<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, 1997
----------------
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, 1997
--------------------- -----------
$.01 par value 3,781,436
Transitional small business disclosure format (check one):
YES NO X
--- ---
<PAGE>
MISONIX, INC.
-------------
Index
PART I. FINANCIAL INFORMATION Page
Financial Statements:
Consolidated Balance Sheet
March 31, 1997 (Unaudited) 3
Consolidated Statements of Operations
Nine months ended March 31, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Operations
Three Months Ended March 31, 1997
and 1996 (Unaudited) 5
Consolidated Statements of Cash Flows
Nine months ended March 31, 1997
and 1996 (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
<PAGE>
MISONIX, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
==========================
March 31,
ASSETS 1997
------ ---------
CURRENT:
Cash and cash equivalents $ 2,719,089
Investments held to maturity 6,691,208
Accounts receivable, net of allowance
for doubtful accounts of $60,726 3,465,033
Inventories (Note 3) 2,082,636
Prepaid expenses and other current assets 441,425
-----------
TOTAL CURRENT ASSETS 15,399,391
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization of $1,518,951
848,913
PATENTS, at cost, less accumulated
amortization of $2,013 44,209
GOODWILL, less accumulated amortization
of $46,736 296,662
OTHER 49,365
-----------
$16,638,540
===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
CURRENT:
Note payable to bank $ 524,347
Accounts payable 1,500,107
Accrued expenses and other current liabilities 1,953,929
Current maturities of capital lease obligations 87,612
-----------
TOTAL CURRENT LIABILITIES 4,065,995
CAPITAL LEASE OBLIGATIONS 113,248
DEFERRED INCOME (Note 4) 749,458
MINORITY INTEREST (Note 1) 97,787
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; shares authorized
10,000,000; issued and outstanding 3,781,436 37,814
Additional paid-in capital 21,212,145
Deficit (9,627,421)
Cumulative foreign currency translation adjustment (10,486)
-----------
TOTAL STOCKHOLDERS' EQUITY 11,612,052
-----------
$16,638,540
===========
See accompanying notes to consolidated financial statements.
3
<PAGE>
MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=====================================
For the nine months ended
March 31,
------------------------------------
1997 1996
---- ----
NET SALES $11,505,876 $ 7,142,479
COST OF GOODS SOLD 5,233,925 3,754,393
----------- -----------
Gross profit 6,271,951 3,388,086
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 3,903,953 3,095,779
Research and development 191,178 151,726
Non-cash compensation charge(Note 6) 4,359,600 -
----------- -----------
Total operating expenses 8,454,731 3,247,505
----------- -----------
(Loss) Income from operations (2,182,780) 140,581
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 75,982 39,917
Interest expense (31,974) (31,636)
Option/license fees 139,375 60,000
Royalty income 121,314 -
Foreign exchange loss (2,702) (20,742)
Miscellaneous income (expense) 1,491 (368)
----------- -----------
Total other income 303,486 47,171
----------- -----------
(Loss) Income before minority
interest and income taxes (1,879,294) 187,752
Minority interest in net income of
consolidated subsidiary (22,508) (45,316)
----------- -----------
(Loss) Income before income taxes (1,901,802) 142,436
Income taxes (29,029) -
----------- -----------
NET (LOSS) INCOME $(1,930,831) $ 142,436
=========== ===========
NET (LOSS) INCOME PER SHARE $ (.64) $ .05
====== ======
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 3,027,447 2,834,752
=========== ===========
See accompanying notes to consolidated financial statement
4
<PAGE>
MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=====================================
For the three months ended
March 31,
------------------------------------
1997 1996
---- ----
NET SALES $ 5,102,599 $ 2,814,607
COST OF GOODS SOLD 2,119,785 1,406,880
----------- -----------
Gross profit 2,982,814 1,407,727
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,539,637 1,071,054
Research and development 92,816 42,315
Non-cash compensation charge(Note 6) 4,359,600 -
----------- -----------
Total operating expenses 5,992,053 1,113,369
----------- -----------
(Loss) Income from operations (3,009,239) 294,358
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 42,181 13,183
Interest expense (10,916) (11,051)
Option/license fees 15,938 7,500
Royalty income 121,314 -
Foreign exchange loss (20,532) (3,290)
Miscellaneous expense (658) (176)
----------- -----------
Total other income 147,327 6,166
----------- -----------
(Loss) Income before minority
interest and income taxes (2,861,912) 300,524
Minority interest in net income of
consolidated subsidiary (15,097) (39,013)
----------- -----------
(Loss) Income before income taxes (2,877,009) 261,511
Income taxes (29,029) -
----------- -----------
NET (LOSS) INCOME $(2,906,038) $ 261,511
=========== ===========
NET (LOSS) INCOME PER SHARE $ (.87) $ .09
====== ======
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 3,336,118 2,826,129
=========== ===========
See accompanying notes to consolidated financial statement
5
<PAGE>
MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
=====================================
Nine months ended
March 31,
-------------------------------
1997 1996
---- ----
OPERATING ACTIVITIES:
Net income (loss) $(1,930,831) $ 142,436
Adjustments to reconcile net (loss) income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 141,828 156,047
Minority interest in net income
of subsidiary 22,508 45,316
Foreign currency loss 6,442 20,742
Non-cash compensation charge 4,359,600 -
Changes in operating assets and
liabilities:
Accounts receivable (1,446,094) (526,572)
Inventory (845,974) (19,146)
Prepaid expenses and other
receivables 69,973 (236,772)
Deposits and other assets (25,526) 2,479
Accounts payable and accrued
expenses 1,843,112 245,868
----------- -----------
Net cash provided by (used in)
operating activities 2,195,038 (169,602)
----------- -----------
INVESTING ACTIVITIES:
Sales of investments held to maturity 493,787 795,168
Purchase of investments held to maturity (6,831,942) (971,872)
Purchase of additional stock in Labcaire (102,099) -
Acquisition of property and equipment (212,168) (39,507)
Patent costs (16,822) (29,400)
----------- -----------
Net cash used in investing activities (6,669,244) (245,611)
----------- -----------
FINANCING ACTIVITIES:
Deferred income 368,625 290,000
Proceeds from note payable to bank - 202,966
Repayment of note payable to bank (22,754) -
Principal payments on capital lease
obligation (68,208) (37,767)
Exercise of employee stock options 98,350 -
Exercise of public warrants,
less associated costs 5,663,216 -
----------- -----------
Net cash provided by financing activities 6,039,229 455,199
----------- -----------
Effect of exchange rates 67 (32)
----------- -----------
NET INCREASE IN CASH 1,565,090 39,954
CASH, beginning of period 1,153,999 885,944
----------- -----------
CASH, end of period $ 2,719,089 $ 925,898
=========== ===========
See accompanying notes to consolidated financial statements.
6
<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 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 nine months ended March 31, 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, 1996.
3. Inventories
-----------
Inventories are summarized as follows:
March 31,
1997
----------
Raw materials $1,244,961
Work-in-process 280,163
Finished goods 557,512
----------
$2,082,636
==========
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 received $100,000 under the option agreement preceding the license
agreement. Under the license agreement, the Company is entitled to receive
aggregate fees of approximately $500,000, subject to attaining certain
milestones over the term of the agreement, plus royalties based upon net sales
of such products. As of March 31, 1997, the Company has received $275,000 under
the license agreement.
5. Acquisition
-----------
In October 1996, 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)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, as defined in the Agreement.
7
<PAGE>
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 80,000 shares at prices of $6.00 and $9.00 under the Employee
Incentive Stock Option Plan and 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, were ratified and approved at the annual meeting of
shareholders on February 19, 1997. This resulted in a non-cash compensation
charge in the amount of $4,359,600.
7. Exercise of Public Warrants
---------------------------
As of the close of business on February 3, 1997, seven hundred twenty nine
thousand one hundred twenty eight publicly issued Redeemable Warrants were
exercised and a like number of common shares were issued. The balance of these
options expired. As a result of the redemption, the Company received gross
proceeds of $5,687,198.
8
<PAGE>
MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
Nine Months Ended March 31, 1997 and 1996
- -----------------------------------------
Net Sales: Net sales of the Company's medical, scientific and industrial
products, increased $4,363,397 (61.1%) from $7,142,479 in the nine months ended
March 31, 1996 to $11,505,876 in the nine months ended March 31, 1997. Parent
Company sales for the nine months ended March 31, 1997 increased 93.7% while
sales at the Company's foreign subsidiary (Labcaire) increased 21.1%. The
Company's backlog of unfilled orders increased from $1,211,586 at March 31, 1996
to $5,640,466 at March 31, 1997. This increase is due to increasing demand for
the Company's scientific and industrial product lines and new orders relative to
the ultrasonic soft tissue aspirator.
Gross Profit: Gross profit increased from 47.4% of sales in the nine months
ended March 31, 1996 to 54.5% of sales in the nine months ended March 31, 1997
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 $3,095,779 (43.3 % of sales) in the nine
months ended March 31, 1996 to $3,903,953 (33.9% of sales) in the nine months
ended March 31, 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 $11,426 in the nine months ended March 31, 1996 and $50,999 in the
nine months ended March 31, 1997. The increase in this area is due to non-funded
development costs associated with the Company's medical devices, under its
agreement with Medical Device Alliance Inc. and U.S. Surgical Corporation.
Industrial product research and development expenses were $140,300 in the nine
months ended March 31, 1996 and $140,179 in the nine months ended March 31,
1997.
Non-cash Compensation Charge: The non-cash compensation charge relates to grants
of options to outside directors to acquire 519,000 shares of the Company's
common stock which were approved by shareholders at the Company's Annual Meeting
on February 19, 1997. Without the effects of this charge, the Company would have
reported net income of $1,453,562, or $.40 per share, for the three months ended
March 31, 1997 and $2,428,769, or $.77 per share, for the nine month period
ended March 31, 1997. Due to the non-cash compensation charge of $4,359,600, the
Company recorded a net loss of $2,906,038, or $(.87) per share, for the quarter
ended March 31, 1997, compared to net income of $261,511, or $.09 per share, for
the quarter ended March 31, 1996. The Company had a net loss of $1,930,831, or
$(.64) per share, for the nine months ended March 31, 1997, after the non-cash
compensation charge as compared to net income of $142,436, or $.05 per share,
for the nine months ended March 31, 1996. This charge does not affect the
Company's net worth.
Other Income (Expense): Other income during the nine months ended March 31, 1996
was $47,171. During the nine months ended March 31, 1997, other income was
$303,486. This increase was principally due to $100,000 of option fees received
from United States Surgical Corporation upon the latter's signing the option
agreement for the Company's ultrasonic medical technology and $121,314 in
royalties received from Medical Device Alliance, on sales of the ultrasonic soft
tissue aspirator, as per the terms of its licensing agreement with the Company.
9
<PAGE>
MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
---------------------------------------------------------
Net Operating Losses: The Company has accumulated approximately $6,956,000 of
net operating losses as of March 31, 1997, 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.
Liquidity and Capital Resources: At March 31, 1997, the Company had a cash
balance of $2,719,089 and investments held to maturity of $6,691,208 compared
with a cash balance of $925,898 and investments held to maturity of $532,304 at
March 31, 1996. This increase is due to the $375,000 received upon the signing
of the option and licensing agreements discussed in Note 4, the $5,687,198
received upon the exercise of warrants discussed in Note 7, and to cash flow
from operations. Inventories have increased from $1,087,011 at March 31, 1996 to
$2,082,636 at March 31, 1997 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 had utilized it in the form of a standby letter of credit in the amount
of approximately $300,000, which guaranteed 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 its own creditworthiness.
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 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 and a guarantee by Labcaire's
directors. As of March 31, 1997, $524,347 was outstanding under this facility.
The Company believes that its existing capital resources will enable it to
maintain its current and planned operations for the foreseeable future, in the
absence of highly unusual circumstances.
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.
10
<PAGE>
MISONIX, INC.
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
There was a report on Form 8-K, dated February 10, 1997,
filed during the quarter ended March 31, 1997 concerning the
exercise of 729,128 publicly issued redeemable warrants.
11
<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: May 12, 1997
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>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 2,719,089
<SECURITIES> 6,691,208
<RECEIVABLES> 3,525,759
<ALLOWANCES> 60,726
<INVENTORY> 2,082,636
<CURRENT-ASSETS> 15,399,391
<PP&E> 2,367,864
<DEPRECIATION> 1,518,951
<TOTAL-ASSETS> 16,638,540
<CURRENT-LIABILITIES> 4,065,995
<BONDS> 0
0
0
<COMMON> 37,814
<OTHER-SE> 11,574,238
<TOTAL-LIABILITY-AND-EQUITY> 16,638,540
<SALES> 11,505,876
<TOTAL-REVENUES> 11,505,876
<CGS> 5,233,925
<TOTAL-COSTS> 9,329,056
<OTHER-EXPENSES> 4,359,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,974
<INCOME-PRETAX> (1,901,802)
<INCOME-TAX> (29,029)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,930,831)
<EPS-PRIMARY> (.64)
<EPS-DILUTED> (.64)
</TABLE>
