Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements.
The following discussion and analysis should be read in conjunction with our consolidated financial statements for the years ended December 31, 2025 and 2024, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). 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.
Overview .
Scientific Industries, Inc., a Delaware corporation (“SI” and along with its subsidiaries, the “Company”, “we”, “our”), 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., a Delaware corporation (“SBHI”), the 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, a German corporation (“Aquila”). 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.
Results of Operations .
The Company’s results reflect the results of the Benchtop Laboratory Equipment operations and the Bioprocessing Systems operations. As of August 7, 2025 the Genie Division of the Benchtop Laboratory Equipment Operations became discontinued due to the sale of the GENIE product line to Troemner LLC, however the Company continued to produce and market its Torbal® weighing and measurement products.
The Company realized a loss from continuing operations of $1,780,300 for the year ended December 31, 2025 compared to loss from operations of $8,023,600 for the year ended December 31, 2024. The decrease in the loss from continuing operations for the year ended December 31, 2025 compared to year ended December 31, 2024 is primarily due to the sale of the Genie® product line which resulted in a gain of $5,263,400, and reduced expenses.
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Year Ended December 31, 2025 compared to Year Ended December 31, 2024
Net revenues for the year ended December 31, 2025 increased $256,700 (5.4%) to $5,053,800 from $4,797,100 for year ended December 31, 2024, reflecting an increase of approximately $645,100 in net revenues from the Benchtop Laboratory Equipment Operations. Such increase resulted primarily from increased sales of the Torbal® division products, offset by decrease in sales from the Bioprocessing Systems products which sales are derived principally from the new DOTS MPS product introduced during the year ended December 31, 2025.
The gross profit percentage for the year ended December 31, 2025 decreased to 25.8% from 41.8% for the year ended December 31, 2024, due primarily to inventory write-offs within the Bioprocessing segment of slow moving and obsolete items. Without the effect of write-offs, the gross profit percentage would have been 42.6%.
General and administrative expenses for the year ended December 31, 2025 decreased by $850,600 (20.6%) to $3,268,800 compared to $4,119,400 for the year ended December 31, 2024 due to decreased expenses of the Bioprocessing Systems Operations and corporate expenses in conjunction with cost savings initiatives.
Selling expenses for the year ended December 31, 2025 decreased by $60,800 (1.9%) to $3,114,900 from $3,205,700 for the year ended December 31, 2024, primarily due to the decreased expenses of the Bioprocessing Systems Operations in conjunction with cost savings initiatives.
Research and development expenses for the year ended December 31, 2025 decreased by $410,200 (14.2%) to $2,487,700 from $2,897,900 for the year ended December 31, 2024, due to cost reductions by the Bioprocessing Systems Operations in conjunction with cost savings initiatives.
Total other income, net for the years ended December 31, 2025 and 2024 was $6,114,200 and $192,800, respectively. The increase was due primarily to the sale of Genie product line which resulted in a gain on sale of $5,263,400, and payroll tax related reimbursements in the Bioprocessing Systems Operations segment.
The Company reflected income tax expense for continuing operations of $4,600 and $0 for the years ended December 31, 2025 and 2024, respectively. The Company maintains a full valuation allowance of $12,928,000 against the consolidated net deferred tax asset as the Company determined the net deferred tax assets which includes net operating loss carry-forwards and other tax credits, are more likely not to be realized in the future. In the event in the future the Company changes the determination as to the amount of deferred tax assets that can be realized, the Company will adjust the valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
As a result of the foregoing, the Company recorded a loss from continuing operations of $1,780,300 for the years ended December 31, 2025 compared to a loss from continuing operations of $8,023,600 for the year ended December 31, 2024.
The Company reflected income from discontinued operations related to the sale of the Genie division of the Benchtop Laboratory Equipment Operations of $559,900 and $1,578,200 for the years ended December 31, 2025 and 2024, respectively.
As a result of the above, the Company recorded a net loss of $1,220,400 for the year ended December 31, 2025 compared to a net loss of $6,445,400 for the year ended December 31, 2024.
Liquidity and Capital Resources.
Cash and cash equivalents increased by $367,100 to $955,000 as of December 31, 2025 from $587,900 as of December 31, 2024.
Net cash used in operating activities was $8,149,600 for the year ended December 31, 2025 and $3,046,100 for the year ended December 31, 2024. This reflected the sale of the Genie division.
Net cash provided by investing activities was $3,831,000 for the year ended December 31, 2025 compared to $2,866,000 for the year ended December 31, 2024, with the increase reflecting the proceeds from the sale of the Genie division of the Benchtop Laboratory Equipment Operations.
Net cash provided by financing activities was $1,952,200 for the year ended December 31, 2025 compared to $645,700 for the year ended December 31, 2024. The increase is primarily due to the issuance of common stock and exercise of certain warrants in the current year.
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Historically at the end of each reporting period, the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the Consolidated Financial Statements were issued. Since the fiscal year ended June 30, 2020 the Company has recorded recuring losses from operations and continued cash outflow from operating activities as a result of its strategic focus on the Bioprocessing Systems Operations, which is still in its start-up stage.
Historically the Company has relied on equity financings. For the year ended December 31, 2025, in addition to equity financings, the Company generated positive cash flows as a result of the sale of the Genie® Product line which occurred in August 2025. The Company reflected an accumulated deficit of $35,150,900 as of December 31, 2025 and continues to generate negative cash flows from its operations and expects to continue to generate negative cash flows from operations in the foreseeable future, however the Company expects that with the cash generated from the recent division sale plus other incoming cash related to the various post sale agreements is sufficient to fund operations of the Company for at least one year from the date of issuance of the consolidated financial statements for the year ended December 31, 2025.
In order to continue as a going concern, the Company will need to decrease expenses or materially increase revenues, and/or secure additional external capital resources. Based on management’s current operating plan, the Company believes its cash on hand, including its investments, are sufficient to fund the Company's operations for a period of at least one year subsequent to the issuance of the accompanying consolidated financial statements. However, there is no assurance that management's current operating plan will be successful.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 2 – Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Management believes that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our board of directors.
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Fair Value Estimates
Goodwill and Finite Lived Intangible Assets and Long-Lived Assets, Net
Goodwill – Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill and long-lived intangible assets are tested for impairment at least annually in accordance with the provisions of Accounting Standards Codification (“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.
As of December 31, 2025, the Company had two reporting units, the Benchtop Laboratory Equipment Operations and the Bioprocessing Systems Operations. Goodwill is tested for impairment by reporting unit on an annual basis as of December 31, the last day of its fiscal year, and in the interim if events and circumstances indicate that goodwill may be impaired. The events and circumstances that are considered in the Company’s goodwill impairment testing include business climate and market conditions, legal factors, operating performance indicators and competition. Impairment of goodwill is first assessed using a qualitative approach. If the qualitative assessment suggests that impairment is more likely than not, a quantitative analysis is performed. The quantitative analysis involves a comparison of the fair value of the reporting unit with its carrying amount. The fair value is determined using the income approach, which utilizes the present value of expected future cash flows for each reporting unit based on estimated cash flows, the timing of these cash flows, and a discount rate based on a weighted average cost of capital. The assumptions used to estimate future cash flows and the development of forecasts used in the fair value determination were based on assumptions made using the best information available at the time, subject to inherent risk and judgement. If the carrying amount of a reporting unit exceeds its fair value, an is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is could change and result in future goodwill charges that will have a material effect on our consolidated financial position or results of operations.
During the year ended December 31, 2025, the Company performed the annual goodwill impairment analysis. The Company elected to perform the qualitative analysis for the Benchtop Laboratory Equipment Operations reporting unit. These qualitative analyses evaluated factors, including, but not limited to, economic, market and industry conditions, cost factors and the overall financial performance of the reporting unit. In completing these assessments, the Company noted no changes in events or circumstances that indicated that it was more likely than not that the fair value of the reporting unit was less than its carrying amount. As of December 31, 2025 and 2024 there was $115,300 of goodwill pertaining to the Benchtop Laboratory Operations and $0 of goodwill on the Bioprocessing System reporting unit.
Intangible assets – Intangible assets consist primarily of acquired technology, customer relationships, non-compete agreements, patents, licenses, websites, intellectual property in-process research and development (“IPR&D”), trademarks and trade names. All intangible assets are amortized on a straight-line basis over the estimated useful lives of the respective assets, generally 3 to 10 years. The Company continually evaluates the remaining estimated useful lives of intangible assets that are being amortized to determine whether events or circumstances warrant a revision to the remaining period of amortization. The Company reviews the recoverability of our finite-lived intangible assets and long-lived assets, when events or conditions occur that indicate a possible impairment exists. Determining whether impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. The assessment for recoverability is based primarily on our ability to recover the carrying value of its long-lived and finite-lived intangible assets from expected future undiscounted net cash flows. If the total of expected future undiscounted net cash flows is less than the total carrying value of the assets the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an should be recognized. An will be recognized if an asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows. There was an of $291,000 of intangible assets within the Bioprocessing segment for the year ended December 31, 2025 while the year ended December 31, 2024 had $0 .
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Income tax
The Company and its subsidiaries file a consolidated U.S. federal income tax return, and a tax return in Germany for Aquila. 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.
In accordance with ASC 740 “Accounting for Income Taxes” (“ASC 740”), the Company evaluated the deferred tax assets to determine if valuation allowances are required or should be adjusted. ASC 740 requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard of whether the deferred tax assets will be realized. As of and for the years ended December 31, 2025 and 2024, the Company maintained a full valuation allowance of $12,928,000 and $9,839,400, respectively, against the consolidated net deferred tax assets as the Company determined the net deferred tax assets which includes net operating loss carry-forwards and other tax credits, are more likely not to be realized and therefore the Company recorded a full valuation allowance. If in the future the Company changes the determination as to the amount of deferred tax assets that can be realized, the Company will adjust the valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
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 December 31, 2025 and 2024, respectively, the Company did not have any unrecognized tax benefits related to various federal and state income tax matters.
The Company recognizes 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 fiscal years ended June 30, 2022 and after. The Company is currently open to audit under the statute of limitations by German tax authorities for the years ended December 31, 2020 and after. The Company does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
Inventories
Current and noncurrent inventories recorded other than those of Aquila, 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. Inventories of Aquila are valued at the lower of cost (determined on a average cost method) or net realizable value and have been reduced by an allowance for excess and obsolete inventories. The Company’s inventory allowance is based on management’s estimates and reviews of inventories on hand compared to estimated future usage and sales.
