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MSON > SEC Filings for MSON > Form 10-Q on 6-Nov-2012All Recent SEC Filings

Show all filings for MISONIX INC

Form 10-Q for MISONIX INC


6-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This Management's Discussion and Analysis of Financial Condition and Results of Operations of Misonix and its subsidiaries, in which we refer to the Company as "Misonix", "we", "our", and "us", should be read in conjunction with the accompanying unaudited financial statements included in Item 1. "Financial Statements" of this Report and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on September 20, 2012, for the fiscal year ended June 30, 2012 ("2012 Form 10-K"). Item 7 of the 2012 Form 10-K describes the application of our critical accounting policies, for which there have been no significant changes as of September 30, 2012.

Forward Looking Statements

This Report contains certain forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (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 the performance of contracts or in conducting other activities, product mix in sales, future economic, competitive and market conditions, and the outcome of legal proceedings as well as management business decisions.

Three months ended September 30, 2012 and 2011.

Net sales: Net sales increased $1,353,326 to $4,570,525 for the three months ended September 30, 2012 from $3,217,199 for the three months ended September 30, 2011. The increase in sales was primarily attributable to sales of the Company's BoneScalpel™ products.

Set forth below are tables showing the Company's net sales by (i) product category and (ii) geographic region for the three months ended September 30, 2012 and 2011.

                                   Three months ended September 30,
                                 2012            2011          Variance
                BoneScalpel   $ 2,101,161     $   655,686     $ 1,445,475
                SonicOne          500,886         254,387         246,499
                SonaStar        1,572,678       1,296,842         275,836
                Other             395,800       1,010,284        (614,484 )
                              $ 4,570,525     $ 3,217,199     $ 1,353,326




                                    Three months ended September 30,
                                      2012                    2011
            United States       $       2,449,610       $       1,877,712
            Australia                     139,900                  18,185
            Europe                        761,911                 828,089
            Asia                          422,227                  38,606
            Canada and Mexico             226,060                 188,141
            South America                 297,926                  74,795
            South Africa                  206,683                  60,386
            Middle East                    66,208                 131,285
                                $       4,570,525       $       3,217,199

Gross profit: Gross profit increased to 59.7% for the three months ended September 30, 2012 from 54.8% for the three months ended September 30, 2011 due to higher margin sales of the Company's BoneScalpel products and lower sales of the low margin Autosonix products.

Selling expenses: Selling expenses increased $278,312 to $1,458,564 for the three months ended September 30, 2012 from $1,180,252 for the three months ended September 30, 2011. Selling expenses increased due to higher personnel costs of $188,540 and higher commission expenses of $86,470.

General and administrative expenses: General and administrative expenses decreased $125,488 to $1,042,332 for the three months ended September 30, 2012 from $1,167,820 for the three months ended September 30, 2011. The decrease in expenses is related to lower legal expenses of $77,221 and lower employee expenses of $69,386, partially offset by higher consulting fees of $9,243 and higher employment fees of $9,314.

Research and development expenses: Research and development expenses increased $87,157 to $397,131 for the three months ended September 30, 2012 from $309,974 for the three months ended September 30, 2011. The increase is due to higher salary expenses of $51,782 and higher product development costs of $34,690.

Other income (expense): Other income for the three months ended September 30, 2012 was $211,417 as compared to $95,228 for the three months ended September 30, 2011. The increase in other income is related to higher royalty income of $85,544 and lower royalty expense of $24,872.

Income taxes: In the first quarter of fiscal 2013, the Company's continuing operations effective tax rate was 3.7% as compared to (.6%) in the first quarter of fiscal 2012. The Company estimates its financial statement effective tax rate for the full year to be approximately 1%. The actual effective rate for continuing operations may vary materially based on several factors including the realization of earn-outs recorded in discontinued operations and the related intraperiod tax allocation, the ratio of permanent differences to pretax income
(loss), and a change in the valuation allowances as well as other factors.

Discontinued Operations



See Note 1 of the notes to consolidated financial statements included in Part 1,
Item 1 for a description of the discontinued operations. The following
summarizes the results of the discontinued operations:



                                                          For the three months ended
                                                                 September 30,
                                                          2012                  2011
Revenues                                             $         4,975       $       521,957
Income/(loss) from discontinued operations, before
tax                                                  $         6,318       $       (79,956 )
Net income/(loss) from discontinued operations net
of tax                                               $         6,318       $       (79,956 )

Liquidity and Capital Resources

We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided by operations and possible future public or private debt and/or equity offerings. At times, we evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which may require the use of cash. We believe that our cash, other liquid assets and access to equity capital markets, taken together, provide adequate resources to fund ongoing operating expenditures. In the event that they do not, we may require additional funds in the future to support our working capital requirements or for other purposes and may seek to raise such additional funds through the sale of public or private equity and/or debt financings, and divestiture of current business lines as well as from other sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on favorable terms when required.

Working capital at September 30, 2012 and June 30, 2012 was $12,010,000 and $11,734,000, respectively. For the three months ended September 30, 2012, cash provided by operations totaled $442,000, primarily due to lower inventory of $293,000, lower prepaid expenses of $103,000 and income from operations of $39,000. For the three months ended September 30, 2012, cash used in investing activities totaled $42,000 due to the acquisition of fixed assets. For the three months ended September 30, 2012, no cash was used or provided by financing activities.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to the Company.

Other

In the opinion of management, inflation has not had a material effect on the operations of the Company.

New Accounting Pronouncements

We are required to adopt certain new accounting pronouncements. See note 11 to our consolidated financial statements included herein.

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