<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 September 30, 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.
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(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 November 1, 1996
--------------------- ----------------
$.01 par value 2,830,000
Transitional small business disclosure format (check one):
YES NO X
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<PAGE>
MISONIX, INC.
Index
PART I. FINANCIAL INFORMATION Page
Financial Statements:
Consolidated Balance Sheet
September 30, 1996(Unaudited) 3
Consolidated Statements of Operations
Three months ended September 30, 1996
and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows
Three months ended September 30, 1996
and 1995 (Unaudited) 5
Notes to Consolidated Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
Signatures 11
2
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MISONIX, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
ASSETS 1996
------ ------------
<S> <C>
CURRENT:
Cash and cash equivalents $ 1,048,278
Investments held to maturity 469,324
Accounts receivable, net of allowance
for doubtful accounts of $59,494 2,075,392
Inventories (Note 3) 1,503,124
Prepaid expenses and other current assets 330,657
------------
TOTAL CURRENT ASSETS 5,426,775
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization of $1,428,733 692,291
PATENTS, at cost, less accumulated
amortization of $1,099 28,623
GOODWILL, less accumulated amortization
of $40,208 201,091
OTHER 23,839
------------
$ 6,372,619
============
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
CURRENT:
Note payable to bank $ 540,919
Accounts payable 1,158,693
Accrued expenses and other current liabilities 225,579
Current maturities of capital lease obligations 67,938
------------
TOTAL CURRENT LIABILITIES 1,993,129
CAPITAL LEASE OBLIGATIONS 105,179
DEFERRED INCOME 370,833
MINORITY INTEREST (Note 1) 77,216
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 (7,271,128)
Cumulative foreign currency translation adjustment (31,403)
------------
TOTAL STOCKHOLDERS' EQUITY 3,826,262
------------
$ 6,372,619
============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended
September 30,
- - - - - - - - - - - - - - - -
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 2,789,834 $ 2,103,226
COST OF GOODS SOLD 1,357,308 1,158,801
----------- -----------
Gross profit 1,432,526 944,425
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,083,813 980,172
Research and development 35,206 55,089
----------- -----------
Total operating expenses 1,119,019 1,035,261
----------- -----------
Income (Loss) from operations 313,507 (90,836)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 16,087 13,449
Interest expense (10,451) (9,203)
Option/license fees 110,000 --
Foreign exchange gain (loss) (1,308) (8,523)
Miscellaneous (expense) income (436) 25,004
----------- -----------
Total other income 113,892 20,727
----------- -----------
Income (Loss) before minority interest 427,399 (70,109)
Minority interest in net income of
consolidated subsidiary (1,937) (5,354)
----------- -----------
NET INCOME (LOSS) $ 425,462 $ (75,463)
=========== ===========
NET INCOME (LOSS) PER SHARE $ .14 $ (.03)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 2,944,716 2,800,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended
September 30,
- - - - - - - - - - - - - - - -
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 425,462 $ (75,463)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 56,494 50,497
Minority interest in net income
of subsidiary 1,937 5,354
Foreign currency loss 4,072 7,414
Changes in operating assets and
liabilities:
Accounts receivable (103,359) 110,311
Inventory (295,641) (72,941)
Prepaid expenses and other
receivables 176,159 (76,899)
Deposits and other assets -- 2,479
Accounts payable and accrued
expenses (179,029) 7,601
----------- -----------
Net cash provided by (used in)
operating activities 86,095 (41,647)
----------- -----------
INVESTING ACTIVITIES:
Sale of investments held to maturity -- 195,017
Purchase of investments held to maturity (116,271) (197,300)
Acquisition of property and equipment (120,657) (34,782)
Patent costs (322) --
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Net cash used in investing activities (237,250) (37,065)
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FINANCING ACTIVITIES:
Increase (decrease) in capital
lease obligations 37,189 (9,076)
Deferred income (10,000) --
Note payable to bank 18,242 201,723
Principal payments on capital lease
obligation -- --
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Net cash provided by financing activities 45,431 192,647
----------- -----------
Effect of exchange rates 3 (4)
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NET (DECREASE) INCREASE IN CASH (105,721) 113,931
CASH, beginning of period 1,153,999 885,944
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CASH, end of period $ 1,048,278 $ 999,875
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
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. Subsequent to September 30, 1996, the Company
increased its ownership in Labcaire to 84.05% (see Note 5). All significant
intercompany balances and transactions have been eliminated.
2. Interim Periods
The financial statements for the three months ended September 30, 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,
1996.
3. Inventories
Inventories are summarized as follows:
September 30,
1996
-------------
Raw materials $ 816,325
Work-in-process 142,152
Finished goods 544,647
----------
$1,503,124
==========
4. License Agreement For Medical Technology
In October 1996, the Company entered into a license agreement, with United
States Surgical Corporation ("USS"), covering the further development and
commercial exploitation of the Company's medical technology relating to
ultrasonic cutting, which uses high frequency sound waves to coagulate and
divide tissue for both open and laparoscopic surgery. The license agreement
gives USS exclusive world-wide marketing and sales rights for this technology.
The Company is entitled, under the license agreement, to receive aggregate
licensing fees, over the term of the agreement, of approximately $500,000, plus
royalties based upon net sales of such products. The Company already received
$100,000 under the option agreement which preceded the license agreement.
5. Acquisition
In October 1996, under the terms of the revised purchase agreement with
Labcaire (as discussed in the Form 10-KSB at June 30, 1996), the Company paid
(pound)62,388 (approximately $102,099) for 9,284 shares (2.65%) of the 65,000
outstanding shares owned by the Labcaire directors. This represents the fiscal
1996 buy-back portion.
6
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MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Information with respect to interim periods is unaudited)
6. Capital Transactions
As previously reported, in March 1996, the Board of Directors approved a 1996
Employee Incentive Stock Option Plan covering an aggregate of 300,000 common
shares of the Company and a 1996 Outside Directors Stock Option Plan covering
an aggregate of 750,000 common shares of the Company. The Board then granted
options to acquire 519,000 shares at a price of $1.10 under the Outside
Directors Plan. The options are exercisable for 10 years. Both of these plans,
and the transactions under which options to acquire 519,000 shares were
granted, are subject to shareholder ratification and approval at the next
annual meeting of shareholders. Such approval may result in a noncash
compensation charge in an amount not presently determinable.
7
<PAGE>
MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three months ended September 30, 1996 and 1995
Net Sales: Net sales, which relate to the Company's medical, scientific and
industrial products, increased $686,608 (32.6%) from $2,103,226 in the three
months ended September 30, 1995 to $2,789,834 in the three months ended
September 30, 1996 reflecting continued demand for the Company's industrial and
scientific products and the first sales of the Company's Ultrasonic Soft Tissue
Aspirator to Medical Device Alliance, Inc. Parent company sales for the three
months ended September 30, 1996 increased 48% while sales at the Company's
foreign subsidiary increased 14%. The Company's backlog of unfilled orders
increased from $631,157 at September 30, 1995 to $1,966,372 at September 30,
1996.
Gross Profit: Gross profit increased from 44.9% of sales in the three months
ended September 30, 1995 to 51.3% of sales in the three months ended September
30, 1996 primarily due to the onset of medical device sales, significant growth
in the domestic sales of the Company and economies of scale relative to this
growth.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased from $980,172 (46.6 % of sales) in the three
months ended September 30, 1995 to $1,083,813 (38.8% of sales) in the three
months ended September 30, 1996. This dollar increase relates to sales costs
associated with higher sales volume and hiring of additional personnel.
Research and Development Expenses: Medical product research and development
expenses were $6,456 in the three months ended September 30, 1996 as compared
to $0 in the three months ended September 30, 1995. The slight increase is due
to non-funded development costs associated with the Company's medical devices.
Industrial product research and development expenses were $55,089 in the three
months ended September 30, 1995 and $28,750 in the three months ended September
30, 1996.
Other Income (Expense): Other income during the three months ended September
30, 1995 was $20,727. During the three months ended September 30, 1996, other
income was $113,892. This increase was principally due to the $100,000 option
fees received from United States Surgical Corporation upon the latter's signing
the option agreement for the Company's ultrasonic medical technology.
Net Operating Losses: The Company has accumulated approximately $6,956,000 of
net operating losses as of September 30, 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 2011. 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.
8
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MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources: At September 30, 1996, the Company had a cash
balance of $1,048,278 and investments held to maturity of $469,324. One hundred
thousand dollars of this amount was derived from the signing of the option
agreement discussed in Note 4. This compares with the cash balance of
$1,153,999 and investments held to maturity of $353,053 at June 30, 1996.
Inventories have increased during this period from $1,202,314 to $1,503,124
reflecting, in part, the establishment of an inventory for the ultrasonic soft
tissue aspirator.
In addition, the Company has a revolving credit facility, which expires on June
30, 1997, in the amount of $500,000 available to the Company for short-term
borrowings and letters of credit. 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. In October 1996, the Company
was released from this standby letter of credit since Labcaire was able to
secure its credit facility based upon their own creditworthiness.
A revolving credit facility from a U.K. bank in the amount of approximately
$560,000 is available to Labcaire for short term borrowings. This facility
expires in August 1997 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 September 30, 1996, $540,919 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.
This Report on Form 10-QSB and the Company's other periodic reports may contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, general economic conditions, competition, technological
advances, regulatory actions, postponement or cancellation of orders, and the
markets acceptance or non-acceptance of the Company's products.
9
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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 September 30, 1996.
10
<PAGE>
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: November 12, 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
11
<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>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,048,278
<SECURITIES> 469,324
<RECEIVABLES> 2,134,886
<ALLOWANCES> 59,494
<INVENTORY> 1,503,124
<CURRENT-ASSETS> 5,426,775
<PP&E> 2,121,024
<DEPRECIATION> 1,428,733
<TOTAL-ASSETS> 6,372,619
<CURRENT-LIABILITIES> 1,993,129
<BONDS> 0
0
0
<COMMON> 28,000
<OTHER-SE> 3,798,262
<TOTAL-LIABILITY-AND-EQUITY> 6,372,619
<SALES> 2,789,834
<TOTAL-REVENUES> 2,789,834
<CGS> 1,357,308
<TOTAL-COSTS> 2,476,327
<OTHER-EXPENSES> 1,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,451
<INCOME-PRETAX> 425,462
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 425,462
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
