<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, 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
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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
- --------------------------------------- --------------
(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 5, 1998
--------------------- --------------------
$.01 par value 5,677,622
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 31,1997(Unaudited) 3
Consolidated Statements of Operations
Six Months Ended December 31, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Operations
Three Months Ended December 31, 1997
and 1996 (Unaudited) 5
Consolidated Statements of Cash Flows
Six Months Ended December 31, 1997
and 1996 (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)
December 31,
ASSETS 1997
-------
CURRENT:
Cash and cash equivalents $ 1,226,593
Investments held to maturity 8,969,945
Accounts receivable, net of allowance
for doubtful accounts of $78,956 5,960,602
Inventories (Note 3) 3,023,860
Prepaid expenses and other current assets 569,362
----------
TOTAL CURRENT ASSETS 19,750,362
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization of $1,736,491 925,889
PATENTS, at cost, less accumulated
amortization of $6,109 37,715
GOODWILL, less accumulated amortization
of $57,833 404,752
OTHER 214,615
-----------
$21,333,333
===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT:
Note payable to bank $ 552,093
Accounts payable 1,737,087
Accrued expenses and other current liabilities 1,847,382
Current maturities of capital lease obligations 124,077
Income taxes payable 250,661
----------
TOTAL CURRENT LIABILITIES 4,511,300
CAPITAL LEASE OBLIGATIONS 123,627
DEFERRED INCOME 814,836
MINORITY INTEREST (Notes 1 and 4) 116,438
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 (5,667,639)
Cumulative foreign currency translation adjustment (6,397)
----------
TOTAL STOCKHOLDERS' EQUITY 15,767,132
----------
$21,333,333
===========
See accompanying notes to consolidated financial statements.
3
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six months ended
December 31,
-----------------------------
1997 1996
---- ----
NET SALES $10,837,508 $ 6,403,277
COST OF GOODS SOLD 4,895,606 3,114,140
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Gross profit 5,941,902 3,289,137
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OPERATING EXPENSES:
Selling, general and
administrative expenses 3,393,804 2,364,316
Research and development 447,703 98,362
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Total operating expenses 3,841,507 2,462,678
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Income from operations 2,100,395 826,459
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OTHER INCOME (EXPENSE):
Interest income 259,564 33,801
Interest expense (24,808) (21,058)
Option/license fees 35,685 123,437
Royalty income 229,754 -
Foreign exchange (loss) gain (12,583) 17,830
Miscellaneous (expense) income (1,475) 2,149
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Total other income 486,137 156,159
---------- ----------
Income before minority interest
and income taxes 2,586,532 982,618
Minority interest in net income of
consolidated subsidiary (9,475) (7,411)
---------- ----------
Income before income taxes 2,577,057 975,207
Income taxes (725,231) -
---------- ----------
NET INCOME $ 1,851,826 $ 975,207
========== ==========
NET INCOME PER SHARE - BASIC $ .33 $ .23
==== =====
NET INCOME PER SHARE - DILUTED $ .28 $ .22
==== =====
WEIGHTED AVERAGE COMMON SHARES 5,674,437 4,236,429
========== ==========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 6,724,552 4,455,890
========== ==========
See accompanying notes to consolidated financial statements.
4
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MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
December 31,
-------------------------------
1997 1996
---- ----
NET SALES $ 5,824,945 $ 3,613,443
COST OF GOODS SOLD 2,737,008 1,756,832
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Gross profit 3,087,937 1,856,611
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OPERATING EXPENSES:
Selling, general and
administrative expenses 1,850,452 1,280,503
Research and development 170,967 63,156
---------- ----------
Total operating expenses 2,021,419 1,343,659
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Income from operations 1,066,518 512,952
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OTHER INCOME (EXPENSE):
Interest income 148,269 17,714
Interest expense (13,256) (10,607)
Option/license fees 18,298 13,437
Royalty income 108,199 -
Foreign exchange (loss) gain (1,818) 19,138
Miscellaneous (expense) income (941) 2,585
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Total other income 258,751 42,267
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Income before minority interest
and income taxes 1,325,269 555,219
Minority interest in net income of
consolidated subsidiary (7,930) (5,474)
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Income before income taxes 1,317,339 549,745
Income taxes (373,141) -
---------- ----------
NET INCOME $ 944,198 $ 549,745
========== ==========
NET INCOME PER SHARE - BASIC $ .17 $ .13
==== ====
NET INCOME PER SHARE - DILUTED $ .14 $ .12
==== ====
WEIGHTED AVERAGE COMMON SHARES 5,676,149 4,275,000
========== ==========
WEIGHTED AVERAGE COMMON SHARES AND
SHARE EQUIVALENTS OUTSTANDING 6,751,109 4,462,995
=========== ==========
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,
----------------------------
1997 1996
---- ----
OPERATING ACTIVITIES:
Net income $ 1,851,826 $ 975,207
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 224,781 76,666
Minority interest in net income
of subsidiary 9,475 7,411
Foreign currency loss (gain) 12,294 (12,033)
Changes in operating assets and
liabilities:
Accounts receivable (2,920,102) 199,061
Inventory (724,773) (592,209)
Prepaid expenses and other
receivables (5,550) 175,731
Deposits and other assets (164,058) (7,526)
Accounts payable and accrued
expenses 46,243 61,674
Income taxes payable 250,661 -
---------- ----------
Net cash (used in) provided by
operating activities (1,419,203) 883,982
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INVESTING ACTIVITIES:
Sales of investment held to maturity 795,803 227,561
Purchases of investments held to maturity (3,398,153) (1,576,772)
Purchase of additional stock in Labcaire (119,187) (102,099)
Acquisition of property and equipment (187,254) (68,770)
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Net cash used in investing activities (2,908,791) (1,520,080)
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FINANCING ACTIVITIES:
Deferred income 67,785 277,963
Proceeds from note payable to bank 55,997 -
Repayment of note payable to bank - (71,782)
Exercise of stock options and warrants 13,500 52,500
Increase in capital lease obligations 22,910 -
Principal payments on capital lease
obligation (15,162) (46,292)
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Net cash provided by financing activities 145,030 212,389
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Effect of exchange rates (273) 45
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NET DECREASE IN CASH (4,183,237) (423,664)
CASH, beginning of period 5,409,830 1,153,999
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CASH, end of period $ 1,226,593 $ 730,335
========== ==========
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 six months ended December 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, 1997.
3. Inventories
Inventories are summarized as follows:
December 31,
1997
-----------
Raw materials $1,871,661
Work-in-process 523,554
Finished goods 628,645
----------
$3,023,860
==========
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 Labcaire's common stock. This represents the fiscal 1997 buyback 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.
7
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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, 1997 and 1996
Net Sales: Net sales of the Company's medical, scientific and industrial
products, increased $4,434,231 (69.2%) from $6,403,277 in the six months ended
December 31, 1996 to $10,837,508 in the six months ended December 31, 1997.
Parent Company sales for the six months ended December 31, 1997 increased 100.1
% while sales at the Company's foreign subsidiary (Labcaire) increased 14.1% .
The Company's backlog of unfilled orders increased from $3,415,275 at December
31, 1996 to $10,855,266 at December 31, 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 51.4% of sales in the six months ended
December 31, 1996 to 54.8% of sales in the six months ended December 31, 1997
primarily due to the increased 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 $2,364,316 (36.9 % of sales) in the six
months ended December 31, 1996 to $3,393,804 (31.3% of sales) in the six months
ended December 31, 1997. 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 $22,120 in the six months ended December 31, 1996 and $287,269 in
the six months ended December 31, 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 and new projects. Industrial product research and development
expenses were $76,242 in the six months ended December 31, 1996 and $160,434 in
the six months ended December 31, 1997. This increase is due to upgrades of fume
enclosure products and development work on new ultrasonic products.
Other Income (Expense): Other income during the six months ended December 31,
1996 was $156,159. During the six months ended December 31, 1997, other income
was $486,137. 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 December 31, 1997, the Company had a cash
balance of $1,226,593 and investments held to maturity of $8,969,945 compared
with a cash balance of $730,335 and investments held to maturity of $1,702,264
at December 31, 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
$1,861,730 at December 31, 1996 to $3,023,860 at December 31, 1997 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 December 31, 1997, $552,093 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.
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 December 31, 1997.
10
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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 11, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,226,593
<SECURITIES> 8,969,945
<RECEIVABLES> 6,039,558
<ALLOWANCES> 78,956
<INVENTORY> 3,023,860
<CURRENT-ASSETS> 19,750,362
<PP&E> 2,662,380
<DEPRECIATION> 1,736,491
<TOTAL-ASSETS> 21,333,333
<CURRENT-LIABILITIES> 4,511,300
<BONDS> 0
0
0
<COMMON> 56,776
<OTHER-SE> 15,710,356
<TOTAL-LIABILITY-AND-EQUITY> 21,333,333
<SALES> 10,837,508
<TOTAL-REVENUES> 10,837,508
<CGS> 4,895,606
<TOTAL-COSTS> 8,737,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,808
<INCOME-PRETAX> 2,577,057
<INCOME-TAX> (725,231)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,851,826
<EPS-PRIMARY> .33
<EPS-DILUTED> .28
</TABLE>