Mail Stop 0306
January 25, 2005
Via U.S. Mail
Ms. Helena R. Santos
Chief Executive Officer and
Chief Financial Officer
Scientific Industries, Inc.
70 Orville Drive
Bohemia, New York 11716
Re: Scientific Industries
Form 10-KSB for the fiscal year ended June 30, 2004
Forms 10-Q for the quarters ended September 30, 2004
File No. 000-06658
Dear Ms. Santos:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
documents in response to these comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable or
a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-KSB for the fiscal year ended June 30, 2004
Item 8A. Controls and Procedures
1. Please revise your filing to include your principal executive
and
principal financial officer`s conclusions on the effectiveness of
your disclosure controls and procedures as defined by Rule 13a-
15(e)
of the Exchange Act, as required by Item 307 of Regulation S-B as
amended effective August 13, 2003.
2. Please revise your filing to include your conclusions
concerning
changes in your internal control over financial reporting to
indicate
whether there was any change in your internal control over
financial
reporting that occurred during the fourth quarter that has
materially
affected or is reasonably likely to materially affect your
internal
control over financial reporting, as required by Item 308(c) of
Regulation S-B as amended effective August 13, 2003.
Notes to Consolidated Financial Statements
Consolidated Statement of Shareholder`s Equity-Page F-4
3. We see your presentation of accumulated comprehensive income as
well as comprehensive income for the reporting periods presented.
Your current presentation can be confusing to investors since
comprehensive income for the reporting periods presented does not
include any changes and your accumulated comprehensive income
includes changes during the period. Since you have chosen to
present
comprehensive income and accumulated comprehensive income in this
format, revise future filings to comply with the example exhibits
presented in Appendix B of SFAS 130.
Note 1. Summary of Significant Accounting Policies
Revenue Recognition-Page F-6
4. We see that your sales are, in part, made through distributors
based upon Item 1. Tell us supplementally and revise future
filings
to address the following:
a. Revise the note to describe how your policy meets each of the
criteria required to recognize revenue outlined in SAB Topic 13A.
b. Describe any significant terms of your arrangements with
distributors, including installation obligations, acceptance
criteria, unusual pricing or payment terms and return policies.
Please cite the accounting literature you relied upon.
c. Confirm to us that payment is not contingent on resale or any
other matter other than the passage of time, or disclose how these
arrangements impact the point at which you recognize the related
revenues.
d. Clarify why it is appropriate to recognize revenue upon
shipment.
Disclose whether your products are shipped FOB shipping point or
FOB
destination.
e. Clearly describe the accounting for any special arrangements
with
distributors such as price protection, rights of return and other
discounts, credits or special terms.
5. We see that your products are sold through distributors as
previously mentioned above. Tell us whether your arrangements with
these distributors or other parties ever include vendor
consideration
as described in EITF 01-09. Describe the nature of, and your
accounting for, any consideration provided to vendors.
Inventories-Page F-6
6. Please tell us and revise future filings to disclose in more
detail how you value inventories, including your accounting method
for inventory reserves.
Note 10. Stock Options and Warrant-Pages F-16-F-17
7. Tell us and revise future filings to describe your accounting
policies related to options or warrants issued to non-employees
for
services. Cite the specific accounting literature that you have
relied upon in your response.
Forms 10-QSB for the quarter ended September 30, 2004
General
8. Please revise your filing to include your principal executive
and
principal financial officer`s conclusions on the effectiveness of
your disclosure controls and procedures as defined by Rule 13a-
15(e)
of the Exchange Act, as required by 307 of Regulation S-B as
amended
effective August 13, 2003.
9. Please revise your filing to include your conclusions
concerning
changes in your internal control over financial reporting to
indicate
whether there was any change in your internal control over
financial
reporting that occurred during your most recent fiscal quarter
that
has materially affected or is reasonably likely to materially
affect
your internal control over financial reporting, as required by
Item
308(c) of Regulation S-B as amended effective August 13, 2003.
Exhibit 31. 1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
of 2002
10. We note that the certification filed as Exhibits 31.1was not
in
the proper form. The required certifications must be in the exact
form prescribed; the wording of the required certifications may
not
be changed in any respect, except for the modifications
temporarily
permitted to be made to the fourth paragraph of the certification
required to be filed as Exhibit 31.1 pursuant to Part III.E of
Release No. 8238. Accordingly, please file an amendment to your
Form
10-QSB that includes the entire filing together with the
certifications of each of your current CEO and CFO in the form
currently set forth in Item 601(b)(31) of Regulation S-B.
* * * *
As appropriate, please amend your June 30, 2004 Form 10-K
and
September 30, 2005 Form 10Q and respond to these comments within
10
business days or tell us when you will provide us with a response.
You may wish to provide us with marked copies of the amendment to
expedite our review. Please furnish a cover letter with your
amendment that keys your responses to our comments and provides
any
requested supplemental information. Detailed cover letters
greatly
facilitate our review. Please file your cover letter on EDGAR.
Please understand that we may have additional comments after
reviewing your amendment and responses to our comments.
You may contact Tara Harkins, Staff Accountant, at (202)
824-
5496 or me at (202) 942-2813 if you have questions. In this
regard,
do not hesitate to contact Martin James, the Senior Assistant
Chief
Accountant, at (202) 942-1984.
Sincerely,
Daniel L. Gordon
Branch Chief
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Ms. Helena R. Santos
Scientific Industries, Inc.
January 25, 2005
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