Form 10QSB for MISONIX INC filed on May 13 1998
MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Results of Operations
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Nine months Ended March 31, 1998 and 1997
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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.
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MISONIX, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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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.
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