UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ 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)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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) and (2) has been subject to such filing requirements for the past 90 days.

☒ 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 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 number of shares outstanding of the registrant’s common stock, par value $.05 per share (“Common Stock”) as of May 7, 2020 is 1,502,773 shares.

SCIENTIFIC INDUSTRIES, INC.

Table of Contents

PART I - Financial Information
Item 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Changes in Shareholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17
Item 4.	CONTROLS AND PROCEDURES	20
PART II - Other Information
Item 6.	EXHIBITS AND REPORTS ON FORM 8-K	20
SIGNATURE		21

  PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	March 31, 2020	June 30, 2019
Current assets:	(Unaudited)
Cash and cash equivalents	$739,400	$1,602,500
Investment securities	301,300	330,900
Trade accounts receivable, less allowance for doubtful accounts of $11,600 at March 31, 2020and $15,000 at June 30, 2019	2,184,200	1,974,200
Inventories	3,044,800	2,592,300
Prepaid expenses and other current assets	80,400	91,200
Total current assets	6,350,100	6,591,100
Property and equipment, net	290,500	318,800
Intangible assets, net	137,400	175,000
Goodwill	705,300	705,300
Other assets	56,000	54,700
Deferred taxes	513,200	431,100
Operating lease right-of-use assets	867,400	-
Total assets	$8,919,900	$8,276,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$451,900	$569,000
Accrued expenses and taxes	710,100	608,300
Contract liabilities	116,100	-
Contingent consideration, current portion	360,000	268,000
Bank overdraft	-	140,000
Operating lease liabilities, current portion	64,100	-
Total current liabilities	1,702,200	1,585,300
Operating lease liabilities, less current portion	869,200	-
Contingent consideration, less current portion	318,000	350,000
Total liabilities	2,889,400	1,935,300
Shareholders’ equity:
Common stock, $.05 par value; authorized 7,000,000 shares; issued 1,522,575, and 1,513,914 shares, and 1,502,773 and 1,494,112 shares outstanding at March 31, 2020 and June 30, 2019	76,100	75,700
Additional paid-in capital	2,649,300	2,592,700
Retained earnings	3,357,500	3,724,700
	6,082,900	6,393,100
Less common stock held in treasury at cost, 19,802 shares	52,400	52,400
Total shareholders’ equity	6,030,500	6,340,700
Total liabilities and shareholders’ equity	$8,919,900	$8,276,000

See notes to unaudited condensed consolidated financial statements.

 1

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Three Month Period Ended March 31,	For the Three Month Period Ended March 31,	For the Nine Month Period Ended March 31,	For the Nine Month Period Ended March 31,
	2020	2019	2020	2019
Revenues	$2,378,000	$3,053,500	$6,654,500	$7,255,300
Cost of revenues	1,274,700	1,972,400	3,479,300	4,252,700
Gross profit	1,103,300	1,081,100	3,175,200	3,002,600
Operating expenses:
General and administrative	524,800	492,400	1,545,100	1,371,000
Selling	433,800	282,100	1,073,500	766,400
Research and development	298,900	120,900	795,500	347,600
Termination costs	180,700	-	180,700	-
Total operating expenses	1,438,200	895,400	3,594,800	2,485,000
Income (loss) from operations	(334,900)	185,700	(419,600)	517,600
Other income (expense):
Interest income	300	300	10,000	3,100
Other income, net	(41,900)	8,100	(39,700)	600
Interest expense	-	(600)	-	(1,400)
Total other income (expense), net	(41,600)	7,800	(29,700)	2,300
Income (loss) before income tax expense (benefit)	(376,500)	193,500	(449,300)	519,900
Income tax expense (benefit):
Current	-	179,700	-	233,600
Deferred	(61,900)	(79,800)	(82,100)	(67,800)
Total income tax expense (benefit)	(61,900)	99,900	(82,100)	165,800
Net income (loss)	$(314,600)	$93,600	$(367,200)	$354,100
Basic earnings (loss) per common share	$(.21)	$.06	$(.25)	$.24
Diluted earnings (loss) per common share	$(.21)	$.06	$(.25)	$.23
Cash dividends declared per common share	$.00	$.00	$.00	$.05

See notes to unaudited condensed consolidated financial statements.

 2

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	For the Three Month Period Ended March 31,	For the Three Month Period Ended March 31	For the Nine Month Period Ended March 31,	For the Nine Month Period Ended March 31,
	2020	2019	2020	2019
Net income (loss)	$(314,600)	$93,600	$(367,200)	$354,100
Other comprehensive income (loss):
Unrealized holding gain (loss) arising during period net of tax	-	7,500	-	(13,500)
Comprehensive income (loss)	$(314,600)	$101,100	$(367,200)	$340,600

See notes to unaudited condensed consolidated financial statements.

  3

  CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

			Additional	Accumulated  Other				Total
	Common Stock		Paid-in	Comprehensive	Retained	Treasury Stock		Shareholders’
Fiscal Year 2020	Shares	Amount	Capital	Gain (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	-	-	-	-	(56,200)	-	-	(56,200)
Stock options exercised	2,000	100	6,900	-	-	-	-	7,000
Stock-based compensation	-	-	17,700	-	-	-	-	17,700
Balance, September 30, 2019	1,515,914	75,800	2,617,300	-	3,668,500	19,802	52,400	6,309,200
Net income	-	-	-	-	3,600	-	-	3,600
Stock options exercised	6,661	300	(300)	-	-	-	-	-
Stock-based compensation	-	-	17,700	-	-	-	-	17,700
Balance, December 31, 2019	1,522,575	76,100	2,634,700	-	3,672,100	19,802	52,400	6,330,500
Net loss	-	-	-	-	(314,600)	-	-	(314,600)
Stock-based compensation	-	-	14,600	-	-	-	-	14,600
Balance, March 31, 2020	1,522,575	$76,100	$2,649,300	$-	$3,357,500	19,802	$52,400	$6,030,500

  See notes to unaudited condensed consolidated financial statements.

  4

  CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

			Additional	Accumulated  Other				Total
	Common Stock		Paid-in	Comprehensive	Retained	Treasury Stock		Shareholders’
Fiscal Year 2019	Shares	Amount	Capital	Gain (Loss)	Earnings	Shares	Amount	Equity
Balance, July 1, 2018	1,513,914	$75,700	$2,545,900	$1,200	$3,131,800	19,802	$52,400	$5,702,200
Cumulative effect of the adoption of	-	-	-	-	22,000	-	-	22,000
ASU 2016-01 – Financial Instruments
Net income	-	-	-	-	142,000	-	-	142,000
Cash dividend declared, $.05	-	-	-	-	(74,700)	-	-	(74,700)
Unrealized holding loss on investment securities, net of tax	-	-	-	(18,100)	-	-	-	(18,100)
Stock-based compensation	-	-	8,700	-	-	-	-	8,700
Balance, September 30, 2018	1,513,914	75,700	2,554,600	(16,900)	3,221,100	19,802	52,400	5,782,100
Net income	-	-	-	-	118,400	-	-	118,400
Unrealized holding loss on investment securities, net of tax	-	-	-	(2,900)	-	-	-	(2,900)
Stock-based compensation	-	-	9,500	-	-	-	-	9,500
Balance, December 31, 2018	1,513,914	75,700	2,564,100	(19,800)	3,339,500	19,802	52,400	5,907,100
Net income	-	-	-	-	93,600	-	-	93,600
Unrealized holding gain on investment securities, net of tax	-	-	-	7,500	-	-	-	7,500
Stock-based compensation	-	-	11,700	-	-	-	-	11,700
Balance, March 31, 2019	1,513,914	$75,700	$2,575,800	$(12,300)	$3,433,100	19,802	$52,400	$6,019,900

  See notes to unaudited condensed consolidated financial statements.

  5

  SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Nine Month Period Ended March 31,	For the Nine Month Period Ended March 31,
	2020	2019
Operating activities:
Net income (loss)	$(367,200)	$354,100
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Gain (loss) on sale of investments	(4,000)	5,000
Depreciation and amortization	123,300	218,200
Deferred income tax expense	(82,100)	(70,800)
Unrealized holding (gain) loss on investments	42,700	(4,200)
Gain on sale of fixed assets	(300)	-
Stock-based compensation	50,000	29,900
Change in fair value of contingent consideration	60,000	567,000
Changes in operating assets and liabilities:
Trade accounts receivable	(210,000)	(556,300)
Contract assets	-	101,300
Inventories	(452,500)	(403,400)
Prepaid and other current assets	9,500	(32,300)
Right-of-use- assets	(867,400)	-
Accounts payable	(117,100)	23,400
Lease liabilities	933,300	-
Contract liabilities	116,100	164,000
Accrued expenses and taxes	(38,100)	88,800
Total adjustments	(436,600)	130,600
Net cash (used in) provided by operating activities	(803,800)	484,700
Investing activities:
Proceeds from sale of investment securities	53,600	72,400
Purchase of investment securities	(62,800)	(75,200)
Capital expenditures	(38,100)	(129,600)
Purchase of intangible assets	(20,000)	(21,400)
Proceeds from sale of fixed assets	1,000	-
Net cash used in investing activities	(66,300)	(153,800)
Financing activities:
Line of credit proceeds	-	50,000
Proceeds from exercise of stock options	7,000	-
Cash dividend declared and paid	-	(74,700
Principal payments on notes payable	-	(5,100)
Net cash provided by (used in) financing activities	7,000	(29,800)
Net change in cash and cash equivalents	(863,100)	301,100
Cash and cash equivalents, beginning of year	1,602,500	1,053,100
Cash and cash equivalents, end of period	$739,400	$1,354,200
Cash paid during the period for:
Income taxes	$40,900	$59,200
Interest	-	1,400

See notes to unaudited condensed consolidated financial statements.

 6

  SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

General: The accompanying unaudited interim condensed consolidated financial statements are prepared pursuant to the Securities and Exchange Commission’s rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States for complete financial statements are not included herein. The Company believes all adjustments necessary for a fair presentation of these interim statements have been included and that they are of a normal and recurring nature. These interim statements should be read in conjunction with the Company’s financial statements and notes thereto, included in its Annual Report on Form 10-K, for the fiscal year ended June 30, 2019. The results for the three months and nine months ended March 31, 2020 are not necessarily an indication of the results for the full fiscal year ending June 30, 2020.

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Scientific Industries, Inc., Altamira Instruments, Inc. (“Altamira”), a Delaware corporation and wholly-owned subsidiary, Scientific Bioprocessing, Inc. (“SBI”), a Delaware corporation and wholly-owned subsidiary, and Scientific Packaging Industries, Inc., an inactive wholly-owned subsidiary (all collectively referred to as the “Company”). All material intercompany balances and transactions have been eliminated.

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("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. The Company is currently evaluating the impact of adopting this guidance.

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. 2019-12 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 Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces previous lease guidance in its entirety with Accounting Standards Codification ("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 8, "Leases", for related disclosures.

2. Revenue

The Company records revenues in accordance with ASC Topic 606 “Revenue from Contracts with Customers, as amended” (“ASC Topic 606”). In accordance with ASC Topic 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.

Nature of Products and Services

We generate revenues from the following sources: (1) Benchtop Laboratory Equipment, (2) Catalyst Research Instruments and (3) Royalties.

The following table summarizes the Company’s disaggregation of revenues for the three and nine months ended March 31, 2020 and 2019.

 7

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended March 31, 2020:
Revenues	$1,800,700	$241,800	$335,500	$-	$2,378,000
Foreign Sales	743,000	236,200	335,000	-	1,314,200

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended March 31, 2019:
				-
Revenues	$1,732,400	$508,600	$812,500	$-	$3,053,500
Foreign Sales	682,300	346,400	-	-	1,028,700

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Nine Months Ended March 31, 2020:
Revenues	$5,320,300	$420,000	$914,200	$-	$6,654,500
Foreign Sales	1,996,400	318,100	913,700	-	3,228,200

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Nine Months Ended March 31, 2019:
Revenues	$5,227,500	$953,200	$1,074,600	$-	$7,255,300
Foreign Sales	2,061,600	711,600	-	-	2,773,200

Benchtop Laboratory Equipment sales are comprised primarily of standard benchtop laboratory equipment from its stock 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. The standard warranty is typically comprised of one to two years of parts and labor and is deemed immaterial.

Catalyst Research Instrument sales are comprised primarily of large instruments which begin with a standard model and then are customized to a customer’s specifications. The sales cycle can be quite long, typically ranging from one to three months, from the time an order is received to the time the instrument is shipped to the customer. Payment terms vary from customer to customer and can include advance payments which are recorded as contract liabilities. Some contracts call for training and installation, which is considered ancillary and not a material part of the contract. Due to the size and nature of the instruments, the Company subjects the instruments to an extensive factory acceptance testing process prior to shipment to ensure that they are fully operational once they reach the customer’s site. Normally, the Company warrantees its instruments for a period of twelve months for parts and labor which normally consists of replacement of small components or software support. Catalyst research instruments are never returned for repairs.

Royalty revenues pertain to royalties earned by the Company, which are paid on a calendar year basis, under a licensing agreement from a single licensee and its sublicenses. The Company is then obligated to pay 50% of all royalties received to the entity that licenses the intellectual property to the Company. During the year, the Company’s management uses its best judgement to estimate the royalty revenues earned during the period.

 8

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

The Company has made the following accounting policy elections and elected to use certain practical expedients, as permitted by the FASB, in applying ASC Topic 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 title 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.

3. Segment Information and Concentrations

The Company views its operations as three segments: the manufacture and marketing of standard benchtop laboratory equipment for research in university, hospital and industrial laboratories sold primarily through laboratory equipment distributors and laboratory and pharmacy balances and scales (“Benchtop Laboratory Equipment Operations”), the manufacture and marketing of custom-made catalyst research instruments for universities, government laboratories, and chemical and petrochemical companies sold on a direct basis (“Catalyst Research Instruments Operations”) and the design and marketing of bioprocessing systems and products and related royalty income (“Bioprocessing Systems”).

Segment information is reported as follows:

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended March 31, 2020:
Revenues	$1,800,700	$241,800	$335,500	$-	$2,378,000
Foreign Sales	743,000	236,200	335,000	-	1,314,200
Income (Loss) From Operations	138,800	(99,900)	(193,100)	(180,700)	(334,900)
Assets	5,229,700	1,227,900	1,647,800	814,500	8,919,900
Long-Lived Asset Expenditures	4,900	-	11,700	-	16,600
Depreciation and Amortization	29,600	300	11,000	-	40,900

  9

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended March 31, 2019:
Revenues	$1,732,400	$508,600	$812,500	$-	$3,053,500
Foreign Sales	682,300	346,400	-	-	1,028,700
Income (Loss) From Operations	57,900	(35,200)	163,000	-	185,700
Assets	4,656,600	1,583,100	1,503,100	788,500	8,531,300
Long-Lived Asset Expenditures	132,900	1,000	2,900	-	136,800
Depreciation and Amortization	56,500	200	9,600	-	66,300

Approximately 49% and 41% of total benchtop laboratory equipment sales (37% and 23% of total revenues) for the three month periods ended March 31, 2020 and 2019, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories.

Approximately 24% and 30% of total benchtop laboratory equipment sales (18% and 17% of total revenues) were derived from the Torbal Scales Division for the three months ended March 31, 2020 and 2019, respectively.

For the three months ended March 31, 2020 and 2019, respectively, three customers accounted for approximately 16% and 22% of net sales of the Benchtop Laboratory Equipment Operations (12% of the Company’s total revenues for both periods).

Sales of catalyst research instruments generally comprise a few very large orders averaging approximately $50,000 per order to a limited number of customers, who differ from order to order. Sales to three and five customers during the three months ended March 31, 2020 and 2019, respectively, accounted for approximately 89% and 86% of the Catalyst Research Instrument Operations’ revenues and 9% and 14% of the Company’s total revenues, respectively.

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Nine Months Ended March 31, 2020:
Revenues	$5,320,300	$420,000	$914,200	$-	$6,654,500
Foreign Sales	1,996,400	318,100	913,700	-	3,228,200
Income (Loss) From Operations	331,100	(360,600)	(209,400)	(180,700)	(419,600)
Assets	5,229,700	1,227,900	1,647,800	814,500	8,919,800
Long-Lived Asset Expenditures	26,800	-	31,300	-	58,100
Depreciation and Amortization	90,900	900	31,500	-	123,300

  10

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Nine Months Ended March 31, 2019:
Revenues	$5,227,500	$953,200	$1,074,600	$-	$7,255,300
Foreign Sales	2,061,600	711,600	-	-	2,773,200
Income (Loss) From Operations	382,100	(146,400)	281,900	-	517,600
Assets	4,656,600	1,583,100	1,503,100	788,500	8,531,300
Long-Lived Asset Expenditures	145,900	2,200	2,900	-	151,000
Depreciation and Amortization	189,200	600	28,400	-	218,200

Approximately 45% and 47% of total benchtop laboratory equipment sales (36% and 34% of total revenues) for both the nine month periods ended March 31, 2020 and 2019, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories.

Approximately 27% of total benchtop laboratory equipment sales (21% and 19% of total revenues, respectively) were derived from the Torbal Scales Division for both the nine months ended March 31, 2020 and 2019. For the nine months ended March 31, 2020 and 2019, respectively, three customers accounted for approximately 17% and 22% of net sales of the Benchtop Laboratory Equipment Operations (13% and 16% of the Company’s total revenues), respectively.

Sales of catalyst research instruments generally comprise a few very large orders averaging approximately $50,000 per order to a limited number of customers, who differ from order to order. Sales to six and eight customers during the nine months ended March 31, 2020 and 2019, accounted for approximately 87% and 88% of the Catalyst Research Instrument Operations’ revenues and 5% and 12% of the Company’s total revenues, respectively.

  11

4. 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 are 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 tables.

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 March 31, 2020 and June 30, 2019 according to the valuation techniques the Company used to determine their fair values:

		Fair Value Measurements Using Inputs Considered as
	Fair Value at March 31, 2020	Level 1	Level 2	Level 3
Assets:
Cash and cash equivalents	$739,400	$739,400	$-	$-
Investment securities	301,300	301,300	-	-
Total	$1,040,700	$1,040,700	$-	$-
Liabilities:
Contingent consideration	$678,000	$-	$-	$678,000

		Fair Value Measurements Using Inputs Considered as
	Fair Value at June 30, 2019	Level 1	Level 2	Level 3
Assets:
Cash and cash equivalents	$1,602,500	$1,602,500	$-	$-
Investment securities	330,900	330,900	-	-
Total	$1,933,400	$1,933,400	$-	$-
Liabilities:
Contingent consideration	$618,000	$-	$-	$618,000

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  Investments in marketable securities classified by security type at March 31, 2020 and June 30, 2019 consisted of the following:

	Cost	Fair Value	Unrealized Holding Gain (Loss)
At March 31, 2020:
Equity securities	$78,200	$82,600	$4,400
Mutual funds	251,300	218,700	(32,600)
	$329,500	$301,300	$(28,200)

	Cost	Fair Value	Unrealized Holding Gain (Loss)
At June 30, 2019:
Equity securities	$47,100	$72,000	$24,900
Mutual funds	292,300	258,900	(33,400)
	$339,400	$330,900	$(8,500)

5. 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.

	March 31, 2020	June 30, 2019
Raw materials	$1,801,900	$1,738,300
Work-in-process	419,900	106,400
Finished goods	823,000	747,600
	$3,044,800	$2,592,300

6. Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in connection with the Company’s acquisitions. Goodwill amounted to $705,300 at March 31, 2020 and June 30, 2019, all of which is expected to be deductible for tax purposes.

The components of other intangible assets are as follows:

	ful Lives	Cost	Accumulated Amortization	Net
At March 31, 2020:
Technology, trademarks	5/10 yrs.	$664,700	$662,100	$2,600
Trade names	6 yrs.	140,000	140,000	-
Websites	5 yrs.	210,000	210,000	-
Customer relationships	9/10 yrs.	357,000	318,100	38,900
Sublicense agreements	10 yrs.	294,000	246,200	47,800
Non-compete agreements	5 yrs.	384,000	384,000	-
IPR&D	3 yrs.	110,000	110,000	-
Other intangible assets	5 yrs.	240,900	192,800	48,100
		$2,400,600	$2,263,200	$137,400

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	Useful Lives	Cost	Accumulated Amortization	Net
At June 30, 2019:
Technology, trademarks	5/10 yrs.	$663,800	$661,700	$2,100
Trade names	6 yrs.	140,000	124,400	15,600
Websites	5 yrs.	210,000	210,000	-
Customer relationships	9/10 yrs.	357,000	308,100	48,900
Sublicense agreements	10 yrs.	294,000	224,100	69,900
Non-compete agreements	5 yrs.	384,000	384,000	-
IPR&D	3 yrs.	110,000	110,000	-
Other intangible assets	5 yrs.	221,700	183,200	38,500
		$2,380,500	$2,205,500	$175,000

Total amortization expense was $18,300 and $47,900 for the three months ended March 31, 2020 and 2019, respectively, and $57,600 and $170,200 for the nine months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, estimated future amortization expense related to intangible assets is $14,700 for the remainder of the fiscal year ending June 30, 2020, $57,500 for fiscal 2021, $35,100 for fiscal 2022, $18,300 for fiscal 2023 and $6,600 for fiscal 2024 and $5,200 thereafter.

7. Earnings (Loss) Per Common Share

Earnings (loss) per common share data was computed as follows:

	For the Three Month Period Ended March 31,  2020	For the Three Month Period Ended March 31,  2019	For the Nine Month Period Ended March 31, 2020	For the Nine Month Period Ended March 31,  2019
Net income (loss)	$(314,600)	$93,600	$(367,200)	$354,100
Weighted average common shares outstanding	1,502,773	1,494,112	1,497,567	1,494,112
Effect of dilutive securities	-	23,007	-	15,248
Weighted average dilutive common shares outstanding	1,502,773	1,517,119	1,497,567	1,509,360
Basic earnings (loss) per common share	$(.21)	$.06	$(.25)	$.24
Diluted earnings (loss) per common share	$(.21)	$.06	$(.25)	$.23

During the three and nine months ended March 31, 2020, the Company did not include 60,167 and 54,235 dilutive shares of common stock because the effect would be anti-dilutive due to the loss during the periods.

Approximately 1,750 shares of the Company's common stock issuable upon the exercise of outstanding options were excluded from the calculation of diluted earnings per common share for the three and nine month periods ended March 31, 2019, because the effect would be anti-dilutive.

8. 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, a facility in Pittsburgh, Pennsylvania for its Catalyst Research Instrument Operations through November 2020 and another facility in Pittsburgh, Pennsylvania for its Bioprocessing Systems Operations through May 2021. In addition, the Company had a lease for its Torbal Division of the Benchtop Laboratory Equipment Operations which was mutually terminated early effective as of October 31, 2019 and a new lease for a similar sales and administration office was entered into as of November 1, 2019 through October 2022. 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.

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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.

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 March 31, 2020, the weighted-average remaining lease term for operating lease liabilities was approximately 3.85 years and the weighted-average discount rate was 5.0%. Total cash payments under these leases were $76,900 and $218,700 for the three and nine month periods ended March 31, 2020 of which $75,500 and $218,700 were recorded as leases expense.

The Company’s approximate future minimum rental payments under all leases existing at March 31, 2020 through January 2025 are as follows:

Fiscal year ending June 30,	Amount
Remainder of 2020	$77,000
2021	265,800
2022	210,600
2023	198,900
2024	195,900
2025	91,600
Total future minimum payments	1,039,800
Less: Imputed interest	106,500
Total Present Value of Operating Lease Liabilities	933,300

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9. Subsequent Event

In March 2020, the World Health Organization ("WHO") classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. National, state and local governments in affected regions have implemented, and may continue to implement, safety precautions, including quarantines, border closures, increased border controls, travel restrictions, shelter in place orders and shutdowns, business closures, cancellations of public gatherings and other measures. Organizations and individuals are taking additional steps to avoid or reduce infection, including limiting travel and staying home from work.

The worldwide spread of the COVID-19 outbreak is expected to result in a global slowdown of economic activity that is likely to decrease demand for a broad variety of goods and services, while also disrupting sales channels and marketing activities for an unknown period of time until the disease is contained.  As discussed in this report's "Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations", the Company has taken steps to protect its business including its employees, and the Company is closely monitoring the evolving impact of the pandemic on all aspects of the Company’s business and periodically evaluates its estimates and they are adjusted prospectively based on such periodic evaluation.  The Company continues to employ all its employees, despite the slowdown.  However, an outbreak of the virus amongst its employees, particularly key management employees, could have a material negative effect on the Company.

In April 2020, the Company received $563,700 in loan proceeds pursuant to the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration through its bank. The loan will bear interest at 1% per annum, mature in April 2022 and contains no collateral or guarantee requirements. Subject to certain eligibility and certification requirements under the PPP, some or all of the loan amount may be forgiven; however, the amount and timing of any forgiveness is uncertain.

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Item 2. 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 reflected loss before income tax benefit of ($376,500) and ($449,300) for the three and nine months ended March 31, 2020 compared to income before income tax of $193,500 and $519,900 for the three and nine months ended March 31, 2019, primarily due to the loss incurred by the Bioprocessing Systems Operations resulting from increased operating and development expenses, a non-recurring charge for the termination of a management employee, and increased loss from the Catalyst Research Operations due to decreased sales, partially offset by increased operating income from the Benchtop Laboratory Equipment Operations. In the last quarter of the Company’s fiscal year ended June 30, 2019, the Company increased its investment in its Bioprocessing Systems Operations with staffing, facilities, and new product development. The Company's results reflected total non-cash amounts for depreciation and amortization and contingent consideration liability adjustments of $100,900 and $193,300 for the three and nine month periods ended March 31, 2020 compared to $633,300 and $785,200 for the corresponding three and nine month periods in 2019.

Impact of COVID-19.

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.  While it is difficult for the Company’s management to fully predict the full impact and broad effects of COVID-19 on its business because of factors beyond its control and knowledge, the Company believes it is well positioned to sustain the effects of the pandemic, with moderate  adverse impact. The Company has taken appropriate action and has plans in place to diminish the effects of COVID-19 on its operations and financial condition, 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 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 primary impact of the COVID-19 pandemic on the Company’s operations for the three and nine month periods ended March 31, 2020, was delay in delivery of certain catalyst research instruments to a customer in China, which has subsequently been delivered, and a forced shutdown of the Company's Catalyst Research Instruments Operations and the Scientific Bioprocessing Systems Operations facilities in Pennsylvania. 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, and training employees on maintaining a healthy work environment. The Scientific Bioprocessing Systems Operations were able to continue to operate by instituting “work-from-home” policies. The Catalyst Research Instrument Operations were able to do the same to some extent until they were granted an exemption and allowed to re-open the facility in early April. The Laboratory Equipment Operations instituted “work-from-home” policies for 75% of its administrative staff in accordance with state mandates.

The Company has been able to retain its employees without furloughs or layoffs, in part, due to the Company’ receipt of a loan under the Federal Government’s Paycheck Protection Program, which has been especially important to the Catalyst Research Instruments due to closures of its facility and customer facilities resulting in delays in order shipments and related receivables. The Company does not anticipate any material impact on its ability to collect its accounts receivable due to the nature of its customers, which are primarily distributers of laboratory equipment and supplies that have the ability to pay and that we believe have not been significantly impacted by the pandemic. However, there will be a delay in receiving some amounts due for sales of catalyst research instruments. The Company has not experienced and does not anticipate any material impairment to its tangible and intangible assets, system of internal controls, supply chain, or delivery and distribution of its products as a result of  COVID-19.

COVID-19 is expected to result in a reduction in demand or delay in orders for the Company’s products, resulting in an approximate 20-40% revenues decrease during the duration of the crisis which will impact the Company's gross margin due to fixed overhead and labor costs. While sales of the Company’s vortex mixers are not expected to be materially reduced because they are used in laboratories performing diagnostic tests, orders for other products such as shakers, incubators, and balances, are expected to decrease because they are discretionary purchases and certain customer sites are either closed or have reduced operations. Orders for Catalyst Instruments are expected to be delayed due to closures. Inventories of raw materials, work in process, and finished goods are expected to be higher as demand decreases and the Company may not be able to adjust all purchases due to purchase commitments, and an increase in stock of finished goods due to lower demand.

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Results of Operations.

The Three Months Ended March 31, 2020 Compared With The Three Months Ended March 31, 2019

Net revenues for the three months ended March 31, 2020 decreased $675,500 (22.1%) to $2,378,000 from $ 3,053,500 for the three months ended March 31, 2019, reflecting increased earned royalties by the Bioprocessing Systems Operations in the prior year, and decreased sales of the Catalysts Research Instruments, partially offset by increased sales of benchtop laboratory equipment. The Benchtop Laboratory Equipment Operations’ revenues included sales of Torbal brand products in the amount of $430,400 and $522,400 for the three months ended March 31, 2020 and 2019, respectively. As previously discussed, the Company’s order input began to be affected by the  COVID-19 crisis towards the end of the quarter.  The Company had a European patent that it licensed through the Company's Bioprocessing Systems Operations for which it received royalties each calendar year.   However, as of January 1, 2020, the licensee will no longer pay royalties on the European patent under mutual agreement, which was due to expire in August 2021. The net revenues related to the European patent for calendar year 2019 were approximately $822,000.

As of March 31, 2020, the order backlog for catalyst research instruments was $439,000, substantially all of which is expected to be shipped during the fiscal year ending June 30, 2020, compared to $834,300 as of March 31, 2019. The Company’s Benchtop Laboratory Equipment Operations has remained fully operational during the COVID-19 crisis with no shipment delays, and the Catalyst Research Instruments were forced to shut down for a period of a few weeks. Shipments to customers were delayed primarily due to customer facility closures, which have since opened or are expected to open in the near future.

The overall gross profit percentage for the three months ended March 31, 2020 increased to 46.4% compared to 35.4% for the three months ended March 31, 2019. The gross profit for the Bioprocessing Systems Operations reflected the recording of expected future contingent consideration payments pertaining to expected future royalties in both the current and prior year quarters, however, the prior year’s quarter was significantly higher. The gross profit for the Benchtop Laboratory Equipment was slightly higher for the three months ended March 31, 2020 compared to the prior year’s quarter due to lower overhead during the current period. The gross profit for the Catalyst Research Instruments Operations was near zero during the three months ended March 31, 2020 due to fixed overhead on low sales during the quarter.

General and administrative expenses for the three months ended March 31, 2020 increased by $32,400 (6.6%) to $524,800 compared to $492,400 for the three months ended March 31, 2019, due to staffing and other administrative costs incurred by the Scientific Bioprocessing Systems Operations.

Selling expenses for the three months ended March 31, 2020 increased by $151,700 (53.8%) to $433,800 from $282,100 for the three months ended March 31, 2019, due to marketing expenses for the Bioprocessing Systems Operations.

Research and development expenses increased by $178,000 (147.2%) to $298,900 for the three months ended March 31, 2020 compared to $120,900 for the three months ended March 31, 2019, primarily due to the ramp up in product development activities by the Bioprocessing Systems Operations which included staffing, facilities, and materials.

The Company reflected a non-recurring charge of terminaton costs for the severance pay and related payroll costs, pertaining to the early termination in February 2020 of the Company's Vice President of Corporate Strategy and Vice President of Sales for the Company's wholly-owned subsidiary, Altamira Insturments, Inc. 

Total other income (expense), net was ($41,600) for the three months ended March 31, 2020 compared to $7,800 for the three months ended March 31, 2019 due to holding losses on investment securities.

The Company reflected an income tax benefit of $61,900 for the three months ended March 31, 2020 compared to expense of $99,900 for the three months ended March 31, 2019 due to the loss for the period.

As a result of the foregoing, the Company recorded a net loss of ($314,600) for the three months ended March 31, 2020 compared to net income of $93,600 for the three months ended March 31, 2019.  

The Nine Months Ended March 31, 2020 Compared With The Nine Months Ended March 31, 2019

Net revenues for the nine months ended March 31, 2020 decreased $600,800 (8.3%) to $6,654,500 from $7,255,300 for the nine months ended March 31, 2019, reflecting a decrease in revenues of $533,200 for the Catalyst Research Operations due in part to the effect of COVID-19 pandemic in the China market, a decrease of $160,400 in earned royalties by the Bioprocessing Systems Operations, partially offset by an increase of $92,800 in net sales of benchtop laboratory equipment, which reflected $1,428,900 of Torbal brand product gross sales for the nine months ended March 31, 2020, compared to $1,406,400 in the nine months ended March 31, 2019.  The Company had a European patent that it licensed through the Company's Bioprocessing Systems Operations for which it received royalties each calendar year.  However, as of January 1, 2020, the licensee will no longer pay royalties on the European patent under mutual agreement, which was due to expire in August 2021. The net revenues related to the European patent for calendar year 2019 were approximately $822,000.

The overall gross profit percentage for the nine months ended March 31, 2020 was 47.7% compared to 41.4% for the nine months ended March 31, 2019.   The gross profit for the Catalyst Research Instruments was negative during the nine months ended March 31, 2020 compared to the nine months ended March 31, 2019 due to fixed overhead and labor combined with low sales during the current nine month period.

The Benchtop Laboratory Equipment Operations’s gross profit margin percentage was approximately the same as the prior year period, while the percentage was higher for the Bioprocessing Systems Operations due to reduced contingent consideration adjustments during the current year period.

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General and administrative expenses for the nine months ended March 31, 2020 increased $174,100 (12.7%) to $1,545,100 from $1,371,000 for the nine months ended March 31, 2019 due to staffing and other administrative costs incurred by the Bioprocessing Systems Operations and legal and other corporate expenses related to strategic initiatives.

Selling expenses for the nine months ended March 31, 2020 increased $307,100 (40.1%) to $1,073,500 from $766,400 for the nine months ended March 31, 2019, mainly due to new marketing expenses for the Bioprocessing Systems Operations, and to a lesser extent increased sales expenses by the Catalyst Research Instruments Operations.

Research and development expenses increased by $447,900 (128.9%) to $795,500 for the nine months ended March 31, 2020 compared to $347,600 for the nine months ended March 31, 2019, primarily due to the ramp up in product development activities by the Bioprocessing Systems Operations which included staffing, facilities, and materials.

The Company reflected a non-recurring charge of termination costs for the severance pay and related payroll costs, pertaining to the early termination in February 2020 of the Company's Vice President of Corporate Strategy and Vice President of Sales for the Company's wholly-owned subsidiary, Altamira Insturments, Inc. 

Total other income (expense), net was ($29,700) for the nine months ended March 31, 2020 compared to $2,300 for the nine months ended March 31, 2019 principally due to realized holding losses on investment securities in the current year period.

The Company reflected income tax benefit of $82,100 for the nine months ended March 31, 2020 compared to $165,800 income tax expense for the nine months ended March 31, 2019, primarily due to the loss during the current year period compared to income in the prior year period.

As a result of the foregoing, the Company recorded a net loss of ($367,200) for the nine months ended March 31, 2020 compared to net income of $354,100 for the nine months ended March 31, 2019.

Liquidity and Capital Resources. Cash and cash equivalents decreased by $863,100 to $739,400 as of March 31, 2020 from $1,602,500 as of June 30, 2019 primarily due to the loss during the period.  The Company's Laboratory Equipment Operations generated positive cash flow, however the Bioprocessing Systems Operations has required material amounts of cash for its operations including new staffing, sales and marketing and facilities.  To a lesser extent, the Catalyst Research Instruments's cash flows were also negatively impacted in the third quarter due to delays in delivering orders and related collections, principally due to the COVID-19 pandemic.

Net cash used in operating activities was $802,800 for the nine months ended March 31, 2020 compared to net cash provided by operating activities of $484,700 during the nine months ended March 31, 2019. The net cash used was primarily a result of the loss for the period.  The Company's Laboratory Equipment Operations provided cash, however the Bioprocessing Systems Operations and the Catalyst Research Operations used cash for its operations as described above.

Net cash used in investing activities was $67,300 for the nine months ended March 31, 2020 compared to $153,800 used during the nine months ended March 31, 2019 principally due to reduced capital purchases by the Benchtop Laboratory Equipment Operations during the current period. The Company provided $7,000 in financing activities in the nine months ended March 31, 2020 compared to $29,800 used in the nine months ended March 31, 2019 mainly due to a cash dividend payment in the prior year.

The Company's working capital decreased by $357,900 to $4,647,900 as of March 31, 2020 compared to $5,005,800, as of June 30, 2019 mainly due to the loss during the period.

On April 14, 2020 the Company received a loan, all of which is outstanding, under the Federal Government’s Paycheck Protection Program with its bank, First National Bank, amounting to $563,700 at an interest rate of 1% with a maturity date of April 17, 2022, a majority of which is expected to be forgiven under the program. The Company also has a demand line of credit through December 2020 with First National Bank of Pennsylvania which provides for borrowings of up to $300,000 for regular working capital needs, bearing interest at prime,  which is currently 3.25%.  Advances on the line, are secured by a pledge of the Company’s assets including inventory, accounts, chattel paper, equipment and general intangibles of the Company. As of March 31, 2020, no borrowings were outstanding under such line.

Management believes that the Company will be able to meet its cash flow needs during the 12 months ending March 31, 2021 from its available financial resources including the lines of credit, its cash and investment securities, and operations, unless there is a material reduction in its cash inflows, or a material increase in expenditures.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, based on an evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), the Chief Executive and Chief Financial Officer of the Company has concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act reports is recorded, processed, summarized and reported within the applicable time periods specified by the SEC's rules and forms. The Company also concluded that information required to be disclosed in such reports is accumulated and communicated to the Company's management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As a result of our adoption of the new leases standard (Topic 842), we implemented controls to ensure adequate review and assessment of contracts containing leases and calculations of assets and liabilities related to the Company's leases as well as required disclosures within the Company's financial statements to facilitate its adoption on July 1, 2019. There were no significant changes to our internal control over financial reporting due to the adoption of the new standard, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the period covered by this Quarterly Report or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

Exhibit Number	Description
31.0	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.0	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Reports on Form 8-K: None

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SIGNATURE

Pursuant to the requirements 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: May 15, 2020	SCIENTIFIC INDUSTRIES, INC. (Registrant) /s/ Helena R. Santos
	Helena R. Santos President, Chief Executive Officer, Treasurer Chief Financial and Principal Accounting Officer

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