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MISONIX Inc. Reports Operating Results (10-Q)

May 12, 2009 | About:

MISONIX Inc. (MSON) filed Quarterly Report for the period ended 2009-03-31.

Misonix Inc. designs develops manufactures and markets medical scientific and industrial ultrasonic equipment laboratory safety equipment and air pollution control products. Misonix's ultrasonic platform is the basis for several innovative medical technologies. Misonix has a minority equity position in Focus Surgery Inc. which uses high intensity focused ultrasound technology to destroy deep-seated cancerous tissues without affecting surrounding healthy tissue. Misonix acquired worldwide rights to use the Focus technology in kidney liver and breast treatment. Addressing a combined market estimated to be in excess of $four billion annually Misonix's proprietary ultrasonic medical devices are used for wound debridement cosmetic surgery neurosurgery laparoscopic surgery and other surgical and medical applications. MISONIX Inc. has a market cap of $17.9 million; its shares were traded at around $2.55 with and P/S ratio of 0.4.

Highlight of Business Operations:

Net sales: Net sales of the Company’s medical device products and laboratory and scientific products decreased $1,263,303 to $29,325,347 for the nine months ended March 31, 2009 from $30,588,650 for the nine months ended March 31, 2008. This difference in net sales is due to a decrease in sales of medical device products of $613,603 to $17,241,229 for the nine months ended March 31, 2009 from $17,854,832 for the nine months ended March 31, 2008. This difference in net sales is also due to a decrease in laboratory and scientific products sales of $649,700 to $12,084,118 for the nine months ended March 31, 2009 from $12,733,318 for the nine months ended March 31, 2008. The decrease in sales of medical device products is due to a decrease in sales of therapeutic medical device products of $159,356 and a decrease of $454,247 in sales of diagnostic medical device products. The decrease in sales of therapeutic medical device products was primarily attributable to sales of the Company’s Neuroaspirator, Lysonix ultrasonic assisted liposuction product and Lithotripsy product, partially offset by an increase in sales of the Company’s bone scalpel product, AutoSonix, and the SonicOne wound debridement system. The decrease in sales of diagnostic medical device products was not attributable to a single customer, distributor or any other specific factor. The decrease in sales of laboratory and scientific products was primarily due to a $445,119 decrease in Labcaire Systems Ltd. (“Labcaire”) products sales, a decrease in Mystaire product sales of $91,270 and a decrease of $113,311 in ductless fume enclosure product sales. Labcaire sales decreased $445,119 due to the strengthening of the U.S. Dollar against the English Pound during the nine months ended March 31, 2009 as compared to the nine months ended March 31, 2008 which had the impact of reducing Labcaire sales reported in U.S. Dollars by approximately $2,252,000.

Research and development expenses: Research and development expenses decreased $279,343 from $2,175,713 for the nine months ended March 31, 2008 to $1,896,370 for the nine months ended March 31, 2009. Laboratory and scientific products research and development expenses decreased approximately $94,047 due to decreased product support related to the Ultrasonic and Labcaire products. Research and development expenses for medical device products decreased $185,296, primarily due to a reduced milestone payment to Focus Surgery, Inc. (“Focus”) related to our HIFU kidney/liver product development efforts.

Other income (expense): Other income for the nine months ended March 31, 2009 was $1,581,107 as compared to $137,950 for the nine months ended March 31, 2008. The increase of $1,443,157 was due to the receipt of $1,516,866 from USHIFU, LLC (“USHIFU”) pursuant to the Focus transaction between the Company and USHIFU. This payment consisted of $837,500 for the 2,500 shares of Series M Preferred Stock of Focus owned by the Company and fifty (50%) percent of the outstanding principal and accrued interest of loans previously made by the Company to Focus. The gain from the Focus transaction was partially offset by $123,140 of exchange losses related to the weakening of the English Pound against the U.S. Dollar.

Net sales: Net sales of the Company’s medical device products and laboratory and scientific products decreased $2,653,570 to $8,047,051 for the three months ended March 31, 2009 from $10,700,621 for the three months ended March 31, 2008. This difference in net sales is due to a decrease in sales of medical device products of $1,676,725 to $4,841,787 for the three months ended March 31, 2009 from $6,518,512 for the three months ended March 31, 2008. This difference in net sales is also due to a decrease in laboratory and scientific products sales of $976,845 to $3,205,264 for the three months ended March 31, 2009 from $4,182,109 for the three months ended March 31, 2008. The decrease in sales of medical device products is due to a decrease in sales of therapeutic medical device products of approximately $1,231,730 and a decrease of $444,995 in sales of diagnostic medical device products. The decrease in sales of therapeutic medical device products was primarily attributable to a decrease in sales of the Company’s Neuroaspirator and Lysonix ultrasonic assisted liposuction products, partially offset by an increase in sales of the Bone Scalpel and the SonicOne wound debridement system. The decrease in sales of diagnostic medical device products was not attributable to a single customer, distributor or any other specific factor. The decrease in sales of laboratory and scientific products was due to a $1,006,497 decrease in Labcaire products sales, a decrease in Mystaire product sales of $20,360 and an increase of $50,012 in ductless fume enclosure product sales. Labcaire sales decreased by $1,006,497 due to the strengthening of the U.S. Dollar against the English Pound during the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 which had the impact of reducing Labcaire sales reported in U.S. Dollars by approximately $992,000.

Research and development expenses: Research and development expenses decreased $79,191 from $653,372 for the three months ended March 31, 2008 to $574,181 for the three months ended March 31, 2009. Laboratory and scientific products research and development expenses decreased approximately $46,300 due to lower exchange rates for Labcaire expenses. Research and development expenses for medical device products decreased $32,891, primarily due to reduced milestone payments to Focus relating to our HIFU kidney/liver product development efforts.

Working capital at March 31, 2009 and June 30, 2008 was $9,977,460 and $8,841,001, respectively. For the nine months ended March 31, 2009, cash used in operations totaled $782,909. Cash used in operations was primarily due to a reduction in customer deposits and VAT payable at Labcaire. For the nine months ended March 31, 2009, cash provided by investing activities totaled $1,254,566. The major source of cash from investing activities was the receipt of $1,516,866 from USHIFU pursuant to the Focus transaction between the Company and USHIFU. This payment consisted of $837,500 for the 2,500 shares of Series M Preferred Stock of Focus owned by the Company and fifty percent (50%) of the outstanding principal and accrued interest of loans previously made by the Company to Focus. The cash received from the Focus transaction was partially offset by the purchase of property, plant and equipment during the regular course of business. For the nine months ended March 31, 2009, cash used in financing activities was $1,323,576, primarily consisting of principal payments on capital lease obligations and short-term borrowings of $22,559,516, partially offset by proceeds from short-term borrowings of $21,235,940.

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