10-K/A: Scientific Industries Files Amended 10-K to Address SEC Cybersecurity Comments

Scientific Industries files an amendment to its annual report to include cybersecurity disclosures, while also providing a detailed overview of its financial performance and business operations.

Summary

• Scientific Industries, Inc. filed an amendment to its annual report on Form 10-K to include cybersecurity disclosures as requested by the SEC.
• The amendment does not change any other part of the original report and should be read in conjunction with the original filing.
• The company is engaged in the design, manufacture, and marketing of benchtop laboratory equipment and bioprocessing systems.
• The company's benchtop laboratory equipment includes mixers, shakers, rotators, incubators, and scales, with the Vortex-Genie 2 Mixer being a significant product, accounting for 32% of total net revenues in 2023.
• The bioprocessing systems segment focuses on smart sensors and software analytics, including products like the Cell Growth Quantifier (CGQ) and Liquid Injection System (LIS).
• The company's sales are primarily to universities, pharmaceutical companies, and research labs, with 34% of sales coming from overseas customers.
• The company reported a net loss of $9,086,500 for the year ended December 31, 2023, compared to a net loss of $15,642,200 for the year ended December 31, 2022.
• The company's research and development expenses were $3,566,200 for the year ended December 31, 2023, and are expected to remain material in 2024.
• The company had a backlog of $563,800 in benchtop equipment orders as of December 31, 2023.
• The company raised $6,283,224 of equity financing in the fourth quarter of 2023 and an additional $716,776 in January 2024.
• The company's management believes that it will be able to meet its cash flow needs during the next 12 months from cash and investment securities on-hand, cash derived from its Benchtop Laboratory Equipment Operations, and availability of the Companys line of credit.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there is some revenue growth and successful capital raising, the significant net loss, declining gross profit, and ongoing risks suggest a cautious outlook. The company is taking steps to reduce operating expenses, but the overall financial health is still concerning.

Positives

• Net revenues increased by 2.1% to $11,111,500 for the year ended December 31, 2023.
• Sales of Torbal division products increased to $3,657,400 for the year ended December 31, 2023.
• The company raised $6,283,224 of equity financing in the fourth quarter of 2023 and an additional $716,776 in January 2024.
• The company is taking steps to reduce operating expenses and improve its financial position.

Negatives

• The company reported a net loss of $9,086,500 for the year ended December 31, 2023.
• The gross profit percentage decreased to 45.9% in 2023 from 47.2% in 2022.
• The company's cash and cash equivalents decreased by $1,131,000 to $796,100 as of December 31, 2023.
• The company has an accumulated deficit of $27,485,100 as of December 31, 2023.

Risks

• The company has limited financial resources and may need to raise additional funding.
• The company has a history of losses and will likely incur future losses.
• The company's common stock has a limited public market and is subject to volatility.
• The commercial success of the company's bioprocessing products depends on market acceptance.
• The company relies on key management personnel and may not be able to execute its business strategy effectively if they leave.
• The company is exposed to foreign exchange rate risk.
• The company is dependent on outside suppliers for components.
• The company has limited patent protection for some of its products.
• The company is subject to general economic, political and social factors.

Future Outlook

The company expects that research and development expenditures in the fiscal year ending December 31, 2024 will continue to be material reflecting continued product development efforts for the Bioprocessing Systems operations and, to a lesser extent, continued investment in new VIVID pill counting products.

Management Comments

• The company's management believes that it will be able to meet its cash flow needs during the next 12 months from cash and investment securities on-hand, cash derived from its Benchtop Laboratory Equipment Operations, and availability of the Companys line of credit.

Industry Context

The company operates in the competitive laboratory equipment and bioprocessing industries, facing competition from larger companies with greater resources. The company's bioprocessing segment is relatively new and subject to rapid innovation.

Comparison to Industry Standards

• The company's main competitors for its Benchtop Laboratory Equipment products include Henry Troemner, Inc., IKA-Werke GmbH & Co. KG, Benchmark Scientific, Inc., and Heidolph Instruments GmbH, all of which are larger and have greater resources.
• The company's main competitors for its Torbal brand products include Ohaus Corporation, A&D Company Ltd., Adam Equipment Co., Ltd., Avery Weigh-Tronix, and Capsa Healthcare, all of which are well-known brands.
• Direct competitors for the company's Bioprocessing Systems products are ABER Instruments and PreSens GmbH, while indirect competitors include Hamilton Bonaduz AG and optek-Danulat GmbH, as well as total solution providers like Sartorius AG or Eppendorf SE, all of which are significantly larger.
• The company's annual sales of Benchtop Laboratory Equipment products are significantly lower than the annual sales of many of its competitors in the industry.

Stakeholder Impact

• Shareholders may be concerned about the company's net loss and declining gross profit.
• Employees may be affected by potential reductions in headcount.
• Customers may be impacted by the company's ability to continue product development and maintain quality.
• Suppliers may be affected by the company's financial situation and potential changes in purchasing.

Next Steps

• The company will continue to evaluate additional cost measures, including reductions in operation headcounts.
• The company will continue product development efforts for the Bioprocessing Systems operations and invest in new VIVID pill counting products.

Key Dates

Keywords

cybersecurity, benchtop laboratory equipment, bioprocessing systems, financial results, research and development, equity financing, Vortex-Genie 2 Mixer, Torbal, net loss, operating expenses