Scientific Industries, Inc. (SCND) Earnings Call Transcript & Summary

This is the annual meeting of the stockholders of Scientific Industries, Inc. I am John A. Moore, Chairman of the Board of Directors. Before the meeting begins, I want to welcome you and express my thanks to you all for attending. The current directors and executive officers of the company are Helena R. Santos, Director and President and CEO; myself, John A. Moore, Director and Chairman of the Board; Reginald Averilla, CFO and Secretary; Michael Blechman, Director; John Nichols, Director; Dr. Jurgen Schumacher, Director; Robert Nichols, President of the Genie Products division; Chris Cox, Director; Karl Nowosielski, President of the Torbal Division; Daniel Donadille, formerly Grunes, President and CEO of Scientific Bioprocessing. Both Mr. Nowosielski and Donadille were unable to attend due to family matters. I'd also like to introduce Howard Cohen, Partner of Mazars USA and the corporation's registered public accounting firm. He'll be available to answer any questions you may have concerning the corporation's financial statements. John Watkins, Reitler Kailas & Rosenblatt LLC, will act as Secretary of the meeting. Erika Young of Continental Stock Transfer & Trust Company has been appointed Inspector of the Elections to act at this meeting and has executed and delivered her written oath as inspector. The inspector has reported that the stockholders who voted by proxy representing more than 50% of the outstanding shares of common stock are present. The meeting is declared lawfully and properly convened. We shall now proceed to transact the business for which the meeting has been called. The meeting will now come to order. Mr. Averilla, the Secretary of the company, will present proof of the due calling of the meeting.

Thank you, John, and I attest to the following: copies of the printing notice of meeting dated April 10, 2024, and accompanying processed statement stating the time, place and purposes of the meeting have been provided and are available at the company's headquarters. Unless specifically requested, I will dispense with the reading of the notice. Also available at the company, which can be supplied at a stockholder's request is a complete list certified by representative of Continental Stock Transfer and Trust company to transferring agent for the corporation of the stockholders of the corporation as of the close of business on April 10, 2024, the record date fixed for stockholders entitled to vote at this meeting. Upon a stockholders request, the list would also be available electronically during the whole time of this meeting. Please indicate if you would like to examine the list and Ms. Young will give you instructions on how to do that at this meeting. The list shows at the close of business on April 10, 2024, there were 10,503,599 shares of common stock issued and outstanding and entitled to vote.

The inspector of elections has reported that each of Mr. Cox and Mr. Nicols have received the highest number of votes of the shares voting on such position and accordingly is elected to serve until the annual meeting of the stockholders the following year ending December 31, 2026, and the due election and qualification of each of his successor. As the next order of business, we'll consider a proposal to ratify the appointment of the Board of Directors of the company of Mazars USA LLP as the company's registered public accounting firm with respect to the company's financial statements for the period ended December 31, 2024. I will entertain the motion with respect to this proposal.

I hereby move the following results that the appointment by the Board of Directors of Mazars USA LLP as the company's registered public accounting firm with respect to the company's financial statements for the period ending December 31, 2024, be and is hereby ratified.

I hereby second the motion.

Are there any questions or discussions? If there are none, I hereby call for a vote. Please indicate if you need a ballot to vote and Ms. Young will give you instructions on how to do that at this meeting. If you have not voted or desire to change your proxy, please deliver your executed proxy or ballot to the inspector as instructed. The inspectors reported that the proposal has received a favorable vote more than a majority of the shares present in person or by proxy, and accordingly, the appointment of Mazars USA LLP as the company's registered public accounting firm with respect to the company's financial statements for the period ended December 31, 2024, has been ratified. I would now like to make some remarks before our CEO makes her presentation. So yesterday, we presented our first quarter earnings results. We gave extensive prepared comments at that time. So I'm just going to refer everybody to go to Seeking Alpha, read the transcript of that presentation or listen to the recorded remarks because in a day, nothing really has changed. All I'd like to overall say is that we've made two new product introductions, the DOTS Multiparameter Sensor at the Scientific Bioprocessing business and the workstation, which is being taken to trade shows right now. And we think this is going to be very -- result in very tangible transformation of the company's business to recurring revenues, higher-margin products and higher growth. So we're really excited about this new chapter. We're really excited about our 2 new directors, Michael Blechman; and John Nicols, who are both very active as our other directors are in assuring the success of the company. And now I'd like to hand the call over to Helena Santos.

Thank you, John. So yes, I will make some comments even though I did speak yesterday. Good morning to everyone, and thank you for attending our 2023 Annual Meeting. I'd just like to expand a little bit on what John had mentioned and spoke about yesterday, which means talking about the activities and the actions we've taken over the last 3 to 6 months and their impact on our company's future. And then just take a few minutes to talk about the status of our legacy business and its expectations for the future. While we look to our Bioprocessing business as the key to substantial and exponential future growth in an industry that does enjoy remarkable growth and returns, we're also mindful that while we are working towards that goal, we do have to nurture and support the legacy Benchtop Lab Equipment business. Because it is the foundation of our company and a business that generates working capital to sustain our corporate structure, which had to be enhanced and expanded in order to support our current larger international operations and larger shareholder base. While we're in the midst of our latest equity financing, we also embarked on a strategy to gain operational efficiencies. This with a view to optimize cash flow and streamline processes, particularly in our Bioprocessing business segment. We combined our goal for cash flow preservation with the normal process of a start-up, whereby it does align the people and the resources that are right for its future. As a result, we rightsized the organization's head count that resulted in having what I believe to be a world-class team that is laser-focused on achieving greatness for our company. All of this was implemented as of April 1 of this year. While most of the rightsizing steps taken were at the Bioprocessing business segment, we did take certain initiatives that were also implemented across corporate activities and the Benchtop Lab Equipment Operations to maximize cash preservation, while we build the rest of our company. This all began with our company's management and key employees volunteering for reductions in their cash comp with a view of investing in theirs and the company's future. The Benchtop Lab Equipment Operations continues to generate meaningful revenues and cash flows. However, in the first quarter of this year, our gross margins were slightly impacted by sales mix. In the Genie division, sales of Vortex-Genie 2s a year ago have been replaced with sales of other Genie products, which do have somewhat of a lower gross margin, and that's just due to economies of scale that exist on the Vortex-Genie 2 line because of its high volume. There appears to be some stability returning to end-user markets within the U.S. and the EU. However, China is still challenging. We are also hopeful that we can improve on our gross margins as the year progresses. We are on target to launch our new VIVID Workstation in our TORBAL division late this year, which will give us a complete line of automated pill counters. It should not be underestimated. It will be the most advanced product in the history of SI. The feedback from sales reps is very good thus far, and we are currently working on the sales and the marketing launch materials, while seeking beta sites for the Workstation within the next few weeks. But we won't stop there. In the background of all this, we are working on the machine learning version of our pill counter, which will entail finding friendly sites to assist us in building and gathering real-world data so we can use AI to count pills. We anticipate a 2025 availability. Just like the original VIVID has evolved since introduction during the pandemic to a more robust pill counter and leading to additional products. I'm sure that we will continue to build on the Workstation as well, as well as the entire VIVID product line to become the most affordable automated pill counter available. And now I'll just turn it back to Mr. Moore for any closing comments.

Great. Yes. I think that the theme of both of our new product introductions are going to be that we're going to be delivering automation and value to our customers through the use of our artificial intelligence. And that's a really exciting thing from a 70-year-old company that's got such a huge installed base in virtually every life science lab in the world. We think that provides a really strong platform. These new technologies that we're bringing to bear in the market saw major pain points in the customers, whether it's the -- in the pharmacies, the overwork and overload of the pharmacies due to the graying of America, or whether it's the life science labs that are trying to scale up and bring products to market faster than ever before at lower cost, at a lower risk. We're delivering those big values to the customer much more than the traditional base of the company, which just made a simple mixing product, but it was -- we were able to sell it to everybody, but we weren't able to extract a lot of value from it. I think that's going to change dramatically. We're going to have recurring revenues from these new value propositions they bring to market, and we've got outstanding board and outstanding management team. So I'm really excited about the future of the company. So we're excited to see some new names of shareholders on the call. Please e-mail me your e-mail contact information, so we can add you to our shareholder list. My e-mail is [email protected]. For those on to Helena -- and like to pause and ask if the shareholders have any questions for us. So if there are no shareholder questions, Mr. Cohen, do you have any statement you want to make to the meeting?

Just we're looking forward to working with the company for the next year with all these things going on.

Great. Well there be no further questions and no other business before the meeting, I'll entertain a motion to adjourn the meeting.

I so move.

Great. Are there any objections? If there are none, I hereby declare the meeting adjourned, thank you so much to our shareholders for attending this meeting.

Thank you.