FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2001
--------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________.
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. 11375
------------------------------------- -------
(Address of principal executive offices) (Zip Code)
(631) 694-9555
--------------
(Registrant's telephone number, including area code)
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 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, 2001
--------------------- -----------
$.01 par value 6,079,015
MISONIX, INC.
Index
Part I - FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of
March 31, 2001 (Unaudited) and June 30, 2000 3
Consolidated Statements of Operations
Nine Months Ended March 31, 2001
and 2000 (Unaudited) 4
Consolidated Statements of Operations
Three Months Ended March 31, 2001
and 2000 (Unaudited) 5
Consolidated Statements of Cash Flows
Nine months ended March 31, 2001
and 2000 (Unaudited) 6-7
Notes to Consolidated Financial Statements 8-12
Item 2. Management's Discussion and Analysis of Financial Condition 13-18
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Part II - OTHER INFORMATION 20
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
2
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
MISONIX, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
2001 2000
(UNAUDITED)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,106,695 $ 7,069,502
Investments held to maturity 1,987,854 3,021,268
Accounts receivable, net of allowance for
doubtful accounts of $195,024 and $200,429,
respectively 7,504,445 7,277,242
Notes receivable 203,651 111,867
Inventories 8,722,983 4,273,223
Deferred income taxes 249,298 167,238
Prepaid expenses and other current assets 2,416,801 682,606
------------ ------------
Total current assets 24,191,727 22,602,946
Property, plant and equipment, net 3,091,817 3,111,112
Deferred income taxes 1,806,000 286,297
Goodwill, less accumulated amortization
of $504,675 and $211,516, respectively 3,567,843 2,007,151
Investment in Focus Surgery, Inc. and
Hearing Innovations, Inc. less accumulated
amortization of $406,626 and $233,450 and
cumulative equity in losses of $819,938 and
$531,014, respectively 2,629,527 3,069,536
Convertible debentures - Hearing Innovations, Inc. 311,375 --
Convertible debentures - Focus Surgery, Inc. 305,166 --
Other assets 164,794 86,580
------------ ------------
Total assets $ 36,068,249 $ 31,163,622
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 495,286 $ 473,050
Accounts payable 2,816,352 2,053,192
Accrued expenses and other current liabilities 1,280,406 1,323,114
Litigation settlement liabilities 5,450,000 --
Income taxes payable -- 1,283,554
Current maturities of long-term debt
and capital lease obligations 214,130 189,632
------------ ------------
Total current liabilities 10,256,174 5,322,542
Long-term debt and capital lease obligations 1,072,863 1,274,738
Deferred income 548,729 395,060
Minority interest 268,888 289,094
Stockholders' equity:
Common stock, $.01 par value-shares authorized
10,000,000; 6,121,915 and 5,967,817 issued,
respectively 61,219 59,678
Additional paid-in capital 21,924,987 21,801,969
Retained earnings 2,471,245 2,294,570
Treasury stock, 42,900 shares (219,006) (219,006)
Accumulated other comprehensive loss (316,850) (55,023)
------------ ------------
Total stockholders' equity 23,921,595 23,882,188
------------ ------------
Total liabilities and stockholders' equity $ 36,068,249 $ 31,163,622
============ ============
See accompanying Notes to Consolidated Financial Statements
3
MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the nine months ended
March 31,
-------------------------------
2001 2000
------------ ------------
Net sales $ 21,812,405 $ 20,587,326
Cost of goods sold 10,385,568 10,989,538
------------ ------------
Gross profit 11,426,837 9,597,788
Operating expenses:
Selling expenses 2,904,166 2,281,753
General and administrative expenses 4,571,949 3,777,363
Research and development expenses 1,376,016 1,071,764
Bad debt expense (recovery) 6,730 (401,846)
Litigation settlement expenses 5,450,000 --
------------ ------------
Total operating expenses 14,308,861 6,729,034
------------ ------------
(Loss) income from operations (2,882,024) 2,868,754
Other income (expense):
Interest income 446,032 488,089
Interest expense (111,850) (116,989)
License fees 18,235 18,234
Royalty income 515,902 460,837
Amortization of investments (173,175) (150,308)
Foreign exchange gain (loss) 384 (2,950)
Miscellaneous income 720 6,033
------------ ------------
(Loss) income before equity in loss of Focus Surgery,
Inc., equity in loss of Hearing Innovations, Inc.,
minority interest and income taxes (2,185,776) 3,571,700
Equity in loss of Focus Surgery, Inc. (256,780) (305,928)
Equity in loss of Hearing Innovations, Inc. (32,144) (33,548)
Minority interest in net loss (income)
of consolidated subsidiaries 20,206 (33,977)
------------ ------------
(Loss) income before income taxes (2,454,494) 3,198,247
Income tax benefit (provision) 2,631,169 (1,312,930)
------------ ------------
Net income $ 176,675 $ 1,885,317
============ ============
Net income per share - Basic $ .03 $ .32
============ ============
Net income per share - Diluted $ .03 $ .29
============ ============
Weighted average common shares outstanding - Basic 5,991,087 5,942,538
============ ============
Weighted average common shares outstanding - Diluted 6,549,124 6,494,533
============ ============
See accompanying Notes to Consolidated Financial Statements
4
MISONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
March 31,
--------------------------
2001 2000
---- ----
Net sales $ 7,404,556 $ 6,820,221
Cost of goods sold 3,529,115 3,540,543
----------- -----------
Gross profit 3,875,441 3,279,678
Operating expenses:
Selling expenses 1,121,859 868,670
General and administrative expenses 1,514,818 1,428,107
Research and development expenses 552,499 479,260
Bad debt expense (recovery) 19,303 (441,941)
Litigation settlement expenses 5,450,000 --
----------- -----------
Total operating expenses 8,658,479 2,334,096
----------- -----------
(Loss) income from operations (4,783,038) 945,582
Other income (expense):
Interest income 116,248 159,551
Interest expense (36,996) (39,276)
License fees 6,079 6,078
Royalty income 108,222 150,540
Amortization of investments (57,725) (57,725)
Foreign exchange loss (2,928) (1,272)
----------- -----------
(Loss) income before equity in loss of Focus Surgery,
Inc., equity in loss of Hearing Innovations, Inc.,
Minority interest and income taxes (4,650,138) 1,163,478
Equity in loss of Focus Surgery, Inc. (85,593) (104,000)
Equity in loss of Hearing Innovations, Inc. (10,558) (16,774)
Minority interest in net (income) loss
of consolidated subsidiaries (6,037) 7,289
----------- -----------
(Loss) income before income taxes (4,752,326) 1,049,993
Income tax benefit (provision) 1,832,997 (480,578)
----------- -----------
Net (loss) income $(2,919,329) $ 569,415
=========== ===========
Net (loss) income per share - Basic $ (.48) $ .10
=========== ===========
Net (loss) income per share - Diluted $ (.48) $ .09
=========== ===========
Weighted average common shares outstanding - Basic 6,079,002 5,918,271
=========== ===========
Weighted average common shares outstanding - Diluted 6,079,002 6,545,527
=========== ===========
See accompanying Notes to Consolidated Financial Statements
5
MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended
March 31,
--------------------------
2001 2000
---- ----
OPERATING ACTIVITIES:
Net income $ 176,675 $ 1,885,317
Adjustments to reconcile net income to net cash
provided by operating activities:
Bad debt expense (recovery) 6,730 (401,846)
Deferred income tax (benefit) expense (1,601,763) (21,027)
Depreciation and amortization 803,455 552,964
Loss on disposal of equipment -- 111,661
Non-cash compensation charge -- 10,768
Deferred income 153,669 (18,234)
Foreign currency gain (384) 2,950
Minority interest in net (loss) income of subsidiaries (20,206) 33,977
Equity in loss of Focus Surgery, Inc. 256,780 305,928
Equity in loss of Hearing Innovations, Inc. 32,144 33,548
Change in operating assets and liabilities:
Accounts receivable (260,512) 937,167
Inventories (3,684,788) (1,519,354)
Prepaid expenses and other current assets (1,759,012) (500,043)
Other assets (14,436) 506
Accounts payable and accrued expenses 426,742 (1,955,979)
Litigation settlement liabilities 5,450,000 --
Income taxes payable (1,300,378) 856,830
----------- -----------
Net cash (used in) provided by operating activities (1,335,284) 315,133
----------- -----------
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (316,621) (246,282)
Redemption of investments held to maturity 2,099,976 3,957,009
Purchase of investments held to maturity (1,066,562) (3,004,064)
Purchase of Labcaire stock (117,349) (173,777)
Cash paid for acquisition of Sonic Technologies
Laboratory Services (318,636) --
Cash paid for acquisition of CraMar Technologies, Inc. (309,531) --
Cash paid for acquisition of Fibra Sonics, Inc., net of
cash acquired (1,723,191) --
Purchase of convertible debentures - Focus Surgery, Inc. (305,166) --
Purchase of convertible debentures - Hearing --
Innovations, Inc. (202,827)
Loan to Hearing Innovations, Inc. (200,332) --
Cash paid for investment in Hearing Innovations, Inc. -- (534,000)
Cash paid for acquisition of Sonora Medical Systems,
Inc., net of cash acquired (169,713) (227,233)
----------- -----------
Net cash used by investing activities (2,629,952) (228,347)
----------- -----------
6
MISONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net 53,461 11,546
Payment of revolving line of credit -- (222,388)
Principal payments on capital lease obligations (145,154) (156,305)
Proceeds from exercise of stock options 124,559 64,376
Purchase of treasury stock -- (219,006)
Payment of long-term debt (31,746) (39,173)
----------- -----------
Net cash provided by (used in) financing activities 1,120 (560,950)
----------- -----------
Effect of exchange rates on cash and cash equivalents 1,309 (29,990)
----------- -----------
Net decrease in cash and cash equivalents (3,962,807) (504,154)
Cash and cash equivalents at beginning of period 7,069,502 8,361,231
----------- -----------
Cash and cash equivalents at end of period $ 3,106,695 $ 7,857,077
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 111,850 $ 116,989
=========== ===========
Income taxes paid $ 1,832,416 $ 564,350
=========== ===========
NON-CASH INVESTING ACTIVITIES:
Conversion of notes receivable from Hearing
Innovations, Inc. to convertible debentures
and equity investment $ 113,444 $ 400,000
=========== ===========
See accompanying Notes to Consolidated Financial Statements
7
MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to interim periods is unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year
ending June 30, 2001.
The balance sheet at June 30, 2000 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended June 30, 2000.
2. Litigation Settlement
The Company recorded a litigation settlement charge of $5,450,000 during the
third quarter ended March 31, 2001. The United States Court of Appeals for
the Federal Circuit Court issued a decision reversing in large part the
decision of the trial court and granting the motion by Mentor H/S, Inc.
("Mentor") against Medical Device Alliance, Inc., its subsidiary LySonix,
Inc. and the Company for violation of Mentor's U.S. Patent No. 4,886,491.
This patent covers Mentor's license for ultrasonic assisted liposuction.
Damages were asserted in favor of Mentor for approximately $4,900,000 and
the Court affirmed that the lower court did not have the ability to increase
damages or award attorney's fees. Mentor may request further relief in the
trial court, including interest and damages award and a permanent injunction
enjoining further sales of the LySonix 2000. The Company and its
co-defendants are considering all alternatives including further legal
measures that are available. Accordingly, the Company accrued $5,450,000 for
damages, attorney fees and other costs during the third quarter ended March
31, 2001.
3. Acquisitions
Fibra Sonics, Inc.
On February 8, 2001, the Company acquired certain assets and liabilities of
Fibra Sonics, Inc. ("Fibra Sonics"), a Chicago-based, privately-held
producer and marketer of ultrasonic medical devices for approximately
$1,800,000. In addition to the purchase price, contingent consideration of
up to, but not exceeding $1,120,000, may be made based upon sales generated
during the consecutive twelve months commencing June 1, 2001. In the event
any additional payments are made to Fibra Sonics, such payments will be
recorded as additional goodwill and amortized over the remaining useful
life. The Company will relocate the assets of Fibra Sonics to the Company's
Farmingdale facility from Chicago Illinois. The acquisition was accounted
for as a purchase. Accordingly, the acquired assets and liabilities have
been initially recorded at their estimated fair value at the date of
acquisition. The final allocation of the purchase price is pending the final
determination of the inventory acquired. The excess of the cost of the
acquisition ($1,720,738 plus acquisition costs of $128,453, which includes a
broker fee of $100,716) over the fair value of net assets acquired of
$1,285,571 is being treated as goodwill and being amortized on a
straight-line basis over a period of 5 years.
8
MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to interim periods is unaudited)
(CONTINUED)
Focus Surgery, Inc.
On November 7, 2000, the Company purchased a $300,000, 5.1% Secured
Cumulative Convertible Debenture from Focus Surgery, Inc. ("Focus Surgery"),
due December 22, 2002 (the "Focus Debenture"). The Focus Debenture is
convertible to 250 shares of Focus Surgery preferred stock at the option of
the Company at any time after December 22, 2000 for two years at a
conversion rate of $1,200 per share, if the Focus Debenture is not retired
by Focus Surgery. Interest accrues and is payable at maturity, or is
convertible on the same terms as the Focus Debenture's principal amount. The
Focus Debenture is secured by a lien on all of Focus Surgery's right, title
and interest in accounts receivable, inventory, property, plant and
equipment and processes of specified products whether now existing or
hereafter arising after the date of the Focus Debenture. The principal and
accrued interest of the Focus Debenture is $305,166 at March 31, 2001.
Labcaire Systems Ltd.
On November 1, 2000, under the terms of the revised purchase agreement (the
"Labcaire Agreement") with Labcaire (as discussed in the Form 10-K for the
year ended June 30, 2000), the Company paid $117,349 for 9,286 shares
(2.65%) of the outstanding common stock of Labcaire bringing the acquired
interest to 94.65%. This represents the fiscal 2001 buy-back portion, as
defined in the Labcaire Agreement. As per the Labcaire Agreement, the
Company is obligated to purchase 2.65% for the next three years until the
Company owns 100% of Labcaire.
Sonic Technologies Laboratory Services
On October 12, 2000, the Company's subsidiary, Sonora, acquired the assets
of Sonic Technologies Laboratory Services ("Sonic Technologies"), an
ultrasound acoustic measurement and testing laboratory for approximately
$319,000. The assets of the Hatboro, Pennsylvania-based operations of
privately-held Sonic Technologies were relocated to Sonora's facility in
Longmont, Colorado. The acquisition was accounted for as a purchase.
Accordingly, acquired assets and liabilities have been recorded at their
estimated fair value at the date of acquisition. The excess of the cost of
the acquisition ($270,000 plus acquisition costs of $48,636, which includes
a broker fee of $25,000) over the fair value of net assets acquired of
$301,219 is being amortized on a straight-line basis over a period of 10
years.
Hearing Innovations, Inc.
During the second and third quarters of fiscal 2001, the Company entered
into eight loan agreements whereby Hearing Innovations, Inc. ("Hearing
Innovations") was required to pay the Company amounts of $200,332 due May
30, 2001. All notes bear interest at 8% per annum. The notes are secured by
a lien on all of Hearing Innovations' right, title and interest in accounts
receivable, inventory, property, plant and equipment and processes of
specified products whether now existing or hereafter arising after the date
of these agreements.
During the fourth quarter of fiscal 2000, the Company entered into four loan
agreements whereby Hearing Innovations was required to pay the Company
amounts of $24,000 due July 1, 2000, $45,000 due July 15, 2000, $29,000 due
July 15, 2000 and $13,000 due July 15, 2000. During the first quarter of
fiscal 2001, the Company entered into an additional four loan agreements
whereby Hearing Innovations was required to pay the Company the total
principal amounts of $39,000, $13,000, $13,000 and $13,000 due September 15,
2000. All notes bore interest at 8% per annum. The notes were secured by a
lien on all of Hearing Innovations' right, title and interest in accounts
receivable, inventory, property, plant and equipment and processes of
specified products whether now existing or hereafter arising after the date
of these agreements.
9
MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to interim periods is unaudited)
(CONTINUED)
No payments were made on the above notes. On September 11, 2000, the Company
loaned an additional $108,000 to Hearing Innovations, which together with
the then outstanding loans aggregating $192,000 (with accrued interest)
described above were exchanged for a $300,000 7% Secured Convertible
Debenture due August 27, 2002 (the "Hearing Debenture") and warrants to
acquire 66,667 shares of Hearing Innovations common stock at $2.25 per
share. The Hearing Debenture is convertible at the option of the Company at
any time into shares of common stock of Hearing Innovations at a conversion
rate of $2.25 per share. Interest accrues and is payable at maturity, or is
convertible on the same terms as the Hearing Debenture's principal amount.
The warrants expire August 27, 2002. If the Company were to convert the
Hearing Debenture and exercise all warrants, including those previously
outstanding, the Company would hold an approximately 20% interest in Hearing
Innovations. The principal and accrued interest of the Hearing Debenture is
$311,375 at March 31, 2001.
CraMar Technologies, Inc.
On July 27, 2000, the Company's subsidiary, Sonora, acquired 100% of the
assets of CraMar Technologies, Inc. ("CraMar"), an ultrasound equipment
servicer for approximately $310,000. The assets of the Colorado-based,
privately-held operations of CraMar were relocated to Sonora's facility in
Longmont, Colorado. The acquisition was accounted for as a purchase.
Accordingly, acquired assets have been recorded at their estimated fair
value at the date of acquisition. The cost of the acquisition ($272,908 plus
acquisition costs of $36,623, which includes a broker fee of $25,000)
approximates the fair value of net assets acquired.
4. Inventories
Inventories are summarized as follows:
March 31, 2001 June 30, 2000
-------------- -------------
Raw materials $ 4,265,886 $ 2,321,828
Work-in-process 1,287,679 362,664
Finished goods 3,169,418 1,588,731
------------ -----------
$ 8,722,983 $ 4,273,223
============ ===========
The increase in inventory is due to an increase in medical devices and
industrial products. The buildup of inventory is due to anticipated
shipments for the fourth quarter ending June 30, 2001.
5. Income Taxes
The Company recorded a reduction of the valuation allowance applied against
deferred tax assets in accordance with the provisions of FASB statement
No.109 "Accounting for Income Taxes" which provided a one-time income tax
benefit of $1,681,502 during the first quarter of fiscal year 2001. The
valuation allowance was established in fiscal year 1997 because the future
tax benefit of certain below market stock option grants issued at that time
could not be reasonably assured. The Company continually reviews the
adequacy of the valuation allowance and recognized the income tax benefit
during the quarter due to the reasonable expectation that such tax benefit
will be realized due to the fiscal strength of the Company. Management
believes that it will generate taxable income sufficient to realize the tax
benefit associated with future deductible temporary differences and,
therefore, the Company reduced the valuation allowance to zero during the
first quarter of fiscal year 2001.
10
MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to interim periods is unaudited)
(CONTINUED)
During the year the Company made estimated tax payments which will exceed
taxes payable for the fiscal year ended June 30, 2001. The reduced taxes
payable was a result of the recording of an unanticipated litigation
settlement expense of $5.4 million. Included in prepaid expenses and
other current assets as of March 31, 2001 is approximately $1,600,000
of income tax receivable.
6. Accrued Expenses and Other Current Liabilities
The following summarizes accrued expenses and other current liabilities:
March 31, 2001 June 30, 2000
-------------- -------------
Accrued payroll and vacation $ 130,903 $ 111,764
Accrued sales tax 15,797 29,638
Accrued commissions and bonuses 265,644 413,292
Customer deposits 446,596 278,635
Professional fees 58,513 117,640
Warranty 312,907 309,766
Other 50,046 62,379
---------- ----------
$1,280,406 $1,323,114
========== ==========
7. Commitments and Contingencies
Employment Agreement
The Company has entered into a new employment agreement with its chief
executive officer and president, which expires on October 31, 2002. This
agreement provides an annual base compensation of $275,000 with an annual
bonus at the discretion of the Board of Directors if certain objectives are
achieved. The agreement also provides for a guaranteed initial bonus of
$250,000, which is to be paid in December 2001.
8. Business Segments
Commencing in fiscal year 2001, the Company operates in two business
segments, which are organized by product types: industrial products and
medical devices. Industrial products include the Sonicator ultrasonic liquid
processor, Aura ductless fume enclosure, the Autoscope endoscope
disinfectant system from Labcaire and the Mystaire scrubber. Medical devices
include the Auto Sonix for ultrasonic cutting and coagulatory system and
refurbishing revenues of high-performance ultrasound systems and replacement
transducers for the medical diagnostic ultrasound industry. The Company
evaluates the performance of the segments based upon income (loss) from
operations less general and administrative expenses, bad debt expense and
litigation settlement expenses. The accounting policies of the segments are
the same as those described in the summary of significant accounting
policies (Note 1) in the Company's June 30, 2000 Form 10-K. Certain items
are maintained at the corporate headquarters (corporate) and are not
allocated to the segments. They primarily include general and administrative
expenses, bad debt expense and litigation settlement expenses. The Company
does not allocate assets by segment as they are not provided to the chief
decision maker. Summarized financial information for each of the segments
for the nine and three months ended March 31, 2001 is as follows:
11
MISONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to interim periods is unaudited)
(CONTINUED)
For the nine months ended March 31, 2001
(a)
MEDICAL INDUSTRIAL CORPORATE AND
DEVICES PRODUCTS UNALLOCATED TOTAL
------------ ------------ ------------ ------------
Net sales $ 9,017,843 $ 12,794,562 $ -- $ 21,812,405
Cost of goods sold 4,117,430 6,268,138 -- 10,385,568
------------ ------------ ------------
Gross profit 4,900,413 6,526,424 -- 11,426,837
Direct selling expenses 621,067 2,283,099 -- 2,904,166
Direct research and
development 850,249 525,767 -- 1,376,016
------------ ------------ ------------
Total direct operating
expenses 1,471,316 2,808,866 -- 4,280,182
------------ ------------
Corporate and unallocated -- -- 10,028,679 10,028,679
------------ ------------
Income (loss) from
operations $ 3,429,097 $ 3,717,558 $(10,028,679) $ (2,882,024)
============ ============ ============ ============
(a) Amount represents general and administrative, litigation settlement
expenses and bad debt expense.
For the three months ended March 31, 2001
(a)
MEDICAL INDUSTRIAL CORPORATE AND
DEVICES PRODUCTS UNALLOCATED TOTAL
----------- ----------- ----------- -----------
Net sales $ 3,235,468 $ 4,169,088 $ -- $ 7,404,556
Cost of goods sold 1,393,391 2,135,724 -- 3,529,115
----------- ----------- -----------
Gross profit 1,842,077 2,033,364 -- 3,875,441
Direct selling expenses 314,399 807,460 -- 1,121,859
Direct research and
development 360,304 192,195 -- 552,499
----------- ----------- -----------
Total direct operating
expenses 674,703 999,655 -- 1,674,358
----------- -----------
Corporate and unallocated 6,984,121 6,984,121
----------- -----------
Income (loss) from
operations $ 1,167,374 $ 1,033,709 $(6,984,121) $(4,783,038)
=========== =========== =========== ===========
(a) Amount represents general and administrative, litigation settlement
expenses and bad debt expense.
The following table provides a breakdown of foreign sales by geographic area
during the periods indicated:
For the nine months ended
March 31
2001 2000
---- ----
Canada and Mexico $ 190,217 $2,079,310
United Kingdom 4,056,726 4,037,639
Europe 1,212,506 1,009,409
Asia 560,792 489,631
Middle East 48,953 250,428
Other 87,451 173,215
---------- ----------
$6,156,645 $8,039,632
========== ==========
12
MISONIX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Nine months and Three months ended March 31, 2001 and 2000.
Net sales: Net sales of the Company's medical devices and industrial products
increased $1,225,079 (5.9%) from $20,587,326 for the nine months ended March 31,
2000 to $21,812,405 for the nine months ended March 31, 2001. This increase in
net sales is due to the increase in medical devices partially offset by a
decrease in industrial products. The increase in medical devices are due to the
inclusion of nine months of revenues of Sonora of $2,169,676, offset by $452,034
of lower medical devices. Industrial products decreased $492,563 predominately
due to less fume enclosure sales of $853,642, offset by an increase in wet
scrubber (Mystaire) sales of $374,358. The weakening of the English Pound
represents approximately $524,000 of the decrease in Labcaire fume enclosure
product sales.
Net sales of the Company's medical devices and industrial products increased
$584,335 (8.6%) from $6,820,221 for the three months ended March 31, 2000 to
$7,404,556 for the three months ended March 31, 2001. The increase is due to
larger revenues from medical devices predominantly from Sonora and industrial
products, primarily from wet scrubber (Mystaire).
The Company's backlog of unfilled orders increased from $9,219,560 at March 31,
2000 to $10,548,824 at March 31, 2001. This increase is primarily due to an
increase in medical device orders.
Gross profit: Gross profit increased to 52.4% of sales in the nine months ended
March 31, 2001 from 46.6% of sales in the nine months ended March 31, 2000.
Gross profit increased to 52.3% of sales in the three months ended March 31,
2001 from 48.1% of sales in the three months ended March 31, 2000. The increases
in gross profit for the periods are due to an increase in profit margins on
industrial product sales. In prior year and quarter wet scrubber (Mystaire) had
a large contract with one customer with a significantly lower gross profit
margin than the current year.
Selling expense: Selling expense increased $622,413 or 27.3% from $2,281,753
(11.1% of sales) in the nine months ended March 31, 2000 to $2,904,166 (13.3% of
sales) in the nine months ended March 31, 2001. Medical device selling expenses
increased $470,968 primarily due to the inclusion of nine months of Sonora of
$319,077 and increased sales and marketing efforts in all medical devices, such
as hiring of additional salesman. Industrial product selling expenses increased
$151,445 due to increased sales and marketing efforts in all industrial
products. Selling expense increased $253,189 or 29.1% from $868,670 (12.7% of
sales) in the three months ended March 31, 2000 to $1,121,859 (15.1% of sales)
in the three months ended March 31, 2001, primarily due to increased sales and
marketing efforts in medical devices, such as hiring of additional salesman.
13
MISONIX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses: General and administrative expenses
increased $794,586 or 21% from $3,777,363 in the nine months ended March 31,
2000 to $4,571,949 in the nine months ended March 31, 2001. The increases are
primarily due to the inclusion of the consolidated results of Sonora of
$337,335, increased expenditures for investor relations activities of
approximately $115,000, amortization of Sonora, Labcaire, Sonic Technologies and
Fibra Sonics goodwill of approximately $211,000 and expenses relating to the
maintenance of the Fibra Sonics facility located in Chicago during the
transition to the Company's Farmingdale facility of approximately $50,000.
General and administrative expenses increased $86,711 or 6.1% from $1,428,107 in
the three months ended March 31, 2000 to $1,514,818 in the three months ended
March 31, 2001. The increases are primarily due to the amortization of Sonora,
Labcaire, Sonic Technologies and Fibra Sonics goodwill of approximately $80,000
and expenses relating to the maintenance of the Fibra Sonics facility located in
Chicago during the transition to the Company's Farmingdale facility of
approximately $50,000.
Research and development expenses: Research and development expenses increased
$304,252 or 28.4% from $1,071,764 in the nine months ended March 31, 2000 to
$1,376,016 in the nine months ended March 31, 2001. The increases are primarily
due to medical devices due to the inclusion of Sonora of $199,201 and increased
development costs associated with certain medical products of $61,198. The
remaining increase of $43,853 is due to an increase in development costs
associated with certain industrial products. Research and development expenses
increased $73,239 or 15.3% from $479,260 in the three months ended March 31,
2000 to $552,499 in the three months ended March 31, 2001. The increases are
primarily due to the Sonora subsidiary, which relate to development costs
associated with certain medical devices.
Bad debt expense (recovery): Bad debt expense increased from recovery of
$401,846 for the nine months ended March 31, 2000 to an expense of $6,730 for
the nine months ended March 31, 2001. Bad debt expense increased from recovery
of $441,941 for the three months ended March 31, 2000 to an expense of $19,303
for the three months ended March 31, 2001. On October 22, 1998, the Company
reserved $1,700,000 against accounts receivable due and owing by Medical Device
Alliance, Inc. ("MDA") and its wholly owned subsidiary, LySonix, Inc.
("LySonix") as licensees for the Misonix ultrasonic soft tissue aspirator. In
December of 1998, an additional reserve was taken against all remaining
receivables from MDA and LySonix totaling $369,903. On June 30, 1999, the MDA
and LySonix accounts receivable of $2,069,903 was written off against the bad
debt reserve.
On March 30, 2000, the Company and LySonix signed a new ten-year Exclusive
License Agreement ("Agreement") for the marketing of the soft tissue aspirator
for aesthetic and cosmetic surgery applications. The Agreement called for
LySonix to purchase the soft tissue aspirators and exclusively represent the
Company's products for the fragmentation and aspiration of soft tissue. The
Company was paid in full for the amounts due and owing by the return of
inventory by MDA and LySonix, which was in accordance with the Agreement. The
Company recorded the receipt of inventory at the lower of cost or market,
thereby a recovery of bad debt expense of approximately $462,000 was recorded
during the third quarter of fiscal 2000.
14
MISONIX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Litigation settlement expenses: The Company recorded a litigation settlement
charge of $5,450,000 during the third quarter ended March 31, 2001. The United
States Court of Appeals for the Federal Circuit Court issued a decision
reversing in large part the decision of the trial court and granting the motion
by Mentor H/S, Inc. ("Mentor") against MDA, its subsidiary LySonix and the
Company for violation of Mentor's U.S. Patent No. 4,886,491. This patent covers
Mentor's license for ultrasonic assisted liposuction. Damages were asserted in
favor of Mentor for approximately $4,900,000 and the Court affirmed that the
lower court did not have the ability to increase damages or award attorney's
fees. Mentor may request further relief in the trial court, including interest
and damages award and a permanent injunction enjoining further sales of the
LySonix 2000. The Company and its co-defendants are considering all alternatives
including further legal measures that are available. Accordingly, the Company
accrued $5,450,000 for damages, attorney fees and other costs during the third
quarter ended March 31, 2001.
Other income (expense): Other income during the nine months ended March 31, 2001
was $696,248. During the nine months ended March 31, 2000, other income was
$702,946. This decrease was principally due to increased royalty income received
from the Company's licensees on the sales of medical devices offset by an
increase in amortization of the goodwill from the investments in capital stock
of Focus Surgery, Inc. ("Focus Surgery") and Hearing Innovations, Inc. ("Hearing
Innovations") and a decrease in interest income due to less cash and cash
equivalents. Other income during the three months ended March 31, 2001 was
$132,900. During the three months ended March 31, 2000, other income was
$217,896. This decrease was principally due to a decrease in interest income and
decreased royalty income received from the Company's licensees on the sales of
medical devices.
Income taxes: For the nine months ended March 31, 2001 there was a tax benefit
of $1,058,828 or 43.1% including a reduction in the deferred tax valuation
allowance of $1,681,502 during the first quarter and a reduction of the deferred
tax asset of $109,161 during the second quarter, resulting in a benefit of
$2,631,169 as compared to a tax provision of $1,312,930 or 41.1% at March 31,
2000. For the three months ended March 31, 2001 there was a tax benefit of
$1,832,997 or 38.6% as compared to a tax provision of $480,578 or 45.8% at March
31, 2000. The decreases for the period and the quarter are due to lower income
tax rates utilized due to the litigation settlement expense recorded. During the
year the Company made estimated tax payments which will exceed taxes payable for
the fiscal year ended June 30, 2001. The reduced taxes payable was a result of
the recording of an unanticipated litigation settlement expense of $5.4 million.
Included in prepaid expenses and other current assets as of March 31, 2001 is
approximately $1,600,000 of income tax receivable.
The Company recorded a reduction of the valuation allowance applied against
deferred tax assets in accordance with the provisions of FASB statement No.109
"Accounting for Income Taxes" which provided a one-time income tax benefit of
$1,681,502 during the first quarter of fiscal year 2001. The valuation allowance
was established in fiscal year 1997 because the future tax benefit of certain
below market stock option grants issued at that time could not be reasonably
assured. The Company continually reviews the adequacy of the valuation allowance
and recognized the income tax benefit during the quarter due to the reasonable
expectation that such tax benefit will be realized due to the fiscal strength of
the Company. Management believes it will generate taxable income sufficient to
realize the tax benefit associated with future deductible temporary differences
and, therefore, the Company reduced the valuation allowance to zero during the
first quarter of fiscal year 2001.
15
MISONIX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES:
Working capital at March 31, 2001 and June 30, 2000 was $13,935,553 and
$17,280,404, respectively. The decrease in working capital is due to the buildup
of medical device and industrial product inventory, primarily at Sonora,
payments of accrued expenses and income taxes and the recording of the accrual
for the litigation settlement (see below). The Company is joint and severally
liable for the litigation settlement with its co-defendants, MDA and its
subsidiary LySonix. The Company expects to pay the damages by the end of fiscal
year 2001. The Company plans to use existing cash, cash equivalents and
investments to pay the damages assessed. The Company is currently evaluating
opportunities to enter into a revolving line of credit up to $5,000,000 with a
commercial bank.
The Company believes that its existing capital resources will enable it to
maintain its current and planned operations for at least 18 months from the date
hereof.
The Company recorded a litigation settlement charge of $5,450,000 during the
third quarter ended March 31, 2001. The United States Court of Appeals for the
Federal Circuit Court issued a decision reversing in large part the decision of
the trial court and granting the motion by Mentor against MDA, its subsidiary
LySonix and the Company for violation of Mentor's U.S. Patent No. 4,886,491.
This patent covers Mentor's license for ultrasonic assisted liposuction. Damages
were asserted in favor of Mentor for approximately $4,900,000 and the Court
affirmed that the lower court did not have the ability to increase damages or
award attorney's fees. Mentor may request further relief in the trial court,
including interest and damages award and a permanent injunction enjoining
further sales of the LySonix 2000. The Company and its co-defendants are
considering all alternatives including further legal measures that are
available. Accordingly, the Company accrued $5,450,000 for damages, attorney
fees and other costs during the third quarter ended March 31, 2001.
On February 8, 2001, the Company acquired certain assets and liabilities of
Fibra Sonics, Inc. ("Fibra Sonics"), a Chicago-based, privately-held producer
and marketer of ultrasonic medical devices for approximately $1,800,000. In
addition to the purchase price, contingent consideration of up to, but not
exceeding $1,120,000, may be made based upon sales generated during the
consecutive twelve months commencing June 1, 2001. In the event any additional
payments are made to Fibra Sonics, such payments will be recorded as additional
goodwill and amortized over the remaining useful life. The acquisition gives the
Company immediate access to three medical markets - neurosurgery, urology and
ophthalmology and is also expected to strengthen the Company's presence in
cosmetic surgery. The Company will relocate the assets of Fibra Sonics to the
Company's Farmingdale facility from Chicago Illinois. The acquisition was
accounted for as a purchase. Accordingly, the acquired assets and liabilities
have been initially recorded at their estimated fair value at the date of
acquisition. The final allocation of the purchase price is pending the final
determination of the inventory acquired. The excess of the cost of the
acquisition ($1,720,738 plus acquisition costs of $128,453, which includes a
broker fee of $100,716) over the fair value of net assets acquired of $1,285,571
is being treated as goodwill and being amortized on a straight-line basis over a
period of 5 years.
On November 7, 2000, the Company purchased a $300,000, 5.1% Secured Cumulative
Convertible Debenture from Focus Surgery, due December 22, 2002 (the "Focus
Debenture"). The Focus Debenture is convertible to 250 shares of Focus Surgery
preferred stock at the option of the Company at any time after December 22, 2000
for two years at a conversion rate of $1,200 per share, if the Focus Debenture
is not retired by Focus Surgery. Interest accrues and is payable at maturity, or
is convertible on the same terms as the Focus Debenture's principal amount. The
Focus Debenture is secured by a lien on all of Focus Surgery's right, title and
interest in accounts receivable, inventory, property, plant and equipment and
processes of specified products whether now existing or hereafter arising after
the date of the Focus Debenture. The principal and accrued interest of the Focus
Debenture is $305,166 at March 31, 2001.
16
MISONIX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
On November 1, 2000, under the terms of the revised purchase agreement (the
"Labcaire Agreement") with Labcaire (as discussed in the Form 10-K for the year
ended June 30, 2000), the Company paid $117,349 for 9,286 shares (2.65%) of the
outstanding common stock of Labcaire bringing the acquired interest to 94.65%.
This represents the fiscal 2001 buy-back portion, as defined in the Labcaire
Agreement. As per the Labcaire Agreement, the Company is obligated to purchase
2.65% for the next three years until the Company owns 100% of Labcaire.
On October 12, 2000, the Company's subsidiary, Sonora, acquired the assets of
Sonic Technologies Laboratory Services ("Sonic Technologies"), an ultrasound
acoustic measurement and testing laboratory for approximately $319,000. The
assets of the Hatboro, Pennsylvania-based operations of privately-held Sonic
Technologies were relocated to Sonora's facility in Longmont, Colorado. The
acquisition was accounted for as a purchase. Accordingly, acquired assets and
liabilities have been recorded at their estimated fair value at the date of
acquisition. The excess of the cost of the acquisition ($270,000 plus
acquisition costs of $48,636, which includes a broker fee of $25,000) over the
fair value of net assets acquired of $301,219 is being amortized on a
straight-line basis over a period of 10 years.
During the second and third quarters of fiscal 2001, the Company entered into
eight loan agreements whereby Hearing Innovations was required to pay the
Company amounts of $200,332 due May 30, 2001. All notes bear interest at 8% per
annum. The notes are secured by a lien on all of Hearing Innovations' right,
title and interest in accounts receivable, inventory, property, plant and
equipment and processes of specified products whether now existing or hereafter
arising after the date of these agreements.
During the fourth quarter of fiscal 2000, the Company entered into four loan
agreements whereby Hearing Innovations was required to pay the Company amounts
of $24,000 due July 1, 2000, $45,000 due July 15, 2000, $29,000 due July 15,
2000 and $13,000 due July 15, 2000. During the first quarter of fiscal 2001, the
Company entered into an additional four loan agreements whereby Hearing
Innovations was required to pay the Company the total principal amounts of
$39,000, $13,000, $13,000 and $13,000 due September 15, 2000. All notes bore
interest at 8% per annum. The notes were secured by a lien on all of Hearing
Innovations' right, title and interest in accounts receivable, inventory,
property, plant and equipment and processes of specified products whether now
existing or hereafter arising after the date of these agreements. On September
11, 2000, the Company loaned an additional $108,000 to Hearing Innovations,
which together with the then outstanding loans aggregating $192,000 (with
accrued interest) described above were exchanged for a $300,000 7% Secured
Convertible Debenture due August 27, 2002 (the "Hearing Debenture") and warrants
to acquire 66,667 shares of Hearing Innovations common stock at $2.25 per share.
The Hearing Debenture is convertible at the option of the Company at any time
into shares of common stock of Hearing Innovations at a conversion rate of $2.25
per share. Interest accrues and is payable at maturity, or is convertible on the
same terms as the Hearing Debenture's principal amount. The warrants expire
August 27, 2002. If the Company were to convert the Hearing Debenture and
exercise all warrants, including those previously outstanding, the Company would
hold an approximately 20% interest in Hearing Innovations. The principal and
accrued interest of the Hearing Debenture is $311,375 at March 31, 2001.
On July 27, 2000, the Company's subsidiary, Sonora, acquired 100% of the assets
of CraMar Technologies, Inc. ("CraMar"), an ultrasound equipment servicer for
approximately $310,000. The assets of the Colorado-based, privately-held
operations of CraMar were relocated to Sonora's facility in Longmont, Colorado.
The acquisition was accounted for as a purchase. Accordingly, acquired assets
have been recorded at their estimated fair value at the date of acquisition. The
cost of the acquisition ($272,908 plus acquisition costs of $36,623, which
includes a broker fee of $25,000) approximates the fair value of net assets
acquired.
17
MISONIX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
Revenue Recognition
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted
accounting principles to revenue recognition in financial statements. The
Company will adopt SAB 101, as required, during the fourth quarter of fiscal
2001. The Company is currently assessing the impact of SAB 101 on its
consolidated financial statements and believes that the effect will not be
material to the Company's operating results and financial position.
Derivatives
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" and on June 15, 2000, issued Statement No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - an Amendment
to FASB Statement No. 133." These statements establish methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. The Company adopted these
statements during the first quarter of 2001. There is no material impact
from the adoption of these statements on its consolidated financial
statements and on the Company's operating results and financial position.
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, product
mix in sales, results of joint venture and investments in related entities,
future economic, competitive and market conditions, the outcome of legal
proceedings, as well as management business decisions.
18
MISONIX, INC.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market Risk:
The principal market risks (i.e. the risk of loss arising from adverse changes
in market rates and prices) to which the Company is exposed are interest rates
on short-term investments and foreign exchange rates, which generate translation
gains and losses due to the English Pound to U.S. Dollar conversion of Labcaire.
Interest Rates:
The Company's short-term investments, which approximated $2 million at March 31,
2001, are made up entirely of held to maturity investments, which include mostly
corporate bonds. Assuming investment levels remained the same, a one-point
change in interest rates would not have a material impact on the Company's
interest income. The Company does not enter into interest rate swap agreements.
Foreign Exchange Rates:
Approximately 23% of the Company's revenues in fiscal 2001 were received in
English Pounds currency. To the extent that the Company's revenues are generated
in English Pounds, its operating results are translated for reporting purposes
into U.S. Dollars using rates of 1.43 and 1.61 for the nine months ended March
31, 2001 and 2000, respectively. A strengthening of the English Pound, in
relation to the U.S. Dollar, will have the effect of increasing its reported
revenues and profits, while a weakening of the English Pound will have the
opposite effect. Since the Company's operations in England generally sets prices
and bids for contracts in English Pounds, a strengthening of the English Pound,
while increasing the value of its UK assets, might place the Company at a
pricing disadvantage in bidding for work from manufacturers based overseas. The
Company collects its receivables in the currency the subsidiary resides in. The
Company has not engaged in foreign currency hedging transactions.
Euro Conversion: The January 1, 1999 adoption of the Euro created a
single-currency market in much of Europe. For a transition period from January
1, 1999 through January 1, 2002, the existing local currencies are anticipated
to remain legal tender as denominations of the Euro. The Company does not
anticipate that its operations will be materially adversely effected by the
conversion to the Euro. The Company has analyzed the impact of conversion to the
Euro on its existing systems and operations and implemented modifications to its
systems to enable the Company to handle Euro invoicing for transactions, which
commenced in 1999. The Company anticipates that any additional cost of such
modifications should not have a material effect on its consolidated results of
operations or liquidity.
19
MISONIX, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The United States Court of Appeals for the Federal Circuit Court issued
a decision reversing in large part the decision of the trial court and
granting the motion by Mentor against MDA, its subsidiary LySonix and
the Company for violation of Mentor's U.S. Patent No. 4,886,491. This
patent covers Mentor's license for ultrasonic assisted liposuction.
Damages were asserted in favor of Mentor for approximately $4,900,000
and the Court affirmed that the lower court did not have the ability to
increase damages or award attorney's fees. Mentor may request further
relief in the trial court, including interest and damages award and a
permanent injunction enjoining further sales of the LySonix 2000. The
Company and its co-defendants are considering all alternatives including
further legal measures that are available. Accordingly, the Company
accrued $5,450,000 for damages, attorney fees and other costs during the
third quarter ended March 31, 2001.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10(gg) - 6% Secured Convertible Debenture of Focus Surgery, Inc.
payable to the Company.
10(hh) - Asset Purchase Agreement dated January 16, 2001, by and
among the Company, Fibra-Sonics, Inc., Mary Anne
Kirchschlager, James Kirchschlager and James Conrad
Kirchschlager.
10(ii) - Purchase and Sale Agreement, dated July 28, 2000, by and
between Cramar Technologies, Inc., Acoustic Marketing
Research, Inc. and Randy Muelot.
10(jj) - 7% Secured Convertible Debenture, dated August 28, 2000,
by Hearing Innovations, Inc. payable to the Company.
10(kk) - 5.1% Secured Convertible Debenture, dated November 7,
2000, by Focus Surgery, Inc. payable to the Company.
10(ll) - Asset Purchase Agreement by and between Perceptron, Inc.
and Acoustic Market Research, Inc. d/b/a Sonora Medical
Systems, Inc.
10(mm) - First Amendment to Employment Agreement, dated October
13, 2000, by and between the Company and Michael A.
McManus, Jr. Exhibit 11 - Computation of Net Earnings Per
Share
Exhibit 11-Computation of Net Earnings Per Share
(b) On January 8, 2001 the Company filed a Report on Form 8-K under the
caption "Item 4. Changes in Registrant's Certifying Accountant."
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 2001
MISONIX, INC.
(Registrant)
By: /s/ Michael A. McManus, Jr.
-------------------------------------
Michael A. McManus, Jr.
President and Chief Executive Officer
By: /s/ Richard Zaremba
-------------------------------------
Richard Zaremba
Vice President,
Chief Financial Officer,
Treasurer and Secretary
21