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's results reflect those of the Benchtop Laboratory
Equipment Operations and the Bioprocessing Systems Operations, which includes
the results for Aquila following its acquisition on April 29, 2021. The Company
realized a loss from continuing operations before income tax benefit of
$1,844,600 for the three months ended March 31, 2022 compared to a $1,830,200
loss for the three months ended March 31, 2021, and a loss before income tax
benefit of $4,698,200 for the nine months ended March 31, 2022 compared to a
loss of $2,205,200 for the nine months ended March 31, 2021, primarily due to
increased operating expenses of its Bioprocessing Systems Operations, which
included significant expenditures for product development, sales and marketing,
and non-cash compensation expense related to stock options.
COVID-19 Pandemic. The Company has not experienced and does not expect to
experience any material impact on its ability to collect its accounts receivable
due to the nature of its customers, which are primarily distributors of
laboratory equipment and supplies, and pharmaceutical companies, which have
benefitted from the Pandemic due to the nature of the products and have the
ability to pay. The Company also has not experienced and does not expect to
experience any material impairment to its tangible and intangible assets
or system of internal controls, however the ultimate impact of COVID-19 on the
Company's business, results of operations, financial condition and cash flows is
dependent on future developments, including the duration or worsening of the
pandemic, which are uncertain and cannot be predicted at this time. The Company
has experienced supply chain disruptions which has had an impact on its
operations causing delayed delivery of some products to its customers, and
production inefficiencies. As of March 31, 2022, the Company had a total backlog
of approximately $747,000 in benchtop laboratory equipment orders, which
approximated the backlog level as of March 31, 2021.
In addition, due to the travel restrictions imposed by the United States and
other governments worldwide, Company personnel had been and may be restricted in
the future from traveling to conduct its operations including trade shows,
Company facility visits, customer visits and installations, vendor facility
visits, and other sales and marketing related travel that can negatively impact
the Company. The operations of Aquila were negatively affected in their ability
to secure new orders because Aquila had historically relied on face-to-face
meetings at trade shows for its sales opportunities. While it has participated
in virtual trade shows, management believes that certain sales opportunities
were lost as a result. The Company has recently started to attend in-person
trade shows.
Results of Operations.
The Three Months Ended March 31, 2022 Compared With The Three Months Ended March
31, 2021
Net revenues for the three months ended March 31, 2022 increased $356,300
(14.2%) to $2,864,900 from $2,508,600 for the three months ended March 31, 2021,
reflecting an increase of $287,400 in net revenues due primarily to product
revenues derived from sale of Aquila bioprocessing products, and $68,900 in
sales from the Benchtop Laboratory Equipment Operations due to increased sales
of its Torbal brand products. The Benchtop Laboratory Equipment Operations sales
reflected $580,100 of Torbal brand net product sales for the three months ended
March 31, 2022, compared to $466,200 for the three months ended March 31, 2021
primarily due to increased sales of its automated VIVID pill counter.
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The gross profit percentage on a combined basis was 54.0% for the three months
ended March 31, 2022 compared to 54.3% for the three months ended March 31,
2021, due primarily to decreased margins for the Benchtop Laboratory Equipment
Operations resulting from increased costs for labor and materials.
General and administrative expenses for the three months ended March 31, 2022
increased by $224,800 (16.2%) to $1,610,400 from $1,385,600 for the three months
ended March 31, 2021 due primarily to costs incurred by the Bioprocessing
Systems Operations which includes Aquila which was acquired in April 2021.
Selling expenses for the three months ended March 31, 2022 decreased $332,100
(24.0%) to $1,054,000 from $1,386,100 for the three months ended March 31,
2021. The decrease was due primarily to extensive use of sales and marketing
consultants in the prior year period compared to lower cost employees in the
current year period, and decreased stock option compensation-related costs for
the Bioprocessing Systems Operations in the current year period.
Research and development expenses increased by $174,500 (38.8%) to $624,500 for
the three months ended March 31, 2022 compared to $450,000 for the three months
ended March 31, 2021, due primarily to product development costs incurred by the
Bioprocessing Systems Operations, including additional expenditures of the
Aquila operation which was acquired in April 2021.
Total other expense, net, for the three months ended March 31, 2022 was
$102,300, compared to $28,600 of total other income, net, for the three months
ended March 31, 2021. The decrease was due primarily to realized losses on
investment securities during the current year period.
The Company reflected a total income tax benefit of $317,200 and $378,200 for
the three months ended March 31, 2022, and 2021, respectively.
As a result of the foregoing, the Company recorded a net loss from continuing
operations of $1,527,400 for the three months ended March 31, 2022 compared to a
net loss from continuing operations of $1,452,000 for the three months ended
March 31, 2021.
The Company reflected a loss from discontinued operations of $7,600 for the
three months ended March 31, 2022, compared to a gain of $16,400 for the three
months ended March 31, 2021, due to miscellaneous expenses incurred during the
current year period.
The Nine Months Ended March 31, 2022 Compared With The Nine Months Ended March
31, 2021
Net revenues for the nine months ended March 31, 2022 increased $1,378,400
(19.0%) to $8,623,500 from $7,245,100 for the nine months ended March 31, 2021,
reflecting an increase of $716,000 in revenues from the Bioprocessing Systems
Operations due primarily to sales of Aquila products, and an increase of
$662,400 in revenue of the Benchtop Laboratory Equipment due to increased sales
of its Genie and Torbal brand products. The Benchtop Laboratory Equipment sales
reflected $1,825,400 of Torbal brand product sales for the nine months ended
March 31, 2022, compared to $1,560,700 for the nine months ended March 31, 2021,
primarily due to increased sales of its automated VIVID pill counter.
The gross profit percentage on a combined basis was 51.8% for the nine months
ended March 31, 2022 compared to 52.8% for the nine months ended March 31, 2021,
due primarily to decreased margins for the Benchtop Laboratory Equipment
Operations resulting from increased costs for labor and materials.
General and administrative expenses for the nine months ended March 31, 2022
increased by $2,000,600 (81.9%) to $4,442,300 from $2,441,700 for the nine
months ended March 31, 2021, due primarily to costs incurred by the
Bioprocessing Systems Operations which includes the Aquila operation which was
acquired in April 2021.
Selling expenses for the nine months ended March 31, 2022 increased $337,900
(12.7%) to $2,996,800 from $2,658,900 for the nine months ended March 31, 2021,
due primarily to the Bioprocessing Systems Operations which includes the Aquila
operation which was acquired in April 2021.
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Research and development expenses increased by $1,117,300 (109.1%) to $2,141,300
for the nine months ended March 31, 2022 compared to $1,024,000 for the nine
months ended March 31, 2021, mainly due to product development costs incurred by
the Bioprocessing Systems Operations' Aquila operation which was acquired in the
fourth quarter of fiscal 2021.
Total other income, net, for the nine months ended March 31, 2022, was $413,300
reflecting $433,800 loan forgiveness for the Company's second PPP Loan, compared
to $93,700 for the nine months ended March 31, 2021.
The Company reflected income tax benefits for continuing operations of
$1,054,500 for the nine months ended March 31, 2022 compared to income tax
benefit of $472,300 for the nine months ended March 31, 2021, primarily due to
the increased loss.
As a result of the foregoing, the Company recorded a net loss from continuing
operations of $3,643,700 for the nine months ended March 31, 2022, compared to a
net loss from continuing operations of $1,732,900 for the nine months ended
March 31, 2021.
The Company reflected a gain from discontinued operations of $3,400 for the nine
months ended March 31, 2022, compared to a loss of $578,500 for the nine months
ended March 31, 2021, due to miscellaneous income earned during the current year
period and the loss on disposal of assets of the discontinued operation in the
prior year period.
Liquidity and Capital Resources.
Cash and cash equivalents decreased by $5,607,200 to $4,068,000 as of March 31,
2022 from $9,675,200 as of June 30, 2021, due primarily to the Company's
purchase of investment securities and the loss during the period, net of cash
received on the issuance of common stock and warrants.
Net cash used in operating activities was $3,695,300 for the nine months ended
March 31, 2022 compared to $2,592,500 during the nine months ended March 31,
2021, primarily as a result of the increased loss incurred for the current
period. Net cash used in investing activities was $4,548,600 for the nine months
ended March 31, 2022 compared to $4,763,100 used during the nine months ended
March 31, 2021 due to a decrease of purchases and redemptions of investments.
Net cash provided by financing activities was $2,727,200 for the nine months
ended March 31, 2022, compared to $423,400 provided during the nine months ended
March 31, 2021, primarily due to the proceeds received on the issuance of common
stock and warrants.
The Company's working capital increased by $245,100 to $16,389,400 as of March
31, 2022 compared to $16,144,300, as of June 30, 2021, primarily due to a net
decrease of $284,300 in current liabilities, that consist of a decrease of
approximately $881,900 in accrued expense and other liabilities and a increase
of $597,600 in accounts payable and a net decrease of $39,200 in current assets,
that consist of a decrease of approximately $1,583,200, net of cash proceeds
received on the issuance of common stock and warrants and cash used in operating
and investing activities, a increase of approximately of $1,391,000 in
inventory, a increase of approximately $418,000 in accounts receivable and a
decrease of $265,000 in prepaid and other assets.
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