<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, 1997
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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
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(State or other jurisdiction of (I.R.S Employer
incorporation or organization Identification No.)
1938 New Highway Farmingdale, N.Y. 11735
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code...(516) 694-9555
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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
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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, 1997
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$.01 par value 5,677,197
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
September 30, 1997 (Unaudited) 3
Consolidated Statements of Operations
Three Months Ended September 30, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows
Three months ended September 30, 1997
and 1996 (Unaudited) 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 9
Signatures 10
2
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MISONIX, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
September 30,
ASSETS 1997
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CURRENT:
Cash and cash equivalents $ 884,594
Investments held to maturity 9,273,905
Accounts receivable, net of allowance
for doubtful accounts of $68,270 4,753,811
Inventories (Note 3) 2,713,467
Prepaid expenses and other current assets 558,860
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TOTAL CURRENT ASSETS 18,184,637
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization of $1,640,748
921,373
PATENTS, at cost, less accumulated
amortization of $5,486 38,338
GOODWILL, less accumulated amortization
of $53,604 289,794
OTHER 55,678
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$ 19,489,820
============
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
CURRENT:
Note payable to bank $ 541,950
Accounts payable 1,533,603
Accrued expenses and other current liabilities 1,301,873
Income taxes payable 241,911
Current maturities of capital lease obligations 111,372
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TOTAL CURRENT LIABILITIES 3,730,709
CAPITAL LEASE OBLIGATIONS 116,390
DEFERRED INCOME (Note 4) 737,464
MINORITY INTEREST (Note 1) 108,508
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; shares authorized
10,000,000; issued and outstanding 5,672,154 56,722
Additional paid-in capital 21,370,945
Deficit (6,611,837)
Cumulative foreign currency translation adjustment (19,081)
------------
TOTAL STOCKHOLDERS' EQUITY 14,796,749
------------
$ 19,489,820
============
See accompanying notes to consolidated financial statements.
3
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
September 30,
------------------------------
1997 1996
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NET SALES $ 5,012,563 $ 2,789,834
COST OF GOODS SOLD 2,158,598 1,357,308
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Gross profit 2,853,965 1,432,526
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OPERATING EXPENSES:
Selling, general and
administrative expenses 1,543,352 1,083,813
Research and development 276,736 35,206
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Total operating expenses 1,820,088 1,119,019
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Income from operations 1,033,877 313,507
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OTHER INCOME (EXPENSE):
Interest income 111,295 16,087
Interest expense (11,552) (10,451)
Option/license fees 17,387 110,000
Royalty income 121,555 --
Foreign exchange loss (10,765) (1,308)
Miscellaneous expense (534) (436)
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Total other income 227,386 113,892
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Income before minority
interest and income taxes 1,261,263 427,399
Minority interest in net income of
consolidated subsidiary (1,545) (1,937)
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Income before income taxes 1,259,718 425,462
Income taxes (352,090) --
----------- -----------
NET INCOME $ 907,628 $ 425,462
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NET INCOME PER SHARE $ .13 $ .10
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WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 6,737,189 4,417,074
=========== ===========
See accompanying notes to consolidated financial statement
4
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended
September 30,
----------------------
1997 1996
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OPERATING ACTIVITIES:
Net income $ 907,628 $ 425,462
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 130,279 56,494
Minority interest in net income
of subsidiary 1,545 1,937
Foreign currency loss 9,394 4,072
Changes in operating assets and
liabilities:
Accounts receivable (1,694,275) (103,359)
Inventory (428,108) (295,641)
Prepaid expenses and other
receivables (3,323) 176,159
Accounts payable and accrued
expenses (719,299) (179,029)
Income taxes payable 241,911 --
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Net cash (used in) provided by
operating activities (1,554,248) 86,095
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INVESTING ACTIVITIES:
Purchase of investments held to maturity (2,906,310) (116,271)
Acquisition of property and equipment (103,021) (120,657)
Patent costs -- (322)
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Net cash used in investing activities (3,009,331) (237,250)
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FINANCING ACTIVITIES:
Deferred income (9,587) (10,000)
Proceeds from note payable to bank 56,155 18,242
Increase in capital lease obligations -- 37,189
Principal payments on capital lease
obligations (7,581) --
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Net cash provided by financing activities 38,987 45,431
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Effect of exchange rates (644) 3
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NET DECREASE IN CASH (4,525,236) (105,721)
CASH, beginning of period 5,409,830 1,153,999
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CASH, end of period $ 884,594 $ 1,048,278
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See accompanying notes to consolidated financial statements.
5
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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 84.05% owned subsidiary, Labcaire Systems Ltd. ("Labcaire"),
and its 100% owned subsidiary, Misonix, Ltd. All significant intercompany
balances and transactions have been eliminated.
2. Interim Periods
The financial statements for the three months ended September 30, 1997 and 1996
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, 1997.
3. Inventories
Inventories are summarized as follows:
September 30,
1997
-------------
Raw materials $1,757,292
Work-in-process 423,573
Finished goods 532,602
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$2,713,467
==========
4. Acquisition
In October 1997, under the terms of the revised purchase agreement (the
"Agreement") with Labcaire (as discussed in the Form 10-KSB at June 30, 1996),
the Company paid (pound)70,666 (approximately $119,000) for 9,286 shares (2.65%)
of the 65,000 outstanding shares owned by the Labcaire directors. This
represents the fiscal 1996 buy-back portion, as defined in the Agreement.
5. Stockholders' Equity
On September 9, 1997, the Board of Directors of the Company declared a
three-for-two stock split payable to the shareholders of record on October 10,
1997. This dividend was paid to the shareholders on October 21, 1997. All common
stock data and per share data in the accompanying consolidated financial
statements, and notes thereto, give retroactive effect to this stock split.
6
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MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 1997 and 1996
Net Sales: Net sales of the Company's medical, scientific and industrial
products, increased $2,222,729 (79.7%) from $2,789,834 in the three months ended
September 30, 1996 to $5,012,563 in the three months ended September 30, 1997.
Parent Company sales for the three months ended September 30, 1997 increased
112.8 % while sales at the Company's foreign subsidiary (Labcaire) increased
19.3% . The Company's backlog of unfilled orders increased from $1,966,372 at
September 30, 1996 to $6,349,585 at September 30, 1997. This increase is due to
increasing demand for the Company's scientific and industrial product lines and
new orders relative to the Company's medical devices.
Gross Profit: Gross profit increased from 51.3% of sales in the three months
ended September 30, 1996 to 56.9% of sales in the three months ended September
30, 1997 primarily due to the continued 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 $1,083,813 (38.8 % of sales) in the three
months ended September 30, 1996 to $1,543,352 (30.8% of sales) in the three
months ended September 30, 1997. This dollar increase relates to sales costs
associated with higher sales volume and hiring of additional personnel, but
reflects a percentage decrease due to higher sales volume.
Research and Development Expenses: Medical product research and development
expenses were $6,456 in the three months ended September 30, 1996 and $189,950
in the three months ended September 30, 1997. The increase in this area is due
to non-funded development costs associated with the Company's medical devices,
under its agreements with Medical Device Alliance, Inc. and U.S. Surgical
Corporation. Industrial product research and development expenses were $28,750
in the three months ended September 30, 1996 and $86,786 in the three months
ended September 30, 1997. This increase is due to upgrades in the fume enclosure
product group.
Other Income (Expense): Other income during the three months ended September 30,
1996 was $113,892. During the three months ended September 30, 1997, other
income was $227,386. This increase was principally due to $121,555 of royalty
income received from Medical Device Alliance, Inc. on sales of the ultrasonic
soft tissue aspirator, as per the terms of its licensing agreement with the
Company.
Income Taxes: The Company is currently providing for income taxes at a rate of
approximately 28%. This rate reflects the benefit of deferred tax assets that
could not be used until the Company was profitable.
Liquidity and Capital Resources: At September 30, 1997, the Company had a cash
balance of $884,594 and investments held to maturity of $9,273,905 compared with
a cash balance of $1,048,278 and investments held to maturity of $469,324 at
September 30, 1996. This increase is due to royalties received from Medical
Device Alliance, Inc., the $5,687,198 received upon the exercise of warrants in
February 1997, and to cash flow from operations. Inventories have increased from
$1,503,124 at September 30, 1996 to $2,713,467 at September 30, 1997 reflecting,
in part, the establishment of an inventory for the ultrasonic soft tissue
aspirator.
7
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MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
In addition, the Company has a revolving credit facility, which expires on June
30, 1998, 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. There are no outstanding borrowings under this facility.
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 1998 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 and a guarantee by Labcaire's
directors. As of September 30, 1997, $541,950 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.
Forward Looking Statements: This report contains certain forward looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, which are intended to be covered by the safe harbors
created thereby. Although the Company believes that the assumptions underlying
the forward looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward looking statements contained in this report will prove to be
accurate. Factors that could cause actual results to differ from the results
specifically discussed in the forward looking statements include, but are not
limited to , the absence of anticipated contracts or higher than historical
costs incurred in performance of contracts or in conducting other activities.
8
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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, 1997.
9
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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: November 12, 1997
MISONIX, INC.
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(Registrant)
By: /s/ Joseph Librizzi
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Joseph Librizzi
President, Chief Executive Officer
By: /s/ Peter Gerstheimer
-------------------------------------
Peter Gerstheimer
Vice President and
Chief Financial Officer
10
<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-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 884,594
<SECURITIES> 9,273,905
<RECEIVABLES> 4,822,081
<ALLOWANCES> 68,270
<INVENTORY> 2,713,467
<CURRENT-ASSETS> 18,184,637
<PP&E> 2,562,121
<DEPRECIATION> 1,640,748
<TOTAL-ASSETS> 19,489,820
<CURRENT-LIABILITIES> 3,730,709
<BONDS> 0
0
0
<COMMON> 56,722
<OTHER-SE> 14,740,027
<TOTAL-LIABILITY-AND-EQUITY> 19,489,820
<SALES> 5,012,563
<TOTAL-REVENUES> 5,012,563
<CGS> 2,158,598
<TOTAL-COSTS> 3,978,686
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,552
<INCOME-PRETAX> 1,259,718
<INCOME-TAX> (352,090)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 907,628
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
