<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-10986
MISONIX, INC.
(Exact name of registrant as specified in its charter)
New York 11-2148932
- - ----------------------------- -------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization Identification No.)
1938 New Highway Farmingdale, N.Y. 11735
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code...(516) 694-9555
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 and 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 X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Outstanding at
Class of Common Stock May 1, 1996
--------------------- -----------
$.01 par value 2,800,000
Transitional small business disclosure format (check one):
YES NO X
--- ---
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MISONIX, INC.
Index
PART I. FINANCIAL INFORMATION Page
Financial Statements:
Consolidated Balance Sheet
March 31, 1996 (Unaudited) 3
Consolidated Statements of Operations
Nine months ended March 31, 1996
and 1995 (Unaudited) 4
Consolidated Statements of Operations
Three Months Ended March 31, 1996
and 1995 (Unaudited) 5
Consolidated Statements of Cash Flows
Nine months ended March 31, 1996
and 1995 (Unaudited) 6
Notes to Consolidated Financial Statements 7-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 11
Signatures 12
2
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MISONIX, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
==========================
March 31,
ASSETS 1996
-----------
CURRENT:
Cash and cash equivalents $ 925,898
Investments held to maturity 532,304
Accounts receivable, net of allowance
for doubtful accounts of $57,258 1,937,708
Inventories (Note 3) 1,087,011
Prepaid expenses and other current assets 359,969
-----------
TOTAL CURRENT ASSETS 4,842,890
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization of $1,334,703
605,663
PATENTS, at cost, less accumulated
amortization of $240 29,160
GOODWILL, less accumulated amortization
of $35,382 205,917
OTHER 23,839
-----------
$ 5,707,469
===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT:
Note payable to bank $ 524,937
Accounts payable 1,175,995
Accrued expenses and other current liabilities 392,645
Current maturities of capital lease obligations 48,844
-----------
TOTAL CURRENT LIABILITIES 2,142,421
CAPITAL LEASE OBLIGATIONS 77,498
DEFERRED INCOME (Note 4) 290,000
MINORITY INTEREST (Note 1) 51,520
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; shares authorized
10,000,000; issued and outstanding 2,800,000 28,000
Additional paid-in capital 11,100,793
Deficit (7,943,581)
Cumulative foreign currency translation adjustment (39,182)
-----------
TOTAL STOCKHOLDERS' EQUITY 3,146,030
-----------
$ 5,707,469
===========
See accompanying notes to consolidated financial statements.
3
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
==========================
For the nine months ended
March 31,
--------------------------
1996 1995
---- ----
NET SALES $ 7,142,479 $ 6,049,790
COST OF GOODS SOLD 3,754,393 3,307,120
----------- -----------
Gross profit 3,388,086 2,742,670
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 3,095,779 2,623,880
Research and development 151,726 777,492
Restructuring costs -- 416,445
----------- -----------
Total operating expenses 3,247,505 3,817,817
----------- -----------
Income (Loss) from operations 140,581 (1,075,147)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 39,917 45,079
Interest expense (31,636) (25,708)
Option/license fees 60,000 --
Foreign exchange gain (loss) (20,742) 11,602
Miscellaneous expense (368) (1,375)
----------- -----------
Total other income 47,171 29,598
----------- -----------
Income (Loss) before minority interest 187,752 (1,045,549)
Minority interest in net income of
consolidated subsidiary (45,316) --
----------- -----------
NET INCOME (LOSS) $ 142,436 $(1,045,549)
=========== ===========
NET INCOME (LOSS) PER SHARE $ .05 $ (.38)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 2,834,752 2,770,000
=========== ===========
See accompanying notes to consolidated financial statements.
4
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
==========================
For the three months ended
March 31,
--------------------------
1996 1995
---- ----
NET SALES $ 2,814,607 $ 2,338,190
COST OF GOODS SOLD 1,406,880 1,295,833
----------- -----------
Gross profit 1,407,727 1,042,357
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,071,054 1,012,955
Research and development 42,315 40,554
Restructuring costs -- 67,500
----------- -----------
Total operating expenses 1,113,369 1,121,009
----------- -----------
Income (Loss) from operations 294,358 (78,652)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 13,183 16,189
Interest expense (11,051) (7,160)
Option/license fees 7,500 --
Foreign exchange (loss) gain (3,290) 22,927
Miscellaneous income (expense) (176) 118
----------- -----------
Total other income 6,166 32,074
----------- -----------
Income (Loss) before minority interest 300,524 (46,578)
Minority interest in net income of
consolidated subsidiary (39,013) --
----------- -----------
NET INCOME (LOSS) $ 261,511 $ (46,578)
=========== ===========
NET INCOME (LOSS) PER SHARE $ .09 $ (.02)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 2,826,129 2,770,000
=========== ===========
See accompanying notes to consolidated financial statements.
5
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
==========================
Nine months ended
March 31,
-----------------------
1996 1995
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ 142,436 $(1,045,549)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Provision for net losses on
accounts receivable -- 13,500
Depreciation and amortization 156,047 171,803
Minority interest in net income
of subsidiary 45,316 --
Foreign currency (gain) loss 20,742 (11,602)
Changes in operating assets and
liabilities:
Accounts receivable (526,572) (116,670)
Inventory (19,146) 69,234
Prepaid expenses and other
receivables (236,772) 40,003
Deposits and other assets 2,479 (199)
Accounts payable and accrued
expenses 245,868 139,470
----------- -----------
Net cash used in operating activities (169,602) (740,010)
----------- -----------
INVESTING ACTIVITIES:
Proceeds from involuntary conversion
of assets -- 152,000
Proceeds relating to investments
held to maturity 795,168 1,277,228
Purchase of investments held to maturity (971,872) --
Acquisition of property and equipment (125,141) (106,461)
Patent costs (29,400) --
----------- -----------
Net cash (used in) provided by
investing activities (331,245) 1,322,767
----------- -----------
FINANCING ACTIVITIES:
Deferred income 290,000 --
Note payable to bank 202,966 (77,616)
Principal payments on capital lease
obligation 47,867 (33,079)
----------- -----------
Net cash provided by (used in)
financing activities 540,833 (110,695)
----------- -----------
Effect of exchange rates (32) 102
----------- -----------
NET INCREASE IN CASH 39,954 472,164
CASH, beginning of period 885,944 607,813
----------- -----------
CASH, end of period $ 925,898 $ 1,079,977
=========== ===========
See accompanying notes to consolidated financial statements.
6
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MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to interim periods is unaudited)
==========================================================
1. Basis of Presentation
The consolidated financial statements of Misonix, Inc. include the accounts of
Misonix, Inc., its 81.4% owned subsidiary, Labcaire Systems Ltd., and its 100%
owned subsidiary Misonix, Ltd. All significant intercompany balances and
transactions have been eliminated.
2. Interim Periods
The financial statements for the nine months ended March 31, 1996 and 1995 are
unaudited but, in the opinion of management, include all adjustments, consisting
of normal recurring accruals, necessary for fair presentation of financial
position and results of operations. Results for the interim periods are not
necessarily indicative of the results for a full year. For further information
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report for the year ended June 30, 1995.
3. Inventories
Inventories are summarized as follows:
March 31,
1996
----------
Raw materials $ 617,915
Work-in-process 62,422
Finished goods 406,674
----------
$1,087,011
==========
4. License Agreement For Medical Technology
In December 1995, the Company entered into a license agreement with Medical
Device Alliance, Inc. ("MDA"), giving MDA exclusive world-wide marketing and
sales rights for the Company's ultrasonic soft tissue removal medical device.
The Company initially received $50,000 upon entering into an option agreement
with MDA leading to this licensing arrangement. The Company received $300,000 in
licensing fees upon signing the agreement and will receive an additional
$200,000 within a one year period, plus royalties based upon net sales of such
products. The $300,000, received in December 1995, is being recorded as income
over the ten year period of the agreement at the rate of $2,500 per month. In
addition, the agreement provides for the reimbursement of development costs
incurred by the Company, not to exceed $30,000 per month, for a period of up to
six months. Misonix will also manufacture the equipment under this agreement.
This agreement primarily focuses on the Company's patent for a liposuction
apparatus granted in May 1995 and its 510(K) approval from the United States
Food and Drug Administration to market and sell a device for ultrasonic tissue
removal.
The Company has settled the dispute(as discussed in prior filings) with the two
individuals who are joint inventors, with the Company's founder, of the Patent
for a Liposuction Method and Apparatus. As a result they have reconfirmed their
assignment, and
7
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MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
======================================================
in return, the Company has reestablished the original payment agreement which
gives the two inventors a 5% royalty on revenues covered, including those
received from the MDA License.
5. Stock Options
The Board of Directors has approved, subject to shareholder approval, two new
stock option plans, one for employees and one for independent directors. The
Board has granted options to acquire 560,000 shares at a price of $1.10 per
share under these new Plans and the existing Stock Option Plan.
8
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MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine months ended March 31, 1996 and 1995
Net Sales: Net sales, which relate to the Company's scientific and industrial
products, increased $1,092,689 (18.1%) from $6,049,790 in the nine months ended
March 31, 1995 to $7,142,479 in the nine months ended March 31, 1996. Domestic
sales for the nine months ended March 31, 1996 increased 19.5% while sales at
the Company's foreign subsidiary increased 17.4%. The Company's backlog of
unfilled orders decreased from $1,293,018 at March 31, 1995 to $1,231,216 at
March 31, 1996. Historically, backlog has not been a meaningful indication of
future sales.
Gross Profit: Gross profit increased from 45.3% of sales in the nine months
ended March 31, 1995 to 47.4% of sales in the nine months ended March 31, 1996
primarily due to sales price increases and economies of scale resulting from
increased sales volume.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased from $2,623,880 (43.4 % of sales) in the nine
months ended March 31, 1995 to $3,095,779 (43.3% of sales) in the nine months
ended March 31, 1996. This increase relates to sales costs associated with
higher sales volume, hiring of additional personnel, and the reassignment of
administrative personnel from medical projects as a result of the Company's
restructuring in fiscal 1995.
Research and Development Expenses: Medical product research and development
expenses were $621,794 in the nine months ended March 31, 1995 and $11,426 in
the nine months ended March 31, 1996. The decrease in this area is due to the
Company's decision, in December 1994, to suspend research and development work
in connection with the Company's medical devices. This license agreement, for
ultrasonic medical technology, may cause research and development expenses to
increase from their current year levels. Industrial product research and
development expenses were $155,698 in the nine months ended March 31, 1995 and
$140,300 in the nine months ended March 31, 1996.
Other Income (Expense): Other income during the nine months ended March 31, 1995
was $29,598. During the nine months ended March 31, 1996, other income was
$47,171. This increase was principally due to the $50,000 option fee received
from Medical Device Alliance, Inc. upon signing the option agreement for the
Company's ultrasonic medical technology.
Net Operating Losses: The Company has accumulated approximately $6,900,000 of
net operating losses as of March 31, 1996, which may be used to reduce taxable
income and income taxes in future years. The utilization of these losses to
reduce future income taxes will depend on the generation of sufficient taxable
income prior to the expiration of the net operating loss carryforwards. The
carryforwards begin to expire in fiscal year 2002 and will expire through fiscal
year 2010. Additionally, based on ownership changes resulting from the offering
completed in January 1992, as well as historical issuances of common stock and
warrants, it is expected that the annual utilization of the otherwise available
pre-offering net operating loss carryforwards will be limited by the provisions
of Section 382 of the Internal Revenue Code as amended.
9
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MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources: At March 31, 1996, the Company had a cash
balance of $925,898 and investments held to maturity of $532,304. Three hundred
fifty thousand dollars of this amount was derived from the signing of the option
and licensing agreements discussed in Note 4.
In addition, the Company has a revolving credit facility from a U.S. bank in the
amount of $500,000 available to the Company for short-term borrowings and
letters of credit which expires on June 30, 1996. Borrowings under the facility
bear interest at prime plus 2% and are collateralized by a security interest in
all assets of the Company. While there are no outstanding borrowings under this
facility, the Company has utilized a portion of it to generate a standby letter
of credit in the amount of approximately $300,000, which guarantees a portion of
the credit facility of its subsidiary Labcaire Systems Ltd.
A revolving credit facility from a U.K. bank in the amount of approximately
$560,000 was available to Labcaire for short term borrowings. This facility
expires in August 1996 when all unpaid principal and interest is due. This
facility bears interest at U.K. prime plus 2% and is collateralized by a
security interest in all the assets of Labcaire, a guarantee (evidenced by a
standby letter of credit) by Misonix, and a guarantee by Labcaire's directors.
As of March 31, 1996, $524,937 was outstanding under this facility.
The Company believes that its existing capital resources will enable it to
maintain its current and planned operations for at least 12 months from the date
hereof.
10
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MISONIX, INC.
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
March 31, 1996.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Quarterly Report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: May 13, 1996
MISONIX, INC.
--------------------------------------
(Registrant)
By: /s/ Joseph Librizzi
--------------------------------------
Joseph Librizzi
President, Chief Executive Officer
By: /s/ Peter Gerstheimer
--------------------------------------
Peter Gerstheimer
Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 925,898
<SECURITIES> 532,304
<RECEIVABLES> 1,994,966
<ALLOWANCES> 57,258
<INVENTORY> 1,087,011
<CURRENT-ASSETS> 4,842,890
<PP&E> 1,940,366
<DEPRECIATION> 1,334,703
<TOTAL-ASSETS> 5,707,469
<CURRENT-LIABILITIES> 2,142,421
<BONDS> 0
0
0
<COMMON> 28,000
<OTHER-SE> 3,118,030
<TOTAL-LIABILITY-AND-EQUITY> 5,707,469
<SALES> 7,142,479
<TOTAL-REVENUES> 7,142,479
<CGS> 3,754,393
<TOTAL-COSTS> 7,001,898
<OTHER-EXPENSES> 21,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,636
<INCOME-PRETAX> 142,436
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,436
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
