<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, 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.
------------------------------------------------------
(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, 1998
--------------------- -----------
$.01 par value 5,682,792
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
March 31, 1998(Unaudited) 3
Consolidated Statements of Operations
Nine months ended March 31, 1998
and 1997 (Unaudited) 4
Consolidated Statements of Operations
Three Months Ended March 31, 1998
and 1997 (Unaudited) 5
Consolidated Statements of Cash Flows
Nine months ended March 31, 1998
and 1997 (Unaudited) 6
Notes to Consolidated Financial Statements 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)
==========================
March 31,
ASSETS 1998
------ ------------
CURRENT:
Cash and cash equivalents $ 3,161,909
Investments held to maturity 8,361,207
Accounts receivable, net of allowance
for doubtful accounts of $106,118 5,068,779
Inventories (Note 3) 3,101,754
Prepaid expenses and other current assets 644,179
------------
TOTAL CURRENT ASSETS 20,337,828
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization of $1,786,666
1,222,518
PATENTS, at cost, less accumulated
amortization of $6,733 37,091
GOODWILL, less accumulated amortization
of $62,459 400,126
OTHER 52,651
------------
$ 22,050,214
============
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
CURRENT:
Note payable to bank $ 236,250
Accounts payable 1,937,212
Accrued expenses and other current liabilities 1,875,015
Current maturities of capital lease obligations 122,341
------------
TOTAL CURRENT LIABILITIES 4,170,818
CAPITAL LEASE OBLIGATIONS 104,331
DEFERRED INCOME 845,872
MINORITY INTEREST (Note 1) 116,502
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; shares authorized
10,000,000; issued and outstanding 5,677,622 56,776
Additional paid-in capital 21,384,392
Deficit (4,632,845)
Cumulative foreign currency translation adjustment 4,368
------------
TOTAL STOCKHOLDERS' EQUITY 16,812,691
------------
$ 22,050,214
============
See accompanying notes to consolidated financial statements
3
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=====================================
For the nine months ended
March 31,
--------------------------------
1998 1997
---- ----
NET SALES $ 17,353,978 $ 11,505,876
COST OF GOODS SOLD 8,105,262 5,233,925
------------ ------------
Gross profit 9,248,716 6,271,951
------------ ------------
OPERATING EXPENSES:
Selling, general and
administrative expenses 5,281,296 3,903,953
Research and development 704,581 191,178
Non-cash compensation charge -- 4,359,600
------------ ------------
Total operating expenses 5,985,877 8,454,731
------------ ------------
Income (Loss) from operations 3,262,839 (2,182,780)
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 343,165 75,982
Interest expense (36,099) (31,974)
Option/license fees 54,649 139,375
Royalty income 386,302 121,314
Foreign exchange gain (loss) 191 (2,702)
Miscellaneous (expense) income (2,085) 1,491
------------ ------------
Total other income 746,123 303,486
------------ ------------
Income (Loss) before minority
interest and income taxes 4,008,962 (1,879,294)
Minority interest in net income of
consolidated subsidiary (9,539) (22,508)
------------ ------------
Income (Loss) before income taxes 3,999,423 (1,901,802)
Income taxes (1,112,803) (29,029)
------------ ------------
NET INCOME (LOSS) $ 2,886,620 $ (1,930,831)
============ ============
NET INCOME (LOSS) PER SHARE - BASIC $ .51 $ (.43)
============ ============
NET INCOME (LOSS) PER SHARE - DILUTED $ .43 $ (.43)
============ ============
WEIGHTED AVERAGE COMMON SHARES 5,675,392 4,541,171
============ ============
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 6,667,868 4,541,171
============ ============
See accompanying notes to consolidated financial statements
4
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=====================================
For the three months ended
March 31,
------------------------------
1998 1997
---- ----
NET SALES $ 6,516,470 $ 5,102,599
COST OF GOODS SOLD 3,209,656 2,119,785
----------- -----------
Gross profit 3,306,814 2,982,814
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,887,492 1,539,637
Research and development 256,878 92,816
Non-cash compensation charge -- 4,359,600
----------- -----------
Total operating expenses 2,144,370 5,992,053
----------- -----------
Income (Loss) from operations 1,162,444 (3,009,239)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 83,601 42,181
Interest expense (11,291) (10,916)
Option/license fees 18,964 15,938
Royalty income 156,548 121,314
Foreign exchange gain (loss) 12,774 (20,532)
Miscellaneous expense (610) (658)
----------- -----------
Total other income 259,986 147,327
----------- -----------
Income (Loss) before minority
interest and income taxes 1,422,430 (2,861,912)
Minority interest in net income of
consolidated subsidiary (64) (15,097)
----------- -----------
Income (Loss) before income taxes 1,422,366 (2,877,009)
Income taxes (387,572) (29,029)
----------- -----------
NET INCOME (LOSS) $ 1,034,794 $(2,906,038)
=========== ===========
NET INCOME (LOSS) PER SHARE - BASIC $ .18 $ (.58)
=========== ===========
NET INCOME (LOSS) PER SHARE - DILUTED $ .16 $ (.58)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES 5,677,622 5,004,177
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 6,587,427 5,004,177
=========== ===========
See accompanying notes to consolidated financial statements
5
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
=====================================
Nine months ended
March 31,
----------------------------
1998 1997
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ 2,886,620 $(1,930,831)
Adjustments to reconcile net income
(loss)to net cash provided by
operating activities:
Depreciation and amortization 275,498 141,828
Minority interest in net income
of subsidiary 9,539 22,508
Foreign currency (loss) gain (2,476) 6,442
Non-cash compensation charge -- 4,359,600
Changes in operating assets and
liabilities:
Accounts receivable (1,967,800) (1,446,094)
Inventory (794,139) (845,974)
Prepaid expenses and other
receivables (78,372) 69,973
Deposits and other assets (2,094) (25,526)
Accounts payable and accrued
expenses 226,889 1,843,112
----------- -----------
Net cash provided by operating activities 553,665 2,195,038
----------- -----------
INVESTING ACTIVITIES:
Sales of investments held to maturity 4,549,722 493,787
Purchase of investments held to maturity (6,543,334) (6,831,942)
Purchase of additional stock in Labcaire (119,187) (102,099)
Acquisition of property and equipment (523,195) (212,168)
Patent costs -- (16,822)
----------- -----------
Net cash used in investing activities (2,635,994) (6,669,244)
----------- -----------
FINANCING ACTIVITIES:
Deferred income 98,821 368,625
Repayment of note payable to bank (262,765) (22,754)
Principal payments on capital lease
obligation (16,067) (68,208)
Exercise of employee stock options 13,500 98,350
Exercise of public warrants,
less associated costs -- 5,663,216
----------- -----------
Net cash (used in) provided by
financing activities (166,511) 6,039,229
----------- -----------
Effect of exchange rates 919 67
----------- -----------
NET (DECREASE) INCREASE IN CASH (2,247,921) 1,565,090
CASH, beginning of period 5,409,830 1,153,999
----------- -----------
CASH, end of period $ 3,161,909 $ 2,719,089
=========== ===========
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 86.7% 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, 1998 and 1997 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:
March 31,
1998
----------
Raw materials $1,815,763
Work-in-process 676,914
Finished goods 609,077
----------
$3,101,754
==========
7
<PAGE>
MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
Nine months Ended March 31, 1998 and 1997
- -----------------------------------------
Net Sales: Net sales of the Company's medical, scientific and industrial
products, increased $5,848,102 (50.8%) from $11,505,876 in the nine months
ended March 31, 1997 to $17,353,978 in the nine months ended March 31, 1998.
Parent Company sales for the nine months ended March 31, 1998 increased 70.4%
while sales at the Company's foreign subsidiary (Labcaire) increased 11.3% .
The Company's backlog of unfilled orders increased from $5,640,466 at March
31, 1997 to $10,423,936 at March 31, 1998. 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 decreased from 54.5% of sales in the nine months
ended March 31, 1997 to 53.3% of sales in the nine months ended March 31,
1998.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased from $3,903,953 (33.9 % of sales) in the
nine months ended March 31, 1997 to $5,281,296 (30.4% of sales) in the nine
months ended March 31, 1998. This dollar 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.
Research and Development Expenses: Medical product research and development
expenses were $50,999 in the nine months ended March 31, 1997 and $489,623 in
the nine months ended March 31, 1998. 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 and new projects. Industrial product research and development
expenses were $140,179 in the nine months ended March 31, 1997 and $214,958 in
the nine months ended March 31, 1998. This increase is due to upgrades of fume
enclosure products and development work on new potential ultrasonic products.
Other Income (Expense): Other income during the nine months ended March 31,
1997 was $303,486. During the nine months ended March 31, 1998, other income
was $746,123. This increase was principally due to royalty income received
from Medical Device Alliance, Inc. on sales of the ultrasonic soft tissue
aspirator and interest income on investments.
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 March 31, 1998, the Company had a cash
balance of $3,161,909 and investments held to maturity of $8,361,207 compared
with a cash balance of $2,719,089 and investments held to maturity of
$6,691,208 at March 31, 1997. This increase is due to royalties received from
Medical Device Alliance, Inc. and to cash flow from operations. Inventories
have increased from $2,082,636 at March 31, 1997 to $3,101,754 at March 31,
1998 reflecting, in part, the establishment of an inventory for the ultrasonic
soft tissue aspirator and the ultrasonic scalpel.
8
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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 is 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 March 31, 1998, $236,250 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, higher than historical
costs incurred in performance of contracts or in conducting other activities,
future economic, competitive and market conditions as well as management
business decisions.
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 March 31, 1998.
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: May 13, 1998
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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 3,161,909
<SECURITIES> 8,361,207
<RECEIVABLES> 5,174,897
<ALLOWANCES> 106,118
<INVENTORY> 3,101,754
<CURRENT-ASSETS> 20,337,828
<PP&E> 3,009,184
<DEPRECIATION> 1,786,666
<TOTAL-ASSETS> 22,050,214
<CURRENT-LIABILITIES> 4,170,818
<BONDS> 0
0
0
<COMMON> 56,776
<OTHER-SE> 16,755,915
<TOTAL-LIABILITY-AND-EQUITY> 22,050,214
<SALES> 17,353,978
<TOTAL-REVENUES> 17,353,978
<CGS> 8,105,262
<TOTAL-COSTS> 14,091,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,099
<INCOME-PRETAX> 3,999,423
<INCOME-TAX> 1,112,803
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,886,620
<EPS-PRIMARY> .51
<EPS-DILUTED> .43
</TABLE>
