Scientific Industries Inc

Good morning, and welcome to the Scientific Industries Fiscal Year 2022 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded today. I would now like to turn the conference over to the Managing Partner, Joe Dorme. Please go ahead.

Thanks, Joe. Good morning and thanks for joining us today to review the financial results of Scientific Industries, Inc. for the fiscal year 2022 ended June 30th, 2022. With us today on the call are John Moore, Chairman, and Helena Santos, Chief Executive Officer. After the conclusion of today's prepared remarks, we'll open the call for questions. Before we begin with prepared remarks, I would like to remind everyone certain statements made by the management team of Scientific Industries during this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except for the statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed under risk factors and documents filed by the company with the Security and Exchange Commission, including the end report on Form 10-K for the fiscal year ended June 30, 2022. Forward-looking statements speak only as of the date the statements were made. The company can give no assurance that such forward-looking statements will prove to be correct. Scientific Industries does not undertake and specifically disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Now I'd like to turn the call over to Helena Santos, CEO of Scientific Industries. Helena?

Thank you, Joe. Welcome to the Scientific Industries 2022 Fiscal Year-End Earnings Call. We are happy to report strong revenue growth from both our business units. We were also able to make important investments in our fastest growing segments, which are Torbell and our bioprocessing. The unifying theme of our growth businesses is that we automate previously manual workflows for highly skilled life sciences workers and pharmacy workers. We call the change and the categories we create digitally simplified bioprocessing, and pharmacy. Our products make these highly skilled workers more productive and help improve their job satisfaction, thereby reducing staff turnover and improving our customers' profitability. Now, the Benchtop Lab Equipment Business Unit saw a $937,000 increase in revenue, and that's about 11%. This increase in revenue composed of a $586,000 increase in Gini product sales and $351,000 increase in Torbell division revenues. And this was due primarily to the sales of our new Vivid automated pill counter. Margin stayed strong at approximately 47% despite the inflammation and supply chain pressures. The newest and fastest-growing part of the benchtop lab equipment business is the automated pill counters from the Torbell division. We acquired Torbell in 2014 for a combination of cash, stock, and earn-out that totaled $1.5 million. We were able to earn back our purchase price in the first three years. Over the past six years, we have been investing the growing earnings from this division in Vivid. a new family of automated pill counter products. Vivid One was launched two years ago, and we have sold over 600 units. Its software is our first cloud-based subscription product. We are currently upgrading the installed base with a new software release of Vivid Plus, that is what we refer to it as, which has key features that closes the performance gap with competitive products that sell for two times our price. We have integrated new key features into our Vivid Pill Counting solution that will streamline workflows and offer a cloud-based solution for pharmacies, and that will generate a meaningful recurring revenue stream for scientific industries in years to come. This Vivid Plus subscription is a revolutionary cloud-based feature that takes advantage of the company's prior experience in cloud-based data collection. This service, which is free for the first year, incorporates customized reporting with unlimited transaction logs and data backup, transaction analytics, allowing a user to do searches and view the statistics. It has the ability to export data, access from any computer or mobile device, for easy access from anywhere, automatic reporting via email, including miscount alerts, inventory reports, user management, and in addition, the Vivid Plus service will now provide the user with access to a premium drug database. It'll also feature automatic software updates to the Vivid, an extended warranty, lifetime technical support with remote assistance, and to top it off, a free pill counting tray replacement. Our plan is for a family of at least three Vivid models. And in November of 2022, which is just around the corner, we are launching the second product, the Vivid Light. It is a lower-priced model targeting price-sensitive independent and major pharmacy chains. This product has the potential to expand the market exponentially. Now, turning to our bioprocessing systems operations. Bioprocessing grew its revenues significantly from $526,000 in fiscal year end 2022 consisting of royalties and two months of Aquila BioLabs revenue to $1.4 in this fiscal year. And this includes a full year of product sales and $200,000 or just about of royalties from Sartorius. And this represents a 100% revenue growth. Our ion processing business started with the acquisition in 2011 of Fluorometrics. This was done for $400,000 in cash and stock. Since that time, we've collected over $4.5 million of net royalties, and we've received the final payment during this year, in August of 2021. Not only was this an excellent use of shareholder capital, but it also provided important early insights into an exciting future market for scientific industries. that offers rapid growth as well as highlights the need by the biotech industry for high-throughput screening tools for cell cultures. We were able to identify one company, now the eight-year-old startup, Aquila Biolabs in Basweiler, Germany. They shared our vision for a need for a substantially lower-cost version of the Sartorius AMBER system that incorporates our sensor technology. We paid approximately $8 million for the business back in April of 2021, and we are investing aggressively to expand their offerings and improve the value customers receive from using these products. We couldn't be happier or have more confidence in our investment in Aquila or its founders. We consolidated the two businesses under the SDI brand. Daniel Gruenis The co-founder and CEO of Aquila was elevated to CEO of SBI in the spring of this year. To take advantage of the excellent technical leadership of the Aquila co-founders, we moved our research staff from our Pittsburgh facility to our German facility and consolidated R&D in Basweiler. We have established a marketing, product management, and finance team and we are continuing our investments into building up a sales force, which will allow us to capture the available market potential. The integration of the two businesses has gone very smoothly, and the growth of the organization to now 45 employees has allowed us to acquire additional knowledge through hires from industry leaders such as Hamilton, Eppendorf, and Eurofence. The results from our substantial investment in R&D are bearing fruit. In September, we released our DOTS software platform, which is a game changer in value and use, easy user interface, and interoperability with other sensor systems and data loggers. Also, it allows customers to combine our previously isolated actuator and biomass sensor portfolio, whereby we increase the value proposition from our existing products. The DOTS platform will have two more important additions in the next years. First, the introduction of the DOTS multi-parameter sensor, and next will be the first optical glucose sensor of its kind. This important development work is being performed in our new state-of-the-art chemosensor lab and our German facility. And lastly, before I turn it over to Mr. John Moore, I would like to summarize what we consider the important milestones for our company over the next six to 12 months. First is, are we launching new products? And more importantly, are they on time? Second, are we adding new important customers to our database? Customers that lend credibility to our products and our solutions. And lastly, Are customers willing to pay for the solutions we offer through our product offerings? Because there comes a time where the measure of a product's success is reflected in your ability to sell your product and, in turn, generate a profit for our business. I would now like to turn it over to Mr. John Moore, the chairman of our company, NSBI, so he can tell us about some very important recent national events and their importance to our bioprocessing business. So I turn it over to John. John?

Thank you, Helena. On September 12th, President Biden announced an executive order on advancing biotechnology and biomanufacturing innovation. In doing so, he instructed the Secretaries of Health, Agriculture, Defense, Commerce, and the National Science Foundation to create an interagency working committee to draft a plan to accelerate federal spending, lay the foundation for what they believe will be a $20 trillion bioeconomy. Specifically, the executive order called out the need to, quote, advance the science of scale-up production while reducing the obstacles for commercialization so that innovative technologies and products can reach the market faster, unquote. So at Scientific Bioprocessing, Scientific Industries, we're on the ground floor of and providing the vital infrastructure for this major transition in the world economy. The federal government is going to provide major funding for research and workforce development. Now, we've anticipated the need to train up to 1 million new workers in the field of fermentation and synthetic biology with our BioMADE and University of Georgia partnership. University of Georgia and their partner, Innovate, an NSF-funded network of 180 community colleges, is using the $650,000 grant to create curriculum for the use of the DOTS platform in educating this next generation of modern fermentation scientists and technicians. We are hard at work training the trainers. Initially at the 22 community college biotech programs where we've provided DOTS education modules, but eventually it's going to spread to the broader network. So it's particularly poignant that one of our BioMADE projects with the National Corn to Ethanol Center and a startup named Valerian Materials was one of the nine projects highlighted as examples of the type of project the government wants to fund. In addition, a new federal agency, ARPA-H, was created, like the original ARPA, which created the original infrastructure for the internet. Susan Hochfeld, PhD and recent president of MIT, in her book, The Age of the Living Machine, said, quote, a century ago, physics and engineering came together and transformed the world completely. And now biology and engineering are poised to transform our world as profound, unquote. We believe this and are excited to invest our capital to cement our leadership in this new economy. So I'd like to leave you with one final thought. The Sartorius AMBER system that we've been collecting royalties on is the mainframe computer of synthetic biology. Our DOTS-enabled shake flask is the PC of the coming bioeconomy. Its step change reduction in cost is going to expand and democratize the coming abundance of the synthetic biology revolution beyond the current confines of the urban centers for biology like Boston, Philadelphia, San Francisco, and Research Triangle to the rural communities where the biomass is created. This is the goal of the U.S. federal government, and we can become their instruments to cause this change. So going forward, we're extremely excited about the future. There are headwinds from a stronger dollar as 50% of our sales from our legacy business comes from outside the United States, but this is also a double-edged sword because it's reduced the relative cost of our research in Germany. So thank you very much, and Helena and I and Daniel are now ready to answer your questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

And again, if you have a question, please press star, then one. Looks like our first question will come from Brett Reese with Jenny Montgomery Scott.

Please go ahead.

Hi, John. Hi, Helena. Can you hear me?

Yes. Good morning, Brad.

Great, great. Just a question. Do you think the cash flow from your legacy businesses plus the pleasurable organic growth you described will be sufficient to fund the Aguayo project? initiatives without any future dilutive financing?

Well, Brett, as you can see from our balance sheet, we have about just under $9.5 million between cash on hand and the investments at the end of our fiscal year. And if you looked at what we went through the past year, that was about $7 million, taking into consideration the financing that we did back in March of $3 million. Although, on the net basis, that was, as you can tell, that was about $2.7, I believe. At this point, we have, based on our projections, approximately 18 months, give or take, of cash on hand. So it is feasible that we would need additional funding, depending on our plans. So that's not off the table.

Right. Okay. Good quarter, and thanks for taking my questions.

Thank you, Brett. It was nice talking to you.

Again, if you have a question, you may press star, then 1 to enter the question queue. All right.

This will conclude our question and answer session. I would like to turn the conference back over to John Moore for any closing remarks.

Great. We thank the investors who are on the call today and also the ones who are listening to the recorded reading the transcript. We appreciate everybody's interest in the company, and we think we're going to be playing a really important role in this new bioeconomy, and we're very excited about the future that's ahead of us.

Thank you all for attending. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.