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Misonix Reports Increase in Revenues for Fiscal 2007 Third Quarter Financial Results

Posted on: Thursday, 10 May 2007, 15:00 CDT

Misonix, Inc. (NASDAQ: MSON), a developer of ultrasonic medical device technology for the treatment of cancer and other chronic health conditions, today reported financial results for the fiscal third quarter ended March 31, 2007. Highlights of the third quarter of fiscal 2007 and other Company initiatives include:

Increased Third Quarter Revenues Year-over-year

Increased Sales of Medical Devices

Increased Revenue Lines for the Sonablate® 500 ("SB500") using HIFU for Treating Prostate Cancer in Europe

Increased Distribution of the SB500 in 16 Countries Throughout Europe

Hemiablation Prostate Studies Supported by Major UK Cancer Research Organizations

Established First Global HIFU Prostate Cancer Treatment Clinical Registry

First Successful Sonatherm Procedures for Human Kidney Cancer

Marketing Efforts Stepped Up for Ultrasonic Wound Care System/Sonic One

Received 15 Orders for Labcaire Endoscopic Disinfectant Unit "ISIS"

Fiscal 2007 Third Quarter Results

Revenues for the three months ended March 31, 2007 were $10.6 million, a 4.1% increase when compared with revenues of $10.2 million for the same period in fiscal 2006. The increase in revenues is due to an increase in sales of medical devices of $949,000, or 19%, to $6.0 million, partially offset by a decrease in laboratory and scientific product revenues of $535,000 to $4.6 million. Medical devices represented 57% of total third quarter 2007 revenues compared with 50% of revenues for the same period in fiscal 2006.

The increase in revenues of medical devices is due to a $654,000 increase in revenues of therapeutic medical devices and an increase of $295,000 in revenues of diagnostic medical devices. The increase in revenues of therapeutic medical devices was primarily due to increased capital equipment unit sales and fee-per-use revenues in Europe for the Sonablate 500 for prostate cancer treatment. The increase in revenues of diagnostic medical devices was not attributable to a single customer, distributor or any other specific factor, but rather was the result of an increase in demand for all products.

The decrease in revenues of laboratory and scientific products is primarily due to a decrease in wet scrubber revenues of $385,000, a decrease in ultrasonic laboratory products of $85,000 and a decrease in Labcaire revenues of $54,000. The decrease in wet scrubber revenues is due to the Company being extremely selective in the opportunities it pursues, which has proven to be a successful strategy implemented earlier in the fiscal year with sales trends improving from the second quarter.

The Company recorded a net loss for the fiscal 2007 third quarter of $529,000, or $.08 loss per fully diluted share, compared with a net loss of $829,000, or $.12 loss per fully diluted share, for the same period in fiscal 2006.

The Company reported a backlog of unfilled orders as of March 31, 2007 of $8.2 million. Medical device products backlog was $4.4 million and laboratory and scientific products backlog was $3.8 million.

Fiscal 2007 Nine Months Results

Revenues for the nine months ended March 31, 2007 were $30.9 million, a 4.5% increase when compared with revenues of $29.5 million for the same period in fiscal 2006. Medical device products revenues increased 10% to $17.1 million and laboratory and scientific products revenues decreased 1.7% to $13.8 million. The Company recorded a net loss for the nine months ended March 31, 2007 of $1.0 million, or $.15 loss per fully diluted share, compared with a net loss of $2.6 million, or $.39 loss per fully diluted share, for the same period in fiscal 2006.

Management's Comments

Commenting on the Company's financial results and recent developments, Michael A. McManus, Jr., President and Chief Executive Officer, said, "We are making good progress in our overall plan to grow our business and accomplish our five goals for fiscal year 2007. For the third consecutive quarter our revenues have increased from the respective prior year periods. Earnings and revenues in our third quarter reflect, among other things, the fact that we only sold one SB500 for prostate cancer in the quarter. We have discussed the strategy of growing a fee-per-use business to generate a form of recurring revenue as well as selling SB500 capital equipment which have longer sales cycles and deliver only one-time contributions to revenue.

"To grow the recurring revenue business for longer-term, higher margin benefits, we have entered into fee-per-use agreements in France and Portugal. We also are working on a fee-per-use business in Germany. As we build the fee-per-use model, we accept a lower price for the SB500 and receive typically a 60%-40% participation, in our favor, to share fee-per-use procedure revenues. As we work through this model, our revenues and earnings will be affected by lower revenues and margin on each fee-per-use SB500 unit placed in the market in the early years but we will be paid an annuity on our share of the procedure income in the future. We have been using this model successfully in the U.K. and believe it is in our Company's interest to find opportunities to open similar businesses throughout the regions in which we market the SB500.

"A principal driver of our five pronged strategy for 2007 is the market's increasing acceptance of ultrasonic medical devices. From our proprietary innovations to specialized high intensity focused ultrasound ("HIFU") processes, we are experiencing heightened interest from medical professionals, health care administrators and patients around the world. At the annual conference of the European Association of Urology in Germany, the SB500 was selected as a featured minimally invasive HIFU technology, where over 200 urologists and related medical professionals from throughout Europe attended, on-site or via teleconference, a live procedure using our medical device to treat prostate cancer.

"Some of Misonix's most promising medical devices involve less invasive treatment of soft tissue, including treatment of the prostrate, kidney and liver. This course of treatment enables substantial quality of life benefits and reduces patient risk as well as ongoing healthcare costs. For example, the use of our SB500 for prostate cancer may eliminate the need for radiation treatment or a radical prostatectomy, which according to sources have resulted in patient erectile dysfunction of between 20%-90% and incontinence of 20%-30%. Radiation and traditional surgical options present significant shortcomings for patients, which has opened the door for new technologies such as ultrasound.

"The SB500, for prostate cancer, is continuing to increase its acceptance by both doctors and patients. Over the past twelve months the number of certified doctors has gone from 9 to 25 with the total procedures increasing to 127 from 83, a 53% increase. Patients in 16 European countries are benefiting from our superior HIFU treatment for prostate cancer.

"Another recent advancement for the SB500 that we announced during the third quarter was the results from the first hemiablation procedures for prostate cancer treatments performed in the United Kingdom. The results show that the hemiablation procedures were successfully completed with positive ablation of cancerous tissue in the effected area of the prostate gland, and patients showed 100% continence and 100% potency in follow-up examinations. Unlike many of the traditional prostate cancer surgeries which treat or remove the entire gland, HIFU hemiablation using the SB500 involves ablation of cancer in patients who have had biopsy-proven prostate cancer limited to one lobe of the prostate.

"Current and future surgeons relying on the SB500 for the most effective prostate cancer therapy will be able to access a newly created Global HIFU Clinical Registry. The registry will provide important medical information relating to completed patient procedures. As a repository for data from all SB500 users from centers around the world, more comprehensive information will be available for research and analysis. This data will be used for the production of reports for publication in medical journals and for use in other mediums to promote the SB500 as the most efficacious and patient-friendly prostate cancer treatment. At our annual SB500 user meeting in Europe, which was attended by a record number of medical professionals, the registry was applauded as essential for optimizing prostate cancer treatment.

"Among other noteworthy HIFU developments, we announced the results from our first human kidney cancer treatments using the Sonatherm 600. Procedures were successfully completed with positive ablation effect noted on cancer cells in tumors within human kidneys. The ability of this device to laparoscopically treat cancerous cells in the kidney effectively and safely has the potential to eliminate the need for nephrectomies, which may jeopardize patients' health and are costly. Treating the cancer cells while keeping the kidney in place and without penetration of the organ is considered a breakthrough process.

"Success on other fronts was achieved as we commenced an international expansion of our ultrasonic neuroaspirator product line into Eastern and Central Europe. Demonstrating the depth of our portfolio of ultrasonic medical devices, the neuroaspirator product line allows surgeons to precisely remove both soft and hard tissue such as brain and spinal tumors. During the quarter we added three new distributors in Europe.

"We have been ramping up the marketing of the SonicOne Ultrasonic Wound Care System with Medline in the United States. Sales of this product have contributed to our third quarter revenue, and we look forward to introducing the product internationally.

"Last quarter we announced the receipt of our first orders for our Labcaire Endoscopic Disinfectant Unit "ISIS", which is part of our laboratory and scientific products segment. The ISIS seems to be exactly what the market is seeking as orders have exceeded our expectations. With an average selling price of approximately $100,000, we'll be recognizing the revenue for the 15 units that have been ordered to date beginning in our fourth fiscal quarter. We remain very excited about the opportunities for this product.

"We continue to see promising results from all of our primary business lines. Misonix, with what management believes is the most impressive platform of ultrasonic medical devices available today, clearly is taking center stage as an innovator in the health care industry. We believe Misonix possesses the most advanced HIFU platform of minimally invasive medical devices for the treatment of cancer. Our HIFU technology, which many are considering the most important trend for the treatment of prostate cancer in Europe as well as around the world, is proving, we believe, to be the modality of choice. It is our intent to capitalize on the impressive progress made in the third quarter toward bridging the gap between an emerging trend and mass adoption for all of our therapeutic medical devices."

Investor Conference Call and Web Cast

As previously announced, the Company has scheduled a conference call and web cast to discuss its third quarter fiscal year 2007 financial results today. The conference call will be broadcast live on the Internet via the Investor Relations section of the Company's Website at www.misonix.com. Alternatively, participants may join the conference call by dialing 800-591-6944 (domestic) or 617-614-4910 (international) and entering the reservation code 85243514. Participants should use these access methods about 10 minutes prior to the start time.

For those unable to attend the live broadcasts, replays will be available beginning approximately one hour after the events. Replay information will be posted on the Misonix Website following the conclusion of the live broadcasts. There is no charge for participants to access the live broadcasts or replays.

About Misonix:

Misonix, Inc. (NASDAQ: MSON) designs, develops, manufactures, and markets medical, scientific, and industrial ultrasonic equipment, laboratory safety equipment, and air pollution control products. Misonix' ultrasonic platform is the basis for several innovative medical technologies. Misonix has a minority equity position in Focus Surgery, Inc. which uses high intensity focused ultrasound technology to destroy deep-seated cancerous tissues without affecting surrounding healthy tissue. Addressing a combined market estimated to be in excess of $3 billion annually, Misonix' proprietary ultrasonic medical devices are used for wound debridement, cosmetic surgery, neurosurgery, laparoscopic surgery, and other surgical and medical applications. Additional information is available on the Company's Website at www.misonix.com.

With the exception of historical information contained in this press release, content herein may contain "forward-looking statements" that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include general economic conditions, delays and risks associated with the performance of contracts, uncertainties as a result of research and development, potential acquisitions, consumer and industry acceptance, litigation and/or court proceedings, including the timing and monetary requirements of such activities, regulatory risks including approval of pending and/or contemplated 510(k) filings, the ability to achieve and maintain profitability in the Company's business lines, and other factors discussed in the Company's Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

MISONIX, INC. and Subsidiaries

Consolidated Statements of Operations

Unaudited

Three Months Ended

Nine Months Ended

March 31,

March 31,

2007

2006

2007

2006

Net sales

$10,583,924 

$10,169,778 

$30,865,888 

$29,549,736 

Cost of goods sold

6,123,927 

6,216,776 

17,687,270 

18,296,682 

Gross profit

4,459,997 

3,953,002 

13,178,618 

11,253,054 

Selling expenses

2,003,430 

1,765,639 

5,524,786 

5,014,110 

General and administrative expenses

2,614,237 

2,502,626 

7,321,668 

7,528,168 

Research and development expenses

735,518 

975,307 

2,383,903 

2,739,043 

Total operating expenses

5,353,185 

5,243,572 

15,230,357 

15,281,321 

Loss from operations

(893,188)

(1,290,570)

(2,051,739)

(4,028,267)

Total other income

81,267 

144,143 

356,342 

458,334 

Loss before minority interest and income taxes

(811,921)

(1,146,427)

(1,695,397)

(3,569,933)

Minority interest in net (loss) income of consolidated subsidiaries

(38,318)

(6,465)

(12,819)

12,659 

Loss before income taxes

(773,603)

(1,139,962)

(1,682,578)

(3,582,592)

Income tax benefit

(244,567)

(310,844)

(634,680)

(941,006)

Net loss

($529,036)

($829,118)

($1,047,898)

($2,641,586)

Net loss per share-basic

($0.08)

($0.12)

($0.15)

($0.39)

Net loss per share-diluted

($0.08)

($0.12)

($0.15)

($0.39)

Weighted average common shares-basic

6,962,802 

6,884,169 

6,923,044 

6,857,924 

Weighted average common shares-diluted

6,962,802 

6,884,169 

6,923,044 

6,857,924 

MISONIX, INC. and Subsidiaries

Consolidated Balance Sheets

UnauditedMarch 31, 2007

Derived from audited financial statements June 30, 2006

Assets

Current assets:

Cash

$866,998 

$675,400 

Accounts receivable, net of allowance for doubtful accounts of $297,068 and $256,309, respectively

8,026,369 

6,530,598 

Inventories, net

12,202,456 

11,307,226 

Income tax receivable

0 

786,654 

Deferred income taxes

1,346,654 

1,419,949 

Prepaid expenses and other current assets

1,318,341 

1,070,903 

Total current assets

23,760,818 

21,790,730 

Property, plant and equipment, net

6,204,878 

6,495,854 

Deferred income taxes

1,859,431 

1,039,824 

Goodwill

4,718,689 

4,673,713 

Other assets

1,222,216 

512,444 

Total assets

$37,766,032 

$34,512,565 

Liabilities and stockholders' equity

Current liabilities:

Revolving credit facilities and note payable

$5,034,828 

$1,572,042 

Accounts payable

4,774,760 

4,784,102 

Accrued expenses and other current liabilities

3,325,190 

2,963,762 

Current maturities of long-term debt and capital lease obligations

341,207 

367,823 

Foreign income tax payable

78,635 

0 

Total current liabilities

13,554,620 

9,687,729 

Long-term debt and capital lease obligations

1,104,613 

1,145,279 

Deferred income taxes

282,455 

282,455 

Deferred income

347,622 

422,634 

Deferred lease liability

395,822 

378,031 

Total liabilities

15,685,132 

11,916,128 

Commitments and contingencies

Minority interest

330,906 

341,631 

Stockholders' equity:

Capital stock, $0.01 par - shares authorized 10,000,000; 7,079,169 and 6,978,169 issued and 7,001,369 and 6,900,369 outstanding, respectively

70,792 

69,782 

Additional paid-in capital

24,822,437 

24,548,536 

Accumulated deficit

(3,206,169)

(2,158,271)

Accumulated other comprehensive income

475,358 

207,183 

Treasury stock, 77,800 shares

(412,424)

(412,424)

Total stockholders' equity

21,749,994 

22,254,806 

Total liabilities and stockholders' equity

$37,766,032 

$34,512,565 

Source: Business Wire

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