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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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
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, 1998
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$.01 par value 5,857,720
Transitional small business disclosure format (check one):
YES [ ] NO [X]
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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, 1998 and 1997
Net Sales: Net sales of the Company's medical, scientific and industrial
products, increased $550,653 (11.0%) from $5,012,563 in the three months ended
September 30, 1997 to $5,563,216 in the three months ended September 30, 1998.
Parent Company sales for the three months ended September 30, 1998 increased
8.2% while sales at the Company's foreign subsidiary (Labcaire) increased
21.1% . The Company's backlog of unfilled orders decreased from $6,349,585 at
September 30, 1997 to $5,789,988 at September 30, 1998. This decrease is
primarily due to a reduction in orders, from the Company's licensee, for the
ultrasonic soft tissue aspirator.
Gross Profit: Gross profit decreased from 56.9% of sales in the three months
ended September 30, 1997 to 50.4% of sales in the three months ended September
30, 1998 due to increased revenue, from one of the Company's licensees, on a
product line which has lower gross profits.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased from $1,543,352 (30.8 % of sales) in the
three months ended September 30, 1997 to $1,664,977 (29.9% of sales) in the
three months ended September 30, 1998. This increase relates to sales costs
associated with higher sales volume and hiring of additional administrative
and technical personnel, but reflects a percentage decrease due to higher
sales volume.
Bad Debt Expense: Bad debt expense increased from none in the three months
ended September 30, 1997 to $1,715,000 in the three months ended September 30,
1998. On October 22, 1998, the Company announced that it had reserved for
possible bad debts of $1,700,000 against accounts receivable due and owing by
Medical Device Alliance, Inc. and its wholly-owned subsidiary, Lysonix, Inc.,
as Licensees for the Misonix ultrasonic soft tissue aspirator. A letter of
default on the license agreement with these parties was contemporaneously
transmitted by the Company. Without the effects of this charge, the Company
would have reported net income after taxes of $757,353 or $.11 diluted
earnings per share for the three months ended September 30, 1998 as compared
to net income after tax of $907,628, or $.13 diluted earnings per share for
the three months ended September 30, 1997. Due to this charge, the Company
reported a net loss of $279,647, or $ (.05) diluted earnings per share for the
three months ended September 30, 1998 as compared to net income of $907,628,
or $ .13 diluted earnings per share for the three months ended September 30,
1997.
Research and Development Expenses: Medical product research and development
expenses were $189,950 in the three months ended September 30, 1997 and
$163,793 in the three months ended September 30, 1998. Industrial product
research and development expenses were $86,786 in the three months ended
September 30, 1997 and $90,105 in the three months ended September 30, 1998.
Other Income (Expense): Other income during the three months ended September
30, 1997 was $227,386. During the three months ended September 30, 1998, other
income was $353,412. This increase was principally due to increased royalty
income received from the Company's licensees on sales of medical devices and
interest income on investments.
Income Taxes: For the three months ended September 30, 1998 there was a tax
benefit of $208,157 as compared to a tax provision of $352,090 at September
30, 1997 due to the fact that the Company had an operating loss for the three
months ended September 30, 1998.
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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, 1998, the Company had a cash
balance of $2,814,332 and investments held to maturity of $10,947,480 compared
with a cash balance of $884,594 and investments held to maturity of $9,273,905
at September 30, 1997. This increase is due to royalties received from the
Company's licensees on sales of medical devices and to cash flow from
operations. Inventories have increased from $2,713,467 at September 30, 1997
to $3,009,074 at September 30, 1998 due to increasing sales of the Company's
medical devices. In addition, the Company has a revolving credit facility,
which expires on June 30, 1999, 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 is available to Labcaire for short term borrowings. This facility
expires in September 1999 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, 1998, $579,724 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.
Year 2000 Compliance: The Company utilizes and is dependent upon data
processing systems and software to conduct its business. The data processing
systems and software include those developed and maintained by the Company's
third-party data processing vendors and software which is run on in-house
computer networks. During the first quarter of fiscal 1998, the Company
initiated a review and assessment of all hardware and software to confirm that
it will function properly in the year 2000. With respect to internal systems,
the results of that evaluation to date have not revealed any year 2000 issues
that, in the Company's opinion, cannot be remediated in a timely manner; and
therefore are not expected to create a material risk of disruption of
operations. With respect to outside vendors, those vendors which have been
contacted have indicated that their hardware or software is or will be year
2000 compliant in time frames that meet regulatory requirements. Evaluations
of these issues is continuing and there can be no assurance that additional
issues, not presently known to the Company, will not be discovered which could
present a material risk of disruption to the Company's operations.
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, higher than historical
costs incurred in performance of contracts or in conducting other activities,
future economic, competitive and market conditions, the outcome of legal
proceedings, as well as management business decisions.
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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: December 4, 1998
MISONIX, INC.
(Registrant)
By: /s/Michael A. McManus, Jr.
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Michael A. McManus, Jr.
President, Chief Executive Officer
By: /s/Peter Gerstheimer
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Peter Gerstheimer
Vice President and
Chief Financial Officer
