modified and amended by this Agreement.
ARTICLE II
Lease Modifications
 
The Original Lease is hereby modified and amended as follows:
 
2.1           Space. Effective as of the 5,003 Expansion Premises Commencement Date (as defined below), Paragraph 41 of the Rider to the Original Lease and all other applicable provisions of the Original Lease are hereby modified and amended as follows:
 
(A)           Landlord shall lease to Tenant, and Tenant shall hire and let from Landlord, the 5,003 Expansion Premises, subject to all of the terms of the Original Lease, as modified by this Agreement;
 
(B)           Except as may be otherwise indicated by the context of its usage, each reference to the terms “demised premises” or “Demised Premises” in the Original Lease and this Agreement shall mean the Original Premises together with the 5,003 Expansion Premises;
 
(C)           The parties hereby stipulate and agree that such combined Demised Premises shall be deemed to consist of 23,953 square feet, in the aggregate; and
 
(D)           The term “Tenant’s Proportionate Share” shall mean (i) 20.43% when used in relation to the Original Premises only; or (ii) 5.40% when used in relation to the 5,003 Expansion Premises only; or (iii) 25.83% when used in relation to the entire Demised Premises.
 
2.2           Term. Effective as of the Effective Date of this Agreement, Paragraph 42 of the Rider to the Original Lease and all other applicable provisions of the Original Lease are hereby modified and amended as follows:
 
(A)           The Term of the Lease, as it relates to the 5,003 Expansion Premises only, shall commence on the date on which Landlord notifies Tenant that Landlord has achieved Substantial Completion of the 5,003 Expansion Work (as hereinafter defined) (the “5,003 Expansion Premises Commencement Date”). “Substantial Completion” as used herein, means when the only items of the 5,003 Expansion 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 5,003 Expansion 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 5,003 Expansion 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 5,003 Expansion Work within seven (7) days of Landlord's delivery to Tenant of a fully-executed copy of this Agreement; or (vii) Tenant's failure to pay the initial installment of Rent (it being understood and agreed that Landlord shall not be required to commence the performance of the 5,003 Expansion Work until all such deliveries and payments have been made) (all such delays being hereinafter referred to as “Tenant Delay”); then the 5,003 Expansion Premises Commencement Date shall be accelerated by the number of days of such Tenant Delay (however, Landlord shall not be obligated to deliver the 5,003 Expansion Premises to Tenant and Tenant shall not have the right to occupy the 5,003 Expansion Premises until the 5,003 Expansion Work is “Substantially Completed”). Tenant waives any right to rescind this Agreement or the Original 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 5,003 Expansion Premises on the scheduled 5,003 Expansion Premises 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. Landlord shall complete the 5,003 Expansion Work in accordance with applicable law.
 
(B)           The Term of the Lease, as it relates to the 5,003 Expansion Premises, shall expire on October 31, 2028 (the “Expiration Date”). The Term of the Lease, as it relates to the Original Premises, is hereby extended to and including the Expiration Date; it being the express intention of the parties that, following the 5,003 Expansion Premises Commencement Date, the Term of the Lease as it relates to the 5,003 Expansion Premises shall run co-terminously with the Term of the Lease as it relates to the Original Premises. Accordingly, unless otherwise indicated by the context of its usage, each reference in the Original Lease or this Agreement to the terms “Expiration Date,” or otherwise to the scheduled date of expiration of the Lease, shall hereafter mean and refer to October 31, 2028.
 
(C)           Paragraphs 42(b) and 42(e) of the Rider to the Original Lease are hereby deleted in their entirety.
 
(D)           For the avoidance of doubt, Tenant shall not be required to restore (i) any work performed in the Demised Premises by Landlord; (ii) any Alteration which Landlord did not inform Tenant in writing at the time Landlord consented thereto that Landlord would require Tenant to remove, repair or restore at the end of the Term; or (iii) any cabling work in connection with the installation of telephone or computer lines in the Demised Premises.
 
(E)           Tenant or its agents and/or contractors shall have a right to enter the 5,003 Expansion Premises subsequent to the commencement of the 5,003 Expansion Work but prior to the 5,003 Expansion Premises Commencement Date in order for Tenant to install its telephone and computer lines or furniture 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 prior notice to Landlord and Tenant’s satisfaction of the conditions of this paragraph and such entry shall only permitted with respect to the office portion of the 5,003 Expansion Premises. Prior to entering the 5,003 Expansion Premises Tenant shall deliver to Landlord (a) evidence of all insurance policies required to be maintained by Tenant under this lease, (b) evidence of insurance satisfactory to Landlord maintained by the contractors or vendors entering the 5,003 Expansion Premises and (c) Tenant and any contractors or vendors entering the 5,003 Expansion Premises on behalf of Tenant shall have entered into an early access and indemnity agreement on Landlord’s form attached hereto as Exhibit B. Tenant shall coordinate Tenant’s (and/or Tenant’s contractors and/or Tenant’s employees) entry upon the 5,003 Expansion 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 the 5,003 Expansion Work, if any, in entering upon the 5,003 Expansion 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 the 5,003 Expansion Work, such interference shall be deemed a Tenant Delay (in addition to those delineated herein).
 
2.3           Rent.
 
(A)           
The Original Premises through the Expiration Date.
 
(1)                 The annual minimum rent (the “Rent”) for the Original Premises shall continue to be payable in accordance with Paragraph 43 of the Rider to the Original Lease through January 31, 2025, except that the Rent for December 2024 and January 2025 shall be increased by $12,633.33 per month.
 
(2)                 The Rent for the Original Premises from February 1, 2025 through the Expiration Date shall be payable as follows:
 
From February 1, 2025 to October 31, 2025, the Rent shall be $152,803.26, payable in nine (9) equal monthly installments of $16,978.14.
 
From November 1, 2025 to October 31, 2026, the Rent shall be $209,849.76, payable in equal monthly installments of $17,487.48.
 
From November 1, 2026 to October 31, 2027, the Rent shall be $216,145.20, payable in equal monthly installments of $18,012.10.
 
From November 1, 2027 to October 31, 2028, the Rent shall be $197,362.86, payable in equal monthly installments of $18,552.46 for each of the first ten (10) months and $5,919.13 for each of the last two (2) months.
 
(B)           
The 5,003 Expansion Premises from the 5,003 Expansion Premises Commencement Date through the Expiration Date. Effective as of the 5,003 Expansion Premises Commencement Date, the Rent for the 5,003 Expansion Premises shall be payable as follows:
 
From the 5,003 Expansion Premises Commencement Date through October 31, 2022, the Rent shall be $12,307.38 for the first month and $4,102.46 for each succeeding month through October 31, 2022.
 
From November 1, 2022 through October 31, 2023, the Rent shall be $50,706.48 payable in equal monthly installments of $4,225.54.
 
From November 1, 2023 through October 31, 2024, the Rent shall be $52,227.72, payable in equal monthly installments of $4,352.31.
 
From November 1, 2024 through October 31, 2025, the Rent shall be $53,794.56, payable in equal monthly installments of $4,482.88.
 
From November 1, 2025 through October 31, 2026, the Rent shall be $55,408.44, payable in equal monthly installments of $4,617.37.
 
From November 1, 2026 through October 31, 2027, the Rent shall be $57,070.68, payable in equal monthly installments of $4,755.89.
 
From November 1, 2027 through October 31, 2028, the Rent shall be $50,577.92, payable in equal monthly installments of $4,898.57 for the first ten (10) months and two (2) installments of $796.11 each for the last two (2) months.
 
(C)           Rent for the first month due with respect to the 5,003 Expansion Premises in the amount of $12,307.38 shall be due simultaneously with the execution and delivery of this Agreement.
 
2.4           Utilities. (A) From and after the 5,003 Expansion Premises Commencement Date, Tenant will furnish and pay for all utilities to the entire Demised Premises (including both the Original Premises and the 5,003 Expansion Premises) in accordance with Paragraph 44(a) of the Original Lease; provided, however, that water, sprinkler supervisory and sewer service for the entire Demised Premises (including both the Original Premises and the 5,003 Expansion Premises) shall be provided and paid for in accordance with Paragraph 44(b) of the Original Lease.
 
(B) As of the Effective Date, Paragraph 44(a) of the Rider to the Original Lease is hereby modified and amended to add the following two (2) sentences to the end of the paragraph: “Tenant shall, throughout the term of this lease, maintain all utility services to the Demised Premises and keep the Demised Premises heated, cooled and lighted. Landlord shall not be liable to Tenant for damages or otherwise (i) if any utilities shall become unavailable from any public utility company, public authority, or any other person or entity supplying or distributing such utility, or (ii) for any interruption in any utility service (including, but without limitation, any heating, ventilation or air conditioning) caused by the making of any necessary repairs or improvements or by any cause, and the same shall not constitute a default, termination or an eviction except to the extent the same arise from or in connection with the gross negligence or willful misconduct of Landlord or its employees, contractors, agents or representatives and Landlord fails to cure same within a commercially reasonable time period.”
 
2.5           Common Area Maintenance.
 
(A)           Through the 5,003 Expansion Premises Commencement Date, Tenant shall continue to pay Tenant’s Proportionate Share of Landlord’s Cost in accordance with the provisions of the Original Lease, specifically including, without limitation, the provisions of Paragraph 47 thereof.
 
(B)           With respect to periods from and after the 5,003 Expansion Premises Commencement Date, the definition of the term “Base CAM Charge” in Paragraph 47 of the Original Lease shall be deemed to have been modified and amended so as to delete therefrom the reference to the amount “$852.75” and replace same with a corresponding reference to the amount “$1,077.89.” The parties hereby agree that the Base CAM Charge is included in the Rent set forth in Section 2.3 of this Agreement.
 
(C)           With respect to all periods from and after the Effective Date, the applicable provisions in Paragraphs 47 and 48 of the Original Lease shall be deemed to have been modified, amended and clarified so as to provide that the removal of snow and ice from the stairways and sidewalks adjacent to the Demised Premises shall be the responsibility of Tenant, not Landlord.
 
2.6           Taxes.
 
(A) With respect to the Original Premises, Tenant shall continue to pay additional rent as set forth in Paragraph 49 of the Rider to the Lease, as previously modified and amended, through and including the Expiration Date.
 
 
(B) With respect to the 5,003 Expansion Premises only, effective as of the Commencement Date, Tenant shall pay additional rent as set forth in Paragraph 49, except that, for the purposes of calculating such additional rent for the 5,003 Expansion Premises only, (a) the term “Tenant’s Proportionate Share” shall mean and refer to 5.40%, and (b) the term “Base Year Taxes”, as referenced in Paragraph 49(a)(ii), shall mean and refer to the Taxes actually due and payable with respect to the 2021/2022 tax year.
 
2.7           Insurance Cost.
 
(A)           Through the 5,003 Expansion Premises Commencement Date, Tenant shall continue to pay Tenant’s Proportionate Share of the Insurance Cost in accordance with the provisions of the Original Lease, specifically including, without limitation, the provisions of Paragraph 59(g) thereof.
 
(B)           With respect to periods from and after the 5,003 Expansion Premises Commencement Date, the definition of the term “Base Insurance Charge” in Paragraph 59(g) of the Original Lease shall be deemed to have been modified and amended so as to delete therefrom the reference to the amount “$331.63” and replace same with a corresponding reference to the amount “$419.18.” The parties hereby agree that the Base Insurance Charge is included in the Rent set forth in Section 2.3 of this Agreement.
 
2.8           
Parking. As of the 5,003 Expansion Premises Commencement Date, Paragraph 55 of the Rider to the Original Lease shall be deemed to have been modified and amended so as to delete the second sentence therefrom and replace the same with the following: “However, at all times during the Term, Tenant shall have the right to use thirty (30) parking spaces at the Building.”
 
2.9           Condition of the Demised Premises. Tenant hereby acknowledges and agrees that (i) all work and installations heretofore required to be performed or made by Landlord under the Original Lease have been fully performed or made prior to the date hereof; (ii) Tenant has inspected the Original Premises and agrees to accept same in its “as is” condition as of the date hereof; (iii) Tenant has inspected the 5,003 Expansion Premises and agrees to accept same in its “as is” condition as of the date hereof and Landlord shall not be required to perform any work, make any installations or incur any expense in or with respect to the Original Premises (or any portion thereof) in order to prepare same for continued occupancy by Tenant or in or with respect to the 5,003 Expansion Premises (or any portion thereof) in order to prepare same for occupancy by Tenant except that Landlord will perform the work and make the installations, at Landlord’s sole cost and expense, and in accordance with the requirements of the Lease (including this Agreement), as set forth on the Floor Plan annexed hereto as Exhibit A, which work is sometimes hereinafter referred to as the “5,003 Expansion Work”. In connection with the performance of the 5,003 Expansion Work, Tenant shall provide Landlord and its contractors with access to the Demised Premises, to the extent necessary, in order to perform the 5,003 Expansion Work. Tenant acknowledges and agrees that there shall be no liability to Landlord, and no abatement of the obligations and liabilities of Tenant under the Lease, on account of any inconvenience or interference that may result from Landlord’s performance of the 5,003 Expansion Work except to the extent the same arise from or in connection with the gross negligence or willful misconduct of Landlord or its employees, contractors, agents or representatives. To the extent necessary, Tenant shall be responsible for moving the furniture and equipment in the Original Premises (at Tenant's sole cost and expense) in order to permit Landlord to perform the 5,003 Expansion Work. Landlord shall use commercially reasonable efforts to minimize interference with or disruption of Tenant’s use of the balance of the Demised Premises while performing the 5,003 Expansion Work.
 
2.10           Hazardous Materials. As of the Effective Date, Paragraph 57 of the Original Lease is hereby modified and amended (x) so as to clarify that the restrictions, obligations and liabilities of Tenant pursuant to said Paragraph 57 shall be deemed to apply to both (a) the introduction by any person or entity (other than Landlord, its agents or contractors) of any Hazardous Materials in or on the Demised Premises during the Term of the Lease and (b) the introduction by Tenant or any of Tenant’s Related Parties of any Hazardous Materials in, on or under any other portion of the Building or the Real Property; (y) to add the following paragraph to Paragraph 57 of the Original Lease:
 
“Notwithstanding anything to the contrary contained in Paragraph 57 of this lease, Tenant shall not be responsible for any Hazardous Materials which (i) were present in or at the Demised Premises, Building and/or Real Property prior to the date on which Tenant first takes occupancy of the Demised Premises (“Pre-Existing Hazardous Materials”) or (ii) are introduced upon the Demised Premises, Building and/or Real Property by persons other than Tenant or Tenant’s Related Parties (“Third-Party Hazardous Materials”). In the event Pre-Existing Hazardous Materials or Third-Party Hazardous Materials are present in the Demised Premises, Building and/or Real Property and same materially and adversely affect Tenant’s use of the Demised Premises, Landlord hereby covenants to address such legal violation in the manner required by applicable law. Notwithstanding the foregoing, if the subject legal violation has been caused by the act or omission of a third party, then Landlord may seek to cause such third party to address such legal violation.”
2.11           Use. As of the Effective Date, (x) the words “and carbon monoxide alarms, detectors or systems” are added after “fire extinguishers” in Paragraph 51(b) of the Rider to the Original Lease, and (y) the words “and for parking tractor trailers and/or containers” are inserted at the end of the second sentence of Paragraph 51(c) of the Rider to the Original Lease.
 
2.12           End of Term. As of the Effective Date, Paragraph 52 of the Rider to the Original Lease is hereby modified and amended (A) to add the words “(i) pay as use and occupancy for each month of the holdover or any portion thereof (including the time holding over in occupancy after the issuance of a judgment of possession and warrant of eviction through the date the Landlord regains possession of the Premises) an amount equal to” after the words “Tenant shall” in the third line of such paragraph; and (B) to add the words “in the event the holdover period extends beyond sixty (60) days” at the beginning of both subsections (ii) and (iii).
 
2.13           Default. (A) As of the Effective Date, the second sentence of Paragraph 58(d) of the Rider to the Original Lease is hereby deleted.
 
(B)           As of the Effective Date, the following is added as the last sentence to Paragraph 58(c) of the Rider to the Original Lease:
 
“Notwithstanding anything to the contrary contained herein, if Tenant prevails on the merits of the dispute that is the subject of any such action or proceeding (as distinguished from the dispute being resolved by settlement or the subject action or proceeding being withdrawn or dismissed in connection with Landlord’s acceptance of a cure offered by Tenant), then (i) Tenant shall not be obligated to pay Landlord’s legal fees in connection with the subject action or proceeding and (ii) instead, Landlord shall reimburse Tenant for the reasonable legal fees incurred by Tenant in defending the subject action or proceeding (in an amount not to exceed the legal fee payment amount to which Landlord would have been entitled had Tenant not prevailed in the subject action or proceeding).”
 
2.14           Insurance. As of the Effective Date,
 
(A) the first line of Paragraph 59(a) of the Rider to the Lease is hereby amended to insert the words “and shall require its contractors and subcontractors to” after the words “Tenant shall”;
 
(B) the words “Landlord and its construction affiliate and management company” are deleted from Paragraph 59(a) of the Rider and replaced with “the Indemnified Parties (as hereinafter defined)”;
 
(C) Paragraph 59(a)(ii) is hereby deleted and replaced with: “ ‘Special Perils’ Property Insurance Form and to include the additional perils of loss from windstorm or hail including coverage for water damage from but not necessarily limited to, sprinkler leakage, sewer discharge or back up and overflow from other tenant’s spaces (if applicable), flood and earthquake (if applicable) insuring 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, equipment and all items within the Premises which Tenant is obligated to maintain and/or replace for the full insurable value thereof or replacement cost value thereof, whichever is greater without deduction for depreciation and shall have an agreed value endorsement or otherwise waive coinsurance penalties.”
 
(D) The following two (2) sentences are inserted as the second and third sentences of Paragraph 59(a): “All of Tenant’s liability insurance policies (including, without limitation, policies carried by Tenant’s contractors and subcontractors) with the exception of worker’s compensation, shall include the Indemnified Parties as additional insureds. All of Tenant’s casualty policies including workers compensation (if applicable under law) shall contain a waiver of subrogation endorsement in favor of the additional insureds and be primary and non-contributory to other insurance carried by the additional insureds. All of Landlord’s casualty policies including workers compensation (if applicable under law) shall contain a waiver of subrogation endorsement in favor of Tenant.”
 
(E) Each of Landlord and Tenant hereby waive and release each other of and from any and all rights of recovery, claims, or causes of action, whether by subrogation or otherwise, against each other, their agents, officers and employees, for any loss or damage that may occur to any furniture, equipment, machinery, goods, supplies or any other property (regardless of cause or origin, including negligence of Landlord or Tenant and their agents, officers and employees), which loss or damage is insured by any policy of insurance carried by the party sustaining such loss, or which loss or damage would have been insured pursuant to insurance required to be carried under this Lease by the party sustaining such loss had such party obtained such insurance.
 
2.15           Assignment/Subletting. As of the Effective Date, in the event that Tenant assigns or sublets the Lease in accordance with Paragraph 54(h) of the Rider to the Lease then (x) the provisions of Paragraphs 54(b) and 54(e) of the Rider to the Lease shall not apply to such assignment or sublease; and (y) Paragraph 54(i) of the Rider to the Lease shall not apply to an assignment or sublease to an affiliated entity provided that the conditions in 54(h)(i) and (ii) are met.
 
2.16           Miscellaneous. (A) As of the Effective Date, Paragraph 63(k) of the Rider to the Lease is hereby modified and amended to add the words “, trade fixtures (including, without limitation, racking) and/or inventory” after the word “equipment”.
 
(B)                 As of the Effective Date, (x) the following words in the first and second line of Paragraph 63(l) of the Rider to the Lease: “To the fullest extent permitted by law, Tenant shall indemnify, hold harmless and defend Landlord, its affiliates, managing agents, construction company, subsidiaries, directors, officers, employees and agents” are hereby deleted and replaced with the following: “Tenant shall, and shall require its contractors and subcontractors to, indemnify, hold harmless and defend Landlord, its affiliates (including, without limitation, Rechler Equity Management LLC and Rechler Equity Construction LLC), partners, members, lenders, managing agents, construction company, subsidiaries, directors, officers, employees and agents (collectively, the “Indemnified Parties”); and (y) the words “real property” are deleted from Paragraph 63(l) of the Rider to the Lease and replaced with “Real Property”.
 
(C)                 As of the Effective Date, Paragraph 63(n) of the Rider to the Lease is hereby deleted and replaced with the following: “(n) Notwithstanding anything contained to the contrary in this lease, except for Tenant’s liability under Paragraph 52 hereof, Landlord and Tenant each hereby waives any right to recover against the other party any indirect, consequential, special, punitive or incidental damages against the other party in any cause of action, proceeding or claim arising out of, or in connection with, this lease.”
 
ARTICLE III
Broker
 
3.1           
Landlord and Tenant each represents that this Agreement was not brought about by any broker, and all negotiations with respect to this Agreement were conducted exclusively between Landlord and Tenant. Landlord and Tenant each agrees that if any claim is made for commissions by any broker through or on account of any acts of Landlord or Tenant, Landlord or Tenant, as applicable, will indemnify, defend and hold the other party free and harmless from any and all liabilities and expenses in connection therewith, including reasonable attorney’s fees and disbursements.
 
ARTICLE IV
Ratification
 
4.1           
Tenant represents and warrants that the Original Lease is presently in full force and effect, that no event of default has occurred on the part of Landlord and that Tenant has no defense or right of offset in connection with Landlord’s performance under the Original Lease to this date.
 
4.2           
The parties hereby ratify and confirm all the terms, covenants and conditions of the Original Lease, except to the extent that those terms, covenants and conditions are amended, modified or varied by this Agreement. If there is a conflict between the provisions of the Original Lease and the provisions of this Agreement, then the provisions of this Agreement shall control.
 
4.3           
This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and/or assigns.
 
4.4           This Agreement may be executed in several counterparts all of which shall constitute one agreement, binding on all the parties hereto, notwithstanding that all the parties are not signatories to the same counterpart. A signature upon this Agreement delivered by facsimile or other electronic means shall be effective for all purposes as the original.
 
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IN WITNESS WHEREOF, the parties have executed this First Amendment to Lease as of the day and year first above written.
 
 
Landlord:                                
REP 2035 LLC
 
 
By: ______________________________
Name:
Title:
 
 
Tenant: 
SCIENTIFIC INDUSTRIES, INC.
 
 
By: ______________________________
Name:
Title:
 
 
 
 
 
EXHIBIT “A”
 
Floor Plan Showing the 5,003 Expansion Premises and the 5,003 Expansion Work
 
(see attached)
 
 
 
 
 
 
EXHBIT “B”
 
FORM OF EARLY ACCESS AND INDEMNITY AGREEMENT
 
PROPERTY
ADDRESS:                                            
________________________________________ (“Property”)
 
CONTRACTOR:                                            
________________________________________ (“Contractor”)
 
TENANT:                                 
________________________________________ (“Tenant”)
 
OWNER: _________________________________________(“Owner”)
 
DATE:                       
                       
_________, 2021
 
1.
PURPOSE: Supplementing the agreement entered into between Contractor and Tenant dated ________, 2021crelating to certain work (the “Work”) to be performed by Contractor at the above captioned Property, Contractor shall be obligated to comply with the terms of this agreement relating to providing insurance and indemnification to the Tenant Parties (as hereinafter defined).
 
OR IF THERE IS NO OTHER WRITTEN AGREEMENT BETWEEN CONTRACTOR AND TENANT:
 
This agreement between Contractor and Tenant is to set forth for the terms upon which Contractor shall provide insurance and indemnification to the Tenant Parties (as hereinafter defined) with respect to certain work (the “Work”) to be performed by Contractor at the above captioned Property.
 
2.
INDEMNITY: To the fullest extent permitted by law, Contractor shall, at its sole cost and expense, indemnify, defend and hold harmless (“Tenant”), (“Owner”), Rechler Equity LLC, Rechler Equity Management LLC, Rechler Equity Construction LLC, and any and all respective members, partners, directors, officers, shareholders, employees, agents, affiliates, subsidiaries, successors and assigns of each of them (hereinafter referred to collectively as the “Tenant Parties”), from and against all claims, damages, losses and expenses, including, but not limited to, attorneys’ fees, arising out of or resulting from the performance or non-performance of the Work by Contractor and all of its sub-contractors, regardless of whether or not it is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge or otherwise reduce any other right or obligation of indemnity which would otherwise exist to any party or person described in this paragraph. This indemnity agreement shall survive the completion of the Work.
 
3.
INSURANCE REQUIREMENTS:
 
(a)
Contractor shall procure and maintain at all times during the term of this Agreement the following insurance with coverage and limits not less than that shown below to protect against any claims arising out of, or resulting from, the Work:
 
Commercial General Liability:                                                            
$1,000,000 Per Location
Premises Liability:                                                       
$1,000,000
Products & Completed Operations:                                                                            
$1,000,000
Personal/Advertising Injury:                                                       
$1,000,000
Contractual Liability:                                                       
$1,000,000
Business Automobile Coverage:                                                                       
$1,000,000
Employer’s Liability:                                                            
$1,000,000 Per Claim
Workers’ Compensation:                                                                       
Per State Requirements
Disability Insurance:                                                                       
Per State Requirements
Umbrella Coverage:                                                                                 
$5,000,000
 
(b)
The Contractor and the Contractor’s insurers shall waive all rights of subrogation against the Tenant Parties.
 
(c)
The Contractor warrants that in addition to the coverage requirements set forth above, the following coverage conditions shall be met:
 
(i) Commercial General Liability and Umbrella Policy: Coverage shall include Premises, Products and Completed Operations, Personal/Advertising Injury, and Contractual Liability for bodily injury, including personal injury, death, and property damage. Each policy shall: (a) be written on a per occurrence basis with an unmodified industry standard coverage form, (b) contain a per location/project aggregate, (c) be written with a deductible not to exceed $5,000 per occurrence (a self insured retention will not be accepted), (d) be primary without right of contribution from any insurance that is carried by the Tenant Parties, (e) name the Tenant Parties as Additional Insureds, (f) include a severability of interest clause, (g) contain a waiver of subrogation in favor of the Additional Insureds, (h) provide that Contractor is solely responsible for the payment of all premiums, deductibles, penalties and punitive damages thereunder, and (i) provide that the act or omission of one insured party will not invalidate the policy as to the other Insureds. Contractor’s umbrella policy shall be no less broad than the underlying policy, shall have the same inception and expiration dates as the underlying policy, and shall include a drop-down provision.
 
(ii) Business Automobile Liability: Coverage shall be written on a business auto form for “any auto” included owned, non-owned, and hired or borrowed vehicles and trailers. Coverage shall be provided with a combined single limit for each accident, including bodily injury and property damage liability.
 
(iii)                   
Worker’s Compensation Insurance and Employer’s Liability: Each policy shall: (a) provide that Contractor is solely responsible for the payment of all premiums thereunder, and (b) contain a waiver of subrogation in favor of the Tenant Parties.
 
(d)                  
Business Personal Property: Contractor shall also be required to purchase acceptable “All-Risk” coverage or provide acceptable proof of self-insurance for all personal property, including any tools, machinery, equipment sheds, and materials or supplies, under an “all risk” property policy, and such policy should grant a waiver of subrogation in favor of the Tenant Parties. The Tenant Parties and their agents take no responsibility for Contractor’s personal property.
 
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In Witness Whereof, the undersigned has executed this agreement the ____ day of __________, 2021.
 
Acknowledged and Agreed by:
 
Tenant:                                                                            
Contractor:
 
_________________________                                                                                      
_________________________
 
 
By: ____________________________                                                                                      
By: _____________________________
Name:                                                                           
Name:
Title:                                                                           
Title: