<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 December 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.
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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 February 10, 1997
--------------------- -----------------
$.01 par value 3,640,128
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
December 31,1996(Unaudited) 3
Consolidated Statements of Operations
Six Months Ended December 31, 1996
and 1995 (Unaudited) 4
Consolidated Statements of Operations
Three Months Ended December 31, 1996
and 1995 (Unaudited) 5
Consolidated Statements of Cash Flows
Six Months Ended December 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)
December 31,
ASSETS 1996
------ ------------
CURRENT:
Cash and cash equivalents $ 730,335
Investments held to maturity 1,702,264
Accounts receivable, net of allowance
for doubtful accounts of $59,631 1,852,681
Inventories (Note 3) 1,861,730
Prepaid expenses and other current assets 341,166
------------
TOTAL CURRENT ASSETS 6,488,176
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization of $1,470,512 755,315
PATENTS at cost, less accumulated
amortization of $1,522 28,200
GOODWILL, less accumulated amortization
of $43,302 300,096
OTHER 31,365
------------
$ 7,603,152
============
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
CURRENT:
Note payable to bank $ 495,413
Accounts payable 1,375,767
Accrued expenses and other current liabilities 319,926
Current maturities of capital lease obligations 84,114
------------
TOTAL CURRENT LIABILITIES 2,275,220
CAPITAL LEASE OBLIGATIONS 118,068
DEFERRED INCOME (Note 4) 658,796
MINORITY INTEREST (Notes 1 and 5) 82,690
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; shares authorized
10,000,000; issued and outstanding 2,870,000 28,700
Additional paid-in capital 11,152,593
Deficit (6,721,383)
Cumulative foreign currency translation adjustment 8,468
------------
TOTAL STOCKHOLDERS' EQUITY 4,468,378
------------
$ 7,603,152
============
See accompanying notes to consolidated financial statements.
3
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six months ended
December 31,
-------------------------------
1996 1995
----------- -----------
NET SALES $ 6,403,277 $ 4,327,872
COST OF GOODS SOLD 3,114,140 2,347,513
----------- -----------
Gross profit 3,289,137 1,980,359
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 2,364,316 2,024,725
Research and development 98,362 109,411
----------- -----------
Total operating expenses 2,462,678 2,134,136
----------- -----------
Income(loss)from operations 826,459 (153,777)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 33,801 26,734
Interest expense (21,058) (20,585)
Option/license fees 123,437 52,500
Foreign exchange gain (loss) 17,830 (17,452)
Miscellaneous income (expense) 2,149 (192)
----------- -----------
Total other income 156,159 41,005
----------- -----------
Income(loss)before minority interest 982,618 (112,772)
Minority interest in net income of
consolidated subsidiary (7,411) (6,303)
----------- -----------
NET INCOME (LOSS) $ 975,207 $ (119,075)
=========== ===========
NET INCOME (LOSS) PER SHARE $ .33 $ (.04)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 2,970,593 2,800,000
=========== ===========
See accompanying notes to consolidated financial statements
4
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
December 31,
-------------------------------
1996 1995
----------- -----------
NET SALES $ 3,613,443 $ 2,224,646
COST OF GOODS SOLD 1,756,832 1,188,712
----------- -----------
Gross profit 1,856,611 1,035,934
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,280,503 1,044,553
Research and development 63,156 54,322
----------- -----------
Total operating expenses 1,343,659 1,098,875
----------- -----------
Income(loss)from operations 512,952 (62,941)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 17,714 13,285
Interest expense (10,607) (11,382)
Option/license fees 13,437 27,500
Foreign exchange gain (loss) 19,138 (8,929)
Miscellaneous income (expense) 2,585 (196)
----------- -----------
Total other income 42,267 20,278
----------- -----------
Income(loss)before minority interest 555,219 (42,663)
Minority interest in net income of
consolidated subsidiary (5,474) (949)
----------- -----------
NET INCOME (LOSS) $ 549,745 $ (43,612)
=========== ===========
NET INCOME (LOSS) PER SHARE $ .18 $ (.02)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 2,975,330 2,800,000
=========== ===========
See accompanying notes to consolidated financial statements
5
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended
December 31,
----------------------------
1996 1995
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $ 975,207 $ (119,075)
Adjustments to reconcile net income
(loss)to net cash provided by
(used in) operating activities:
Depreciation and amortization 76,666 103,093
Minority interest in net income
of subsidiary 7,411 6,303
Foreign currency (gain) loss (12,033) 17,452
Changes in operating assets and
liabilities:
Accounts receivable 199,061 95,428
Inventory (592,209) 5,146
Prepaid expenses and other
receivables 175,731 (52,121)
Deposits and other assets (7,526) 2,479
Accounts payable and accrued
expenses 61,674 (130,576)
----------- -----------
Net cash provided by (used in)
operating activities 883,982 (71,871)
----------- -----------
INVESTING ACTIVITIES:
Sales of investment held to maturity 227,561 451,197
Purchases of investments held to maturity (1,576,772) (344,262)
Purchase of additional stock in Labcaire (102,099) --
Acquisition of property and equipment (68,770) (46,690)
----------- -----------
Net cash (used in) provided by
investing activities (1,520,080) 60,245
----------- -----------
FINANCING ACTIVITIES:
Deferred income 277,963 297,500
Proceeds from note payable to bank -- 214,530
Repayment of note payable to bank (71,782) --
Exercise of employee stock options 52,500 --
Principal payments on capital lease
obligation (46,292) (18,152)
----------- -----------
Net cash provided by
financing activities 212,389 493,878
----------- -----------
Effect of exchange rates 45 (30)
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NET (DECREASE) INCREASE IN CASH (423,664) 482,222
CASH, beginning of period 1,153,999 885,944
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CASH, end of period $ 730,335 $ 1,368,166
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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 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 six months ended December 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,
1996.
3. Inventories
Inventories are summarized as follows:
December 31,
1996
----------
Raw materials $1,103,904
Work-in-process 173,967
Finished goods 583,859
----------
$1,861,730
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. The Company has already received $275,000 under 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.
7
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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 70,000 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, are subject to shareholder ratification
and approval at the next annual meeting of shareholders on February 19, 1997.
Such approval may result in a noncash compensation charge in an amount not
presently determinable.
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, the Company received gross proceeds of
$5,687,198, giving it approximately 9,326,864 in cash and marketable securities
as of that date.
8
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MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended December 31, 1996 and 1995
Net Sales: Net sales, which relate to the Company's medical, scientific and
industrial products, increased $2,075,405 (48.0%) from $4,327,872 in the six
months ended December 31, 1995 to $6,403,277 in the six months ended December
31, 1996. Domestic sales for the six months ended December 31, 1996 increased
66 % while sales at the Company's foreign subsidiary increased 25 %. The
Company's backlog of unfilled orders increased from $1,110,337 at December 31,
1995 to $3,415,275 at December 31, 1996. This increase is due to increasing
demand for the Company's base product line and new orders relative to the
ultrasonic soft tissue aspirator.
Gross Profit: Gross profit increased from 45.8% of sales in the six months
ended December 31, 1995 to 51.4% of sales in the six months ended December 31,
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 $2,024,725 (46.8 % of sales) in the six
months ended December 31, 1995 to $2,364,316 (36.9% of sales) in the six months
ended December 31, 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 none in the six months ended December 31, 1995 and $22,120 in the
six months ended December 31, 1996. 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. Industrial product
research and development expenses were $109,411 in the six months ended
December 31, 1995 and $76,242 in the six months ended December 31, 1996. This
increase resulted from the current program which provides for selective product
improvement.
Other Income (Expense): Other income during the six months ended December 31,
1995 was $41,005. During the six months ended December 31, 1996, other income
was $156,159. This increase was principally due to the $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
Net Operating Losses: The Company has accumulated approximately $6,956,000 of
net operating losses as of December 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 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.
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 December 31, 1996, the Company had a cash
balance of $730,335 and investments held to maturity of $1,702,264. Three
hundred seventy five thousand dollars of this amount was derived from the
signing of the option and licensing agreements discussed in Note 4. This
compares with the cash balance of $1,368,166 and investments held to maturity
of $248,665 at December 31, 1995. Inventories have increased during this period
from $1,071,708 to $1,852,681 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 December 31, 1996, $495,413 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 December 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: February 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 730,335
<SECURITIES> 1,702,264
<RECEIVABLES> 1,912,312
<ALLOWANCES> 59,631
<INVENTORY> 1,852,681
<CURRENT-ASSETS> 6,488,176
<PP&E> 2,225,827
<DEPRECIATION> 1,470,512
<TOTAL-ASSETS> 7,603,152
<CURRENT-LIABILITIES> 2,275,220
<BONDS> 0
0
0
<COMMON> 28,700
<OTHER-SE> 4,439,678
<TOTAL-LIABILITY-AND-EQUITY> 7,603,152
<SALES> 6,403,277
<TOTAL-REVENUES> 6,403,277
<CGS> 3,114,140
<TOTAL-COSTS> 5,576,818
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,058
<INCOME-PRETAX> 975,207
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 975,207
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
