10-Q

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 December 31, 2017

☐ 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

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 

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 February 2, 2018 is 1,494,112 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 Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
Item 4.	CONTROLS AND PROCEDURES	14
PART II - Other Information
Item 6.	EXHIBITS AND REPORTS ON FORM 8-K	14
SIGNATURE		15

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	December 31, 2017	June 30, 2017
Current assets:	(Unaudited)
Cash and cash equivalents	$700,700	$1,025,100
Investment securities	314,700	295,500
Trade accounts receivable, less allowance for doubtful accounts of $11,600 at December 31, 2017 and June 30, 2017	1,475,300	1,424,400
Inventories	2,392,600	1,961,200
Prepaid expenses and other current assets	146,600	80,300
Total current assets	5,029,900	4,786,500
Property and equipment, net	235,600	199,300
Intangible assets, net	458,300	579,000
Goodwill	705,300	705,300
Other assets	52,500	52,500
Deferred taxes	488,600	505,100
Total assets	$6,970,200	$6,827,700

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$379,400	$139,200
Accrued expenses, current portion	466,500	491,000
Bank line of credit	40,000	-
Customer advances	321,800	-
Contingent consideration, current portion	33,000	175,700
Notes payable, current portion	6,800	6,700
Total current liabilities	1,247,500	812,600
Accrued expenses, less current portion	60,000	60,000
Notes payable, less current portion	2,300	5,800
Contingent consideration payable, less current portion	121,300	121,300
Total liabilities	1,431,100	999,700
Shareholders’ equity:
Common stock, $.05 par value; authorized 7,000,000 shares; issued 1,513,914 shares outstanding at December 31, 2017 and June 30, 2017	75,700	75,700
Additional paid-in capital	2,536,400	2,515,900
Accumulated other comprehensive income (loss)	700	(3,500)
Retained earnings	2,978,700	3,292,300
	5,591,500	5,880,400
Less common stock held in treasury at cost, 19,802 shares	52,400	52,400
Total shareholders’ equity	5,539,100	5,828,000
Total liabilities and shareholders’ equity	$6,970,200	$6,827,700

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 December 31,	For the Three Month Period Ended December 31,	For the Six Month Period Ended December 31,	For the Six Month Period Ended December 31,
	2017	2016	2017	2016
Revenues	$1,892,400	$2,683,800	$3,173,300	$4,242,900
Cost of revenues	1,126,700	1,888,900	1,955,900	2,778,400
Gross profit	765,700	794,900	1,217,400	1,464,500
Operating expenses:
General and administrative	407,900	409,200	836,300	821,600
Selling	214,600	224,200	415,600	440,900
Research and development	132,900	105,000	262,000	220,400
Total operating expenses	755,400	738,400	1,513,900	1,482,900
Income (loss) from operations	10,300	56,500	(296,500)	(18,400)
Other income (expense):
Interest income	5,200	8,800	5,600	9,100
Other income, net	1,400	400	1,400	5,700
Interest expense	(500)	(900)	(600)	(1,100)
Total other income, net	6,100	8,300	6,400	13,700
Income (loss) before income tax expense (benefit)	16,400	64,800	(290,100)	(4,700)
Income tax expense (benefit):
Current	71,800	20,900	8,000	(15,400)
Deferred	25,600	(1,400)	15,500	14,100
Total income tax expense (benefit)	97,400	19,500	23,500	(1,300)
Net income (loss)	$(81,000)	$45,300	$(313,600)	$(3,400)
Basic earnings (loss) per common share	$(.05)	$.03	$(.21)	$.00
Diluted earnings (loss) per common share	$.(05)	$.03	$(.21)	$.00
Cash dividends declared per common share	$.00	$.03	$.00	$.03

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 December 31,	For the Three Month Period Ended December 31,	For the Six Month Period Ended December 31,	For the Six Month Period Ended December 31,
	2017	2016	2017	2016
Net income (loss)	$(81,000)	$45,300	$(313,600)	$(3,400)
Other comprehensive income (loss):
Unrealized holding gain (loss)
arising during period,
net of tax	1,600	(8,000)	4,200	(6,900)
Comprehensive Income (loss)	$(79,400)	$37,300	$(309,400)	$(10,300)

See notes to unaudited condensed consolidated financial statements.

3

SCIENTIFIC INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six  Month Period Ended December 31,	For the Six Month Period Ended December 31,
	2017	2016
Operating activities:
Net loss	$(313,600)	$(3,400)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on sale of investment	-	(2,600)
Depreciation and amortization	154,100	189,500
Deferred income taxes	16,500	14,100
Income tax benefit of stock options exercised	8,000	-
Stock-based compensation	12,400	1,000
Changes in operating assets and liabilities:
Trade accounts receivable	(50,900)	(436,100)
Inventories	(431,400)	287,100
Prepaid expenses and other current assets	(66,300)	(75,300)
Accounts payable	240,200	(42,200)
Customer advances	321,800	17,000
Accrued expenses	(24,500)	(399,400)
Total adjustments	179,900	(446,900)
Net cash used in operating activities	(133,700)	(450,300)
Investing activities:
Redemption of investment securities, available-for-sale	-	11,100
Purchase of investment securities, available for sale	(15,000)	(18,700)
Capital expenditures	(68,100)	(4,700)
Purchase of other intangible assets	(1,500)	(14,700)
Net cash used in investing activities	(84,600)	(27,000)
Financing activities:
Line of credit proceeds	40,000	250,000
Payments for contingent consideration	(142,700)	(117,400)
Principal payments on notes payable	(3,400)	(3,200)
Net cash provided by (used in) financing activities	(106,100)	129,400
Net decrease in cash and cash equivalents	(324,400)	(347,900)
Cash and cash equivalents, beginning of year	1,025,100	1,245,000
Cash and cash equivalents, end of period	$700,700	$897,100
Supplemental disclosures:
Cash paid during the period for:
Income taxes	$16,000	$186,000
Interest	600	1,100

See notes to unaudited condensed consolidated financial statements.

4

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, 2017. The results for the three months and six months ended December 31, 2017, are not necessarily an indication of the results for the full fiscal year ending June 30, 2018.

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying condensed 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 January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The update addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted only for certain portions of the ASU related to financial liabilities. The Company is currently evaluating the impact of the provisions of this new standard on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the effect of the new standard.

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09.  The Company has performed a review of the requirements of the new guidance and has identified which of its revenue streams will be within the scope of ASC 606. The Company has applied the five-step model of the new standard to a selection of contracts within each of its revenue streams and has compared the results to its current accounting practices. Based on this analysis, the Company does not currently expect a material impact on the Company’s consolidated financial statements. The Company is expecting to utilize the modified retrospective transition method of adoption. The Company is continuing to work through the remaining steps of the adoption plan to facilitate adoption effective July 1, 2018. As part of this, the Company is assessing changes that might be necessary to information technology systems, processes, and internal controls to capture new data and address changes in financial reporting. The Company will be revising its revenue recognition accounting policy and expanding revenue disclosures to reflect the requirements of ASC 606, which include disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgements and assets recognized from the costs to obtain or fulfill a contract.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectibility, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the effect of the standard.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments”. This update provides guidance on how to record eight specific cash flow issues. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and a retrospective transition method to each period should be presented. The Company is currently evaluating the effect of this update on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.

5

Adopted Accounting Pronoucements

In November 2015, the FASB issued ASU No. 2015-17, "Income Taxes: Balance Sheet Classification of Derffered Taxes" (ASU 2015-17") which was effective for fiscal years begining December 15, 2016 (fiscal 2018 for the Company). ASU 2015-17 required that deferred tax assets and liabilities be net and classified as noncurrent on the balance sheet rather than presenting deferred taxes into current and noncurrent amounts. The Company adopted ASU 2015-07 effective for the first fiscal quarter of the year ending June 30, 2018. The Company applied the new guidance on a respective basis, resulting in a reclassification of current deferred tax assets totaling $129,000 against long term deferred tax assets in the Company's Condensed Consolidated Balance Sheet as of June 30, 2017. The adoption of this ASU had no impact on the Company’s Condensed Consolidated Statement of Operations.

On December 22, 2017, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act, or SAB 118,” which addresses situations where the accounting under the FASB, Accounting Standards Codification No. 740, Income Taxes, or ASC 740 is incomplete for certain income tax effects of Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act, or the 2017 Tax Act, by the time an entity issues its financial statements for the fiscal period that includes the date the 2017 Tax Act was enacted.

Under ASC 740, entities are required to adjust current and deferred tax assets and liabilities for the effects of changes in tax laws or rates at their date of enactment. However, pursuant to SAB 118, if an entity does not have the necessary information available, prepared, or analyzed for certain income tax effects of the 2017 Tax Act at the time an entity’s financial statements are issued, an entity shall apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the enactment of the 2017 Tax Act. If the accounting for certain income tax effects of the 2017 Tax Act is incomplete, but an entity can determine a reasonable estimate for those effects, an entity can record provisional amounts during a measurement period, which ends on the earlier of when an entity has obtained, prepared, and analyzed the information necessary to complete the accounting requirements of ASC 740 and December 22, 2017.

The 2017 Tax Act includes significant changes to the U.S. income tax system. The 2017 Tax Act contains numerous provisions impacting the Company, the most significant of which reduces the Federal corporate statutory rate from 35% to 21%. The Company is a fiscal-year end taxpayer and is required to use a blended statutory federal tax rate, inclusive of the Federal rate change enacted on December 22, 2017 to compute its effective rate for the three and six months ended December 31, 2017. The various provisions under the 2017 Tax Act most relevant to the Company have been considered in the preparation of the financial statements as of December 31, 2017. However, as of December 31, 2017, the Company had not completed its accounting for the tax effects of the enactment of 2017 Tax act. The Company’s provision for income taxes for the three and six months ended December 31, 2017 is based on reasonable estimates of the effects of its implementation and existing deferred tax balances. The Company estimates it will record a one-time non-cash charge of approximately $30,000 for the fiscal year ended June 30, 2018 due to an estimated reduction in deferred tax assets as a result of the reduction in the Federal tax rate. We expect to complete our accounting during the one year measurement period from the enactment date.

2. 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”).

6

Segment information is reported as follows:

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended December 31, 2017:
Revenues	$1,686,200	$153,500	$52,700	$-	$1,892,400
Foreign Sales	815,300	2,600	-	-	817,900
Income (Loss) From     Operations	122,000	(103,400)	(8,300)	-	10,300
Assets	4,085,800	1,613,200	467,900	803,300	6,970,200
Long-Lived Asset     Expenditures	33,000	1,900	2,500	-	37,400
Depreciation and     Amortization	67,000	700	9,300	-	77,000

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended December 31, 2016:
Revenues	$1,466,800	$1,192,100	$24,900	$-	$2,683,800
Foreign Sales	751,800	10,300	-	-	762,100
Income (Loss) From     Operations	62,600	26,600	(32,700)	-	56,500
Assets	4,131,400	1,982,800	434,700	695,900	7,244,800
Long-Lived Asset     Expenditures	5,200	-	5,800	-	11,000
Depreciation and     Amortization	76,700	4,500	12,600	-	93,800

Approximately 31% and 55% of net benchtop laboratory equipment sales (48% and 30% of total revenues) for the three month periods ended December 31, 2017 and 2016, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories.

Approximately 12% and 21% of total benchtop laboratory equipment sales (19% and 11% of total revenues) were derived from the Torbal Scales Division for the three months ended December 31, 2017 and 2016, respectively.

For the three months ended December 31, 2017 and 2016, respectively, two customers accounted in the aggregate for approximately 10% and 17% of net sales of the Benchtop Laboratory Equipment Operations (15% and 9% of the Company’s total revenues). 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 one and three customers during the three months ended December 31, 2017 and 2016, accounted for approximately 74% and 99% of the Catalyst Research Instrument Operations’ revenues and 7% and 44% of the Company’s total revenues, respectively.

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	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Six Months Ended December 31, 2017:
Revenues	$2,885,600	$182,300	$105,400	$-	$3,173,300
Foreign Sales	1,317,600	9,000	-	-	1,326,600
Income (Loss) From     Operations	28,100	(287,500)	(37,100)	-	(296,500)
Assets	4,085,800	1,613,200	467,900	803,300	6,970,200
Long-Lived Asset     Expenditures	65,200	1,900	2,500	-	69,600
Depreciation and     Amortization	131,900	3,500	18,700	-	154,100

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Six Months Ended December 31, 2016:
Revenues	$2,923,600	$1,269,600	$49,700	$-	$4,242,900
Foreign Sales	1,313,000	15,100	-	-	1,328,100
Income (Loss) From     Operations	164,000	(115,000)	(67,400)	-	(18,400)
Assets	4,131,400	1,982,800	434,700	695,900	7,244,800
Long-Lived Asset     Expenditures	13,600	-	5,800	-	19,400
Depreciation and     Amortization	153,400	11,100	25,000	-	189,500

Approximately 36% and 52% of net benchtop laboratory equipment sales (46% and 36% of total revenues) for the six month periods ended December 31, 2017 and 2016, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories.

Approximately 16% and 23% of total benchtop laboratory equipment sales (21% and 16% of total revenues) were derived from the Torbal Scales Division for the six months ended December 31, 2017 and 2016, respectively. For the six months ended December 31, 2017 and 2016, respectively, two customers accounted in the aggregate for approximately 11% and 16% of net sales of the Benchtop Laboratory Equipment Operations (15% and 11% of the Company’s total revenues).

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 one and six customers during the six months ended December 31, 2017 and 2016, accounted for approximately 64% and 97% of the Catalyst Research Instrument Operations’ revenues and 4% and 29% of the Company’s total revenues, respectively.

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:

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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 December 31, 2017 and June 30, 2017 according to the valuation techniques the Company used to determine their fair values:

		Fair Value Measurements Using Inputs Considered as
	Fair Value at December 31, 2017	Level 1	Level 2	Level 3
Assets:
Cash and cash equivalents	$700,700	$700,700	$-	$-
Available for sale securities	314,700	314,700	-	-
Total	$1,015,400	$1,015,400	$-	$-
Liabilities:
Contingent consideration	$154,300	$-	$-	$154,300

		Fair Value Measurements Using Inputs Considered as
	Fair Value at June 30, 2017	Level 1	Level 2	Level 3
Assets:
Cash and cash equivalents	$1,025,100	$1,025,100	$-	$-
Available for sale securities	295,500	295,500	-	-
Total	$1,320,600	$1,320,600	$-	$-
Liabilities:
Contingent consideration	$297,000	$-	$-	$297,000

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The following table sets forth an analysis of changes during the six months ended December 31, 2017 and 2016 in Level 3 financial liabilities of the Company:

	2017	2016
Beginning balance	$297,000	$346,300
Payments	(142,700)	(117,400)
Ending balance	$154,300	$228,900

Investments in marketable securities classified as available-for-sale by security type at December 31, 2017 and June 30, 2017 consisted of the following:

	Cost	Fair Value	Unrealized Holding Gain (Loss)
At December 31, 2017:
Available for sale:
Equity securities	$46,300	$66,800	$20,500
Mutual funds	267,700	247,900	(19,800)
	$314,000	$314,700	$700

	Cost	Fair Value	Unrealized Holding Gain (Loss)
At June 30, 2017:
Available for sale:
Equity securities	$37,000	$50,800	$13,800
Mutual funds	262,000	244,700	(17,300)
	$299,000	$295,500	$(3,500)

4. 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 managements 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.

	December 31, 2017	June 30, 2017
Raw materials	$1,502,000	$1,373,800
Work-in-process	476,300	166,500
Finished goods	414,300	420,900
	$2,392,600	$1,961,200

5. 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 December 31, 2017 and June 30, 2017, all of which is expected to be deductible for tax purposes.

The components of other intangible assets are as follows:

	Useful Lives	Cost	Accumulated Amortization	Net
At December 31, 2017:
Technology, trademarks	5/10 yrs.	$662,800	$577,300	$85,500
Trade names	6 yrs.	140,000	89,400	50,600
Websites	5 yrs.	210,000	161,000	49,000
Customer relationships	9/10 yrs.	357,000	288,100	68,900
Sublicense agreements	10 yrs.	294,000	180,100	113,900
Non-compete agreements	5 yrs.	384,000	321,000	63,000
IPR&D	3 yrs.	110,000	110,000	-
Other intangible assets	5 yrs.	196,000	168,600	27,400
		$2,353,800	$1,895,500	$458,300

10

	Useful Lives	Cost	Accumulated Amortization	Net
At June 30, 2017:
Technology, trademarks	5/10 yrs.	$662,800	$541,100	$121,700
Trade names	6 yrs.	140,000	77,800	62,200
Websites	5 yrs.	210,000	140,000	70,000
Customer relationships	9/10 yrs.	357,000	281,400	75,600
Sublicense agreements	10 yrs.	294,000	165,400	128,600
Non-compete agreements	5 yrs.	384,000	294,000	90,000
IPR&D	3 yrs.	110,000	110,000	-
Other intangible assets	5 yrs.	194,500	163,600	30,900
		$2,352,300	$1,773,300	$579,000

Total amortization expense was $61,100 and $76,200 for the three months ended December 31, 2017 and 2016, respectively and $122,200 and $154,100 for the six months ended December 31, 2017 and 2016, respectively. As of December 31, 2017, estimated future amortization expense related to intangible assets is $124,700 for the remainder of the fiscal year ending June 30, 2018, $185,800 for fiscal 2019, $65,400 for fiscal 2020, $48,000 for fiscal 2021, $27,000 for fiscal 2022, and $7,400 thereafter.

6. Earnings (Loss) Per Common Share

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

	For the Three Month Period Ended December 31, 2017	For the Three Month Period Ended December 31, 2016	For the Six Month Period Ended December 31, 2017	For the Six Month Period Ended December 31, 2016
Net income (loss)	$(81,000)	$45,300	$(313,600)	$(3,400)
Weighted average common shares outstanding	1,494,112	1,489,112	1,494,112	1,489,112
Basic and diluted earnings (loss) per common share	$(.05)	$.03	$(.21)	$(.00)

Approximately 82,000 and 43,500 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 six month periods ended December 31, 2017 and 2016, respectively, because the effect would be anti-dilutive.

11

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 income before income tax expense of $16,400 for the three months ended December 31, 2017 compared to $64,800 for the three months ended December 31, 2016, primarily due to lack of sales of catalyst research instruments during the period and product development expenses for a new automated pill counter for the Laboratory Equipment Operations. The Company reflected a loss before income tax benefit of $290,100 for the six months ended December 31, 2017 compared to $4,700 for the six months ended December 31, 2016 mainly due to decreased catalyst research instrument sales and product development costs as previously discussed. The results reflected total non-cash amounts for depreciation and amortization of $77,000 and $154,100 for the three and six month periods ended December 31, 2017 compared to $93,800 and $189,500 for the corresponding three and six month periods in 2016.

Results of Operations.

The Three Months Ended December 31, 2017 Compared with The Three Months Ended December 31, 2016

Net revenues for the three months ended December 31, 2017 decreased $791,400 (29.5%) to $1,892,400 from $2,683,800 for the three months ended December 31, 2016, reflecting a decrease of $1,038,600 in net sales of catalyst research instruments due to decreased orders from Original Equipment Manufacturer OEM customers and lack of large orders, partially offset by increased sales of benchtop laboratory equipment of $219,400 and bioprocessing royalties of $27,800. The benchtop laboratory equipment sales reflected $359,900 of Torbal brand product sales for the three months ended December 31, 2017, compared to $303,500 in the three months ended December 31, 2016. As of December 31, 2017, the order backlog for catalyst research instruments was $752,500, all of which is expected to be shipped during fiscal year ending June 30, 2018, compared to $397,300 as of December 31, 2016.

The overall gross profit percentage for the three months ended December 31, 2017 was 40.5% compared to 29.6% for the three months ended December 31, 2016. The current year period gross margin for the Benchtop Laboratory Equipment Operations was higher due to the effect of the allocation of fixed costs on higher sales. The catalyst research instruments was negatively impacted by the lower sales.

General and administrative expenses for the three months ended December 31, 2017 amounted to $407,900 compared to $409,200 for the three months ended December 31, 2016.

Selling expenses for the three months ended December 31, 2017 decreased $9,600 (4.3%) to $214,600 from $224,200 for the three months ended December 31, 2016, due to lower sales related expenses for the Catalyst Research Instruments Operations.

Research and development expenses increased by $27,900 (26.6%) to $132,900 for the three months ended December 31, 2017 compared to $105,000 for the three months ended December 31, 2016, primarily due to increased new product development costs incurred by the Benchtop Laboratory Equipment Operations related to the Torbal Scales Division.

Total other income decreased by $2,200 (26.5%) from $8,300 for the three months ended December 31, 2016 to $6,100 for the three months ended December 31, 2017 due to lower interest on its investment securities.

The Company reflected an income tax expense of $97,400 for the three months ended December 31, 2017 compared to income tax expense of $19,500 for the three months ended December 31, 2016, primarily due to a revision  of the estimate of the Company's expected annual income.

As a result of the foregoing, the Company recorded a net loss of $81,000 for the three months ended December 31, 2017 compared to net income $45,300 for the three months ended December 31, 2016.

The Six Months Ended December 31, 2017 Compared with The Six Months Ended December 31, 2016

Net revenues for the six months ended December 31, 2017 decreased $1,069,600 (25.2%) to $3,173,300 from $4,242,900 for the six months ended December 31, 2016, reflecting a decrease of $1,087,300 in net sales of catalyst research instruments due to decreased orders from Original Equipment Manufacturer OEM customers and lack of large orders, and a decrease of $38,000 in sales of benchtop laboratory equipment derived from the Torbal Division, partially offset by a $55,700 increase in bioprocessing royalties. The benchtop laboratory equipment sales reflected $664,200 of Torbal brand product sales for the six months ended December 31, 2017, compared to $685,500 in the six months ended December 31, 2016.

The overall gross profit percentage for the six months ended December 31, 2017 was 38.4% compared to 34.5% for the six months ended December 31, 2016  as a result of the Benchtop Laboratory Equipment Operations (which is sold at higher margins) consisting of a higher percentage of total sales for the year.

General and administrative expenses for the six months ended December 31, 2017 increased slightly by $14,700 (1.8%) to $836,300 compared to $821,600 for the six months ended December 31, 2016.

Selling expenses for the six months ended December 31, 2017 decreased $25,300 (5.7%) to $415,600 from $440,900 for the six months ended December 31, 2016, due to lower sales related expenses for the Catalyst Research Instruments Operations.

12

Research and development expenses increased by $41,600 (18.9%) to $262,000 for the six months ended December 31, 2017 compared to $220,400 for the six months ended December 31, 2016, primarily due to increased new product development costs incurred by the Benchtop Laboratory Equipment Operations related to the Torbal Scales Division.

Total other income decreased by $7,300 (53.3%) from $13,700 for the six months ended December 31, 2016 to $6,400 for the six months ended December 31, 2017 due to lower interest on its investment securities and miscellaneous income items.

The Company reflected an income tax expense of $23,500 for the six months ended December 31, 2017 compared to an income tax benefit of $1,300 for the six months ended December 31, 2016, primarily due to the statutory federal tax rate change resulting from the recently enacted 2017 Tax Act, including a write off of deferred tax assets of $15,500.

As a result of the foregoing, the Company recorded a net loss of $313,600 for the six months ended December 31, 2017 compared to $3,400 for the six months ended December 31, 2016.

Liquidity and Capital Resources. Cash and cash equivalents decreased by $324,400 to $700,700 as of December 31, 2017 from $1,025,100 as of June 30, 2017 primarily due to decreased cash generated by the Catalyst Research Instrument Operations and increased inventories.

Net cash used in operating activities was $133,700 for the six months ended December 31, 2017 compared to $450,300 used during the six months ended December 31, 2016. The current period reflected higher accounts payable and customer advances, partially offset by increased prepaid expenses and higher inventories. Net cash used in investing activities was $84,600 for the six months ended December 31, 2017 compared to $27,000 used during the six months ended December 31, 2016 principally due to new capital equipment purchased during the current year period by the Benchtop Laboratory Equipment Operations. The Company used $106,100 in financing activities in the six months ended December 31, 2017 compared to cash provided of $129,400 in the six months ended December 31, 2016 mainly due to decreased proceeds under the line of credit in the current year.

The Company's working capital decreased by $191,500 to $3,782,400 as of December 31, 2017 compared to $3,973,900, as of June 30, 2017 due to increased capital expenditures and a net loss incurred during the current period.

The Company has a Demand Line of Credit through June 2018 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 4.5%. 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 December 31, 2017 $40,000 which was borrowed by our subsidiary, Altamira Instruments, was outstanding under such line. In addition, the Company utilized $245,400 of its borrowing availability under the line as collateral for a warranty standby letter of credit required during a two year warranty period as a condition of sale for a large order of catalyst research instruments shipped in a prior fiscal year and installed in the first quarter of fiscal 2018, leaving an available borrowing balance of $14,600 under the line of credit.

Management believes that the Company will be able to meet its cash flow needs during the 12 months ending June 30, 2018 from its available financial resources including its line of credit, its cash and investment securities, and operations.

13

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.

Changes in Internal Control Over Financial Reporting. There was no change in the Company's internal controls over financial reporting that occurred during the most recently completed fiscal quarter that materially affected or is reasonably likely to materially affect the Company's internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

Exhibit Number	Description
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	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

14

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: February 14, 2018	SCIENTIFIC INDUSTRIES, INC. (Registrant) /s/ Helena R. Santos
	Helena R. Santos President, Chief Executive Officer, Treasurer Chief Financial and Principal Accounting Officer

15

EX-31

Exhibit 31.0

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT

I, Helena R. Santos, certify that:

1.

I have reviewed this Annual Report on Form 10-K of Scientific Industries, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting (that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions);

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	Scientific Industries, Inc.
Date: September 29, 2017	By:	/s/ Helena R. Santos
		Helena R. Santos
		Chief Executive Officer and
		Chief Financial Officer

EX-32

Exhibit 32.0

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT

The undersigned as Chief Executive Officer and Chief Financial Officer of the Company, does hereby certifty that the foregoing Quarterly Report of Scientific Industries, Inc. (the “Company”), on Form 10-Q for the period ended December 31, 2017:

1.

Fully complies with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 193;

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: February 14, 2018	By:	/s/ Helena R. Santos
		Helena R. Santos
		Chief Executive Officer and
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2017	Feb. 02, 2018
Document And Entity Information
Entity Registrant Name	SCIENTIFIC INDUSTRIES INC
Entity Central Index Key	0000087802
Document Type	10-Q
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,494,112
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Dec. 31, 2017	Jun. 30, 2017
Current Assets:
Cash and cash equivalents	$ 700,700	$ 1,025,100
Investment securities	314,700	295,500
Trade accounts receivable, less allowance for doubtful accounts of $11,600 at December 31, 2017 and June 30, 2017	1,475,300	1,424,400
Inventories	2,392,600	1,961,200
Prepaid expenses and other current assets	146,600	80,300
Total current assets	5,029,900	4,786,500
Property and equipment at cost, net	235,600	199,300
Intangible assets, net	458,300	579,000
Goodwill	705,300	705,300
Other assets	52,500	52,500
Deferred taxes	488,600	505,100
Total assets	6,970,200	6,827,700
Current Liabilities:
Accounts payable	379,400	139,200
Accrued expenses, current portion	466,500	491,000
Bank line of credit	40,000	0
Customer advances	321,800	0
Contingent consideration, current portion	33,000	175,700
Notes payable, current portion	6,800	6,700
Total current liabilities	1,247,500	812,600
Accrued expenses, less current portion	60,000	60,000
Notes payable, less current portion	2,300	5,800
Contingent consideration payable, less current portion	121,300	121,300
Total liabilities	1,431,100	999,700
Shareholders' equity:
Common stock, $.05 par value; authorized 7,000,000 shares; issued 1,513,914 shares outstanding at December 31, 2017 and June 30, 2017	75,700	75,700
Additional paid-in capital	2,536,400	2,515,900
Accumulated other comprehensive income (loss)	700	(3,500)
Retained earnings	2,978,700	3,292,300
Total	5,591,500	5,880,400
Less common stock held in treasury at cost, 19,802 shares	52,400	52,400
Total shareholders' equity	5,539,100	5,828,000
Total liabilities and shareholders' equity	$ 6,970,200	$ 6,827,700

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Dec. 31, 2017	Jun. 30, 2017
Statement of Financial Position [Abstract]
Trade accounts receivable, allowance for doubtful accounts	$ 11,600	$ 11,600
Shareholders' equity:
Common stock,par value	$ 0.05	$ 0.05
Common stock, authorized shares	7,000,000	7,000,000
Common stock, issued shares	1,513,914	1,513,914
Common stock, outstanding shares	1,513,914	1,513,914
Stock held in treasury, shares	19,802	19,802

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Income Statement [Abstract]
Revenues	$ 1,892,400	$ 2,683,800	$ 3,173,300	$ 4,242,900
Cost of revenues	1,126,700	1,888,900	1,955,900	2,778,400
Gross profit	765,700	794,900	1,217,400	1,464,500
Operating Expenses:
General and administrative	407,900	409,200	836,300	821,600
Selling	214,600	224,200	415,600	440,900
Research & development	132,900	105,000	262,000	220,400
Total operating expenses	755,400	738,400	1,513,900	1,482,900
Income (loss) from operations	10,300	56,500	(296,500)	(18,400)
Other income (expense):
Interest income	5,200	8,800	5,600	9,100
Other income, net	1,400	400	1,400	5,700
Interest expense	(500)	(900)	(600)	(1,100)
Total other income, net	6,100	8,300	6,400	13,700
Income (loss) before income tax expense (benefit)	16,400	64,800	(290,100)	(4,700)
Income tax expense (benefit):
Current	71,800	20,900	8,000	(15,400)
Deferred	25,600	(1,400)	16,500	14,100
Total income tax expense (benefit)	97,400	19,500	23,500	(1,300)
Net income (loss)	$ (81,000)	$ 45,300	$ (313,600)	$ (3,400)
Basic earnings (loss) per common share	$ (.05)	$ .03	$ (.21)	$ .00
Diluted earnings (loss) per common share	(0.05)	.03	(.21)	.00
Cash dividends declared per common share	$ .00	$ .03	$ .00	$ .03

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Condensed Consolidated Statements Of Comprehensive Income Loss
Net loss	$ (81,000)	$ 45,300	$ (313,600)	$ (3,400)
Other comprehensive income:
Unrealized holding gain arising during period, net of tax	1,600	(8,000)	4,200	(6,900)
Comprehensive income loss	$ (79,400)	$ 37,300	$ (309,400)	$ (10,300)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Operating activities:
Net loss	$ (313,600)	$ (3,400)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on sale of investments	0	(2,600)
Depreciation and amortization	154,100	189,500
Deferred income taxes	16,500	14,100
Income tax benefit of stock options exercised	8,000	0
Stock-based compensation	12,400	1,000
Changes in operating assets and liabilities:
Trade accounts receivable	(50,900)	(436,100)
Inventories	(431,400)	287,100
Prepaid expenses and other current assets	(66,300)	(75,300)
Accounts payable	240,200	(42,200)
Customer advances	321,800	17,000
Accrued expenses	(24,500)	(399,400)
Total adjustments	179,900	(446,900)
Net cash used in operating activities	(133,700)	(450,300)
Investing activities:
Redemption of investment securities, available-for-sale	0	11,100
Purchase of investment securities, available-for-sale	(15,000)	(18,700)
Capital expenditures	(68,100)	(4,700)
Purchase of other intangible assets	(1,500)	(14,700)
Net cash used in investing activities	(84,600)	(27,000)
Financing activities:
Line of credit proceeds	40,000	250,000
Payments for contingent consideration	(142,700)	(117,400)
Principal payments on note payable	(3,400)	(3,200)
Net cash provided by (used in) financing activities	(106,100)	129,400
Net decrease in cash and cash equivalents	(324,400)	(347,900)
Cash and cash equivalents, beginning of year	1,025,100	1,245,000
Cash and cash equivalents, end of period	700,700	897,100
Cash paid during the period for:
Income Taxes	16,000	186,000
Interest	$ 600	$ 1,100

XML

1. Summary of Significant Accounting Policies

6 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying condensed 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 January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The update addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted only for certain portions of the ASU related to financial liabilities. The Company is currently evaluating the impact of the provisions of this new standard on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the effect of the new standard.

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09. The Company has performed a review of the requirements of the new guidance and has identified which of its revenue streams will be within the scope of ASC 606. The Company has applied the five-step model of the new standard to a selection of contracts within each of its revenue streams and has compared the results to its current accounting practices. Based on this analysis, the Company does not currently expect a material impact on the Company’s consolidated financial statements. The Company is expecting to utilize the modified retrospective transition method of adoption. The Company is continuing to work through the remaining steps of the adoption plan to facilitate adoption effective July 1, 2018. As part of this, the Company is assessing changes that might be necessary to information technology systems, processes, and internal controls to capture new data and address changes in financial reporting. The Company will be revising its revenue recognition accounting policy and expanding revenue disclosures to reflect the requirements of ASC 606, which include disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgements and assets recognized from the costs to obtain or fulfill a contract.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectibility, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the effect of the standard.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments”. This update provides guidance on how to record eight specific cash flow issues. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and a retrospective transition method to each period should be presented. The Company is currently evaluating the effect of this update on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures

Adopted Accounting Pronoucements

In November 2015, the FASB issued ASU No. 2015-17, "Income Taxes: Balance Sheet Classification of Derffered Taxes" (ASU 2015-17") which was effective for fiscal years begining December 15, 2016 (fiscal 2018 for the Company). ASU 2015-17 required that deferred tax assets and liabilities be net and classified as noncurrent on the balance sheet rather than presenting deferred taxes into current and noncurrent amounts. The Company adopted ASU 2015-07 effective for the first fiscal quarter of the year ending June 30, 2018. The Company applied the new guidance on a respective basis, resulting in a reclassification of current deferred tax assets totaling $129,000 against long term deferred tax assets in the Company's Condensed Consolidated Balance Sheet as of June 30, 2017. The adoption of this ASU had no impact on the Company’s Condensed Consolidated Statement of Operations.

On December 22, 2017, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act, or SAB 118,” which addresses situations where the accounting under the FASB, Accounting Standards Codification No. 740, Income Taxes, or ASC 740 is incomplete for certain income tax effects of Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act, or the 2017 Tax Act, by the time an entity issues its financial statements for the fiscal period that includes the date the 2017 Tax Act was enacted.

Under ASC 740, entities are required to adjust current and deferred tax assets and liabilities for the effects of changes in tax laws or rates at their date of enactment. However, pursuant to SAB 118, if an entity does not have the necessary information available, prepared, or analyzed for certain income tax effects of the 2017 Tax Act at the time an entity’s financial statements are issued, an entity shall apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the enactment of the 2017 Tax Act. If the accounting for certain income tax effects of the 2017 Tax Act is incomplete, but an entity can determine a reasonable estimate for those effects, an entity can record provisional amounts during a measurement period, which ends on the earlier of when an entity has obtained, prepared, and analyzed the information necessary to complete the accounting requirements of ASC 740 and December 22, 2017.

The 2017 Tax Act includes significant changes to the U.S. income tax system. The 2017 Tax Act contains numerous provisions impacting the Company, the most significant of which reduces the Federal corporate statutory rate from 35% to 21%. The Company is a fiscal-year end taxpayer and is required to use a blended statutory federal tax rate, inclusive of the Federal rate change enacted on December 22, 2017 to compute its effective rate for the three and six months ended December 31, 2017. The various provisions under the 2017 Tax Act most relevant to the Company have been considered in the preparation of the financial statements as of December 31, 2017. However, as of December 31, 2017, the Company had not completed its accounting for the tax effects of the enactment of 2017 Tax act. The Company’s provision for income taxes for the three and six months ended December 31, 2017 is based on reasonable estimates of the effects of its implementation and existing deferred tax balances. The Company estimates it will record a one-time non-cash charge of approximately $30,000 for the fiscal year ended June 30, 2018 due to an estimated reduction in deferred tax assets as a result of the reduction in the Federal tax rate. We expect to complete our accounting during the one year measurement period from the enactment date.

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2. Segment Information and Concentrations

6 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

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 December 31, 2017:
Revenues	$1,686,200	$153,500	$52,700	$-	$1,892,400
Foreign Sales	815,300	2,600	-	-	817,900
Income (Loss) From     Operations	122,000	(103,400)	(8,300)	-	10,300
Assets	4,085,800	1,613,200	467,900	803,300	6,970,200
Long-Lived Asset     Expenditures	33,000	1,900	2,500	-	37,400
Depreciation and     Amortization	67,000	700	9,300	-	77,000

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended December 31, 2016:
Revenues	$1,466,800	$1,192,100	$24,900	$-	$2,683,800
Foreign Sales	751,800	10,300	-	-	762,100
Income (Loss) From     Operations	62,600	26,600	(32,700)	-	56,500
Assets	4,131,400	1,982,800	434,700	695,900	7,244,800
Long-Lived Asset     Expenditures	5,200	-	5,800	-	11,000
Depreciation and     Amortization	76,700	4,500	12,600	-	93,800

Approximately 31% and 55% of net benchtop laboratory equipment sales (48% and 30% of total revenues) for the three month periods ended December 31, 2017 and 2016, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories.

Approximately 12% and 21% of total benchtop laboratory equipment sales (19% and 11% of total revenues) were derived from the Torbal Scales Division for the three months ended December 31, 2017 and 2016, respectively.

For the three months ended December 31, 2017 and 2016, respectively, two customers accounted in the aggregate for approximately 10% and 17% of net sales of the Benchtop Laboratory Equipment Operations (15% and 9% of the Company’s total revenues). 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 one and three customers during the three months ended December 31, 2017 and 2016, accounted for approximately 74% and 99% of the Catalyst Research Instrument Operations’ revenues and 7% and 44% of the Company’s total revenues, respectively.

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Six Months Ended December 31, 2017:
Revenues	$2,885,600	$182,300	$105,400	$-	$3,173,300
Foreign Sales	1,317,600	9,000	-	-	1,326,600
Income (Loss) From     Operations	28,100	(287,500)	(37,100)	-	(296,500)
Assets	4,085,800	1,613,200	467,900	803,300	6,970,200
Long-Lived Asset     Expenditures	65,200	1,900	2,500	-	69,600
Depreciation and     Amortization	131,900	3,500	18,700	-	154,100

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Six Months Ended December 31, 2016:
Revenues	$2,923,600	$1,269,600	$49,700	$-	$4,242,900
Foreign Sales	1,313,000	15,100	-	-	1,328,100
Income (Loss) From     Operations	164,000	(115,000)	(67,400)	-	(18,400)
Assets	4,131,400	1,982,800	434,700	695,900	7,244,800
Long-Lived Asset     Expenditures	13,600	-	5,800	-	19,400
Depreciation and     Amortization	153,400	11,100	25,000	-	189,500

Approximately 36% and 52% of net benchtop laboratory equipment sales (46% and 36% of total revenues) for the six month periods ended December 31, 2017 and 2016, respectively, were derived from the Company’s main product, the Vortex-Genie 2 mixer, excluding accessories.

Approximately 16% and 23% of total benchtop laboratory equipment sales (21% and 16% of total revenues) were derived from the Torbal Scales Division for the six months ended December 31, 2017 and 2016, respectively. For the six months ended December 31, 2017 and 2016, respectively, two customers accounted in the aggregate for approximately 11% and 16% of net sales of the Benchtop Laboratory Equipment Operations (15% and 11% of the Company’s total revenues).

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 one and six customers during the six months ended December 31, 2017 and 2016, accounted for approximately 64% and 97% of the Catalyst Research Instrument Operations’ revenues and 4% and 29% of the Company’s total revenues, respectively.

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3. Fair Value of Financial Instruments

6 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

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 l

evel 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 December 31, 2017 and June 30, 2017 according to the valuation techniques the Company used to determine their fair values:

			Fair Value Measurements Using Inputs Considered as
	Fair Value at December 31, 2017		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	700,700	$	700,700	$	-	$	-
Available for sale securities		314,700		314,700		-		-
Total	$	1,015,400	$	1,015,400	$	-	$	-
Liabilities:
Contingent consideration	$	154,300	$	-	$	-	$	154,300

			Fair Value Measurements Using Inputs Considered as
	Fair Value at June 30, 2017		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	1,025,100	$	1,025,100	$	-	$	-
Available for sale securities		295,500		295,500		-		-
Total	$	1,320,600	$	1,320,600	$	-	$	-
Liabilities:
Contingent consideration	$	297,000	$	-	$	-	$	297,000

The following table sets forth an analysis of changes during the six months ended December 31, 2017 and 2016 in Level 3 financial liabilities of the Company:

	2017			2016
Beginning balance	$	297,000		$	346,300
Payments		(142,700	)		(117,400	)
Ending balance	$	154,300		$	228,900

Investments in marketable securities classified as available-for-sale by security type at December 31, 2017 and June 30, 2017 consisted of the following:

	Cost		Fair Value		Unrealized Holding Gain (Loss)
At December 31, 2017:
Available for sale:
Equity securities	$	46,300	$	66,800	$	20,500
Mutual funds		267,700		247,900		(19,800	)
	$	314,000	$	314,700	$	700

	Cost		Fair Value		Unrealized Holding Gain (Loss)
At June 30, 2017:
Available for sale:
Equity securities	$	37,000	$	50,800	$	13,800
Mutual funds		262,000		244,700		(17,300	)
	$	299,000	$	295,500	$	(3,500	)

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4. Inventories

6 Months Ended

Dec. 31, 2017

Inventory Disclosure [Abstract]

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 managements 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.

	December 31, 2017		June 30, 2017
Raw materials	$	1,502,000	$	1,373,800
Work-in-process		476,300		166,500
Finished goods		414,300		420,900
	$	2,392,600	$	1,961,200

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5. Goodwill and Other Intangible Assets

6 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

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 December 31, 2017 and June 30, 2017, all of which is expected to be deductible for tax purposes.

The components of other intangible assets are as follows:

	Useful Lives	Cost		Accumulated Amortization		Net
At December 31, 2017:
Technology, trademarks	5/10 yrs.	$	662,800	$	577,300	$	85,500
Trade names	6 yrs.		140,000		89,400		50,600
Websites	5 yrs.		210,000		161,000		49,000
Customer relationships	9/10 yrs.		357,000		288,100		68,900
Sublicense agreements	10 yrs.		294,000		180,100		113,900
Non-compete agreements	5 yrs.		384,000		321,000		63,000
IPR&D	3 yrs.		110,000		110,000		-
Other intangible assets	5 yrs.		196,000		168,600		27,400
		$	2,353,800	$	1,895,500	$	458,300

	Useful Lives	Cost		Accumulated Amortization		Net
At June 30, 2017:
Technology, trademarks	5/10 yrs.	$	662,800	$	541,100	$	121,700
Trade names	6 yrs.		140,000		77,800		62,200
Websites	5 yrs.		210,000		140,000		70,000
Customer relationships	9/10 yrs.		357,000		281,400		75,600
Sublicense agreements	10 yrs.		294,000		165,400		128,600
Non-compete agreements	5 yrs.		384,000		294,000		90,000
IPR&D	3 yrs.		110,000		110,000		-
Other intangible assets	5 yrs.		194,500		163,600		30,900
		$	2,352,300	$	1,773,300	$	579,000

Total amortization expense was $61,100 and $76,200 for the three months ended December 31, 2017 and 2016, respectively and $122,200 and $154,100 for the six months ended December 31, 2017 and 2016, respectively. As of December 31, 2017, estimated future amortization expense related to intangible assets is $124,700 for the remainder of the fiscal year ending June 30, 2018, $185,800 for fiscal 2019, $65,400 for fiscal 2020, $48,000 for fiscal 2021, $27,000 for fiscal 2022, and $7,400 thereafter.

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6. Earnings (Loss) Per Common Share

6 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Earnings (Loss) Per Common Share

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

	For the Three Month Period Ended December 31, 2017	For the Three Month Period Ended December 31, 2016	For the Six Month Period Ended December 31, 2017	For the Six Month Period Ended December 31, 2016
Net income (loss)	$(81,000)	$45,300	$(313,600)	$(3,400)
Weighted average common shares outstanding	1,494,112	1,489,112	1,494,112	1,489,112
Basic and diluted earnings (loss) per common share	$(.05)	$.03	$(.21)	$(.00)

Approximately 82,000 and 43,500 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 six month periods ended December 31, 2017 and 2016, respectively, because the effect would be anti-dilutive.

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1. Summary of Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Principles of Consolidation

The accompanying condensed 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 January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The update addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted only for certain portions of the ASU related to financial liabilities. The Company is currently evaluating the impact of the provisions of this new standard on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the effect of the new standard.

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09. The Company has performed a review of the requirements of the new guidance and has identified which of its revenue streams will be within the scope of ASC 606. The Company has applied the five-step model of the new standard to a selection of contracts within each of its revenue streams and has compared the results to its current accounting practices. Based on this analysis, the Company does not currently expect a material impact on the Company’s consolidated financial statements. The Company is expecting to utilize the modified retrospective transition method of adoption. The Company is continuing to work through the remaining steps of the adoption plan to facilitate adoption effective July 1, 2018. As part of this, the Company is assessing changes that might be necessary to information technology systems, processes, and internal controls to capture new data and address changes in financial reporting. The Company will be revising its revenue recognition accounting policy and expanding revenue disclosures to reflect the requirements of ASC 606, which include disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgements and assets recognized from the costs to obtain or fulfill a contract.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectibility, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the effect of the standard.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments”. This update provides guidance on how to record eight specific cash flow issues. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and a retrospective transition method to each period should be presented. The Company is currently evaluating the effect of this update on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures

Adopted Accounting Pronouncements

In November 2015, the FASB issued ASU No. 2015-17, "Income Taxes: Balance Sheet Classification of Derffered Taxes" (ASU 2015-17") which was effective for fiscal years begining December 15, 2016 (fiscal 2018 for the Company). ASU 2015-17 required that deferred tax assets and liabilities be net and classified as noncurrent on the balance sheet rather than presenting deferred taxes into current and noncurrent amounts. The Company adopted ASU 2015-07 effective for the first fiscal quarter of the year ending June 30, 2018. The Company applied the new guidance on a respective basis, resulting in a reclassification of current deferred tax assets totaling $129,000 against long term deferred tax assets in the Company's Condensed Consolidated Balance Sheet as of June 30, 2017. The adoption of this ASU had no impact on the Company’s Condensed Consolidated Statement of Operations.

On December 22, 2017, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act, or SAB 118,” which addresses situations where the accounting under the FASB, Accounting Standards Codification No. 740, Income Taxes, or ASC 740 is incomplete for certain income tax effects of Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act, or the 2017 Tax Act, by the time an entity issues its financial statements for the fiscal period that includes the date the 2017 Tax Act was enacted.

Under ASC 740, entities are required to adjust current and deferred tax assets and liabilities for the effects of changes in tax laws or rates at their date of enactment. However, pursuant to SAB 118, if an entity does not have the necessary information available, prepared, or analyzed for certain income tax effects of the 2017 Tax Act at the time an entity’s financial statements are issued, an entity shall apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the enactment of the 2017 Tax Act. If the accounting for certain income tax effects of the 2017 Tax Act is incomplete, but an entity can determine a reasonable estimate for those effects, an entity can record provisional amounts during a measurement period, which ends on the earlier of when an entity has obtained, prepared, and analyzed the information necessary to complete the accounting requirements of ASC 740 and December 22, 2017.

The 2017 Tax Act includes significant changes to the U.S. income tax system. The 2017 Tax Act contains numerous provisions impacting the Company, the most significant of which reduces the Federal corporate statutory rate from 35% to 21%. The Company is a fiscal-year end taxpayer and is required to use a blended statutory federal tax rate, inclusive of the Federal rate change enacted on December 22, 2017 to compute its effective rate for the three and six months ended December 31, 2017. The various provisions under the 2017 Tax Act most relevant to the Company have been considered in the preparation of the financial statements as of December 31, 2017. However, as of December 31, 2017, the Company had not completed its accounting for the tax effects of the enactment of 2017 Tax act. The Company’s provision for income taxes for the three and six months ended December 31, 2017 is based on reasonable estimates of the effects of its implementation and existing deferred tax balances. The Company estimates it will record a one-time non-cash charge of approximately $30,000 for the fiscal year ended June 30, 2018 due to an estimated reduction in deferred tax assets as a result of the reduction in the Federal tax rate. We expect to complete our accounting during the one year measurement period from the enactment date.

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2. Segment Information and Concentrations (Tables)

6 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Segment Information

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended December 31, 2017:
Revenues	$1,686,200	$153,500	$52,700	$-	$1,892,400
Foreign Sales	815,300	2,600	-	-	817,900
Income (Loss) From     Operations	122,000	(103,400)	(8,300)	-	10,300
Assets	4,085,800	1,613,200	467,900	803,300	6,970,200
Long-Lived Asset     Expenditures	33,000	1,900	2,500	-	37,400
Depreciation and     Amortization	67,000	700	9,300	-	77,000

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Three Months Ended December 31, 2016:
Revenues	$1,466,800	$1,192,100	$24,900	$-	$2,683,800
Foreign Sales	751,800	10,300	-	-	762,100
Income (Loss) From     Operations	62,600	26,600	(32,700)	-	56,500
Assets	4,131,400	1,982,800	434,700	695,900	7,244,800
Long-Lived Asset     Expenditures	5,200	-	5,800	-	11,000
Depreciation and     Amortization	76,700	4,500	12,600	-	93,800

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Six Months Ended December 31, 2017:
Revenues	$2,885,600	$182,300	$105,400	$-	$3,173,300
Foreign Sales	1,317,600	9,000	-	-	1,326,600
Income (Loss) From     Operations	28,100	(287,500)	(37,100)	-	(296,500)
Assets	4,085,800	1,613,200	467,900	803,300	6,970,200
Long-Lived Asset     Expenditures	65,200	1,900	2,500	-	69,600
Depreciation and     Amortization	131,900	3,500	18,700	-	154,100

	Benchtop Laboratory Equipment	Catalyst Research Instruments	Bioprocessing Systems	Corporate And Other	Consolidated
Six Months Ended December 31, 2016:
Revenues	$2,923,600	$1,269,600	$49,700	$-	$4,242,900
Foreign Sales	1,313,000	15,100	-	-	1,328,100
Income (Loss) From     Operations	164,000	(115,000)	(67,400)	-	(18,400)
Assets	4,131,400	1,982,800	434,700	695,900	7,244,800
Long-Lived Asset     Expenditures	13,600	-	5,800	-	19,400
Depreciation and     Amortization	153,400	11,100	25,000	-	189,500

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3. Fair Value of Financial Instruments (Tables)

6 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Inputs

			Fair Value Measurements Using Inputs Considered as
	Fair Value at December 31, 2017		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	700,700	$	700,700	$	-	$	-
Available for sale securities		314,700		314,700		-		-
Total	$	1,015,400	$	1,015,400	$	-	$	-
Liabilities:
Contingent consideration	$	154,300	$	-	$	-	$	154,300

			Fair Value Measurements Using Inputs Considered as
	Fair Value at June 30, 2017		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	1,025,100	$	1,025,100	$	-	$	-
Available for sale securities		295,500		295,500		-		-
Total	$	1,320,600	$	1,320,600	$	-	$	-
Liabilities:
Contingent consideration	$	297,000	$	-	$	-	$	297,000

Changes to Level 3 Financial Liabilities

	2017			2016
Beginning balance	$	297,000		$	346,300
Payments		(142,700	)		(117,400	)
Ending balance	$	154,300		$	228,900

Investments in Marketable Securitites

	Cost		Fair Value		Unrealized Holding Gain (Loss)
At December 31, 2017:
Available for sale:
Equity securities	$	46,300	$	66,800	$	20,500
Mutual funds		267,700		247,900		(19,800	)
	$	314,000	$	314,700	$	700

	Cost		Fair Value		Unrealized Holding Gain (Loss)
At June 30, 2017:
Available for sale:
Equity securities	$	37,000	$	50,800	$	13,800
Mutual funds		262,000		244,700		(17,300	)
	$	299,000	$	295,500	$	(3,500	)

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4. Inventories (Tables)

6 Months Ended

Dec. 31, 2017

Inventory Disclosure [Abstract]

Inventories

	December 31, 2017		June 30, 2017
Raw materials	$	1,502,000	$	1,373,800
Work-in-process		476,300		166,500
Finished goods		414,300		420,900
	$	2,392,600	$	1,961,200

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5. Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

	Useful Lives	Cost		Accumulated Amortization		Net
At December 31, 2017:
Technology, trademarks	5/10 yrs.	$	662,800	$	577,300	$	85,500
Trade names	6 yrs.		140,000		89,400		50,600
Websites	5 yrs.		210,000		161,000		49,000
Customer relationships	9/10 yrs.		357,000		288,100		68,900
Sublicense agreements	10 yrs.		294,000		180,100		113,900
Non-compete agreements	5 yrs.		384,000		321,000		63,000
IPR&D	3 yrs.		110,000		110,000		-
Other intangible assets	5 yrs.		196,000		168,600		27,400
		$	2,353,800	$	1,895,500	$	458,300

	Useful Lives	Cost		Accumulated Amortization		Net
At June 30, 2017:
Technology, trademarks	5/10 yrs.	$	662,800	$	541,100	$	121,700
Trade names	6 yrs.		140,000		77,800		62,200
Websites	5 yrs.		210,000		140,000		70,000
Customer relationships	9/10 yrs.		357,000		281,400		75,600
Sublicense agreements	10 yrs.		294,000		165,400		128,600
Non-compete agreements	5 yrs.		384,000		294,000		90,000
IPR&D	3 yrs.		110,000		110,000		-
Other intangible assets	5 yrs.		194,500		163,600		30,900
		$	2,352,300	$	1,773,300	$	579,000

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6. Earnings (Loss) per common share (Tables)

6 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Earnings (loss) per common share

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

	For the Three Month Period Ended December 31, 2017	For the Three Month Period Ended December 31, 2016	For the Six Month Period Ended December 31, 2017	For the Six Month Period Ended December 31, 2016
Net income (loss)	$(81,000)	$45,300	$(313,600)	$(3,400)
Weighted average common shares outstanding	1,494,112	1,489,112	1,494,112	1,489,112
Basic and diluted earnings (loss) per common share	$(.05)	$.03	$(.21)	$(.00)

Approximately 82,000 and 43,500 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 six month periods ended December 31, 2017 and 2016, respectively, because the effect would be anti-dilutive.

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2. Segment Information and Concentrations (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Depreciation and Amortization			$ 154,100	$ 189,500
Benchtop Laboratory Equipment [Member]
Revenues	$ 1,686,200	$ 1,466,800	2,885,600	2,923,600
Foreign Sales	815,300	751,800	1,317,600	1,313,000
Income (Loss) from Operations	122,000	62,600	28,100	164,000
Assets	4,085,800	4,131,400	4,085,800	4,131,400
Long-lived Asset Expenditures	33,000	5,200	65,200	13,600
Depreciation and Amortization	67,000	76,700	131,900	153,400
Catalyst Research Instruments [Member]
Revenues	153,500	1,192,100	182,300	1,269,600
Foreign Sales	2,600	10,300	9,000	15,100
Income (Loss) from Operations	(103,400)	26,600	(287,500)	(115,000)
Assets	1,613,200	1,982,800	1,613,200	1,982,800
Long-lived Asset Expenditures	1,900	0	1,900	0
Depreciation and Amortization	700	4,500	3,500	11,100
Bioprocessing Systems [Member]
Revenues	52,700	24,900	105,400	49,700
Foreign Sales	0	0	0	0
Income (Loss) from Operations	(8,300)	(32,700)	(37,100)	(67,400)
Assets	467,900	434,700	467,900	434,700
Long-lived Asset Expenditures	2,500	5,800	2,500	5,800
Depreciation and Amortization	9,300	12,600	18,700	25,000
Corporate and Other [Member]
Revenues	0	0	0	0
Foreign Sales	0	0	0	0
Income (Loss) from Operations	0	0	0	0
Assets	803,300	695,900	803,300	695,900
Long-lived Asset Expenditures	0	0	0	0
Depreciation and Amortization	0	0	0	0
Consolidated [Member]
Revenues	1,892,400	2,683,800	3,173,300	4,242,900
Foreign Sales	817,900	762,100	1,326,600	1,328,100
Income (Loss) from Operations	10,300	56,500	(296,500)	(18,400)
Assets	6,970,200	7,244,800	6,970,200	7,244,800
Long-lived Asset Expenditures	37,400	11,000	69,600	19,400
Depreciation and Amortization	$ 77,000	$ 93,800	$ 154,100	$ 189,500

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2. Segment Information and Concentrations (Details Narrative)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Benchtop Laboratory Equipment [Member]
Net sales	31.00%	55.00%	36.00%	52.00%
Total revenues	48.00%	30.00%	46.00%	36.00%
Benchtop Laboratory Equipment [Member] | TwoCustomers [Member]
Net sales			11.00%	16.00%
Total revenues			15.00%	11.00%
Benchtop Laboratory Equipment [Member] | One to Three Customers [Member]
Net sales	10.00%	17.00%
Total revenues	15.00%	9.00%
Benchtop Laboratory Equipment [Member] | One to Six Customers [Member]
Net sales			11.00%	16.00%
Total revenues			15.00%	11.00%
Benchtop Laboratory Equipment [Member] | Torbal Brand Products
Net sales	12.00%	21.00%	16.00%	23.00%
Total revenues	19.00%	11.00%	21.00%	16.00%
Catalyst Research Instruments [Member]
Net sales	74.00%	99.00%	64.00%	97.00%
Total revenues	7.00%	44.00%	4.00%	29.00%

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3. Fair Value of Financial Instruments (Details) - USD ($)	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016
Assets:
Cash and cash equivalents	$ 700,700	$ 1,025,100	$ 897,100	$ 1,245,000
Available for sale securities	314,700	295,500
Total	1,015,400	1,320,600
Liabilities:
Contingent consideration	154,300	297,000
Level 1
Assets:
Cash and cash equivalents	700,700	1,025,100
Available for sale securities	314,700	295,500
Total	1,015,400	1,320,600
Liabilities:
Contingent consideration	0	0
Level 2
Assets:
Cash and cash equivalents	0	0
Available for sale securities	0	0
Total		0
Liabilities:
Contingent consideration	0	0
Level 3
Assets:
Cash and cash equivalents	0	0
Available for sale securities	0	0
Total		0
Liabilities:
Contingent consideration	$ 154,300	$ 297,000

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3. Fair Value of Financial Instruments (Details 1) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Fair Value Of Financial Instruments Details 1
Beginning balance	$ 297,000	$ 346,300
Payments	(142,700)	(117,400)
Ending balance	$ 154,300	$ 228,900

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3. Fair Value of Financial Instruments (Details 2) - USD ($)	Dec. 31, 2017	Jun. 30, 2017
Cost	$ 314,000	$ 299,000
Fair Value	314,700	295,500
Unrealized Holding Gain (Loss)	700	(3,500)
Equity Securities
Cost	46,300	37,000
Fair Value	66,800	50,800
Unrealized Holding Gain (Loss)	20,500	13,800
Mutual Funds
Cost	267,700	262,000
Fair Value	247,900	244,700
Unrealized Holding Gain (Loss)	$ (19,800)	$ (17,300)

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4. Inventories (Details) - USD ($)	Dec. 31, 2017	Jun. 30, 2017
Inventory Disclosure [Abstract]
Raw Materials	$ 1,502,000	$ 1,373,800
Work in process	476,300	166,500
Finished Goods	414,300	420,900
Inventory	$ 2,392,600	$ 1,961,200

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5. Goodwill and Other Intangible Assets (Details) - USD ($)	6 Months Ended	12 Months Ended
	Dec. 31, 2017	Jun. 30, 2017
Cost	$ 2,353,800	$ 2,352,300
Accumulated Amortization	1,895,500	1,773,300
Net	$ 458,300	$ 579,000
Technology, trademarks [Member]
Useful Lives Minimum	5 years	5 years
Useful Lives Maximum	10 years	10 years
Cost	$ 662,800	$ 662,800
Accumulated Amortization	577,300	541,100
Net	$ 85,500	$ 121,700
Trade names [Member]
Useful Lives	6 years	6 years
Cost	$ 140,000	$ 140,000
Accumulated Amortization	89,400	77,800
Net	$ 50,600	$ 62,200
Websites [Member]
Useful Lives	5 years	5 years
Cost	$ 210,000	$ 210,000
Accumulated Amortization	161,000	140,000
Net	$ 49,000	$ 70,000
Customer relationships [Member]
Useful Lives Minimum	9 years	9 years
Useful Lives Maximum	10 years	10 years
Cost	$ 357,000	$ 357,000
Accumulated Amortization	288,100	281,400
Net	$ 68,900	$ 75,600
Sublicense agreements [Member]
Useful Lives	10 years	10 years
Cost	$ 294,000	$ 294,000
Accumulated Amortization	180,100	165,400
Net	$ 113,900	$ 128,600
Non-compete agreements [Member]
Useful Lives	5 years	5 years
Cost	$ 384,000	$ 384,000
Accumulated Amortization	321,000	294,000
Net	$ 63,000	$ 90,000
Intellectual property, research & development (IPR&D) [Member]
Useful Lives	3 years	3 years
Cost	$ 110,000	$ 110,000
Accumulated Amortization	110,000	110,000
Net	$ 0	$ 0
Other intangible assets [Member]
Useful Lives	5 years	5 years
Cost	$ 196,000	$ 194,500
Accumulated Amortization	168,600	163,600
Net	$ 27,400	$ 30,900

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5. Goodwill and Other Intangible Assets (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Estimated future amortization expense 2018	$ 124,700		$ 124,700
Estimated future amortization expense 2019	185,800		185,800
Estimated future amortization expense 2020	65,400		65,400
Estimated future amortization expense 2021	48,000		48,000
Estimated future amortization expense 2022	27,000		27,000
Estimated future amortization expense thereafter	7,400		7,400
Total amortization expense	61,100	$ 76,200	122,200	$ 154,100
Goodwill	$ 705,300		$ 705,300		$ 705,300

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6. Earnings (Loss) Per Common Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Earnings Per Share [Abstract]
Net loss	$ (81,000)	$ 45,300	$ (313,600)	$ (3,400)
Weighted average common shares outstanding	1,494,112	1,489,112	1,494,112	1,489,112
Basic and diluted earnings (loss) per common share	$ (0.05)	$ 0.03	$ (0.21)	$ 0.00

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6. Earnings (Loss) Per Common Share (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Earnings Per Share [Abstract]
Common stock issuable upon the exercise of outstanding stock options	82,000	82,000	43,500	43,500