-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FiTqWwtTRUCybKuKyXmKq//tZEBbgmz10NPeKXHqG0iyX8U1+GWZFEyS4UyCZADR KByxvAzAXpHYeKGqddKRvA== 0001015402-04-001902.txt : 20040507 0001015402-04-001902.hdr.sgml : 20040507 20040507131415 ACCESSION NUMBER: 0001015402-04-001902 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISONIX INC CENTRAL INDEX KEY: 0000880432 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY APPARATUS & FURNITURE [3821] IRS NUMBER: 112148932 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10986 FILM NUMBER: 04788040 BUSINESS ADDRESS: STREET 1: 1938 NEW HIGHWAY CITY: FARMINGDALE STATE: NY ZIP: 11747 BUSINESS PHONE: 5166949555 FORMER COMPANY: FORMER CONFORMED NAME: MEDSONIC INC DATE OF NAME CHANGE: 19930328 10-Q 1 doc1.txt 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, 2004 -------------- 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, NY 11735 - ---------------------------------------- ---------- (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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- 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, 2004 --------------------- -------------- Common Stock, $.01 par value 6,655,865
MISONIX, INC. ------------- INDEX ----- PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements: Consolidated Balance Sheets as of March 31, 2004 (Unaudited) and June 30, 2003 3 Consolidated Statements of Income Nine months ended March 31, 2004 and 2003 (Unaudited) 4 Consolidated Statements of Income Three months ended March 31, 2004 and 2003 (Unaudited) 5 Consolidated Statements of Cash Flows Nine months ended March 31, 2004 6 and 2003 (Unaudited) Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition 14 and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 25 Item 4. Controls and Procedures 25 Part II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 26 Signatures 27
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PART I - FINANCIAL INFORMATION Item 1. Financial Statements. MISONIX, INC. CONSOLIDATED BALANCE SHEETS =========================== MARCH 31, June 30, 2004 2003 -------------------------- ASSETS (UNAUDITED) -------------------------- Current assets: Cash and cash equivalents $ 4,140,253 $ 2,279,869 Accounts receivable, less allowance for doubtful accounts of $530,204 and $644,157, respectively 6,513,591 7,844,399 Inventories 10,975,988 8,979,472 Deferred income taxes 599,130 477,580 Prepaid expenses and other current assets 1,238,261 983,523 -------------------------- Total current assets 23,467,223 20,564,843 Property, plant and equipment, net 3,930,592 3,574,207 Deferred income taxes 450,778 862,690 Goodwill 4,473,713 4,473,713 Other assets 348,725 319,136 -------------------------- Total assets $32,671,031 $29,794,589 ========================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving credit facilities $ 641,636 $ 704,669 Accounts payable 4,366,485 3,563,208 Accrued expenses and other current liabilities 2,070,873 2,002,154 Income taxes payable 399,245 47,453 Current maturities of long-term debt and capital lease obligations 308,007 279,554 -------------------------- Total current liabilities 7,786,246 6,597,038 Long-term debt and capital lease obligations 1,320,613 1,235,362 Deferred income 387,479 356,076 Minority interest 299,392 263,450 Stockholders' equity: Common stock, $.01 par value-shares authorized 10,000,000; 6,733,665 issued and 6,655,865 outstanding 67,337 67,337 Additional paid-in capital 22,712,511 22,712,511 Retained earnings (deficit) 117,593 (1,053,484) Treasury stock, 77,800 shares (412,424) (412,424) Accumulated other comprehensive income 392,284 28,723 -------------------------- Total stockholders' equity 22,877,301 21,342,663 ------------ ------------ Total liabilities and stockholders' equity $32,671,031 $29,794,589 ==========================
See Accompanying Notes to Consolidated Financial Statements. 3
MISONIX, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) =========== FOR THE NINE MONTHS ENDED MARCH 31, 2004 2003 ------------------------------- Net sales $ 28,262,256 $ 23,932,512 Cost of goods sold 16,164,154 13,731,118 ------------------------------- Gross profit 12,098,102 10,201,394 Operating expenses: Selling expenses 3,282,312 3,123,225 General and administrative expenses 5,703,640 4,966,700 Research and development expenses 1,717,878 1,599,766 Litigation (recovery) settlement expenses - (201,106) ------------------------------- Total operating expenses 10,703,830 9,488,585 ------------------------------- Income from operations 1,394,272 712,809 Other income (expense): Interest income 39,278 42,722 Interest expense (119,972) (132,706) Option/license fees 19,815 18,234 Royalty income 1,036,485 386,424 Foreign exchange (loss) gain (16,562) 4,807 Loss on impairment of Hearing Innovations, Inc. (198,800) (231,982) Loss on impairment of Focus Surgery, Inc. - (13,725) ------------------------------- Total other income 760,244 73,774 Income before minority interest and income taxes 2,154,516 786,583 Minority interest in net income (loss) of consolidated subsidiary 35,941 (4,208) ------------------------------- Income before income taxes 2,118,575 790,791 Income tax expense 947,498 382,158 ------------------------------- Net income $ 1,171,077 $ 408,633 =============================== Net income per share - Basic $ .18 $ .06 =============================== Net income per share - Diluted $ .17 $ .06 =============================== Weighted average common shares outstanding - Basic 6,655,865 6,420,118 =============================== Weighted average common shares outstanding - Diluted 6,744,207 6,598,608 ===============================
See Accompanying Notes to Consolidated Financial Statements. 4
MISONIX, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) =========== FOR THE THREE MONTHS ENDED MARCH 31, 2004 2003 ----------------- ------------- Net sales $ 10,346,249 $ 8,747,677 Cost of goods sold 5,892,060 4,908,659 -------------------------------- Gross profit 4,454,189 3,839,018 Operating expenses: Selling expenses 1,203,820 1,090,662 General and administrative expenses 1,813,594 1,814,569 Research and development expenses 654,232 583,878 Litigation (recovery) settlement expenses - (48,478) -------------------------------- Total operating expenses 3,671,646 3,440,631 -------------------------------- Income from operations 782,543 398,387 Other income (expense): Interest income 11,432 1,324 Interest expense (42,969) (45,226) Option/license fees 6,690 6,078 Royalty income 197,897 137,779 Foreign exchange (loss) gain (7,621) 2,562 Loss on impairment of Hearing Innovations, Inc. (163,200) (49,075) -------------------------------- Total other income 2,229 53,442 Income before minority interest and income taxes 784,772 451,829 Minority interest in net income of consolidated subsidiary 7,790 29,628 -------------------------------- Income before income taxes 776,982 422,201 Income tax expense 388,933 177,766 -------------------------------- Net income $ 388,049 $ 244,435 ================================ Net income per share - Basic $ .06 $ .04 ================================ Net income per share - Diluted $ .06 $ .04 ================================ Weighted average common shares outstanding - Basic 6,655,865 6,643,300 ================================ Weighted average common shares outstanding - Diluted 6,774,501 6,686,981 ================================
See Accompanying Notes to Consolidated Financial Statements. 5
MISONIX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) =========== FOR THE NINE MONTHS ENDED MARCH 31, 2004 2003 ------------------------------- OPERATING ACTIVITIES Net income $ 1,171,077 $ 408,633 Adjustments to reconcile net income to net cash provided by operating activities: Bad debt (recovery) expense (53,264) 120,560 Litigation recovery - (201,106) Deferred income tax benefit 290,362 (68,424) Depreciation and amortization 542,866 473,387 Loss on disposal of equipment 45,843 90,154 Foreign currency exchange loss (gain) 16,562 (4,807) Minority interest in net income of subsidiaries 35,941 (4,208) Loss on impairment of investments 198,800 245,707 Changes in operating assets and liabilities: Accounts receivable 1,569,258 310,094 Inventories (1,619,688) (1,882,911) Prepaid income taxes 25,314 2,400,894 Prepaid expenses and other current assets (194,731) (448,308) Other assets (47,198) 145,336 Accounts payable and accrued expenses 444,557 373,460 Litigation settlement liabilities - (4,332) Deferred income 31,403 4,262 Income taxes payable 320,010 (173,907) ------------------------------- Net cash provided by operating activities 2,777,112 1,784,484 ------------------------------- INVESTING ACTIVITIES Acquisition of property, plant and equipment (350,870) (340,527) Loans to Hearing Innovations, Inc. (198,800) (208,741) Purchase of Labcaire stock - (232,394) Cash acquired from consolidation of variable interest entity 236 - ------------------------------- Net cash used in investing activities (549,434) (781,662) -------------------------------
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MISONIX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) =========== FINANCING ACTIVITIES Proceeds from short-term borrowings 492,632 360,815 Payments of short-term borrowings (629,654) (441,719) Principal payments on capital lease obligations (241,806) (209,103) Proceeds from long-term debt - 11,410 Payments of long-term debt (41,756) (22,201) Proceeds from stock options - 393,104 Purchase of treasury stock - (10,450) ------------------------- Net cash (used in) provided by financing activities (420,584) 81,856 ------------------------- Effect of exchange rate changes on assets and liabilities 53,290 10,760 ------------------------- Net increase in cash and cash equivalents 1,860,384 1,095,438 Cash and cash equivalents at beginning of period 2,279,869 1,065,465 ------------------------- Cash and cash equivalents at end of period $4,140,253 $ 2,160,903 ========================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for (received from): Interest $ 119,972 $ 132,706 ========================= Income taxes $ 118,917 $(1,688,469) ========================= SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Capital lease additions $ 236,199 $ 237,785 =========================
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 accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending June 30, 2004. The balance sheet at June 30, 2003 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, 2003. 2. Variable Interest Entities ---------------------------- In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 ("FIN 46"). In December 2003, the FASB modified FIN 46 to make certain technical corrections and address certain implementation issues that had arisen. FIN 46 provides a new framework for identifying variable interest entities ("VIEs") and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. In general, a VIE is a corporation, partnership, limited liability company, trust, or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations. FIN 46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) is obligated to absorb a majority of the risk of loss from the VIE's activities, is entitled to receive a majority of the VIE's residual returns (if no party absorbs a majority of the VIE's losses), or both. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE's assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also requires disclosures about VIEs that the variable interest holder is not required to consolidate but in which it has a significant variable interest. In connection with the adoption of FIN 46 during the third quarter of fiscal 2004, the Company consolidated Hearing Innovations, Inc. ("Hearing Innovations") in its March 31, 2004 balance sheet as the entity was determined to be a VIE and the Company is its primary beneficiary. The Company elected to record the adoption of FIN 46 as a cumulative effect of an accounting change. Consolidating Hearing Innovations did not have a material impact on the Company's consolidated results of operations or financial condition. Prior periods were not restated. For additional information on Hearing Innovations, see Note 9 of the consolidated financial statements. 8 MISONIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information with respect to interim periods is unaudited) (CONTINUED) ====================================================================== 3. Net Income Per Share ----------------------- Basic income per common share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive earnings per share reflects the potential dilution that would occur if options to purchase common stock were exercised. The following table sets forth the reconciliation of weighted average shares outstanding and diluted weighted average shares outstanding:
For the Nine Months For the Three Months Ended March 31, Ended March 31, 2004 2003 2004 2003 ---------- --------- ----------- --------- Weighted average common shares outstanding 6,655,865 6,420,118 6,655,865 6,643,300 Dilutive effect of stock options 88,342 178,490 118,636 43,681 ---------- --------- ----------- --------- Diluted weighted average common shares outstanding 6,744,207 6,598,608 6,774,501 6,686,981 ========== ========= =========== =========
4. Comprehensive Income --------------------- Total comprehensive income was $1,534,638 and $506,051 for the nine and three months ended March 31, 2004, respectively, and $600,974 and $221,391 for the nine and three months ended March 31, 2003, respectively. Accumulated other comprehensive income is comprised of foreign currency translation adjustments. 5. Stock-Based Compensation ------------------------- The Company accounts for stock-based employee and outside directors' compensation under APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. The Company has adopted the disclosure-only provisions of Statements of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure", which was released in December 2002 as an amendment of SFAS No. 123. The following table illustrates the effect on net income and net income per share as if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation. 9
MISONIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information with respect to interim periods is unaudited) (CONTINUED) ====================================================================== For the Nine Months Ended For the Three Months Ended March 31, 2004 2003 2004 2003 ---------------- ------------- --------------- -------------- Net income - As reported: $ 1,171,077 $ 408,633 $ 388,049 $ 244,435 Stock based compensation determined under SFAS 123 (473,867) (268,441) (193,318) (117,817) ---------------- ------------- --------------- -------------- Net income - Pro forma: $ 697,210 $ 140,192 $ 194,731 $ 126,618 Net income per share - Basic: As reported $ .18 $ .06 $ .06 $ .04 Pro forma $ .10 $ .02 $ .03 $ .02 Net income per share - Diluted: As reported $ .17 $ .06 $ .06 $ .04 Pro forma $ .10 $ .02 $ .03 $ .02
6. Inventories ----------- Inventories are summarized as follows: MARCH 31, 2004 June 30, 2003 --------------- -------------- Raw materials $ 4,256,195 $ 4,230,870 Work-in-process 2,387,235 1,112,453 Finished goods 4,332,558 3,636,149 ------------------------------- $ 10,975,988 $ 8,979,472 =============================== 7. Revolving Credit Facilities ----------------------------- On December 31, 2003, Labcaire extended its debt purchase agreement with Lloyds TSB Commercial Finance through June 30, 2004. During the nine months ended March 31, 2004 Labcaire borrowed $492,632 and made payments of $629,654 under the debt purchase agreement. At March 31, 2004, the balance outstanding under this debt purchase agreement was $641,636 and Labcaire was in compliance with all financial covenants. 8. Accrued Expenses and Other Current Liabilities --------------------------------------------------- The following summarizes accrued expenses and other current liabilities:
MARCH 31, 2004 June 30, 2003 --------------- -------------- Accrued payroll and vacation $ 302,550 $ 283,339 Accrued sales tax 96,708 208,005 Accrued commissions and bonuses 145,912 212,585 Customer deposits and deferred contracts 1,335,181 1,116,869 Accrued professional fees 116,885 132,766 Other 73,637 48,590 --------------- -------------- $ 2,070,873 $ 2,002,154 =============== ==============
10 MISONIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information with respect to interim periods is unaudited) (CONTINUED) ====================================================================== 9. Loans to Affiliate -------------------- Hearing Innovations, Inc. - --------------------------- During fiscal 2004, the Company entered into seven loan agreements whereby Hearing Innovations is required to pay the Company an aggregate amount of $198,800. Two of these notes aggregating $23,000 are currently in default due to non-payment. Hearing Innovations is currently negotiating with the Company to extend the due dates of all its outstanding debt. The remaining five notes aggregating $175,800 are due June 30, 2004. 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 arising after the date of these agreements. The loan agreements contain warrants to acquire 198,800 shares of Hearing Innovations common stock, at the option of the Company, at a cost of $.20 per share. These warrants, which are deemed nominal in value, expire in October 2005. The Company recorded an allowance against the entire balance of $198,800 for the above loans. The related expense has been included in loss on impairment of Hearing Innovations in the accompanying consolidated statements of income. The Company believes the loans and related interest are impaired since the Company does not anticipate that these loans will be paid in accordance with the contractual terms of the loan agreements and Hearing Innovations has no predictable cash flows from its product revenue. The current ability of companies such as Hearing Innovations to access capital markets or incur third party debt is very limited and is likely to remain so for the foreseeable future. In light of this fact, the Company continues to review strategic options available to it and Hearing Innovations due to Hearing Innovations' continuing need for financial support. The Company previously made the decision not to continue funding Hearing Innovations' operations, however, the Company loaned Hearing Innovations $198,800 to enable Hearing Innovations to reduce a substantial portion of its long-term debt to certain third parties. The Company continues to believe that Hearing Innovations' technology could provide a benefit to patients but the products require more improvement and market development. All equity investments and debt in Hearing Innovations have been fully reserved and currently have a zero basis. As discussed in Note 2, in connection with the adoption of FIN 46, the Company consolidated Hearing Innovations in its March 31, 2004 balance sheet as the entity was determined to be a VIE and the Company is its primary beneficiary. The Company elected to record the adoption of FIN 46 as a cumulative effect of an accounting change. Consolidating Hearing Innovations did not have a material impact on the Company's consolidated results of operations or financial condition. 10. Business Segments ------------------ The Company operates in two business segments which are organized by product types: laboratory and scientific products and medical devices. Laboratory and scientific products include the Sonicator ultrasonic liquid processor, Aura ductless fume enclosure, the Labcaire Autoscope and Guardian endoscope disinfectant systems and the Mystaire wet scrubber. Medical devices include the Auto Sonix ultrasonic cutting and coagulatory system, refurbishing revenues of high-performance ultrasound systems and replacement transducers for the medical diagnostic ultrasound industry, ultrasonic lithotriptor, ultrasonic neuroaspirator (used for neurosurgery) and soft tissue aspirator (used primarily for the cosmetic surgery market). The Company evaluates the performance of the segments based upon income from operations before general and administrative expenses and litigation (recovery) 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 Annual Report on Form 10-K for the year ended June 30, 2003. Certain items are maintained at the corporate headquarters (corporate) and are not allocated to the segments. They primarily include general and administrative expenses. The Company does not allocate assets by segment. Summarized financial information for each of the segments are 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, 2004: (a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL --------------------------------------------------------------- Net sales $15,771,176 $ 12,491,080 $ - $28,262,256 Cost of goods sold 8,700,327 7,463,827 - 16,164,154 ----------- -------------------- ----------- Gross profit 7,070,849 5,027,253 - 12,098,102 Selling expenses 1,415,141 1,867,171 - 3,282,312 Research and development expenses 1,119,595 598,283 - 1,717,878 ----------- -------------------- ----------- Total operating expenses 2,534,736 2,465,454 5,703,640 10,703,830 ----------- -------------------- --------------- ----------- Income from operations $ 4,536,113 $ 2,561,799 $ (5,703,640) $ 1,394,272 =========== ==================== =============== ===========
(a) Amount represents general and administrative expenses only.
For the three months ended March 31, 2004: (a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL -------------------------------------------------------------- Net sales $6,040,544 $ 4,305,705 $ - $10,346,249 Cost of goods sold 3,299,161 2,592,899 - 5,892,060 ---------- -------------------- ----------- Gross profit 2,741,383 1,712,806 - 4,454,189 Selling expenses 551,549 652,271 - 1,203,820 Research and development expenses 424,851 229,381 - 654,232 ---------- -------------------- ----------- Total operating expenses 976,400 881,652 1,813,594 3,671,646 ---------- -------------------- --------------- ----------- Income from operations $1,764,983 $ 831,154 $ (1,813,594) $ 782,543 ========== ==================== =============== ===========
(a) Amount represents general and administrative expenses only.
For the nine months ended March 31, 2003: (a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL --------------------------------------------------------------- Net sales $11,769,483 $ 12,163,029 $ - $23,932,512 Cost of goods sold 6,471,209 7,259,909 - 13,731,118 ----------- -------------------- ----------- Gross profit 5,298,274 4,903,120 - 10,201,394 Selling expenses 1,037,082 2,086,143 - 3,123,225 Research and development expenses 1,079,821 519,945 - 1,599,766 ----------- -------------------- ----------- Total operating expenses 2,116,903 2,606,088 4,765,594 9,488,585 ----------- -------------------- --------------- ----------- Income from operations $ 3,181,371 $ 2,297,032 $ (4,765,594) $ 712,809 =========== ==================== =============== ===========
(a) Amount represents general and administrative and litigation (recovery) settlement expenses only. 12 MISONIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information with respect to interim periods is unaudited) (CONTINUED) ====================================================================== For the three months ended March 31, 2003:
(a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL ------------------------------------------------------------- Net sales $4,557,903 $ 4,189,774 $ - $8,747,677 Cost of goods sold 2,389,023 2,519,636 - 4,908,659 ---------- -------------------- ---------- Gross profit 2,168,880 1,670,138 - 3,839,018 Selling expenses 393,402 697,260 - 1,090,662 Research and development expenses 388,968 194,910 - 583,878 ---------- -------------------- ---------- Total operating expenses 782,370 892,170 1,766,091 3,440,631 ---------- -------------------- --------------- ---------- Income from operations $1,386,510 $ 777,968 $ (1,766,091) $ 398,387 ========== ==================== =============== ==========
(a) Amount represents general and administrative and litigation (recovery) settlement expenses only. The Company's revenues are generated from various geographic regions. The following is an analysis of net sales by geographic region: For the nine months ended March 31: 2004 2003 ----------- ----------- United States $18,746,761 $15,716,426 Canada 342,071 310,182 Mexico 229,603 5,543 United Kingdom 6,383,027 5,903,344 Europe 1,133,740 1,014,798 Asia 757,271 758,022 Middle East 229,229 48,285 Other 440,554 175,912 ------------------------ $28,262,256 $23,932,512 ======================== 11. Regulatory Requirements ----------------------- The Company received a letter dated October 31, 2003 from the Food and Drug Administration ("FDA") regarding the Company's notification concerning the implemented procedures to "field correct" a shock sensation that was caused by users forcing the output connector improperly when using the Lysonix 2000. Although the output cable was properly marked, the Company issued new sticker directions and notified all its customers in writing. The FDA stated that it "agreed with the Company's decision to "field correct" the Lysonix 2000." The FDA classified this field correction as a Class II recall which means that this is a situation in which use of or exposure to such product may cause temporary or medically reversible adverse health consequences or which the probability of serious adverse health consequences is remote. The Company will do everything necessary to satisfy the FDA request for information on the "field correction." The Company, additionally, is following FDA policies to be fully compliant with all requirements. The Company has estimated the cost of this field correction to be immaterial. 13 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 Ended March 31, 2004 and 2003. NET SALES. Net sales of the Company's medical devices and laboratory and - ----------- scientific products increased $4,329,744 to $28,262,256 for the nine months ended March 31, 2004 from $23,932,512 for the nine months ended March 31, 2003. This difference in net sales is due to an increase in sales of medical devices of $4,001,693 to $15,771,176 for the nine months ended March 31, 2004 from $11,769,483 for the nine months ended March 31, 2003. This difference is also due to an increase in sales of laboratory and scientific products of $328,051 to $12,491,080 for the nine months ended March 31, 2004 from $12,163,029 for the nine months ended March 31, 2003. The increase in sales of medical devices is due to an increase in sales of therapeutic medical devices of $2,980,829 and an increase in diagnostic medical devices of $1,020,864, both due to increased customer demand for several therapeutic and diagnostic medical devices. The increase in sales of diagnostic medical devices was not attributable to a single customer, distributor or any other specific factor. The increase in sales of therapeutic medical devices was mostly attributable to an increase in sales to Mentor Corporation ("Mentor") of the Lysonix 3000 device, the Auto Sonix device and accessories sold to United States Surgical Corporation ("USS") and an increase of sales of the Sonoblate 500 of approximately $855,000, $657,000, and $722,000, respectively. The increase in sales of the Sonoblate 500 is due to both an increase in sales to Focus Surgery, Inc. ("Focus Surgery") as the manufacturer of the device and the sale of the device in Europe by the Company, in which sales back to the Company are not recorded as revenue until the total earnings process is complete. The remaining increase in sales of therapeutic medical devices is due to increased demand for several products. The increase in sales of laboratory and scientific products is due to an increase in Labcaire sales of $398,365 and sales of ultrasonic laboratory products of $361,584 partially offset by a decrease in wet scrubber sales of $284,255 and a decrease in ductless fume enclosure sales of $147,643. The increase in Labcaire sales is primarily due to the strengthening of the English Pound partially offset by a decrease in sales of the Guardian (endoscopic cleaning) product. The increase in laboratory and scientific ultrasonic sales is due to an increase in customer demand for several ultrasonic products. Wet scrubber sales continue to be adversely affected by the downturn in the semi-conductor market, although for the third quarter of fiscal 2004 is starting to turn around. Sales of wet scrubbers, however, are still affected by the strong competition in this market. The decrease in fume enclosure sales is due to lower customer demand for several laboratory and scientific products and current economic conditions for such products. Export sales from the United States are remitted in U.S. Dollars and export sales for Labcaire are remitted in English Pounds. During the nine months ended March 31, 2004 and 2003, the Company had foreign net sales of $9,515,495 and $8,216,086, respectively, representing 33.7% and 34.3% of net sales for such periods, respectively. The increase in foreign sales during the nine months ended March 31, 2004 as compared to the nine months ended March 31, 2003 is substantially due to an increase in Labcaire sales due to the strengthening of the English Pound as well as an increase in foreign diagnostic and therapeutic medical device sales as the Company started to sell the ultrasonic neuroaspirator and the Sonoblate 500 to distributors in Europe. Labcaire represented 75% and 70% of foreign net sales during the nine months ended March 31, 2004 and 2003, respectively. The remaining 25% and 30% represents net foreign sales remitted in U.S. Dollars during the nine months ended March 31, 2004 and 2003, respectively. Approximately 23% of the Company's revenues for the nine months ended March 31, 2004 were received in English Pounds. 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 weighted average rates of 1.77 and 1.57 for the nine months ended March 31, 2004 and 2003, respectively. A strengthening of the English Pound, in relation to the U.S. Dollar, will have the effect of increasing reported revenues and profits, while a weakening of the English Pound will have the opposite effect. Since the Company's operations in England generally set 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, which include forward exchange agreements. 14 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ============================================================ The Company's revenues are generated from various geographic regions. The following is an analysis of net sales by geographic region: For the nine months ended March 31: 2004 2003 ----------- ----------- United States $18,746,761 $15,716,426 Canada 342,071 310,182 Mexico 229,603 5,543 United Kingdom 6,383,027 5,903,344 Europe 1,133,740 1,014,798 Asia 757,271 758,022 Middle East 229,229 48,285 Other 440,554 175,912 ------------------------ $28,262,256 $23,932,512 ======================== Summarized financial information for each of the segments for the nine months ended March 31, 2004 and 2003 are as follows: For the nine months ended March 31, 2004:
(a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL --------------------------------------------------------------- Net sales $15,771,176 $ 12,491,080 $ - $28,262,256 Cost of goods sold 8,700,327 7,463,827 - 16,164,154 ----------- -------------------- ----------- Gross profit 7,070,849 5,027,253 - 12,098,102 Selling expenses 1,415,141 1,867,171 - 3,282,312 Research and development expenses 1,119,595 598,283 - 1,717,878 ----------- -------------------- ----------- Total operating expenses 2,534,736 2,465,454 5,703,640 10,703,830 ----------- -------------------- --------------- ----------- Income from operations $ 4,536,113 $ 2,561,799 $ (5,703,640) $1 ,394,272 =========== ==================== =============== ===========
(a) Amount represents general and administrative expenses only. For the nine months ended March 31, 2003:
(a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL --------------------------------------------------------------- Net sales $11,769,483 $ 12,163,029 $ - $23,932,512 Cost of goods sold 6,471,209 7,259,909 - 13,731,118 ----------- -------------------- ----------- Gross profit 5,298,274 4,903,120 - 10,201,394 Selling expenses 1,037,082 2,086,143 - 3,123,225 Research and development expenses 1,079,821 519,945 - 1,599,766 ----------- -------------------- ----------- Total operating expenses 2,116,903 2,606,088 4,765,594 9,488,585 ----------- -------------------- --------------- ----------- Income from operations $ 3,181,371 $ 2,297,032 $ (4,765,594) $ 712,809 =========== ==================== =============== ===========
(a) Amount represents general and administrative and litigation (recovery) settlement expenses only. 15 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ============================================================ GROSS PROFIT: Gross profit for the nine months ended March 31, 2004 is 42.8%. - -------------- Gross profit for the nine months ended March 31, 2003 was 42.6%. Gross profit for medical devices decreased to 44.8% of sales in the nine months ended March 31, 2004 from 45% of sales in the nine months ended March 31, 2003. The decrease in gross profit for medical devices was impacted by the favorable order mix for sales of therapeutic medical devices offset by an unfavorable order mix of diagnostic medical devices, which traditionally carry lower margins. Gross profit for laboratory and scientific products decreased to 40.2% for the nine months ended March 31, 2004 from 40.3% for the nine months ended March 31, 2003. The decrease is due to a decrease in gross profit for wet scrubber products due to pricing pressures from competition. The Company manufactures and sells both medical devices and laboratory and scientific products with a wide range of product costs and gross margin dollars as a percentage of revenues. SELLING EXPENSES: Selling expenses increased $159,087 to $3,282,312 for the nine - ----------------- months ended March 31, 2004 from $3,123,225 for the nine months ended March 31, 2003. Medical devices selling expenses increased $378,059 due both to additional sales and marketing efforts for diagnostic medical devices and therapeutic medical devices. The increase in therapeutic medical devices selling expenses of $253,097 is due to an increase in sales and marketing efforts relating to European distribution. Laboratory and scientific products selling expenses decreased $218,972 predominantly due to a decrease in fume enclosure and laboratory and scientific ultrasonic commissions and marketing expenses and a transfer of Labcaire personnel to general and administrative expenses from selling expenses offset by the strengthening of the English Pound. GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses - -------------------------------------- increased $736,940 to $5,703,640 in the nine months ended March 31, 2004 from $4,966,700 in the nine months ended March 31, 2003. The increase is predominantly due to an increase in general and administrative expenses relating to severance costs, a transfer of personnel from selling expenses and the strengthening of the English Pound, all attributable to Labcaire, as well as an increase in corporate expenses relating to insurance, legal fees and other accrued corporate expenses partially offset by a decrease in bad debt expense. RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses increased - ------------------------------------ $118,112 to $1,717,878 for the nine months ended March 31, 2004 from $1,599,766 for the nine months ended March 31, 2003. Laboratory and scientific products research and development expenses increased $78,338 predominantly due to increased research and development efforts and the strengthening of the English Pound at Labcaire. Medical devices research and development expenses increased $39,774 predominantly due to an increase in research and development efforts in therapeutic medical devices. LITIGATION (RECOVERY) SETTLEMENT EXPENSES: The Company recorded a reversal of - --------------------------------------------- the litigation settlement for the nine months ended March 31, 2003 of $201,106 as compared to $0 for the nine months ended March 31, 2004. This reversal represents the sale of Lysonix 2000 units by Mentor that were received by Mentor from LySonix, Inc. ("LySonix") under the settlement agreement with LySonix (this inventory was previously reserved for in fiscal year June 30, 2002, as its salability was uncertain). 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, 2003. OTHER INCOME (EXPENSE): Other income for the nine months ended March 31, 2004 - ------------------------- was $760,244 as compared to $73,774 for the nine months ended March 31, 2003. The increase of $686,470 was primarily due to an increase in royalty income of $650,061 and a decrease in loss on impairment of investments of $46,907. The Company received an additional royalty payment in the first quarter of fiscal 2004 of approximately $410,000, which was based upon a review of USS' records that determined that royalties were due for prior years. The review showed that USS owed (and subsequently paid in the first quarter) royalties due on a product that was not included in the original royalty computation. The increase was also due to a decrease in loss on impairment of investments of Hearing Innovations, Inc. ("Hearing Innovations") of $33,182. The decrease in loss on impairment of Hearing Innovations is a direct result of current period loans to Hearing Innovations being less than in the prior period. 16 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ============================================================ INCOME TAXES: The effective tax rate is 44.7% for the nine months ended March - -------------- 31, 2004 as compared to an effective tax rate of 48.3% for the nine months ended March 31, 2003. The current effective income tax rate of 44.7% was impacted by no corresponding income tax benefit from the loss on impairment of Hearing Innovations of approximately $78,000 plus the standard consolidated tax rate of approximately 40%. The decrease in the effective tax rate for the current nine months compared to the prior year is primarily due to the reduction in the impaired loans to Hearing Innovations. The loss on impairment of Hearing Innovations is recorded with no corresponding tax benefit since these transactions are capital losses. Benefits for such losses are only received if the Company has the ability to generate capital gains. Three Months Ended March 31, 2004 and 2003. NET SALES. Net sales of the Company's medical devices and laboratory and - ----------- scientific products increased $1,598,572 to $10,346,249 for the three months ended March 31, 2004 from $8,747,677 for the three months ended March 31, 2003. This difference in net sales is due to an increase in sales of medical devices of $1,482,641 to $6,040,544 for the three months ended March 31, 2004 from $4,557,903 for the three months ended March 31, 2003. This difference is also due to an increase in sales of laboratory and scientific products of $115,931 to $4,305,705 for the three months ended March 31, 2004 from $4,189,774 for the three months ended March 31, 2003. The increase in sales of medical devices is due to an increase in sales of therapeutic medical devices of $1,396,963 and an increase in sales of diagnostic medical devices of $85,678. The increase in sales of diagnostic medical devices was not attributable to a single customer, distributor or any other specific factor. The increase in sales of therapeutic medical devices was mostly attributable to an increase in sales of the ultrasonic neuroaspirator device, an increase in sales to Mentor of the Lysonix 3000 device and an increase in sales of the Sonoblate 500 of approximately $290,000, $214,000, and $233,000, respectively. The increase in sales of the Sonoblate 500 is due to both an increase in sales to Focus Surgery as the manufacturer of the device and the sale of the device in Europe by the Company, in which sales back to the Company are not recorded as revenue until the total earnings process is complete. The increase in sales of laboratory and scientific products is due to an increase in sales of ultrasonic products of $68,621, an increase in wet scrubber sales of $56,212 and an increase in fume enclosure sales of $33,544 partially offset by a decrease in Labcaire sales of $42,446. The increase in laboratory and scientific ultrasonic sales, wet scrubber sales and fume enclosure sales is due to an increase in customer demand for several laboratory and scientific products. The decrease in Labcaire sales is due to a decrease in sales of the Guardian (endoscopic cleaning) product. Export sales from the United States are remitted in U.S. Dollars and export sales for Labcaire are remitted in English Pounds. During the three months ended March 31, 2004 and 2003, the Company had foreign net sales of $3,526,136 and $3,097,714, respectively, representing 34.1% and 35.4% of net sales for such periods, respectively. The increase in foreign sales during the three months ended March 31, 2004 as compared to the three months ended March 31, 2003 is substantially due to an increase in foreign diagnostic and therapeutic medical device sales partially offset by a decrease in Labcaire sales. The Company started to sell the ultrasonic neuroaspirator and the Sonoblate 500 to distributors in Europe in the third quarter of fiscal 2004. Labcaire represented 68% and 80% of foreign net sales during the three months ended March 31, 2004 and 2003, respectively. The remaining 32% and 20% represents net foreign sales remitted in U.S. Dollars during the three months ended March 31, 2004 and 2003, respectively. Approximately 21% of the Company's revenues for the three months ended March 31, 2004 were received in English Pounds. 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 weighted average rates of 1.84 and 1.51 for the three months ended March 31, 2004 and 2003, respectively. A strengthening of the English Pound, in relation to the U.S. Dollar, will have the effect of increasing reported revenues and profits, while a weakening of the English Pound will have the opposite effect. Since the Company's operations in England generally set 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, which include forward exchange agreements. 17 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ============================================================ The Company's revenues are generated from various geographic regions. The following is an analysis of net sales by geographic region: For the three months ended March 31: 2004 2003 ----------- ---------- United States $ 6,820,113 $5,649,963 Canada 193,001 144,792 Mexico 63,170 2,321 United Kingdom 2,163,826 2,257,979 Europe 621,660 337,957 Asia 339,507 263,260 Middle East 78,193 5,763 Other 66,779 85,642 ----------------------- $10,346,249 $8,747,677 ======================= Summarized financial information for each of the segments for the three months ended March 31, 2004 and 2003 are as follows: For the three months ended March 31, 2004:
(a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL -------------------------------------------------------------- Net sales $6,040,544 $ 4,305,705 $ - $10,346,249 Cost of goods sold 3,299,161 2,592,899 - 5,892,060 ---------- -------------------- ----------- Gross profit 2,741,383 1,712,806 - 4,454,189 Selling expenses 551,549 652,271 - 1,203,820 Research and development expenses 424,851 229,381 - 654,232 ---------- -------------------- ----------- Total operating expenses 976,400 881,652 1,813,594 3,671,646 ---------- -------------------- --------------- ----------- Income from operations $1,764,983 $ 831,154 $ (1,813,594) $ 782,543 ========== ==================== =============== ===========
(a) Amount represents general and administrative expenses only. For the three months ended March 31, 2003:
(a) MEDICAL LABORATORY AND CORPORATE AND DEVICES SCIENTIFIC PRODUCTS UNALLOCATED TOTAL ------------------------------------------------------------- Net sales $4,557,903 $ 4,189,774 $ - $8,747,677 Cost of goods sold 2,389,023 2,519,636 - 4,908,659 ---------- -------------------- ---------- Gross profit 2,168,880 1,670,138 - 3,839,018 Selling expenses 393,402 697,260 - 1,090,662 Research and development expenses 388,968 194,910 - 583,878 ---------- -------------------- ---------- Total operating expenses 782,370 892,170 1,766,091 3,440,631 ---------- -------------------- --------------- ---------- Income from operations $1,386,510 $ 777,968 $ (1,766,091) $ 398,387 ========== ==================== =============== ==========
(a) Amount represents general and administrative and litigation (recovery) settlement expenses only. 18 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ============================================================ GROSS PROFIT: Gross profit decreased to 43.1% for the three months ended March - -------------- 31, 2004 from 43.9% for the three months ended March 31, 2003. Gross profit for medical devices decreased to 45.4% of sales in the three months ended March 31, 2004 from 47.6% of sales in the three months ended March 31, 2003. Gross profit for laboratory and scientific products decreased to 39.8% for the three months ended March 31, 2004 from 39.9% for the three months ended March 31, 2003. The decrease in gross profit for medical devices was impacted by the favorable order mix for sales of therapeutic medical devices offset by an unfavorable order mix of diagnostic medical devices, which traditionally carry lower margins. The decrease in gross profit for laboratory and scientific products was positively impacted by the favorable order mix for sales of ultrasonic products, due to volume, and custom fume enclosures, which traditionally carry a higher gross profit partially offset by a decrease in gross profit of Labcaire and wet scrubber products due pricing pressures from competition. The Company manufactures and sells both medical devices and laboratory and scientific products with a wide range of product costs and gross margin dollars as a percentage of revenues. SELLING EXPENSES: Selling expenses increased $113,158 to $1,203,820 for the - ------------------ three months ended March 31, 2004 from $1,090,662 for the three months ended March 31, 2003. Medical devices selling expenses increased $158,147 due both to additional sales and marketing efforts for therapeutic medical devices and diagnostic medical devices. The increase in therapeutic medical devices selling expenses of $143,877 is due to an increase in sales and marketing efforts relating to European distribution. Laboratory and scientific products selling expenses decreased $44,989 predominantly due to a decrease in fume enclosure and mystaire commissions and marketing expenses and a transfer of salaries of Labcaire personnel to general and administrative expenses from selling expenses offset by the strengthening of the English Pound. GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses - -------------------------------------- decreased $975 to $1,813,594 in the three months ended March 31, 2004 from $1,814,569 in the three months ended March 31, 2003. The decrease is predominantly due to a decrease in corporate expenses relating to bad debt expense partially offset by an increase in insurance and other accrued corporate expenses in addition to an increase in general and administrative expenses relating to severance costs, a transfer of personnel from selling expenses, and the strengthening of the English Pound, all attributable to Labcaire. RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses increased - ------------------------------------ $70,354 to $654,232 for the three months ended March 31, 2004 from $583,878 for the three months ended March 31, 2003. Medical devices research and development expenses increased $35,883 predominantly due to an increase in research and development efforts in therapeutic medical devices which included an increase of $30,000 in funding made to Focus Surgery for the three months ended March 31, 2004 for the development for the treatment of kidney and liver tumors utilizing high intensity focused ultrasound technology. Laboratory and scientific products increased $34,471 predominantly due to increased research and development efforts at Labcaire and the strengthening of the English Pound. LITIGATION (RECOVERY) SETTLEMENT EXPENSES: The Company recorded a reversal of - --------------------------------------------- the litigation settlement for the three months ended March 31, 2003 of $48,478 as compared to $0 for the three months ended March 31, 2004. This reversal represents the sale of Lysonix 2000 units by Mentor that were received by Mentor from LySonix under the settlement agreement with LySonix (this inventory was previously reserved for in fiscal year June 30, 2002, as its salability was uncertain). 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, 2003. 19 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ============================================================ OTHER INCOME (EXPENSE): Other income for the three months ended March 31, 2004 - ------------------------- was $2,229 as compared to $53,442 for the three months ended March 31, 2003. The decrease of $51,213 was primarily due to an increase in loss on impairment of Hearing Innovations of $114,125 partially offset by an increase in royalty income of $60,118. The increase in loss on impairment of Hearing Innovations is a direct result of current period loans to Hearing Innovations being greater than in the prior period of $114,125. The increase in royalty income is due to the Company currently receiving royalty payments on a product that was not included in the prior year's royalty computation. INCOME TAXES: The effective tax rate is 50% for the three months ended March 31, - ------------- 2004 as compared to an effective tax rate of 42.1% for the three months ended March 31, 2003. The current effective income tax rate of 50% was impacted by no corresponding income tax benefit from the loss on impairment of Hearing Innovations of approximately $64,000 plus the standard consolidated tax rate of approximately 41%. The increase in the effective tax rate for the current three months compared to the prior year is primarily due to the increase in the impaired loans to Hearing Innovations. The loss on impairment of Hearing Innovations is recorded with no corresponding tax benefit since these transactions are capital losses. Benefits for such losses are only received if the Company has the ability to generate capital gains. CRITICAL ACCOUNTING POLICIES: General: Financial Reporting Release No. 60, which was released by the - -------- Securities and Exchange Commission in December 2001, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of the financial statements. Note 1 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended June 30, 2003 includes a summary of the Company's significant accounting policies and methods used in the preparation of its financial statements. The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts, inventories, goodwill, property, plant and equipment and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company considers certain accounting policies related to allowance for doubtful accounts, inventories, property, plant and equipment, goodwill and income taxes to be critical policies due to the estimation process involved in each. Allowance for Doubtful Accounts: The Company's policy is to review its - ----------------------------------- customers' financial condition prior to extending credit and, generally, collateral is not required. The Company utilizes letters of credit on foreign or export sales where appropriate. Inventories: Inventories are stated at the lower of cost (first-in, - ------------ first-out) or market and consist of raw materials, work-in-process and finished goods. Management evaluates the need to record adjustments for impairments of inventory on a quarterly basis. The Company's policy is to assess the valuation of all inventories, including raw materials, work-in-process and finished goods. 20 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ============================================================ Property, Plant and Equipment: Property, plant and equipment are recorded - -------------------------------- at cost. Depreciation of property and equipment is provided using the straight-line method over estimated useful lives ranging from 1 to 5 years. Depreciation of the Labcaire building is provided using the straight-line method over the estimated useful life of 50 years. Leasehold improvements are amortized over the life of the lease or the useful life of the related asset, whichever is shorter. The Company's policy is to periodically evaluate the appropriateness of the lives assigned to property, plant and equipment and to make adjustments if necessary. Goodwill: In July 2001, the Financial Accounting Standards Board ("FASB") - --------- issued Statement of Financial Accounting Standards ("SFAS") No. 141 ("SFAS 141") and No. 142 ("SFAS 142"), "Business Combinations" and "Goodwill and Other Intangible Assets," respectively. SFAS 141 replaced Accounting Principles Board ("APB") Opinion 16 "Business Combinations" and requires the use of the purchase method for all business combinations initiated after June 30, 2001. SFAS 142 requires goodwill and intangible assets with indefinite useful lives to no longer be amortized, but instead be tested for impairment at least annually and whenever events or circumstances occur that indicate goodwill might be impaired. With the adoption of SFAS 142, as of July 1, 2001, the Company reassessed the useful lives and residual values of all acquired intangible assets to make any necessary amortization period adjustments. Based on that assessment, only goodwill was determined to have an indefinite useful life and no adjustments were made to the amortization period or residual values of other intangible assets. In accordance with SFAS 141, the Company completed its annual goodwill impairment tests for fiscal 2003 in the fourth quarter with no impairment noted. Income Taxes: Income taxes are accounted for in accordance with SFAS No. - -------------- 109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Stock-Based Compensation: The Company accounts for its stock-based - -------------------------- compensation plans in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations. Under APB 25, because the exercise price of the Company's employee stock options is generally set equal to the market price of the underlying stock on the date of grant, no compensation expense is recognized. LIQUIDITY AND CAPITAL RESOURCES: Working capital at March 31, 2004 and June 30, 2003 was $15,680,977 and $13,967,805, respectively. In the nine months ended March 31, 2004, cash provided by operations totaled $2,777,112. The increase in the cash provided by operations is due to an increase in net income, the collection of accounts receivable and royalties from the prior period and the increase of accounts payable and income tax payable partially offset by cash paid for inventory purchased for unshipped orders. In the nine months ended March 31, 2004, cash used in investing activities was $549,434, which primarily consisted of the purchase of property, plant and equipment during the regular course of business of $350,870 and of loans made to Hearing Innovations. In the nine months ended March 31, 2004, cash used by financing activities was $420,584, primarily consisting of payments of short-term borrowings and capital lease obligations offset by proceeds from short-term borrowings. 21 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ========================================================= Hearing Innovations, Inc. - --------------------------- During fiscal 2004, the Company entered into seven loan agreements whereby Hearing Innovations is required to pay the Company an aggregate amount of $198,800. Two of these notes aggregating $23,000 are currently in default due to non-payment. Hearing Innovations is currently negotiating with the Company to extend the due dates of all its outstanding debt. The remaining five notes aggregating $175,800 are due June 30, 2004. 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 arising after the date of these agreements. The loan agreements contain warrants to acquire 198,800 shares of Hearing Innovations common stock, at the option of the Company, at a cost of $.20 per share. These warrants, which are deemed nominal in value, expire in October 2005. The Company recorded an allowance against the entire balance of $198,800 for the above loans. The related expense has been included in loss on impairment of Hearing Innovations in the accompanying consolidated statements of income. The Company believes the loans and related interest are impaired since the Company does not anticipate that these loans will be paid in accordance with the contractual terms of the loan agreements and Hearing Innovations has no predictable cash flows from its product revenue. The current ability of companies such as Hearing Innovations to access capital markets or incur third party debt is very limited and is likely to remain so for the foreseeable future. In light of this fact, the Company continues to review strategic options available to it and Hearing Innovations due to Hearing Innovations' continuing need for financial support. The Company previously made the decision not to continue funding Hearing Innovations' operations, however, the Company loaned Hearing Innovations $198,800 to enable Hearing Innovations to reduce a substantial portion of their long-term debt to certain third parties. The Company continues to believe that Hearing Innovations' technology could provide a benefit to patients but the products require more improvement and market development. All equity investments and debt in Hearing Innovations have been fully reserved and currently have a zero basis. In connection with the adoption of FIN 46, the Company consolidated Hearing Innovations in its March 31, 2004 balance sheet as the entity was determined to be a variable interest entity and the Company is its primary beneficiary. The Company elected to record the adoption of FIN 46 as a cumulative effect of an accounting change. Consolidating Hearing Innovations did not have a material impact on the Company's consolidated results of operations or financial condition. Regulatory - ---------- The Company received a letter dated October 31, 2003 from the Food and Drug Administration ("FDA") regarding the Company's notification concerning the implemented procedures to "field correct" a shock sensation that was caused by users forcing the output connector improperly when using the Lysonix 2000. Although the output cable was properly marked, the Company issued new sticker directions and notified all its customers in writing. The FDA stated that it "agreed with the Company's decision to "field correct" the Lysonix 2000." The FDA classified this field correction as a Class II recall which means that this is a situation in which use of or exposure to such product may cause temporary or medically reversible adverse health consequences or which the probability of serious adverse health consequences is remote. The Company will do everything necessary to satisfy the FDA request for information on the "field correction." The Company, additionally, is following FDA policies to be fully compliant with all requirements. The Company has estimated the cost of this field correction to be immaterial. 22 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ========================================================= Recent Accounting Pronouncements - ---------------------------------- In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"). This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)" ("Issue No. 94-3"). This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of an entity's commitment as provided under Issue No. 94-3. This Statement also establishes that fair value is the objective for initial measurement of the liability. The provisions of this Statement are effective for exit or disposal activities that are initiated after March 31, 2003. The adoption of SFAS No. 146 did not have a material impact on the Company's consolidated results of operations or financial condition. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). Among other things, the Statement requires that contracts with comparable characteristics be accounted for similarly and clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative. SFAS No. 149 was effective July 1, 2003. In the first quarter of fiscal 2004, the Company adopted SFAS No. 149. The adoption of SFAS No. 149 did not have a material impact on the Company's consolidated results of operations or financial condition. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with characteristics of both Liabilities and Equity" ("SFAS No. 150"). SFAS No. 150 establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 was effective for financial instruments entered into or modified after May 31, 2003. In October 2003, the FASB deferred indefinitely the application of SFAS 150 only as it relates to non-controlling interests that are classified as equity in the financial statements of the subsidiary but would be classified as a liability in the parent's financial statements under SFAS No. 150. In the first quarter of fiscal 2004, the Company adopted SFAS No. 150. The adoption of SFAS No. 150 did not have a material impact on the Company's consolidated results of operations or financial condition. In November 2002, the Emerging Issues Task Force reached a consensus opinion on EITF 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"). The consensus provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting if certain criteria are met. The consideration for the arrangement should be allocated to the separate units of accounting based on their relative fair values, with different provisions if the fair value of all deliverables are not known or if the fair value is contingent on delivery of specified items or performance conditions. Applicable revenue recognition criteria should be considered separately for each separate unit of accounting. EITF 00-21 was effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Entities may elect to report the change as a cumulative effect adjustment in accordance with APB Opinion 20, Accounting Changes. In the first quarter of fiscal 2004, the Company adopted EITF 00-21. The adoption of EITF 00-21 did not have a material impact on the Company's consolidated results of operations or financial condition. In January 2003, the FASB issued FASB Interpretation 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 ("FIN 46"). In December 2003, the FASB modified FIN 46 to make certain technical corrections and address certain implementation issues that had arisen. FIN 46 provides a new framework for identifying variable interest entities ("VIEs") and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. 23 MISONIX, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ========================================================= In general, a VIE is a corporation, partnership, limited liability company, trust, or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations. FIN 46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) is obligated to absorb a majority of the risk of loss from the VIE's activities, is entitled to receive a majority of the VIE's residual returns (if no party absorbs a majority of the VIE's losses), or both. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE's assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also requires disclosures about VIEs that the variable interest holder is not required to consolidate but in which it has a significant variable interest. In connection with the adoption of FIN 46 during the third quarter of fiscal 2004, the Company consolidated Hearing Innovations in its March 31, 2004 balance sheet as the entity was determined to be a variable interest entity and the Company is its primary beneficiary. The Company elected to record the adoption of FIN 46 as a cumulative effect of an accounting change. Consolidating Hearing Innovations did not have a material impact on the Company's consolidated results of operations or financial condition. Prior periods were not restated. For additional information on Hearing Innovations see Note 9 of the consolidated financial statements. 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 ventures and investments in related entities, future economic, competitive and market conditions, and the outcome of legal proceedings as well as management business decisions. 24 MISONIX, INC. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market Risk: The principal market risk (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. Foreign Exchange Rates: Approximately 23% of the Company's revenues in the nine-month period ended March 31, 2004 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 1.77 and 1.57 for the nine months ended March 31, 2004 and 2003, 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, which include forward exchange agreements. ITEM 4. CONTROLS AND PROCEDURES. Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2004 and, based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There has been no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the first nine months of fiscal 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 25 MISONIX, INC. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification Exhibit 32.1 - Section 1350 Certification of Chief Executive Officer Exhibit 32.2 - Section 1350 Certification of Chief Financial Officer (b) The following report on Form 8-K was filed during the last quarter of the period covered by the Report. On January 31, 2004, a Form 8-K was filed by the Company under "Item 9. Regulation FD Disclosure." 26 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 6, 2004 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 27 EX-31.1 2 doc2.txt CEO CERTIFICATION EXHIBIT 31.1 CERTIFICATIONS I, Michael A. McManus, Jr., certify that: I have reviewed this quarterly report on Form 10-Q of MISONIX, INC.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [*** Omitted pursuant to extended compliance period] for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [*** Omitted pursuant to extended compliance period]; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 6, 2004 /s/ Michael A. McManus, Jr. - ---------------------------- Michael A. McManus, Jr. President and Chief Executive Officer 28 EX-31.2 3 doc3.txt CFO CERTIFICATION EXHIBIT 31.2 CERTIFICATIONS I, Richard Zaremba, certify that: I have reviewed this quarterly report on Form 10-Q of MISONIX, INC.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [*** Omitted pursuant to extended compliance period] for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [*** Omitted pursuant to extended compliance period]; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 6, 2004 /s/ Richard Zaremba - -------------------- Richard Zaremba Vice President, Chief Financial Officer, Treasurer and Secretary 29 EX-32.1 4 doc4.txt CEO CERTIFICATION EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of MISONIX, INC. (the "Company") on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael A. McManus, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Michael A. McManus, Jr. - ------------------------------- Michael A. McManus, Jr. President and Chief Executive Officer May 6, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to MISONIX, INC. and will be retained by MISONIX, INC. and furnished to the Securities and Exchange Commission or its staff upon request. 30 EX-32.2 5 doc5.txt CFO CERTIFICATION EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of MISONIX, INC. (the "Company") on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard Zaremba, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly represents, in all material respects, the financial condition and result of operations of the Company. /s/ Richard Zaremba - --------------------- Richard Zaremba Vice President, Chief Financial Officer, Treasurer and Secretary May 6, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to MISONIX, INC. and will be retained by MISONIX, INC. and furnished to the Securities and Exchange Commission or its staff upon request. 31 -----END PRIVACY-ENHANCED MESSAGE-----