-----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, KkuyLBlcdVMUW7SIksQB+AVTrZ7y8mOCO67qzllkJCKuZVnfYAWE8vQC9sAgp3fs lTwEr+wXt49B/5uUOELuBg== 0000889812-97-000088.txt : 19970120 0000889812-97-000088.hdr.sgml : 19970120 ACCESSION NUMBER: 0000889812-97-000088 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970117 SROS: NASD 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: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-43585 FILM NUMBER: 97507664 BUSINESS ADDRESS: STREET 1: 1938 NEW HIGHWAY CITY: FARMINGDALE STATE: NY ZIP: 11735 BUSINESS PHONE: 5166949555 FORMER COMPANY: FORMER CONFORMED NAME: MEDSONIC INC DATE OF NAME CHANGE: 19930328 POS AM 1 POST EFFECTIVE AMENDMENT NO. 1 TO FORM S-1 As filed with the Securities and Exchange Commission on January 17, 1997 Registration No. 33-43585 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 POST EFFECTIVE AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MISONIX, INC. (Name of small business issuer in its charter) New York 3841 11-2148932 (State or other jurisdiction of (Primary Standard Industrial I.R.S. Employer Incorporation or organization) Classification Code Number) Identification No.
1938 New Highway Farmingdale, New York 11735 (516) 694-9555 (Address of principal executive offices and place of business and telephone number) Joseph L. Librizzi President Misonix, Inc. 1938 New Highway Farmingdale, New York 11735 (516) 694-9555 (Name, address and telephone number of agent for service) ------------------------------ Copies to: Edward I. Tishelman, Esq. Hartman & Craven LLP 460 Park Avenue, Suite 1100 New York, New York 10022 Tel: (212) 836-4940 Fax: (212) 688-2870 Approximate date of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: /X/ The Registrant hereby amends this Post-Effective Amendment No. 1 on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Post-Effective Amendment No. 1 shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Post-Effective Amendment No. 1 shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. CALCULATION OF REGISTRATION FEE
Proposed Proposed Title of each class of Amount to be maximum maximum Amount of securities registered (1) offering price aggregate registration to be registered per unit offering price fee Common Stock, $.01 1,940,000 $ 6.50 $12,610,000.00 $3,940.63 par value shares(2) Redeemable Warrants 1,940,000 $ .10 $ 194,000.00 $ 60.63 warrants(3) Common Stock, $.01 1,940,000 $ 7.80 $15,132,000.00 $4,728.75 par value shares (4) Underwriter's Warrants 160,000 $ .001 $ 160.00 (5) warrants Common Stock, $.01 160,000 shares $10.725 $ 1,716,000.00 $ 536.25 par value(6) Redeemable Warrants 160,000 $ .165 $ 26,400.00 $ 8.25 warrants Common Stock, $.01 16,000 shares $12.87 $ 2,059,200.00 $ 643.50 par value(7) Total $31,737,760.00 $9,918.01(8)
- ----------------------------------- (1) Pursuant to Rule 416, there are also being registered an undeterminable number of shares of the Registrant's Common Stock which may become issuable pursuant to the antidilution provisions of the warrants being registered. (2) Includes 240,000 shares subject to an over-allotment option granted to the Underwriter by the Registrant and 100,000 shares issued to non-affiliated investors as partial consideration for the Registrant's September and October 1991 private placement. See "Underwriting" and "Selling Securityholders." (3) Includes 240,000 Redeemable Warrants subject to an over-allotment option granted to the Underwriter by the Registrant and 100,000 Redeemable Warrants issued to non-affiliated investors as partial consideration for the Registrant's September and October 19991 private placement. See "Underwriting" and "Selling Securityholders." (4) Issuable upon exercise of the Redeemable Warrants. (5) No fee pursuant to Rule 457(g). (6) Issuable upon exercise of the Underwriter's Warrants. (7) Issuable upon exercise of the Redeemable Warrants underlying the Underwriter's Warrants. (8) Of which the entire $9,918.01 has previously been paid. On July 23, 1992, Registrant's Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. Pursuant to such Registration Statement, an aggregate of 1,600,000 shares of common stock ("Shares") and 1,840,000 redeemable warrants ("Warrants") were publicly offered and sold by Registrant. In addition, 100,000 Shares and 100,000 Warrants were publicly offered and sold for the account of certain selling securityholders. This post-effective amendment to the Registration Statement covers the 1,940,000 Shares reserved for issuance by Registrant upon exercise of the Warrants; these Shares were included for registration in the original Registration Statement. MISONIX, INC. Cross-Reference Sheet Showing Location in Prospectus of Information Required by Items in Part I of Form S-1
Form S-1 Item Number and Heading Location in Prospectus -------------------------------- ---------------------- Item 1. Forepart of the Registration Statement and Outside Cover Front Cover of Prospectus........................... Item 2. Inside Front and Outside Back Cover Pages of Inside Front Cover; Outside Back Cover Prospectus ......................................... Item 3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Risk Factors Earnings to Fixed Charges ........................ Item 4. Use of Proceeds..................................... Use of Proceeds Item 5. Determination of Offering Price..................... Not Applicable Item 6. Dilution............................................ Dilution Item 7. Selling Security Holders............................ Selling Stockholders and Plan of Distribution Item 8. Plan of Distribution................................ Cover; Selling Stockholders and Plan of Distribution Item 9. Description of Securities to be Registered.......... Description of Securities Item 10. Interests of Named Experts and Counsel.............. Legal Matters; Experts Item 11. Information with respect to the Registrant.......... Item 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.... Part II Item 13. Other Expenses of Issuance and Distribution......... Part II Item 14. Indemnification of Directors and Officers........... Part II Item 15. Recent sales of Unregistered Securities............. Part II Item 16. Exhibits and Financial Statement Schedule........... Part II Item 17. Undertakings........................................ Part II
PROSPECTUS MISONIX, INC. 1,940,000 common shares, $.01 par value ("Shares") ------------------------ This Prospectus relates to the offer, sale, and issuance by MISONIX, INC., a New York corporation (the "Company"), of up to 1,940,000 Shares, for issuance to the holders of 1,940,000 redeemable warrants (the "Warrants"). The Warrants are exercisable, through the close of business on February 3, 1997, at a price of $7.80 per Warrant, which entitles the holder to receive one Share. The Company will use the net proceeds received by it from the exercise of Warrants for working capital. See "Use of Proceeds." The Shares and Warrants are quoted on the NASDAQ Small-Cap Market system ("NASDAQ") and on the Boston Stock Exchange ("BSE") under the symbols, "MSON" and "MSONW" for NASDAQ and "MSO" and "MSOW" on the BSE. On January 10, 1997 the reported closing sale price of the Shares on NASDAQ was $8.18. ----------------------------- THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE FACTORS SPECIFIED UNDER THE CAPTIONS "RISK FACTORS." ----------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is January 17, 1997. AVAILABLE INFORMATION The Company has filed a Registration Statement on Form S-1 ("Registration Statement") under the Securities Act of 1933, as amended ("1933 Act") with the Securities and Exchange Commission ("SEC"), with respect to the securities being offered by this Prospectus. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits thereto. For further information with respect to the Company and the securities offered hereby, reference is made to the Registration Statement and the exhibits thereto. All of these documents may be inspected without charge at the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may be obtained therefrom at prescribed rates. Statements contained in this Prospectus concerning the provisions of documents filed with the Registration Statement as exhibits are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the copy of the applicable document filed with the SEC. The Company furnishes its shareholders and holders of its Warrants with annual reports containing financial statements audited by its independent auditors, and with quarterly reports containing unaudited summary financial information for the first three quarters of each fiscal year. Additional copies of such reports are available upon request by such holders to the Company. No person is authorized in connection with any offering made hereby to give any information or to make any representation other than as contained in this Prospectus, and if given or made, such information or representation must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstances create any implication that the information herein is correct as of any date subsequent to the date hereof. - 2 - PROSPECTUS SUMMARY This summary is qualified in its entirety by the other information and financial statements appearing elsewhere in the Prospectus. The Company MISONIX, INC. (the "Company") is a New York corporation which, through its predecessors, was first organized in 1959. The Company designs, develops, manufactures and markets ultrasonic equipment for scientific and industrial applications, ductless fume enclosures for filtration of gaseous contaminates, and environmental control products for the abatement of air pollution, as well as medical devices. Other products manufactured or distributed by the Company include ultrasonic cleaners and spray nozzles. The Company previously designed and developed medical devices using ultrasonic technology but had to suspend further development work on these devices in December 1994, when the Company's Board of Directors formally approved a plan to suspend such research and development since outside funding, necessary to complete the project, was not available. A restructuring charge was recorded at that time to reflect the estimated cost of suspending this portion of the Company's operations. Although the Company suspended its research and development activities related to its medical devices, it retained ownership rights in its various patents and related technologies. It continued its efforts to sell or license the rights to the technology or attract a joint venture partner to fund the future development of one or more of these devices. The Company was successful in December 1995 and entered into a license agreement with Medical Device Alliance, Inc.("MDA"), giving MDA exclusive world-wide marketing and sales rights for the Company's ultrasonic soft tissue aspiration medical device (see "Medical Products"). On October 18, 1996, the Company entered into an exclusive license agreement with United States Surgical Corporation ("USS") for the Company's ultrasonic cutting technology. See "Business--Recent Developments." - 3 - The Offering This offering is comprised of 1,940,000 Shares for issuance to the holders of the Company's Warrants. The Warrants are exercisable at a price of $7.80 per Warrant in exchange for which the holder of a Warrant will receive one Share. Holders of Warrants may exercise the same on or before the close of business on January 23, 1997 (the "Warrant Expiration Date") by sending notice of exercise, together with payment in the amount of $7.80 per Share multiplied by the number of Warrants being exercised, to Continental Stock Transfer & Trust Company ("Continental"), 2 Broadway, New York, New York 10004; Attention: William Seegraber-Vice President; Continental is acting as the warrant agent ("Warrant Agent"). Use of Proceeds: The net proceeds received by the Company from the exercise of the Warrants will be used for general and working capital purposes. Risk Factors: Prospective investors should carefully consider the factors described under the caption "Risk Factors." Among the Risk Factors to be considered are: the Company's Possible Need for Additional Working Capital and Liquidity Constraints, Competition, Dependence on Proprietary and Confidential Information and Potential Technological Changes. Expenses: The Company estimates that its legal, accounting, printing, Warrant Agent fees and related expenses from this Offering will be approximately $18,500. In addition, for each Warrant exercised (except in an unsolicited transaction) and payment of $7.80 for a share by the warrantholder, the Company will pay a fee of $.39 to Josephthal, Lyon & Ross, Inc. ("JLR"), which was the underwriter of the Company's securities in its public offering pursuant to which the Warrants were originally offered and sold. - 4 - RISK FACTORS In addition to the other information in this Prospectus, the following should be considered carefully in evaluating the Company and its business before purchasing the Shares offered by this Prospectus. RISKS RELATED TO THE COMPANY 1. Possible Need for Additional Working Capital and Liquidity Constraints. The Company anticipates that its existing capital resources, including the net proceeds of this offering, will be adequate to satisfy its capital requirements and foreseeable operating needs for at least eighteen months after the date hereof. The Company's future capital requirements will depend on many factors, including cash flow from operations, implementation of its capital and facilities expansion program, ability to anticipate and react with flexibility to future technological and market developments, and ultimately on the Company's future ability to generate revenues and profits from operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Financial Statements." To the extent that the funds presently available are insufficient to fund the Company's future activities (such as acquisitions which are not presently identified or expansion of facilities), it may be necessary to raise additional funds, through equity or debt financings. There can be no assurance that liquidity problems will not occur in the future or that the Company will be able to renew or refinance its borrowings or to raise equity capital if this becomes necessary. See "Business." 2. Competition. The market for the Company's services and products is highly competitive, and the Company expects such competition to continue and possibly to increase. A number of the Company's current and prospective competitors have significantly greater financial, technical and marketing resources than the Company. Competitive pressures could cause the Company to lose market acceptance or result in significant price erosion with a material adverse effect upon the Company's results of operations. Although the Company believes its services and products are competitive with those of its competitors in functionality, creativity, cost, market acceptance, performance and reliability, the Company has not effected any market studies to substantiate such belief. See "Business-Competition." 3. Patents; Dependence on Proprietary and Confidential Information. The Company has received a patent on its liposuction apparatus and associated method and has obtained patents on items relating to the Alliger System, among other things. The Company has also received a 510(k) medical device clearance from the US Food and Drug Administration to market and sell a device in connection with ultrasonic tissue aspiration. However, patient protection has its limitation and, accordingly, the Company has developed a - 5 - body of proprietary knowledge and "know-how", including its confidential methods of operation and knowledge of customer and market needs and expectations, derived from its experience. The Company takes diligent steps to protect the confidentiality and nondisclosure of its proprietary information. See "Business--Patents, Trademarks, Trade Secrets and Licenses." 4. Potential Technological Changes The Company must focus primarily on providing services using advanced available technology, which the Company intends to expand and update as its business needs and technological advances warrant. This may involve significant expenditures and there can be no assurance that the Company's future capital resources will be sufficient to enable it to acquire new technologies. 5. Dependence on Key Personnel The Company's success depends to a significant extent upon the efforts of a small number of key executives. The loss of the services of one or more of such persons could have a material adverse effect on the Company. Although the Company has had no difficulty in attracting qualified personnel to date, competition for such personnel is intense and there is no assurance as to its future ability to retain its present personnel or acquire additional skilled personnel as and when needed. See "Business--Employees" and "Management--Directors and Executive Officers." 6. Ability of Present Management and Its Board of Directors To Control Company. The Company's management and its Board of Directors, together with the holders of the non-publicly traded shares, will be able to elect all of the Company's directors and will be in a position to control the Company's business and affairs. See "Security Ownership of Certain Beneficial Owners and Management." In addition, the Company's by-laws, among other things, protect officers and directors by indemnifying them against losses they may incur in legal proceedings resulting from their service to the Company. See "Management--Directors, Executive Officers and Other Significant Personnel." 7. Risks Associated with International Sales. The Company, through its Labcaire Inc. subsidiary, sells numerous of its industrial products in the UK, Western Europe and elsewhere. This makes it subject to risks inherent in international business activities, including unexpected changes in regulatory requirements and the burdens of complying with a wide variety of foreign laws and regulations. As with any company generally involved in international markets, risks of political and social uncertainty are always present; however, to the extent that the Company's recent markets have been based in the United Kingdom and Western Europe, with business sources derived from the United States as well, these risks have been somewhat mitigated because of historically better records of stability in these regions. In addition, exchange rate fluctuation between English Pounds Sterling - 6 - and the US dollar pose an additional business risk. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Currency Risk." DIVIDENDS No cash or other dividends have been paid upon the Company's Shares to date and none are expected in the foreseeable future since it is management policy to conserve cash for working capital purposes. PRICE RANGE OF SHARES The Company's Common Stock is listed on the Boston Stock Exchange under the symbol "MSO" and is traded in the over-the-counter market on the National Association of Securities Dealers' Automated Quotation System ("NASDAQ") under the symbol "MSON". Trading on both the Boston Stock Exchange and on NASDAQ commenced on January 23, 1992. The following table sets forth the high and low bid prices for the Common Stock during the periods indicated as reported by NASDAQ. The prices reported reflect inter-dealer quotations, may not represent actual transactions, and do not include retail mark-ups, mark-downs or commissions. The trading on the Boston Stock Exchange has been very limited to date and has been at prices substantially similar to those quoted below for NASDAQ. Fiscal 1997 High Low First Quarter........... 4-1/4 2-7/8 Second Quarter.......... 8-3/8 3-3/8 Fiscal 1996 First Quarter........... $ 1-1/2 $ 21/32 Second Quarter.......... 1-5/16 3/4 Third Quarter........... 1-3/16 3/4 Fourth Quarter.......... 4-5/8 1-1/64 Fiscal 1995 Third Quarter........... 13/16 9/16 Fourth Quarter.......... 21/32 1/2 As of September 30, 1996, the Company had 2,800,000 shares of Common Stock outstanding and 145 shareholders of record. This does not take into account stockholders whose shares are held in "street name" by brokerage houses. - 7 - CAPITALIZATION The following table sets forth the capitalization of the Company as of September 30, 1996, and as adjusted, to give effect to the exercise of the 1,940,000 Warrants into a like number of Shares. This table should be read in conjunction with the Financial Statements and related notes thereto included elsewhere in this Prospectus. September 30, 1996 Consolidated As Adjusted ------------ ----------- Long Term Debt including current portion $173,117 $173,117 Common Shares, par value .01 per share; 10,000,000 shares authorized: 2,800,000 Shares of Common issued and outstanding(1); 4,740,000 shares as adjusted 28,000 47,400 Additional paid in capital 11,100,793 26,194,893 Accumulated earnings (7,271,128) (7,271,128) Total Stockholders' Equity $3,857,665 $18,971,165 ---------- ----------- Total Capitalization $4,030,782 $19,144,282 ========== =========== - ---------------------------------- (1) Does not include: Options to acquire 175,500 Shares outstanding under the Company's stock option plans and options to acquire 1,050,000 Shares under stock option plans and transactions which are to be presented for shareholder approval at the Company's next Annual Meeting of Shareholders. - 8 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information which the Company's management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein. All of the Company's sales to date have been derived from the manufacture and distribution of ultrasonic equipment for scientific and industrial purposes, ductless fume enclosures for filtration of gaseous emissions in laboratories, and environmental control equipment for the abatement of air pollution. The Company's research and development programs have, from 1987 to December 1994, emphasized development of medical devices utilizing ultrasonic technology for the removal of arterial obstructions, soft tissue aspiration, and laparoscopic surgical procedures. The medical products portion of total research and development expenses increased during the period 1990 through December 1994. To date, no revenues have been generated from the sale of medical devices and, in December 1994, the Company suspended further research and development work on these devices since outside funding, necessary to complete the project, was not available. In December 1995, the Company entered into a license agreement with Medical Device Alliance, Inc. ("MDA"), covering the further development and commercial exploitation of the Company's medical technology relating to soft tissue aspiration (see "Description of Business"). Pursuant to the agreement with MDA, the Company will receive aggregate licensing fees, over time, of approximately $500,000, plus royalties based upon net sales of such products. The Company has received $300,000 in licensing fees as of June 30, 1996. Also as part of the MDA agreement, the Company was reimbursed a maximum of $30,000 per month (commencing September 1995) for product development expenditures (as defined in such agreement). The amount of reimbursement for the year ended June 30, 1996 was $320,363. The Company continues to devote a small amount of research and development resources toward improvement of its industrial ultrasonic product line, ductless fume enclosures, and air pollution abatement and other equipment. Results of Operations: The following table sets forth, for the two most recent fiscal years, the percentage relationship to net sales of principal items in the Company's Statement of Operations: - 9 - Fiscal years ended June 30, --------------------------- 1996 1995 ---- ---- (in thousands) Net sales.............................................. 100.0% 100.0% Cost of goods sold..................................... 52.3 54.2 ----- ----- Gross Profit........................................... 47.7 45.8 ----- ----- Selling & administrative expenses...................... 41.8 42.5 Research & development expenses-medical products....... .4 7.4 Research & development expenses-industrial products.... 1.6 2.1 Restructuring costs.................................... .0 4.9 ----- ----- Total operating expenses............................... 43.8 56.9 ----- ----- Income (loss) from operations.......................... 3.9 (11.1) Other income........................................... .7 .3 ----- ----- Net income (loss) before minority interest............. 4.6 (10.8) Minority interest...................................... (.7) .1 ----- ----- Net income (loss)...................................... 3.9 (10.9) ===== ===== The following table provides a breakdown of net sales by major category for the periods indicated: Fiscal years ended June 30, --------------------------- 1996 1995 ---- ---- (in thousands) Ultrasonic products.................................... $2,632 $2,575 Scrubbers.............................................. 1,156 1,081 Ductless fume enclosures............................... 6,125 4,896 ------ ------ Net sales.......................................... $9,913 $8,552 ====== ====== The following table provides a breakdown of foreign sales by geographic area during the periods indicated: Fiscal years ended June 30, --------------------------- 1996 1995 ---- ---- (in thousands) Canada & Mexico........................................ $ 95 $ 71 Europe................................................. 4,533 3,860 Asia................................................... 703 424 Middle East............................................ 146 67 Other.................................................. 166 62 ------ ------ $5,643 $4,484 ====== ====== - 10 - Fiscal years ended June 30, 1995 and 1996 Net Sales. Net sales increased by $1,361,452 (15.9%) between the fiscal year ended June 30, 1995 and the fiscal year ended June 30, 1996 from $8,551,684 to $9,913,136. The Company's largest product category, fume enclosures, increased by $1,229,000 or 25.1% in the fiscal year ended 1996 due to increased marketing efforts for its domestic products and the continued success of Labcaire's Autoscope which was added to the fume enclosure product line in fiscal 1995. Ultrasonic products include the Sonicator liquid processor and cell disrupter systems, ultrasonic cleaners, related accessories, and repair and service. The small increase of $57,000 or 2.2% in sales of ultrasonic products in fiscal 1996 reflects the fact that the Sonicator is a mature product. The increase of $75,000 or 6.9% in scrubber sales between fiscal 1995 and fiscal 1996 was due to increased marketing efforts for the microelectronics industry. During fiscal 1995 and fiscal 1996 the Company had foreign net sales of $4,483,764 and $5,643,101, respectively, representing 52% and 57% of net sales for such years, respectively. This increase is principally due to Labcaire's increased sales volume in fiscal 1996 over fiscal 1995, increasing to $4,711,667 from $3,920,400. Gross profit. There was an increase in overall gross profit margin to 47.7% in fiscal 1996 from 45.8% in fiscal 1995 because of economies of scale resulting from increased sales volume, sales of higher gross profit products, and various product price increases. Selling and general and administrative expenses. There was a 14% increase, from $3,632,151 to $4,139,183, in SG&A expenses from fiscal 1995 to fiscal 1996 owing in part to higher commissions on increased sales volume and the hiring of additional executive and other employees. This resulted in a decrease of these expenses to 41.8% of net sales in fiscal 1996 compared to 42.5% in fiscal 1995. Research and development expenses. Medical product research and development expenses were $629,837 in fiscal 1995 and $42,933 in fiscal 1996. The decrease in medical product R&D expenses was principally due to the fact that in December 1994, the Company suspended further research and development work in connection with its medical devices because outside funding, necessary to complete the project, was not available. Industrial product R&D expenses were $182,452 in fiscal 1995 and $161,253 in fiscal 1996. Interest expense. Interest expense was $32,780 in fiscal 1995 and $41,529 in fiscal 1996. This increase was due to an increased level of borrowing by Labcaire during the fiscal year. - 11 - Option/license Fees. The Company initially received $50,000 upon entering into an option agreement with Medical Device Alliance, Inc.("MDA"), leading to a ten year licensing agreement. As part of this agreement, the Company received $300,000 in licensing fees, of which $19,167 has been recorded as income during fiscal 1996. Net operating losses. The Company has accumulated approximately $6,956,000 of net operating losses as of December 31, 1996, which may be used to reduce taxable income and income taxes in future years. The utilization of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryfor- wards. The carryforwards begin to expire in fiscal year 2002 and will continue to expire through fiscal year 2011. Additionally, based on ownership changes resulting from the Company's 1992 public offering, as well as historical issuances of common stock and warrants, it is expected that the annual utilization of the otherwise available pre fiscal 1992 net operating loss carryforwards will be restricted. Results of Operations Three months ended September 30, 1996 and 1995 Net Sales: Net sales, which relate to the Company's medical, scientific and industrial products, increased $686,608 (32.6%) from $2,103,226 in the three months ended September 30, 1995 to $2,789,834 in the three months ended September 30, 1996 reflecting continued demand for the Company's industrial and scientific products and the first sales of the Company's ultrasonic soft tissue aspirator to MDA. Parent company sales for the three months ended September 30, 1996 increased 48% while sales at the Company's foreign subsidiary increased 14%. The Company's backlog of unfilled orders increased from $631,157 at September 30, 1995 to $1,966,372 at September 30, 1996. Gross Profit: Gross profit increased from 44.9% of sales in the three months ended September 30, 1995 to 51.3% of sales in the three months ended September 30, 1996 primarily due to the onset of medical device sales, significant growth in the domestic sales of the Company and economies of scale relative to this growth. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased from $980,172 (46.6 % of sales) in the three months ended September 30, 1995 to $1,083,813 (38.8% of sales) in the three months ended September 30, 1996. This dollar increase relates to sales costs associated with higher sales volume and hiring of additional personnel. Research and Development Expenses: Medical product research and development expenses were $6,456 in the three months ended September 30, 1996 as compared to $0 in the three months ended September 30, 1995. The slight increase is due to non-funded development costs associated with the Company's medical devices. Industrial product research and development - 12 - expenses were $55,089 in the three months ended September 30, 1995 and $28,750 in the three months ended September 30, 1996. Other Income (Expense): Other income during the three months ended September 30, 1995 was $20,727. During the three months ended September 30, 1996, other income was $113,892. This increase was principally due to the $100,000 option fees received from United States Surgical Corporation upon the latter's signing the option agreement for the Company's ultrasonic medical technology. Net Operating Losses: The Company has accumulated approximately $6,956,000 of net operating losses as of September 30, 1996, which may be used to reduce taxable income and income taxes in future years. The utilization of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The carryforwards begin to expire in fiscal year 2002 and will expire through fiscal year 2011. Additionally, based on ownership changes resulting from the offering completed in January 1992, as well as historical issuances of common stock and warrants, it is expected that the annual utilization of the otherwise available pre-offering net operating loss carryforwards will be limited by the provisions of Section 382 of the Internal Revenue Code as amended. Liquidity and Capital Resources: At September 30, 1996, the Company had a cash balance of $1,048,278 and investments held to maturity of $469,324. One hundred thousand dollars of this amount was derived from the signing of the option agreement discussed in Note 4 of the Financial Statements included herewith. This compares with the cash balance of $1,153,999 and investments held to maturity of $353,053 at June 30, 1996. Inventories have increased during this period from $1,202,314 to $1,503,124 reflecting, in part, the establishment of an inventory for the ultrasonic soft tissue aspirator. In addition, the Company has a revolving credit facility, which expires on June 30, 1997, in the amount of $500,000 available to the Company for short-term borrowings and letters of credit. Borrowings under the facility bear interest at prime plus 2% and are collateralized by a security interest in all assets of the Company. While there are no outstanding borrowings under this facility, the Company has utilized a portion of it to generate a standby letter of credit in the amount of approximately $300,000, which guarantees a portion of the credit facility of its subsidiary Labcaire Systems Ltd. In October 1996, the Company was released from this standby letter of credit since Labcaire was able to secure its credit facility based upon their own creditworthiness. A revolving credit facility from a U.K. bank in the amount of approximately $560,000 is available to Labcaire for short term borrowings. This facility expires in August 1997 when all unpaid principal and interest is due. This facility bears interest at U.K. prime plus 2% and is collateralized by a security interest in all the assets of Labcaire, a guarantee by Misonix, and a guarantee by Labcaire's directors. As of September 30, 1996, $540,919 was outstanding under this facility. - 13 - The Company believes that its existing capital resources will enable it to maintain its current and planned operations for at least 12 months from the date hereof. Currency Risk: Approximately 48% of the Company's revenues in fiscal 1996 were received in English Pounds. To the extent that the Company's revenues will be generated in English Pounds, for purposes of its reporting its financial position, its operating results will be converted into US Dollars. A strengthening of the English Pound, in relation to the US 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 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. Other: In the opinion of management, inflation has not had a material effect on the operations of the Company. Forward Looking Statements: This Prospectus 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 included in this Prospectus 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, those discussed in "Risk Factors." In light of the significant uncertainties inherent in the forward looking statements included herein, the inclusion of information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. - 14 - BUSINESS General MISONIX, INC. (the "Company") is a New York corporation which, through its predecessors, was first organized in 1959. The Company designs, develops, manufactures and markets ultrasonic equipment for scientific and industrial applications, ductless fume enclosures for filtration of gaseous contaminates, and environmental control products for the abatement of air pollution, as well as medical devices. Other products manufactured or distributed by the Company include ultrasonic cleaners and spray nozzles. The Company previously designed and developed medical devices using ultrasonic technology but had to suspend further development work on these devices in December 1994, when the Company's Board of Directors formally approved a plan to suspend such research and development since outside funding, necessary to complete the project, was not available. A restructuring charge was recorded at that time to reflect the estimated cost of suspending this portion of the Company's operations. Although the Company suspended its research and development activities related to its medical devices, it retained ownership rights in its various patents and related technologies. It continued its efforts to sell or license the rights to the technology or attract a joint venture partner to fund the future development of one or more of these devices. The Company was successful in December 1995 and entered into a license agreement with Medical Device Alliance, Inc.("MDA"), giving MDA exclusive world-wide marketing and sales rights for the Company's ultrasonic soft tissue aspiration medical device (see "Medical Products"). Scientific and Industrial Products The Company's current revenue-producing activities consist of the manufacture and sale of the Sonicator(Registered) ultrasonic liquid processor and cell disruptor, the distribution of other ultrasonic equipment for scientific and industrial purposes, the manufacture and sale of Mystaire(Registered) ductless fume enclosures for filtration of gaseous contaminants and the manufacture and sale of Mystaire scrubbers for the abatement of air pollution. The Sonicator is used in laboratories as a biological cell and tissue disruptor and for the preparation of substances used to target drug delivery in the body and certain agents used to visualize the circulatory system non-invasively. In analytical chemistry, ultrasonic processors such as the Sonicator remove gases from solvents and prepare samples for chemical analysis. Similar procedures are used in biotechnology in the production of medications and chemicals. The Sonicator is also used in the acceleration of chemical reactions and the extraction of proteins from cells such as E.coli and yeast. Sonication can strip away the outer coating of a virus and fragment DNA for immunological studies. It is also widely applied in manufacturing pharmaceuticals, fuel/oil emulsions, homogenizing pigments and dyes and improving the quality and consistency of these products. Additional uses of the Sonicator are, among others, quality control, including the dispersion of black carbon in the ink industry, improving polymer films, degassing carbonated beverages, beer, wines and spirits, and solvents. - 15 - In addition to the Sonicator, the Company also manufactures and sells an ultrasonic spray nozzle, marketed under the name Sonimist(Registered), and distributes ultrasonic cleaners, marketed under the names Astrason(Registered) bench-top cleaner and Astramax(Registered) industrial ultrasonic cleaner. The Sonimist ultrasonic spray nozzles are used for, among other things, coating, cleaning, cooling and disinfecting products in the food, pharmaceutical, paint, chemical, electronic, environmental and printing industries. Ultrasonic cleaners are marketed to research and industrial laboratories to remove various contaminants, such as radioactive particles, proteins, rust, blood and oil, from laboratory equipment. The Mystaire fume enclosure is a ductless filtration and containment hood which is portable and easy to install. It eliminates the duct work that is otherwise necessary for exhausting to the outside air. The enclosure is sold to clinical, research, and industrial laboratories for various industrial purposes. Laboratory applications include working with organic solvents and radioisotopes, chemical storage, chemical dispensing, pathology and histology. Industrial markets for the product line include the pharmaceutical, semiconductor manufacturing, and asbestos containment industries. The Mystaire air purifier is a general purpose recirculating system with activated carbon filters that purify air and remove airborne fumes, odors, and particulates. A new product, the Forensic Evidence Cabinet, is being marketed to crime labs, medical examiners, and police stations. Its primary use is to insure proper storage and minimize cross contamination as well as protect staff from exposure to airborne pathogens during storage of evidence. The Mystaire scrubber is an air pollution abatement system which removes difficult airborne contaminants emitted from laboratory, industrial and sewage treatment processes. The scrubber operates on a broad range of contaminants and is particularly effective on gaseous contaminants such as sulfur oxides. The Company also manufactures a range of "point of use" scrubbers for the microelectronics industry. This equipment eliminates low levels of toxic and noxious contaminants arising from silicon wafer production. The Company owns an 81.4% interest in Labcaire Systems Ltd. ("Labcaire"), a United Kingdom company formed in February 1992 with its principal place of business in Clevedon, England. The balance of the capital stock of Labcaire is owned by four directors who had the right, under a purchase agreement (the "Agreement"), to require the Company to repurchase such shares at a price equal to its pro rata share of 8.5 times Labcaire's earnings before interest, taxes and management charges for the proceeding fiscal year. In June 1996, this Agreement was amended and each of the four directors agreed to sell one-seventh of his total holding of Labcaire shares to the Company in each of the next seven consecutive years, commencing with fiscal year 1996. The price to be paid by the Company for these shares is based on the formula outlined in the Agreement. Pursuant to the Agreement, 9,284 shares (2.65%) of Labcaire common stock will be purchased by the Company for (pounds)62,388 (approximately $93,582). The effective date of this transaction was October 1996. Labcaire's business consists of designing, manufacturing, and marketing air handling systems for the protection of personnel, products and the environment from airborne hazards. Labcaire is the European distributor of the Company's ultrasonic scientific and industrial products. The present management of Labcaire consists of - 16 - four executives with experience in chemical containment and air handling technologies. Labcaire manufactures class 100 biosafety hazard enclosures, used in laboratories to provide sterile environments and protect lab technicians from airborne contaminants, and class 100 laminar flow enclosures. Labcaire also manufactures the Company's ductless fume enclosures for the European market and sells the enclosures under its tradename. Labcaire has developed and now manufactures and sells an automatic endoscope disinfection system (Autoscope). The Autoscope disinfects and rinses several endoscopes while abating the noxious disinfectant fumes. Medical Products Although the Company suspended its research and development activities related to its medical devices, in December 1994, it retained ownership rights in its various patents and related technologies. It has continued its efforts to sell or license the rights to the technology or attract a joint venture partner to fund the future development of one or more of these devices. The Company was successful in December 1995 and entered into a license agreement with Medical Device Alliance, Inc. ("MDA"), giving MDA exclusive world-wide marketing and sales rights for the Company's ultrasonic soft tissue aspiration medical device. Pursuant to the License Agreement, the Company will receive aggregate licensing fees, over time, of approximately $500,000, plus royalties based upon net sales of such products. The Company has received $300,000 in licensing fees, as of June 30, 1996. Also as part of the MDA agreement, the Company was reimbursed a maximum of $30,000 per month (commencing September 1995) for product development expenditures (as defined in the MDA agreement). The amount of reimbursement for the year ended June 30, 1996 was $320,363. This license deals with, among other matters, the Company's patent for a liposuction apparatus granted in May, 1995 and its 510(K) approval from the United States Food and Drug Administration to market and sell a device for ultrasonic tissue aspiration. The Company has settled the dispute (as discussed in prior filings) with the two individuals who are joint inventors, with the Company's founder, of the Patent for a Liposuction Method and Apparatus. As a result, they have reconfirmed their assignment, and in return, the Company has reestablished the original payment agreement which gives the two inventors a 5% royalty on revenues covered, including those received from the MDA license. In addition to the Company's medical technology related to soft tissue aspiration, the Company has previously designed other medical devices which were at various stages of development when the Company's restructuring plan was implemented in December 1994. The Company is seeking to commercially exploit and further develop certain of these devices. Recent Developments On October 18, 1996, the Company announced that it has entered into an exclusive license agreement with United States Surgical Corporation ("USS") for Misonix's ultrasonic cutting technology, which uses high frequency sound waves to coagulate and divide tissue for both open and laparoscopic surgery. The license agreement provides USS with the exclusive worldwide marketing and sales rights for this technology. The license agreement provides for a payment of $300,000 to the Company on signing and an additional $200,000 based upon certain milestones over the next year, plus royalties based upon net sales of such products. - 17 - Market and Customers The largest market for the Company's Sonicator includes research and clinical laboratories worldwide. In addition, the Company has expanded its sales of the ultrasonic processor into industrial markets such as paint, pigment, ceramic and pharmaceutical manufacturers. The Company views a wide range of industries as prospective customers for its pollution abatement scrubbers. Scrubbers are usable in any industry or environment in which airborne contaminants are created. The market for the Company's ductless fume enclosures includes laboratory or industrial environments in which workers may be exposed to noxious fumes or vapors. The products are suited to laboratories in which personnel perform functions which release noxious fumes or vapors (including hospital and medical laboratories), industrial processing (particularly involving the use of solvents) and soldering and other general chemical processes. The products are particularly suited to users in the pharmaceutical, semiconductor, biotechnology, and forensic industries. The Company relies on manufacturing representatives, distributors, direct salespersons and catalogue listings for the marketing of its scientific and industrial products. The Company currently sells through more than 10 manufacturing representatives and distributors in the United States. The Company currently employs 3 direct sales persons who operate outside the Company's offices and conduct direct marketing on a regional basis and 2 product managers, 1 sales specialist, and a vice-president of sales and marketing who work in the Company's offices. Approximately nine percent of its sales are through catalogue distributors. The Company's sales efforts include advertising and participating in trade shows. The Company relies on MDA for marketing its ultrasonic soft tissue aspiration medical device and, with respect to any other potential ultrasonic medical devices, will likely seek and rely upon other joint venture partners. In fiscal 1996, approximately 57% of the Company's net sales were to foreign markets. Labcaire, a subsidiary of the Company, acts as the European distributor of the Company's scientific and industrial products and manufactures and sells the Company's fume enclosure line as well as its own range of laboratory environmental control products. Sales by the Company in other major industrial countries are made through distributors. Manufacturing and Supply The Company manufactures and assembles the majority of its scientific and industrial products at its production facility located in Farmingdale, New York. The Company's products include components manufactured by other companies in the United States. The Company believes that it will not encounter difficulty in obtaining materials, supplies and components - 18 - adequate for its anticipated short-term needs. The Company is not dependent upon any single source of supply and has no long-term supply agreements. Labcaire manufactures and assembles its products at its facility located in Clevedon, England. It is not dependent upon any single source of supply and has no long-term supply agreements. Competition Competitors in the ultrasonic industry for industrial products range from large corporations with greater production and marketing capabilities to smaller firms specializing in single products. The Company believes that its significant competitors in the manufacture and distribution of industrial ultrasonic devices are Branson Sonic Power, a division of Emerson Electric Co., and Sonics & Materials, Inc. In addition, the Company is aware of at least four other manufacturers of ultrasonic liquid processors. It is possible that other companies in the industry are currently developing products with the same capabilities as those of the Company. The Company believes that the features of its Sonicator and the Company's customer assistance in connection with particular applications give the Sonicator a competitive advantage over comparable products. Competitors in the air pollution abatement industry range from large, multi-national corporations with greater production and marketing capabilities to small firms specializing in single products. The Company competes with other entities whose financial resources are substantially greater and, in many cases, whose share of the air pollution abatement market is significant. The Company believes that its principal competitors in the manufacture and distribution of scrubbers are The Ceilcote Company, Inc., Duall Division, a division of Met-Pro Corporation, and Croll-Reynolds Company, Inc. The principal competitor for the ductless fume enclosure is Captair, Inc. The Company believes that specific advantages of its scrubbers include efficiency, price and customer assistance and that specific advantages of its fume enclosures include efficiency and other product features, such as durability and ease of operation. Competition in the medical and medical device industry is rigorous with many companies having huge capital resources, research laboratories and distribution systems in excess of the Company's. Accordingly, the Company believes participation in this field is only feasible if it enters into strategic alliances and/or joint ventures with other entities having greater experience and resources for use in this field. Patents, Trademarks, Trade Secrets and Licenses The Company owns United States trademark registrations for the following marks: Mystaire, Waterweb, Sonimist, Astrason and Astramax. Pursuant to a royalty free license agreement with an unaffiliated third party, the Company has the right to use the trademark - 19 - "Sonicator" in the United States. The Company also owns trademark registrations for Mystaire in both England and Germany. In May 1990, the United States Patent and Trademark Office (the "U.S. Patent Office") issued a patent relating to the Alliger System for applying ultrasonic forces on clots and plaque in human arteries using a generator, transducer and titanium wire. In June 1991, the U.S. Patent Office issued a patent relating to the Company's environmental control product line for introducing ozone and liquid into the cavitation zone for an ultrasonic probe. In July 1991, the U.S. Patent Office issued a patent relating to the Company's environmental control product line for the intimate mixing of ozone and contaminated water for the purpose of purification. In September 1993, the U.S. Patent Office issued a patent relating to the Company's Alliger System for reducing transverse motion in its catheters. In April 1994 and August 1995, the U.S. Patent Office issued two patents relating to the Company's Alliger System for a catheter with collapsible wire guide. In December 1994, the U.S. Patent Office issued a patent relating to the Company's liposuction system and its ultrasonic industrial products for an electromechanical transducer device. In March 1995, the U.S. Patent Office issued a patent relating to the Company's Alliger System for an ultrasonic device with sheath and transverse motion damping. In May 1995, the U.S. Patent Office issued a patent relating to the Company's liposuction apparatus and associated method. The Company has settled the dispute with the two individuals who are joint inventors, with the Company's founder, of this patent (see "Medical Products"). In November 1995, the U.S. Patent Office issued a patent relating to the method of making an electromechanical transducer device to be used in conjunction with the soft tissue aspiration system and the Company's ultrasonic industrial products. In May 1996, the U.S. Patent Office issued a patent relating to an ultrasonic atomizing device which is used in the Company's industrial products. In June 1996, the U.S. Patent Office issued a patent relating to an ultrasonic lipectomy probe to be used with the soft tissue aspiration technology. - 20 - Backlog As of June 30, 1996, the Company's backlog, including Labcaire, relating to industrial products was approximately $1,800,000 as compared with approximately $634,000 as at June 30, 1995. Historically, backlog has not been a meaningful indication of future sales. Employees As of September 30, 1996 the Company, including Labcaire, employed a total of 83 full-time people, including 16 in management and supervisory positions. The Company considers its relationship with its employees to be satisfactory. Properties The Company occupies approximately 34,000 square feet at 1938 New Highway, Farmingdale, New York, under a lease expiring on April 30, 1998. The rental amount, which is approximately $20,000 per month, includes a pro rata share of real estate taxes, water and sewer charges, and other charges which are assessed on the leased premises or the land upon which the leased premises are situated. Labcaire occupies approximately 12,000 feet, at 15 Hither Green, Clevedon, England, under a lease expiring July 20, 1999. The rental amount is approximately $4,000 per month with a pro rata share of local taxes and water and sewer charges billed separately. Both properties are in good condition. - 21 - MANAGEMENT Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. The Company currently has four Directors. Their term expires at the Annual Meeting and all four are standing for reelection for a term of one year. The following tables contains information regarding all Directors and executive officers of the Company: Director Name Age Principal Occupation Since - ---- --- -------------------- -------- Gary Gelman 49 Chairman of the Board 1995 of Directors Joseph Librizzi 58 Director, President, 1975 Chief Executive Officer, Treasurer and Secretary Peter Gerstheimer 47 Vice President and Chief Financial Officer -- Ronald Manna 42 Vice President - Operations -- Howard Alliger 69 Director 1971 Arthur Gerstenfeld 68 Director 1992 The following is a brief account of the business experience for the past five years of the Company's Directors and officers: Gary Gelman, the founder of American Claims Evaluation, Inc., a publicly traded company engaged in auditing hospital bills and providing vocational rehabilitational counseling, has been Chairman of the Board and a Director of that company for more than ten years. Since 1973, Mr. Gelman has also been President and a principal of American Para Professional Systems, Inc., which provides nurses who perform physical examinations of applicants for life and/or health insurance for insurance companies. He received a B.A. Degree from Queens College. In March 1996, Mr. Gelman became Chairman of the Board of the Company. Joseph Librizzi became President and Chief Executive Officer of the Company in March 1995. Prior to this he was Executive Vice President, Chief Operating Officer, Treasurer and Secretary of the Company since September 1991. Dr. Librizzi was previously President of the Company (prior to the merger between the Company and Sonic Needle Corp.) from 1986 to September - 22 - 1991. Dr. Librizzi holds a doctorate in applied mechanics and aerospace engineering from Polytechnic Institute of Brooklyn. Peter Gerstheimer became Vice President and Chief Financial Officer of the Company in September 1992. From December 1984 to September 1992, he was Vice President of Finance at Thermex-Thermatron, Inc., a manufacturer of high-frequency electronic heat sealing and processing equipment. Previously, he served as Treasurer and Controller of LogiMetrics, a manufacturer of electronic test components and systems for military and non-military use. Mr. Gerstheimer is a licensed certified public accountant in the State of New York and was a senior accountant at Touche Ross & Co. Mr. Gerstheimer holds a B.A. Degree from Hofstra University. Ronald Manna became Vice President - Operations of the Company in September 1989. For more than three years prior thereto, Mr. Manna served as the Director of Engineering of the Company. Mr. Manna holds a B.S. Degree in mechanical engineering from Hofstra University. Howard Alliger has served since 1955 as the sole proprietor or as the Chairman of the Board of Directors of the Company and its predecessors. In March 1996, Mr. Alliger resigned as Chairman of the Board of Directors while remaining on the Board. Mr. Alliger holds a B.A. degree in economics from Allegheny College and attended Cornell University's School of Engineering. He has received 15 patents, has published various papers on ultrasonic technology and, for the three years ended in June 1991, was the President of the Ultrasonic Industry Association. Arthur Gerstenfeld is a Professor at Worcester Polytechnic Institute and Director of its Advanced Automation Technology Program. He is also the President of UFA, Inc. a manufacturer of air traffic control simulation systems, and has served in that capacity since 1980. Dr. Gerstenfeld received a B.M.E. from Rensselaer Polytechnic Institute in 1950 and an M.S. and Ph.D. from the Massachusetts Institute of Technology in 1966 and 1967, respectively. Based upon an examination of public filings, the Company believes all reports required under Section 16(a) of the Securities and Exchange Act of 1934 have been filed on a timely basis. - 23 - Executive Compensation. The following table sets forth for the fiscal years indicated the compensation paid by the Company to its Chief Executive Officer and each of the four other highest paid executive officers with annual compensation exceeding $100,000: Summary Compensation Table Annual Compensation (1) Long Term Compensation ----------------------- ---------------------- Awards Name and Underlying Principal Position Fiscal Year Salary Options/SARS (#) - ------------------ ----------- -------- ---------------- Joseph Librizzi, President 1996 $183,971 --- Chief Executive Officer, 1995 135,000 --- Treasurer and Secretary 1994 135,000 --- - ------------------------ (1) No other annual compensation is shown because the amounts of perquisites and other non-cash benefits provided by the Company do not exceed the lesser of $50,000 or 10% of the total annual base salary and bonus disclosed in this table for the respective officer. Employment Agreements On September 1, 1995, the Company entered into an employment agreement with Dr. Librizzi, who is employed as President and Chief Executive Officer. The agreement provides for an annual salary of $160,000 plus a bonus measured by pretax operating earnings. Dr. Librizzi receives additional benefits that are generally provided to other employees of the Company. The agreement was renewed in July 1996 and expires on August 31, 1997. It is automatically renewed for a successive one year term unless the Company or the executive elects not to renew. In conformity with the Company's policy, all of its Directors, officers and employees execute confidentiality and nondisclosure agreements upon the commencement of employment with the Company. The agreements generally provide that all inventions or discoveries by the employee related to the Company's business and all confidential information developed or made known to the employee during the term of employment shall be the exclusive property of the Company and shall not be disclosed to third parties without prior approval of the Company. Messrs. Librizzi, Gerstheimer, and Manna also have agreements with the Company which provide for the payment of six months severance upon their termination for any reason including a change in control of the Company. The Company's employment agreement with Dr. Librizzi also contains non-competition provisions that preclude him from competing with the Company for a period of one year from the date of his termination of employment unless his employment is terminated by the Company without cause. - 24 - Option Exercises in Last Fiscal Year and Year-end Values No options were exercised by any executive officer named in the Summary Compensation Table during the fiscal year ended June 30, 1996. The following table contains information concerning the number and value, at June 30, 1996, of unexercised options held by executive officers named in the Summary Compensation Table: Number of Unexercised Value of Unexercised Options Held at Fiscal In-the-Money Options Year-End Held at Fiscal Year-End Name (Exercisable/Unexercisable) (Exercisable/Unexercisable)(1) ---- --------------------------- ------------------------------ Joseph Librizzi 60,000/0 $172,500/0 - -------------------------------- (1) Fair market value of underlying securities (the closing price of the Company's Common Shares on the National Association of Securities Dealers Automated Quotation System) at fiscal year end (June 30, 1996) minus the exercise price. Stock Options In September 1991, in order to attract and retain persons necessary for the success of the Company, the Company adopted a stock option plan (the "Plan") which, as amended, covers up to 250,000 of the Company's Common Shares. Pursuant to the Plan, officers, Directors, consultants and key employees of the Company are eligible to receive incentive and/or non-incentive stock options. The Plan, which expires on December 31, 2003, is administered by the Board of Directors with the right to designate a committee. The selection of participants, allotments of shares, determination of price and other conditions relating to options will be determined by the Board of Directors, or a committee thereof, in its sole discretion. Incentive stock options granted under the Plan are exercisable for a period of up to ten years from the date of grant at any exercise price which is not less than the fair market value of the Common Shares on the date of the grant, except that the term of an incentive stock option granted under the Plan to a shareholder owning more than 10% of the outstanding Common Shares may not exceed five years and its exercise price may not be less than 110% of the fair market value of the Common Shares on the date of grant. At June 30, 1996, options to purchase 250,000 shares were outstanding under the plan at $ .75 to $6.50 per share and no options had been exercised. Compliance with Section 16(a) of the Securities Exchange Act Section 16(a) of the Securities and Exchange Act of 1934 requires the Company's executive officers, Directors and persons who own more than ten percent of a registered class of the Company's equity securities ("Reporting Persons") to file reports of ownership and changes in ownership on Forms 3, 4, and 5 with the Securities and Exchange Commission (the "SEC"), the Boston Stock Exchange, and the National Association of Securities Dealers, Inc. - 25 - (the "NASD"). These Reporting Persons are required by SEC regulation to furnish the Company with copies of all Forms 3, 4 and 5 they file with the SEC and NASD. Based solely on the Company's review of the copies of the forms it has received, the Company believes that all Reporting Persons complied on a timely basis with all filing requirements applicable to them with respect to transactions during fiscal year 1996. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth as of January 2, 1997 certain information with regard to ownership of the Company's Common Shares by (i) each beneficial owner of more than 5% of the Company's Common Shares; (ii) each Director and nominee for Director; (iii) each executive officer named in the "Summary Compensation Table" below; and (iv) all executive officers and Directors of the Company as a group. Unless otherwise stated, the persons named in the table have sole voting and investment power with respect to all Common Shares shown as beneficially owned by them. Common Shares Percent Name and Address(1) Beneficially Owned of Class Howard Alliger 728,072(2) 25.0% Joseph Librizzi 161,661(3) 5.5% Gary Gelman 337,930(4) 11.6% Arthur Gerstenfeld 26,300(5) * All executive officer and Directors as a group (seven persons) 1,331,266(6) 45.7% - -------------------- *Less than 1% (1) The business address of each of the named individuals in this table is c/o MISONIX, INC., 1938 New Highway, Farmingdale, New York 11735. (2) Includes 27,000 Common Shares held by Mr. Alliger's daughter, of which he disclaims all beneficial interest, but does not include options for 50,000 Common Shares which are to be voted upon at the Annual Meeting. (3) Includes 60,000 Common Shares which Dr. Librizzi has the right to acquire upon exercise of stock options which are currently exercisable, but does not include options for 40,000 Common Shares which are to be voted upon at the Annual Meeting. (4) Does not include options for 459,000 Common Shares which are to be voted upon at the Annual Meeting. (5) Includes 2,000 Common Shares which Mr. Gerstenfeld has the right to acquire upon exercise of stock options which are currently exercisable, but does not include options for 10,000 Common Shares which are to be voted upon at the Annual Meeting. (6) Includes the Common Shares indicated in notes (2), (3), and (5) but does not include options for 569,000 Common Shares to be voted upon at the Annual Meeting. - 26 - DESCRIPTION OF SECURITIES Common Stock The Company is authorized to issue 10,000,000 Shares, par value $0.01 per share. As of September 30, 1996, there were 2,800,000 shares of common stock outstanding. Each share of Common Stock entitles the holder thereof to one vote on all matters submitted to a vote of the stockholders. Since the holders of Common Stock do not have cumulative voting rights, holders of more than 50% of the outstanding shares can elect all of the Directors of the Company and holders of the remaining shares by themselves cannot elect any Directors. The holders of Common Stock will not have preemptive rights or rights to convert their Common Stock into other securities. Holders of Common Stock will be entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, holders of the Common Stock have the right to a ratable portion of the assets remaining after payment of liabilities. All shares of Common Stock outstanding and to be outstanding upon completion of this offering are and will be fully paid and non-assessable. Preferred Stock The Company's authorized Preferred Stock consists of 2,000,000 shares, par value $ 1.00 per share. The Company's Restated Certificate of Incorporation grants the Board of Directors the authority to issue by resolution shares of Preferred Stock in one or more series and to fix the number of shares constituting any such series, the voting powers, if any, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including the rate or rates at which, and the other terms and conditions on which, dividends shall be payable; whether and on what terms the shares constituting any series shall be redeemable, subject to sinking fund provisions, or convertible or exchangeable into securities of the Company and the liquidation preferences, if any, of such series, without any further vote or action by the stockholders. For example, the Board of Directors is authorized to issue a series of Preferred Stock that would have the right to vote, separately or with any other series of Preferred Stock, on any other proposed amendment to the Company's Restated Certificate of Incorporation or any other proposed corporate action, including business combinations and other transactions. The Board of Directors currently does not contemplate the issuance of any Preferred Stock and is not aware of any pending or proposed transactions that would be affected by such issuance. The authority possessed by the Board of Directors to issue Preferred Stock could potentially be used to discourage attempts by others to obtain control of the Company through merger, tender offer, proxy contest or otherwise by making such attempts more difficult to achieve or more costly. The Board of Directors may issue the Preferred Stock without stockholder approval and with voting and conversion rights which could adversely affect the voting power of the holders - 27 - of Common Stock. There are no agreements or understandings for the issuance of Preferred Stock and the Board of Directors has no present intention to issue any Preferred Stock. Warrants The Warrants are issued in registered form pursuant to an agreement, dated January 23, 1992 (the "Warrant Agreement"), between the Company and Continental Stock Transfer & Trust Company (the "Warrant Agent"). The following discussion of certain terms and provisions of the Warrants is qualified in its entirety by reference to the detailed provisions of the Warrant Agreement, the form of which has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. One Warrant represents the right of the registered holder to purchase one Share at an exercise price of $7.80 per Share, subject to adjustment (the "Purchase Price"). The Warrants will be entitled to the benefit of adjustments in the Purchase Price and in the number of Shares and/or other securities deliverable upon the exercise thereof in the event of a stock dividend, stock split, reclassification, reorganization consolidation or merger. The Company has the right to reduce the Purchase Price or increase the number of Shares issuable upon the exercise of the Redeemable Warrants. Unless previously redeemed, the Warrants may be exercised at any time prior to the close of business on February 3, 1997 (the "Expiration Date"). On and after the Expiration Date, the Warrants become wholly void and of no value. The Company may at any time extend the Expiration Date of all outstanding Warrants for such increased period of time as it may determine. The Warrants may be exercised at the office of the Warrant Agent. The Company has the right at any time after January 23, 1993 to redeem the Redeemable Warrants in whole for cancellation at a price of $0.10 each, by written notice mailed 30 days prior to the redemption date to each Warrantholder at his address as it appears on the books of the Warrant Agent; provided, however, that the Company does not have the right to call for redemption any of the Redeemable Warrants underlying the Underwriter's Warrants. Such notice may only be given within 1O days following any period of 20 consecutive trading days during which the high closing bid price of the Shares (if then traded on the NASDAQ National Market System or on a national securities exchange) exceeds $9.75 per share, subject to adjustments for stock dividends, stock splits and the like. If the Warrants are called for redemption, they must be exercised prior to the close of business on the date of any such redemption or the right to purchase the applicable Shares. No holder, as such, of Warrants shall be entitled to vote or receive dividends or be deemed the holder of Shares for any purpose whatsoever until such Warrants have been duly exercised and the Purchase Price has been paid in full. - 28 - Shares Eligible for Future Sale The Company has outstanding 2,800,000 Shares, without taking into account Shares issuable upon exercise of outstanding options, the Underwriter's Warrants or the Warrants referred to in this Prospectus. Of such Shares, approximately 920,677 Shares (the "Restricted Shares") were issued and sold by the Company in private transactions three or more years ago based upon one or more exemptions contained in the Securities Act. In general, under Rule 144 as currently in effect, any person (or persons whose Shares are aggregated), including persons deemed to be affiliates of the Company, whose restricted securities have been fully paid for and held for at least two years from the later of the date of issuance by the Company or acquisition from an affiliate, may sell such securities in brokers' transactions or directly to market makers, provided that the number of shares sold in any three month period may not exceed the greater of 1% of the then outstanding Shares or the average weekly trading volume of the Sharesin the over-the-counter market during the four calendar weeks preceding the sale. Sales under Rule 144 are also subject to certain notice requirements and the availability of current public information about the Company. After three years have elapsed from the later of the issuance of restricted securities by the Company and their acquisition from an affiliate, such securities may be sold without limitation by persons who are not affiliates under the rule, in accordance with Rule 144(k). Transfer Agent The Company's transfer and warrant agent is Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York 10004. LITIGATION The Company is not involved in any material litigation. LEGAL MATTERS The validity of the Shares being offered hereby, which is being issued pursuant to the laws of New York, will be passed upon for the Company by Hartman & Craven LLP, 460 Park Avenue, New York, New York 10022-1987. EXPERTS The consolidated financial statements of Misonix, Inc. and subsidiaries at June 30, 1996 and for each of the two years in the period then ended, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. - 29 - Index to Financial Statements Audited Consolidated Financial Statements for Year Ended June 30, 1996 - ---------------------------------------------------------------------- Report of Independent Auditors..........................................F-2 Consolidated Balance Sheet-June 30, 1996................................F-3 Consolidated Statements of Operations-Years Ended June 30, 1996 and 1995..........................................F-4 Consolidated Statements of Stockholders' Equity-Years Ended June 30, 1996 and 1995.............................F-5 Consolidated Statements of Cash Flows-Years Ended June 30, 1996 and 1995..........................................F-6 Notes to Consolidated Financial Statements..............................F-7 Unaudited Consolidated Financial Statements for Three Months ended September 30, 1996 Consolidated Balance Sheet September 30, 1996(Unaudited)...............F-20 Consolidated Statements of Operations Three months ended September 30, 1996 and 1995 (Unaudited)...........F-21 Consolidated Statements of Cash Flows Three months ended September 30, 1996 and 1995 (Unaudited) .......................F-22 Notes to Consolidated Financial Statements.............................F-23 F-1 Report of Independent Auditors The Board of Directors and Stockholders Misonix Inc. and Subsidiaries We have audited the accompanying consolidated balance sheet of Misonix, Inc. and Subsidiaries (the "Company") as of June 30, 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Misonix, Inc. and Subsidiaries at June 30, 1996, and the consolidated results of their operations and their cash flows for each of the two years in the period then ended, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Melville, NY August 9, 1996 F-2 Misonix, Inc. and Subsidiaries Consolidated Balance Sheet June 30, 1996 Assets Current assets: Cash and cash equivalents $ 1,153,999 Investments held to maturity 353,053 Accounts receivable, less allowance for doubtful accounts of $58,468 1,981,205 Inventories (Note 3) 1,202,314 Prepaid expenses and other current assets 505,892 -------------- Total current assets 5,196,463 Property and equipment, at cost, less accumulated depreciation and amortization (Note 4) 622,427 Goodwill, net of amortization of $37,795 (Note 12) 203,504 Other assets 52,563 -------------- Total assets $ 6,074,957 ============== Liabilities and stockholders' equity Current liabilities: Notes payable (Note 5) 518,259 Accounts payable 1,159,438 Accrued expenses and other current liabilities (Note 6) 408,853 Current maturities of capital lease obligations (Note 7) 52,884 -------------- Total current liabilities 2,139,434 Capital lease obligations (Note 7) 81,763 Deferred income (Note 13) 380,833 Minority interest 75,279 Commitments and contingencies (Notes 7, 9 and 12) Stockholders' equity (Note 8): Common stock, $.01 par value--shares authorized 10,000,000; issued and outstanding 2,800,000 28,000 Additional paid-in capital 11,100,793 Deficit (7,696,590) Foreign currency translation adjustment (34,555) -------------- Total stockholders' equity 3,397,648 -------------- Total liabilities and stockholders' equity $ 6,074,957 ============== See accompanying notes. F-3 Misonix, Inc. and Subsidiaries Consolidated Statements of Operations Year ended June 30 1996 1995 ------------------------------- Net sales (Note 10) $ 9,913,136 $ 8,551,684 Cost of goods sold 5,181,222 4,638,983 ------------------------------- Gross profit 4,731,914 3,912,701 Operating expenses: Selling, general and administrative expenses 4,139,183 3,632,151 Research and development expenses (Note 2) 204,186 812,289 Restructuring charge (Note 2) - 416,445 ------------------------------- Total operating expenses 4,343,369 4,860,885 ------------------------------- Income (loss) from operations 388,545 (948,184) Other income (expense): Interest income 54,209 55,319 Interest expense (41,529) (32,780) Option/license fees (Note 13) 69,167 - Foreign currency exchange (loss) gain (11,890) 2,834 ------------------------------- Income (loss) before minority interest 458,502 (922,811) Minority interest in net income of consolidated subsidiary (69,075) (6,204) ------------------------------- Net income (loss) $ 389,427 $ (929,015) =============================== Net income (loss) per common and common equivalent share $ .14 $ (.34) =============================== Net income (loss) per common and common equivalent share assuming full dilution $ .13 $ (.34) =============================== Weighted average common and common equivalent shares outstanding 2,867,108 2,770,411 =============================== Weighted average common and common equivalent shares outstanding assuming full dilution 2,926,317 2,770,411 =============================== See accompanying notes. F-4 Misonix, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity
Common Stock $.01 Par Value Foreign ------------------------------ Additional Currency Total Number Paid-in Translation Stockholders' of Shares Amount Capital (Deficit) Adjustment Equity -------------- --------------- --------------- --------------- --------------- ----------------- Balance, June 30, 1994 2,770,000 $27,700 $11,086,093 $(7,157,002) $(27,517) $3,929,274 Stock issuance to outside directors 30,000 300 14,700 - - 15,000 (Note 8) Foreign currency translation adjustment - - - - (6,709) (6,709) Net loss - - - (929,015) - (929,015) -------------- --------------- --------------- --------------- --------------- ----------------- Balance, June 30, 1995 2,800,000 28,000 11,100,793 (8,086,017) (34,226) 3,008,550 Foreign currency translation adjustment - - - - (329) (329) Net income - - - 389,427 - 389,427 -------------- --------------- --------------- --------------- --------------- ----------------- Balance June 30, 1996 2,800,000 $28,000 $11,100,793 $(7,696,590) $(34,555) $3,397,648 ============== =============== =============== =============== =============== =================
See accompanying notes. F-5 Misonix, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Year ended June 30 1996 1995 -------------------------------- Operating activities Net income (loss) $ 389,427 $ (929,015) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Provision for net losses on accounts receivable 1,892 18,741 Depreciation and amortization 193,417 213,166 Minority interest in net income of subsidiary 69,075 6,204 Foreign currency loss 904 3,032 Noncash restructuring charge - 245,438 Issuance of stock to outside directors - 15,000 Changes in operating assets and liabilities: Accounts receivable (529,105) (82,717) Inventories (125,690) 2,385 Prepaid expenses and other current assets (380,455) 45,240 Deposits and other assets 2,479 (199) Accounts payable and accrued expenses 222,383 (103,134) Deferred income 380,833 - ---------- --------- Net cash provided by (used) in operating activities 225,160 (565,859) ---------- --------- Investing activities Acquisition of property and equipment and other (107,742) (120,483) Proceeds from involuntary conversion of assets - 152,000 Sales of investments held to maturity 355,600 1,277,228 Purchases of investments held to maturity (353,053) (355,600) ---------- --------- Net cash (used in) provided by investing activities (105,195) 953,145 ---------- --------- Financing activities Increase (decrease) in short-term borrowings 187,338 (55,647) Principal payments on capital lease obligations (39,221) (53,609) ---------- --------- Net cash provided by (used in) financing activities 148,117 (109,256) ---------- --------- Effect of exchange rates (27) 101 ---------- --------- Net increase in cash and cash equivalents 268,055 278,131 Cash and cash equivalents at beginning of period 885,944 607,813 ---------- --------- Cash and cash equivalents at end of year $1,153,999 $ 885,944 ========== ========= Supplemental disclosure of cash flow information Interest paid during the year $ 41,529 $ 32,780 ========= =========
See accompanying notes. F-6 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements June 30, 1996 1. Basis of Presentation, Organization and Business, and Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements of Misonix, Inc. ("Misonix") include the accounts of Misonix, its 81.4% owned subsidiary, Labcaire Systems, Ltd. ("Labcaire"), and its 100% owned subsidiary, Misonix, Ltd. (collectively, the "Company"). Misonix Ltd. was incorporated in the United Kingdom on July 19, 1993 and its operations since inception have been minimal. All significant intercompany balances and transactions have been eliminated. Organization and Business Misonix was incorporated under the laws of the State of New York on July 31, 1967. During the period from 1987 through December 1994, Misonix was engaged in the design and development of medical devices which would utilize proprietary and patented ultrasound technology for the treatment of cardiovascular disease and for soft tissue removal. Research and development work in connection with these medical devices, however, was suspended in December 1994 and the Company recorded a restructuring charge (see Note 2) as outside funding was not available to further develop these technologies. During this period, there was no revenue from the sale of medical devices. However, in December 1995, the Company entered into a licensing agreement to further develop one of its medical devices (see Note 13). Misonix's principal revenue producing activities, from 1967 to date, have been the manufacture and distribution of proprietary ultrasound equipment for scientific and industrial purposes and environmental control equipment for the abatement of air pollution. Misonix's products are sold worldwide. Labcaire, which began operations in February of 1992, is located in the United Kingdom, and its core business is the innovation, design, manufacture, and marketing of air handling systems for the protection of personnel, products and the environment from airborne hazards. Net sales to unaffiliated customers, net income and total assets related to Labcaire as of and for the year ended June 30, 1996 were approximately $4,712,000, $369,000 and $2,263,000, respectively. For the year ended June 30, 1995, these amounts were approximately $3,920,400, $319,100 and $1,796,100, respectively. F-7 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. Basis of Presentation, Organization and Business, and Summary of Significant Accounting Policies (continued) Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Investments Held to Maturity Effective July 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity Securities," which was effective for fiscal years beginning after December 15, 1993. Adoption of SFAS 115 had no effect on the Company's financial position as of July 1, 1994 or results of operations for the year ended June 30, 1995. The Company's investments, maturing at various dates through June 1997, consist primarily of U.S. Government Treasury Bills and are valued at amortized cost which approximates market. The Company classifies its investments as held-to-maturity as the Company has both the intent and ability to hold these securities until maturity. Concentration of Credit Risk The Company's operations are located in New York and Clevedon, England. The Company's policy is to review its customers' financial condition prior to extending credit and, generally, collateral is not required. At June 30, 1996, the Company's accounts receivable with customers outside the United States was approximately $1,322,000 of which approximately $1,233,000 related to its Labcaire operations. Where necessary, the Company utilizes letters of credit on foreign or export sales. Credit losses relating to both domestic and foreign customers have historically been minimal and within management's expectations. Inventories Inventories are stated at the lower of cost (first-in, first-out) method or market. F-8 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. Basis of Presentation, Organization and Business, and Summary of Significant Accounting Policies (continued) Property and Equipment Property and equipment are recorded at cost. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives ranging from 3 to 10 years. Capital lease equipment and leasehold improvements are amortized over the life of the lease or the useful life of the related asset, whichever is shorter. Revenue Recognition Sales are recognized upon shipment of products. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in connection with the Company's acquisition of 81.4% of the common stock of Labcaire. The goodwill is being amortized by the straight-line method over its estimated useful life of 25 years. The carrying value of such costs is reviewed by management to determine whether an impairment may have occurred. If this review indicates that such costs, or a portion thereof, will not be recovered, as determined based on the undiscounted cash flows of Labcaire over the remaining amortization period, the carrying value of these costs will be reduced by the estimated shortfall of cash flows. There has been no such impairment to date. Income Taxes The Company accounts for income taxes under the liability method in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. F-9 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. Basis of Presentation, Organization and Business, and Summary of Significant Accounting Policies (continued) Net Income (Loss) Per Common and Common Equivalent Share Net income per common and common equivalent share is based on the weighted average number of common shares outstanding during the year ended June 30, 1996 plus dilutive common share equivalents. For the year ended June 30, 1995, outstanding common stock warrants and options have not been included in such computation as the effect of such would be antidilutive. Foreign Currency Translation The Company follows the policies prescribed by SFAS No. 52 for translation of the financial results of its foreign subsidiary. Accordingly, assets and liabilities are translated at the foreign currency exchange rate in effect at the balance sheet date. Results of operations are translated using the weighted average of the prevailing foreign currency rates during the fiscal year. Stockholders' equity accounts are translated at historical exchange rates. Gains and losses on foreign currency transactions are recorded in other income. Research and Development All research and development expenses related to the Company's industrial and medical products are expensed as incurred and are included in operating expenses. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. F-10 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. Basis of Presentation, Organization and Business, and Summary of Significant Accounting Policies (continued) Recently Issued Accounting Pronouncement In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which is required to be adopted by the Company in fiscal year 1997. The new standard defines a fair value method of accounting for the issuance of stock options and other equity instruments. Under the fair value method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. Pursuant to SFAS No. 123, companies are encouraged, but are not required, to adopt the fair value method of accounting for employee stock-based transactions. Companies are also permitted to continue to account for such transactions under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," but would be required to disclose in a note to the 1997 financial statements pro forma net income and per share amounts as if the Company had applied the new method of accounting. SFAS No. 123 also requires increased disclosures for stock-based compensation arrangements. The Company has not yet determined if it will elect to change to the fair value method or provide the necessary pro forma information, nor has it determined the effect the new standard will have on its operating and per share results should it elect to make such change. 2. Restructuring Charge In December 1994, the Company's Board of Directors formally approved a plan to suspend research and development in connection with the Company's medical devices. This was necessary because outside funding for further development of these technologies was not available (see Note 13). As a result, the Company recorded a restructuring charge of approximately $416,000 to reflect the discontinuance of this portion of the Company's operations. The restructuring charge included approximately $197,000 of employee severance and related costs (which included the resignation of the Company's CEO), approximately $138,000 of property and equipment write-offs and approximately $81,000 of facility rental expense related to the Company's research and development activities. At June 30, 1996, accrued expenses includes $45,000 related to the balance of the restructuring charge. F-11 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. Inventories Inventories are summarized as follows: June 30, 1996 ---------------- Raw materials $ 653,884 Work-in-process 49,962 Finished goods 498,468 ---------------- $ 1,202,314 ================ 4. Property and Equipment Property and equipment consist of the following: June 30, 1996 ---------------- Machinery and equipment $ 896,292 Furniture and fixtures 556,113 Autos 287,111 Leasehold improvements 255,932 ---------------- 1,995,448 Less accumulated depreciation and amortization 1,373,021 ---------------- $ 622,427 ================ Included in machinery and equipment at June 30, 1996 is approximately $148,000 of data processing equipment and telephone equipment under capital leases with related accumulated amortization of approximately $148,000. Also, included in autos is approximately $197,298 under capital leases with accumulated amortization of approximately $56,463. The Company purchased approximately $94,000 of equipment under capital lease arrangements during the year ended June 30, 1996. F-12 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. Revolving Note Payable and Line of Credit Since October 1992, Labcaire has had an overdraft facility with a United Kingdom bank. As of June 30, 1996, the amount of this facility is (pound)350,000 and bears interest at United Kingdom prime rate (5.75% at June 30, 1996) plus 2%. This facility is secured by the assets of Labcaire and (pound)50,000 is guaranteed by its directors. As of June 30, 1996, (pound)150,000 of this facility was guaranteed by Misonix with an irrevocable standby letter of credit. As of July 1996, Misonix no longer guaranteed this facility as it was not required to by the Bank. The facility expires in August 1997. At June 30, 1996, the balance outstanding under this overdraft facility was (pound)333,930 ($518,259). In October 1992, Misonix secured a $500,000 line of credit with a bank bearing interest at the bank's prime (8.25% at June 30, 1996) plus 2%. The line of credit, renewable on an annual basis, currently expires on June 30, 1997 and is secured by all assets of Misonix. No amounts are outstanding under this line at June 30, 1996. 6. Accrued Expenses and Other Current Liabilities The following summarizes accrued expenses and other current liabilities: June 30, 1996 ---------------- Accrued payroll and vacation $ 74,682 Accrued payroll taxes 64,228 Accrued commissions 57,352 Accrued restructuring costs 44,862 Other 167,729 ================ $ 408,853 ================ F-13 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. Leases Misonix has entered into several noncancellable operating leases for the rental of certain office space and automobiles expiring in various years through 1998. The principal lease for office space provides for a monthly rental amount of $20,427. The Company also leases certain office equipment and automobiles under capital leases expiring through fiscal 2000. The following is a schedule of future minimum lease payments, by year and in the aggregate, under capital and operating leases with initial or remaining terms of one year or more at June 30, 1996: Capital Operating Leases Leases ----------------------------- 1997 $ 66,809 $ 313,000 1998 60,354 275,000 1999 35,800 71,000 2000 6,652 4,000 ----------------------------- Total minimum lease payments 169,615 $ 663,000 Amounts representing interest 34,968 =============== -------------- Present value of net minimum lease payments (including current portion of $52,884) $ 134,647 =============== Certain of the leases provide for renewal options and the payment of real estate taxes and other occupancy costs. Rent expense for all operating leases was approximately $282,000 and $286,000 for the years ended June 30, 1996 and 1995, respectively. F-14 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 8. Capital Transactions In June 1995, the Company issued 30,000 shares of common stock to three outside directors for serving on its Board of Directors for the year ended June 30, 1995. In January 1992, the Company completed a public offering of 1,600,000 shares of its common stock and 1,840,000 warrants to purchase 1,840,000 shares of its common stock at $7.80 per share, for $8,686,024, net of expenses. These warrants expire in January 1997. Also, in connection with this offering, the Company granted the underwriters a right through January 1997 to acquire an additional 160,000 shares of common stock at a price of $10.725 per share and warrants to acquire 160,000 shares of common stock in similar form to the public offering warrants, but at an exercise price of $12.87 per share. In connection with a private placement which occurred in October 1991, redeemable warrants entitling the holders the right to purchase 100,000 shares of common stock at $7.80 are outstanding. These warrants also expire in 1997. Stock Option Plan In September 1991, the Board of Directors adopted and, in October 1991, the shareholders approved, the 1991 Stock Option Plan (the "Option Plan"). The Option Plan provides for the granting, at the discretion of the Board of Directors, of (i) options that are intended to qualify as incentive stock options ("Incentive Stock Options") within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code") to certain employees and (ii) options not intended to so qualify ("Nonqualified Stock Options") to employees, consultants and directors. The total number of shares of Common Stock for which options may be granted under the Option Plan is 250,000 shares. The exercise price of all stock options granted under the Option Plan must be at least equal to the fair market value of such shares on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting rights on the Company's outstanding capital stock, the exercise price of any incentive stock option must be not less than 110% of the fair market value on the date of grant. The maximum term of each option is ten years for options granted pursuant to the Option Plan. Options shall become exercisable at such time and in such installments as the Board shall provide in the terms of each individual option. F-15 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 8. Capital Transactions (continued) In March 1996, the Board of Directors approved the 1996 Employee Incentive Stock Option Plan covering an aggregate of 300,000 common shares of the Company, and a 1996 Outside Directors Stock Option plan covering an aggregate of 750,000 common shares of the Company. The Board then granted options to acquire 519,000 shares at a price of $1.10 under the Outside Directors Plan. The options are exercisable for 10 years. Both of these Plans are subject to shareholder approval. Options and warrants outstanding are summarized as follows: Options Warrants --------------------------------------------------------- Exercise Price Exercise Price Shares Per Share Shares Per Share --------------------------------------------------------- June 30, 1994 149,000 $3.25-$6.50 2,100,000 $7.80-$12.87 Granted 40,000 .75 - - Exercised - - - - Sold - - - - Terminated - - - - --------------------------------------------------------- June 30, 1995 189,000 $.75-$6.50 2,100,000 $7.80-$12.87 Granted 61,000 $1.10-$1.44 - - Exercised - - - - Sold - - - - Terminated - - - - --------------------------------------------------------- June 30, 1996 250,000 $.75-$6.50 2,100,000 $7.80-$12.87 ========================================================= As of June 30, 1996, 250,000 shares of common stock are reserved for issuance under outstanding options and no shares of common stock are reserved for the granting of additional options. All outstanding options are exercisable and expire between February 2002 and September 2007. In June 1995, the Company's Board of Directors approved a change in the exercise price of the 135,000 outstanding employee stock options to the current market price of $.75 per share. F-16 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. Commitments Employment Agreements The Company has entered into an employment agreement with its chief executive officer which expires August 31, 1997. Said agreement provides for an annual base compensation of $160,000 plus incentives as defined in the agreement. 10. Geographic Information The Company's revenues are generated from various geographical regions. The following is an analysis of net sales by geographic region: Year ended June 30 1996 1995 ------------------------------ United States $ 4,270,035 $ 4,067,920 Canada & Mexico 94,993 70,583 Europe 4,532,986 3,859,774 Asia 703,371 423,884 Middle East 146,086 67,336 Other 165,665 62,187 ------------------------------ $ 9,913,136 $ 8,551,684 ============================== 11. Income Taxes The Company has accumulated approximately $6,956,000 of net operating losses as at December 31, 1995 which may be used to reduce taxable income and income taxes in future years. The utilization of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The carryforwards begin to expire in fiscal year 2002 and will expire through fiscal year 2011. Additionally, based on ownership changes as a result of the public offering consummated in January 1992 (Note 8), as well as historical issuances of common stock, it is expected that the annual utilization of the otherwise available net operating loss carryforwards will be limited by the provisions of Section 382 of the Internal Revenue Code, as amended. As such, the Company will be restricted as to the utilization of its pre-fiscal 1992 net operating loss carryforwards. F-17 Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. Income Taxes (continued) The Company has recorded a deferred tax asset of approximately $2,782,000 at June 30, 1996 related to the aforementioned net operating loss carryforwards. A valuation allowance of equal value has been recorded which has the effect of reducing the carrying value of the deferred tax asset to zero. The valuation allowance, which increased by approximately $22,000 during the year ended June 30, 1996, is of equal value since it is unknown as to whether the net operating loss carryforwards will be utilized. Other temporary differences are not material. 12. Acquisition In prior years, the Company acquired an 81.4% interest in Labcaire Systems, Ltd., a U.K. company, for $545,169. The total acquisition cost exceeded the fair value of the net assets acquired by $241,299 and is being amortized over 25 years. The balance of the capital stock of Labcaire is owned by four directors of Labcaire who had the right, under the original purchase agreement (the "Agreement"), to require the Company to repurchase such shares at a price equal to its pro rata share of 8.5 times Labcaire's earnings, before interest, taxes and management charges for the preceding fiscal year. In June 1996, this Agreement was amended and each of the four directors agreed to sell one-seventh of his total holding of Labcaire shares to the Company in each of the next seven consecutive years, commencing with fiscal year 1996. The price to be paid by the Company for these shares is based on the formula outlined in the original Agreement. Pursuant to the Agreement, 9,284 shares (2.65%) of Labcaire common stock will be purchased by the Company for (pound)62,388 (approximately $93,582) representing the fiscal 1996 buy-back portion. The effective date of this transaction is expected to be October 1996. 13. Licensing Agreement In December 1995, the Company entered into a licensing agreement with Medical Device Alliance, Inc. ("MDA"), for a ten year period, covering the further development and commercial exploitation of the Company's medical technology relating to soft tissue removal. This agreement primarily focuses on the Company's patent for a liposuction apparatus granted in May 1995 and its 510(K) approval from the United States Food and Drug Administration to market and sell a device for ultrasonic soft tissue removal. The licensing agreement gives MDA exclusive world-wide marketing and sales rights for the device, with manufacturing to Misonix, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 13. Licensing Agreement (continued) be performed by the Company. Pursuant to the license agreement, the Company received $300,000 in licensing fees (which is being recorded as income over the term of the agreement) and will receive royalties based upon net sales of such products. The Company expects to receive an additional $200,000 of licensing fees from MDA ($100,000 of which is included in accounts receivable and deferred income at June 30, 1996). Also as part of the agreement, the Company was reimbursed for certain pre-marketing costs and a maximum of $30,000 per month (commencing September 1995) for product development expenditures (as defined in the agreement). The amount of all reimbursements for the year ended June 30, 1996 was $320,363. The Company has settled a dispute with two individuals who claimed that they, together with the Company's founder, were joint inventors of the technology covered under the Patent for Liposuction Method and Apparatus. As a result, they have reconfirmed their assignment of the patent rights to the Company in exchange for 5% of all royalties received by the Company from this technology, including those received from the MDA license. F-19 MISONIX, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) September 30, ASSETS 1996 ------ -------------- CURRENT: Cash and cash equivalents $ 1,048,278 Investments held to maturity 469,324 Accounts receivable, net of allowance for doubtful accounts of $59,494 2,075,392 Inventories (Note 3) 1,503,124 Prepaid expenses and other current assets 330,657 ---------- TOTAL CURRENT ASSETS 5,426,775 PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization of $1,428,733 692,291 PATENTS, at cost, less accumulated amortization of $1,099 28,623 GOODWILL, less accumulated amortization of $40,208 201,091 OTHER 23,839 $ 6,372,619 ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------- CURRENT: Note payable to bank $ 540,919 Accounts payable 1,158,693 Accrued expenses and other current liabilities 225,579 Current maturities of capital lease obligations 67,938 ---------- TOTAL CURRENT LIABILITIES 1,993,129 CAPITAL LEASE OBLIGATIONS 105,179 DEFERRED INCOME 370,833 MINORITY INTEREST (Note 1) 77,216 STOCKHOLDERS' EQUITY: Common stock, $.01 par value; shares authorized 10,000,000; issued and outstanding 2,800,000 28,000 Additional paid-in capital 11,100,793 Deficit (7,271,128) Cumulative foreign currency translation adjustment (31,403) ---------- TOTAL STOCKHOLDERS' EQUITY 3,826,262 ---------- $ 6,372,619 ---------- ----------
See accompanying notes to consolidated financial statements. F-20 MISONIX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the three months ended September 30, ---------------------------- 1996 1995 ---- ---- NET SALES $ 2,789,834 $ 2,103,226 COST OF GOODS SOLD 1,357,308 1,158,801 ---------- ---------- Gross profit 1,432,526 944,425 ---------- ---------- OPERATING EXPENSES: Selling, general and administrative expenses 1,083,813 980,172 Research and development 35,206 55,089 --------- ---------- Total operating expenses 1,119,019 1,035,261 ---------- ---------- Income (Loss) from operations 313,507 (90,836) ---------- ---------- OTHER INCOME (EXPENSE): Interest income 16,087 13,449 Interest expense (10,451) (9,203) Option/license fees 110,000 - Foreign exchange gain (loss) (1,308) (8,523) Miscellaneous (expense) income (436) 25,004 ----------- ---------- Total other income 113,892 20,727 ---------- ---------- Income (Loss) before minority interest 427,399 (70,109) Minority interest in net income of consolidated subsidiary (1,937) (5,354) ---------- ---------- NET INCOME (LOSS) $ 425,462 $ (75,463) ========== ========== NET INCOME (LOSS) PER SHARE $ .14 $ (.03) ===== ===== WEIGHTED AVERAGE COMMON SHARES AND SHARE EQUIVALENTS OUTSTANDING 2,944,716 2,800,000 ========== ==========
See accompanying notes to consolidated financial statements F-21 MISONIX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months ended September 30, -------------------------------------- 1996 1995 ---- ---- OPERATING ACTIVITIES: Net income (loss) $ 425,462 $ (75,463) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 56,494 50,497 Minority interest in net income of subsidiary 1,937 5,354 Foreign currency loss 4,072 7,414 Changes in operating assets and liabilities: Accounts receivable (103,359) 110,311 Inventory (295,641) (72,941) Prepaid expenses and other receivables 176,159 (76,899) Deposits and other assets - 2,479 Accounts payable and accrued expenses (179,029) 7,601 ---------- ---------- Net cash provided by (used in) operating activities 86,095 (41,647) ---------- ---------- INVESTING ACTIVITIES: Sale of investments held to maturity - 195,017 Purchase of investments held to maturity (116,271) (197,300) Acquisition of property and equipment (120,657) (34,782) Patent costs (322) - ---------- ---------- Net cash used in investing activities (237,250) (37,065) ---------- ---------- FINANCING ACTIVITIES: Increase (decrease) in capital lease obligations 37,189 (9,076) Deferred income (10,000) - Note payable to bank 18,242 201,723 Principal payments on capital lease obligation - - ---------- ---------- Net cash provided by financing activities 45,431 192,647 ---------- ---------- Effect of exchange rates 3 (4) ---------- ---------- NET (DECREASE) INCREASE IN CASH (105,721) 113,931 CASH, beginning of period 1,153,999 885,944 ---------- ---------- CASH, end of period $ 1,048,278 $ 999,875 ========== ==========
See accompanying notes to consolidated financial statements. F-22 MISONIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information with respect to interim periods is unaudited) 1. Basis of Presentation The consolidated financial statements of Misonix, Inc. include the accounts of Misonix, Inc., its 81.4% owned subsidiary, Labcaire Systems Ltd., and its 100% owned subsidiary Misonix, Ltd. Subsequent to September 30, 1996, the Company increased its ownership in Labcaire to 84.05% (see Note 5). All significant intercompany balances and transactions have been eliminated. 2. Interim Periods The financial statements for the three months ended September 30, 1996 and 1995 are unaudited but, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for fair presentation of financial position and results of operations. Results for the interim periods are not necessarily indicative of the results for a full year. For further information refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended June 30, 1996. 3. Inventories Inventories are summarized as follows: September 30, 1996 Raw materials $ 816,325 Work-in-process 142,152 Finished goods 544,647 ---------- $1,503,124 ---------- ---------- 4. License Agreement For Medical Technology In October 1996, the Company entered into a license agreement, with United States Surgical Corporation ("USS"), covering the further development and commercial exploitation of the Company's medical technology relating to ultrasonic cutting, which uses high frequency sound waves to coagulate and divide tissue for both open and laparoscopic surgery. The license agreement gives USS exclusive world-wide marketing and sales rights for this technology. The Company is entitled, under the license agreement, to receive aggregate licensing fees, over the term of the agreement, of approximately $500,000, plus royalties based upon net sales of such products. The Company already received $100,000 under the option agreement which preceded the license agreement and has recorded this amount as option fee income for the quarter ended September 30, 1996. 5. Acquisition In October 1996, under the terms of the revised purchase agreement with Labcaire (as discussed in the Form 10-KSB at June 30, 1996), the Company paid (pound)62,388 (approximately $102,099) for 9,284 shares (2.65%) of the 65,000 outstanding shares owned by the Labcaire directors. This represents the fiscal 1996 buy-back portion. F-23 MISONIX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Information with respect to interim periods is unaudited) 6. Capital Transactions As previously reported, in March 1996, the Board of Directors approved a 1996 Employee Incentive Stock Option Plan covering an aggregate of 300,000 common shares of the Company and a 1996 Outside Directors Stock Option Plan covering an aggregate of 750,000 common shares of the Company. The Board then granted options to acquire 519,000 shares at a price of $1.10 under the Outside Directors Plan. The options are exercisable for 10 years. Both of these plans, and the transactions under which options to acquire 519,000 shares were granted, are subject to shareholder ratification and approval at the next annual meeting of shareholders. Such approval may result in a noncash compensation charge in an amount not presently determinable. F-24 ================================================================================ No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company, the Selling Securityholders or by the Underwriter. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy, by any person in any jurisdiction in which it is unlawful for such person to make such offer or solicitation. Neither the delivery of this Prospectus nor any offer, solicitation or sale made hereunder shall, under any circumstances create any implication that the information herein is correct as of any time subsequent to the date of the Prospectus. ------------------------------- TABLE OF CONTENTS Page ---- Prospectus Summary....................................................... 3 The Company.............................................................. 3 The Offering............................................................. 4 Risk Factors............................................................. 5 Dividends................................................................ 7 Price Range.............................................................. 7 Capitalization........................................................... 8 Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 9 Business ................................................................ 15 Management............................................................... 22 Certain Transaction...................................................... 26 Description of Securities................................................ 27 Litigation............................................................... 29 Legal Matters............................................................ 29 Experts.................................................................. 29 Index to Financial Statements............................................ F-1 ------------------------------- Until February 13, 1997 (25 days after the date of this Prospectus), all dealers affecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligations of dealers to deliver a Prospectus when acting as underwriters and with their unsold allotments or subscriptions. ================================================================================ MISONIX, INC. 1,940,000 Share of Common Stock ========== PROSPECTUS ========== January 17, 1997 ================================================================================ -36- Part II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution It is estimated that the following expenses will be incurred in connection with the proposed offering hereunder. All of such expenses will be borne by the Company. Transfer Agent and Warrant Agent fees and expenses......................$ 500 Legal fees and expenses..................................................10,000 Accounting fees and expenses..............................................5,000 Printing expenses and electronic filing (EDGAR costs).................... 3,000 Total...........................................................18,500 Item 14. Indemnification of Directors and Officers a. Section 722 of the New York Business Corporation Law ("NYBCL") permits, in general, a New York corporation to indemnify any person made, or threatened to be made, a party to an action or proceeding by reason of the fact that he or she was a director or officer of the corporation, or served another entity in any capacity at the request of the corporation, against any judgment, fines, amounts paid in settlement and reasonable expenses, including attorney's fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such person acted in good faith, for a purpose he or she reasonably believed to be in, or, in the case of service for another entity, not opposed to, the best interests of the corporation and, in criminal actions or proceedings, in addition had no reasonable cause to believe that his or her conduct was unlawful. Section 723 of the NYBCL permits the corporation to pay in advance of a final disposition of such action or proceeding the expenses incurred in defending such action or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount as, and to the extend, required by statute. Section 721 of the NYBCL provides that indemnification and advancement of expense provisions contained in the NYBCL shall not be deemed exclusive of any rights to which a director or officer seeking indemnification or advancement of expenses may be entitled, provided no indemnification may be made on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his or her acts were committed in bad faith or were the result of active or deliver dishonesty and were material to the cause of action so adjudicated, or that he or she personally gained in fact a financial profit or to the advantage to which he or she was not legally entitled. b. Article Seventh of the Company's Certificate of Incorporation provides, in general, that the Company may indemnify, to the fullest extent permitted by applicable law, every person threatened to be made a party to any action, suit or proceeding by reason of the fact that such person is or was an officer or director or was serving at the request of the Company as a director, officer, employee, agent or trustee of another corporation, business, partnership, joint venture, trust, employee benefit plan, or other enterprise, against expenses, judgments, fines and amounts paid in settlement in connection with such suit or proceeding. Article Seventh of the certificate of Incorporation also provides that the Company may indemnify and advance expenses to those persons as authorized by resolutions of a majority of the Board of Directors or -37- stockholders, agreement, directors' or officers' liability insurance policies, or any other form of indemnification agreement. c. In accordance with that provision of the Certificate of Incorporation, the Company shall indemnify any officer or director (including officers and directors serving another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity at the Company's request) made, or threatened to be made, a party to an action or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that he or she was serving in any of those capacities against judgments, fines, amounts paid in settlement and reasonable expenses (including attorney's fees) incurred a sa result of such action or proceeding Indemnification would not be available under Article Seventh of the Certificate of Incorporation if a judgment or other final adjudication adverse to such director or officer establishes that (i) his or her acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (ii) he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled. Article Seventh of the Certificate of Incorporation further stipulates that the rights granted therein are contractual in nature. Item 15. Recent Sales of Unregistered Securities N/A -38- Item 16. Exhibits and Financial Statement Schedule (a) The following exhibits are filed as part of this Registration Statement: 1.1 Form of Underwriting Agreement 1.2 Form of Underwriter's Warrant Agreement 2.1 Certificate of Merger, dated August 27, 1991, including Plan of Merger 3.1 Restated Certificate of Incorporation of the Company 3.2 By-laws of the Company 4.1 Form of Warrant Agreement 4.2 Form of Specimen of Redeemable Warrant Certificate 5.1 Opinion of Parker Chapin Flattau & Kimpl re: legality of securities being registered 5.2* Opinion of Hartman & Craven LLP respecting legality of securities being registered 10.1 Lease of the Company's executive offices 10.2 Stock Option Plan 10.3 Consulting Agreement dated as of October 16, 1990 between the Company and Michael Juliano 10.4 Employment Agreement dated September 1, 1991 between the Company and Michael Juliano 10.5 Employment Agreement dated September 1, 1991 between the Company and Howard Alliger 10.6 Employment Agreement dated September 1, 1991 between the Company and Joseph Librizzi 10.7 Form of Financial Advisory and Investment Banking Agreement between the Company and Josephthal Lyon & Ross Incorporated 10.8 Revolving Credit Note dated June 25, 1991 from the Company to The North East Bank & Trust Company (the "Bank") 10.9 Promissory Note in the principal amount of $100,000, dated May 13, 1991, from the Company to the Bank 10.10 Security Agreement dated May 13, 1991, between the Company and the Bank 10.11 Settlement and License Agreement dated March 12, 1984 between the Company and Mettle Electronics Corp. 10.12 Know-How, Trademark and License Agreement dated July 25, 1983, between the Company and Astec Environmental Systems, Ltd. 10.13 Form of Confidentiality Agreement between the Company and its employees -39- 10.14 Form of Second Promissory Note issued in connection with the Private Placement 10.15 Security Agreement dated September 16, 1991, between the Company and Josephthal Lyon & Ross incorporated, as agent 10.16 Form of Common Stock Purchase Warrants issued in connection with the Private Placement 10.17* Agreement with Medical Device Alliance, Inc. 10.18* Agreement with United States Surgical Corporation 10.19* Amended Employment Agreement with Joseph Librizzi 16 Letter from Frederick S. Todman & Company Regarding Change in Accountants 22 Subsidiaries of the Company 24.1 Consent of BDO Seidman (see page II-6) 24.2 Consent of Frederick S. Todman & Company (see page II-7) 24.3 Consent of Parker Chapin Flattau & Klimpl (included in their opinion filed as Exhibit 5.1) 24.4 Consent of James H. Boyle 24.5 Consent of Arthur Gerstenfeld 24.6* Consent of Ernst & Young LLP 24.7* Consent of Hartman & Craven LLP (included in their opinion filed as Exhibit 5.2) 25.1 Power of Attorney - ------------------------- * Filed herewith (b) Financial Statement Schedules Schedules: Schedule IV - Indebtedness of and to Related Parties Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-term Borrowings Schedule X - Supplementary Income Statement Information -40- Item 17. Undertakings The undersigned Company hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any fats or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) To provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will,unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Signatures In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirement of filing on Form S-1 and has authorized this Post-Effective Amendment No. 1 to its registration statement to be signed on its behalf by the undersigned in the city of Farmingdale, New York on January 15, 1997. MISONIX, INC. BY: s/Joseph Librizzi --------------------------- Joseph Librizzi, President and Chief Executive Officer In accordance with the requirements of the Securities Act of 1933, the registration statement was signed by the following persons in the capacities and on the dates stated. Signatures Title Date s/Joseph Librizzi President and January 15, 1997 - --------------------- Chief Executive Officer Joseph Librrizi s/Gary Gelman Chairman of the Board of January 15, 1997 - --------------------- Directors Gary Gelman s/Peter Gerstheimer Chief Financial Officer, January 15, 1997 - --------------------- Treasurer, and Secretary Peter Gerstheimer s/Howard Alliger Director January 15, 1997 - --------------------- Howard Alliger s/Arthur Gerstenfeld Director January 15, 1997 - --------------------- Arthur Gerstenfeld Exhibit No. DESCRIPTION - ----------- ----------- 1.1 Form of Underwriting Agreement 1.2 Form of Underwriter's Warrant Agreement 2.1 Certificate of Merger, dated August 27, 1991, including Plan of Merger 3.1 Restated Certificate of Incorporation of the Company 3.2 By-laws of the Company 4.1 Form of Warrant Agreement 4.2 Form of Specimen of Redeemable Warrant Certificate 5.1 Opinion of Parker Chapin Flattau & Kimpl re: legality of securities being registered 5.2* Opinion of Hartman & Craven LLP respecting legality of securities being registered 10.1 Lease of the Company's executive offices 10.2 Stock Option Plan 10.3 Consulting Agreement dated as of October 16, 1990 between the Company and Michael Juliano 10.4 Employment Agreement dated September 1, 1991 between the Company and Michael Juliano 10.5 Employment Agreement dated September 1, 1991 between the Company and Howard Alliger 10.6 Employment Agreement dated September 1, 1991 between the Company and Joseph Librizzi 10.7 Form of Financial Advisory and Investment Banking Agreement between the Company and Josephthal Lyon & Ross Incorporated 10.8 Revolving Credit Note dated June 25, 1991 from the Company to The North East Bank & Trust Company (the "Bank") 10.9 Promissory Note in the principal amount of $100,000, dated May 13, 1991, from the Company to the Bank 10.10 Security Agreement dated May 13, 1991, between the Company and the Bank 10.11 Settlement and License Agreement dated March 12, 1984 between the Company and Mettle Electronics Corp. 10.12 Know-How, Trademark and License Agreement dated July 25, 1983, between the Company and Astec Environmental Systems, Ltd. 10.13 Form of Confidentiality Agreement between the Company and its employees 10.14 Form of Second Promissory Note issued in connection with the Private Placement 10.15 Security Agreement dated September 16, 1991, between the Company and Josephthal Lyon & Ross incorporated, as agent 10.16 Form of Common Stock Purchase Warrants issued in connection with the Private Placement 10.17* Agreement with Medical Device Alliance, Inc. 10.18* Agreement with United States Surigical Corporation 10.19* Amended Employment Agreement with Joseph Librizzi 16 Letter from Frederick S. Todman & Company Regarding Change in Accountants 22 Subsidiaries of the Company 24.1 Consent of BDO Seidman (see page II-6) 24.2 Consent of Fredercik S. Todman & Company (see page II-7) 24.3 Consent of Parker Chapin Flattau & Klimpl (included in their opinion filed as Exhibit 5.1) 24.4 Consent of James H. Boyle 24.5 Consent of Arthur Gerstenfeld 24.6* Consent of Ernst & Young LLP 24.7* Consent of Hartman & Craven LLP (included in their opinion filed as Exhibit 5.2) 25.1 Power of Attorney - ------------------------- * Filed herewith EX-5.2 2 CONSENT OF HARTMAN & CRAVEN LLP [LETTERHEAD OF HARTMAN & CRAVEN LLP] 212-836-4940 January 15, 1997 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Re: Misonix, Inc. Post Effective Amendment No. 1 to Registration Statement, File No. 33-43585 Dear Sir or Madam: We are corporate and securities counsel to Misonix, Inc., a New York corporation (the "Company") in connection with the registration on Form S-1 of 1,940,000 of the Company's common shares, $.01 par value ("Shares"), reserved for issuance upon exercise of its Redeemable Warrants. We hereby advise that, in our opinion, the Shares have been duly authorized by all necessary corporate acts of the Company and, when issued, delivered and paid for by the holders of Redeemable Warrants in connection with their exercise of the Redeemable Warrants, will be legally and validly issued, fully paid and non-assessable. We consent to the use of our firm's name under the heading "Legal Matters" in the Registration Statement, and any amendments thereto, filed with the Securities and Exchange Commission in connection with the above-referenced offering. Very truly yours, HARTMAN & CRAVEN LLP BY: /S/ Edward I. Tishelman ----------------------- Edward I. Tishelman, a duly authorized partner EX-10.18 3 LICENSE AGREEMENT LICENSE AGREEMENT This Agreement, dated as of October 16, 1996, is by and between Misonix Incorporated, a New York corporation, with its principal place of business at 1838 New Highway, Farmingdale, New York 11735 ("Misonix"), and United States Surgical Corporation, a Delaware corporation, with its principal place of business at 150 Glover Avenue, Norwalk, Connecticut 06856 ("USSC"). WHEREAS, Misonix designs and develops ultrasonic medical devices and desires to further develop its proprietary ultrasonic cutting, sealing and dissection technology (the "Technology"); and WHEREAS, USSC develops, manufactures, markets and sells medical products. NOW THEREFORE, in consideration of the mutual promises, covenants, undertakings and obligations set forth herein and for other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 - DEFINITIONS 1.1 For the purposes of this Agreement, the definitions set forth below shall be applicable. Affiliate - The term "Affiliate" means a corporation or other entity controlled by, controlling or under common control with another person, corporation or other entity. For the purpose of this Agreement, "control" means: (i) the ownership, directly or indirectly, of 50% or more of the voting stock or analogous interest in a corporation or other entity, by another person, corporation or other entity; or (ii) the commonality of 50% or more of the directors on the Board of a corporation or other entity with the directors on the Board of another corporation or other entity; or (iii) the commonality of 50% or more of the directors on the Board of a corporation or other entity with the executive officers, or holders of 5% or more of any class of the outstanding capital stock, of another corporation or other entity; or (iv) the commonality of 50% or more of the partners (general or limited), principals, or other controlling parties of any entity, with the partners (general or limited), principals or other controlling parties of another entity; or (v) the existence of any other relationship between a corporation or entity and another person, corporation or other entity which results in effective managerial control by one over the other, regardless of the level of commonality of the number of directors, partners, principals or other controlling parties or whether such control is continuously exercised. Field - The term "Field" means all human and veterinary medical applications. Know-How - The term "Know-How" means any and all secret or confidential information, trade secrets, specifications, test results, analyses and data, inventions, methods, processes, formulae, mixtures, compositions, designs, techniques, applications, ideas or concepts, whether or not reduced to practice, relating directly or indirectly to the Products, including, but not limited to, technology that is or could be the subject matter of a foreign or domestic patent or patent application, whether or not reduced to writing in a patent application. Net Sales - (i) The term "Net Sales" means gross sales of the Products billed and shipped by USSC or its Subsidiaries, Affiliates, Sublicensees, or permitted assignees, less allowances and discounts actually allowed (other than advertising allowances, or fees or commissions to salesmen or sales representatives), returns, billed taxes and customs duties paid by USSC, freight and transit insurance, and shall not include samples or demonstration materials or any sale to USSC employees for any reason other than resale. The term "Net Sales" shall not include sales between the parties, sales by independent distributors, or sales between USSC and its Affiliates, Subsidiaries, Sublicensees or permitted assignees. (ii) For the purposes of this Section 1.1(e), the term "Products" shall also include Products sold in packages, trays, or other groups of items consisting of one or more Products and one or more non-Products (the "Package" or "Packages"). The Net Sales price of any Product sold in a Package shall bear the same ratio to the Net Sales price of the Package, as the individual retail list price of the Product bears to the sum of all individual retail list prices of every item in the Package if all of such items were sold separately. Patents and Trademarks - The term "Patents and Trademarks" means all patents, patent applications, registered trademarks and trademark applications identified on Schedule 1 hereto, all other foreign and domestic patents, patent applications, registered trademarks and trademark applications filed by or assigned in whole or in part to Misonix prior or subsequent to the date hereof and covering or relating to any Invention (defined below) having application to a Product, all foreign and domestic patents and registered trademarks issuing on 2 any of the foregoing patent applications and trademark applications, and all continuations, continuations-in-part, divisions, reissues, reexaminations, additions, and renewals thereof. Products - The term "Product" or "Products" means any instrument, device or system usable in the Field (defined below) which involve or relate to the Technology and embody or utilize any or all of the following in which Misonix has or, during the term of this Agreement, acquires a proprietary interest: (i) the inventions, methods, processes, formulae, mixtures, and compositions disclosed and/or claimed in the Patents and Trademarks (defined below), and any invention, method, process, formula, mixture, or composition similar or related to, or designed for use with, any of the foregoing; (ii) every part, subassembly, component or accessory of, and addition or improvement to, any of the foregoing; (iii) Know-How (defined below); and (iv) all registered trademarks and trademark applications within Patents and Trademarks and all good will associated with such registered trademarks and trademark applications. Sublicensee - The term "Sublicensee" means any third party to whom USSC grants a sublicense to manufacture or sell the Products. Subsidiary - The term "Subsidiary" means any corporation, partnership or other entity, 50% or more of the outstanding shares of any class of stock, general partnership interest, or other equity of which is owned by USSC; and any operating division of USSC not separately incorporated or organized as an independent business entity. Trademarks - The term "Trademarks" means all registered trademarks and trademark applications within Patents and Trademarks. ARTICLE 2 - THE GRANT 2.1 Misonix hereby grants to USSC, and USSC hereby accepts from Misonix, an exclusive worldwide right and license during the term of this Agreement (and for five (5) years after the Unilateral Termination Date in the event of a termination of this Agreement under Section 14.1(c) below), including the right to grant sublicenses, to evaluate, develop, test, conduct clinical trials, obtain governmental approvals, make, have made, use, practice, manufacture, have manufactured, sell, transfer or commercialize Products and to practice and use the Know-How and the Trademarks throughout the world (the "License"). ARTICLE 3 - IMPROVEMENTS IN THE FIELD; PRODUCT MANUFACTURE 3 3.1 If, during the term of this Agreement, Misonix conceives, develops or acquires any new invention, method, process, design, formula, mixture, composition, modification or improvement relating to a Product, or the use or manufacture thereof (collectively "Invention"), Misonix shall furnish full details thereof to USSC, including all conceptual, technical and design information, specifications, test results, analyses and data, prototypes, drawings, formulae, mixtures, compositions and any other useful information. Such inventions, methods, processes, formulae, mixtures, compositions, modifications and improvements shall be deemed, without any compensation being due thereby, included in the License except insofar as USSC, upon request by Misonix, agrees in writing to exclude from the License all or any portion of such inventions, methods, processes, formulae, mixtures, compositions, modifications or improvements. 3.2 All Patents and Trademarks and all inventions, methods, processes, formulae, mixtures, compositions, delivery systems, modifications or improvements thereto referred to in Section 3.1 above, shall be the exclusive property of Misonix, subject to the License hereby granted. 3.3 Misonix hereby covenants and agrees for as long as this Agreement shall be and remain in effect, that it shall not grant to any other or different person, or entity, any other right, option or license to evaluate, develop, test, conduct clinical trials, obtain governmental approvals, make, have made, use, practice, manufacture, have manufactured, sell, transfer or commercialize any Product, or any new inventions, methods, processes, formulae, mixtures, compositions, modifications or improvements thereon, or, to practice or use the Know-How or to use the Trademarks, anywhere in the world. 3.4 The parties acknowledge that USSC has substantial expertise in the manufacture of surgical products. USSC shall have the right, in its discretion, to manufacture or have one or more third parties selected by it, in its discretion, to manufacture the Product. However, if during the term of this Agreement, USSC wishes to have a party other than USSC manufacture the Product, it shall notify Misonix in writing thereof and shall for a period of thirty (30) days thereafter negotiate with Misonix in good faith concerning a manufacturing agreement on terms and conditions mutually acceptable to both parties in their discretion. ARTICLE 4 - CONSIDERATION 4 4.1 The total consideration to be paid by USSC for the license and other rights granted hereunder and the non-compete agreement pursuant to Article 8 shall be a license fee (the "License Fee"), milestone payments (the "Milestone Payments") and a periodic royalty (the "Royalty"), all calculated and payable in accordance with this Article 4. 4.2 The License Fee shall be in the amount of Two Hundred and Seventy Five Thousand Dollars ($275,000) and shall be payable with execution and delivery of this Agreement. 4.3 The Milestone Payments shall be as follows: (a) One Hundred Thousand Dollars ($100,000) payable within three (3) business days of USSC's completion of the first full production units of both the hook probe and the damping/sealing probe (the "First Generation"), but no less than fifty percent (50%) of such amount on the date which is one year from the date hereof; (b) One Hundred Thousand Dollars ($100,000) if USSC completes the first full production units of the First Generation on or before March 1, 1997; and (c) One Hundred Thousand Dollars ($100,000) payable within three (3) business days of (i) receipt by USSC of FDA Approval to market the Product or (ii) approval of USSC's application to market the Product in any country in the world. 4.4 The Royalty shall be as follows: (a) an amount equal to five percent (5%) of Net Sales of a Product occurring during the term of this Agreement; and (b) (i) if USSC terminates this Agreement under Section 14.1(c) and on such termination date (the "Unilateral Termination Date") neither Misonix nor any Affiliate of Misonix owns or has exclusive license rights to a issued patent covering the Product, which patent is unexpired and has not been held invalid by a court of competent jurisdiction from which no appeal can be taken, an amount equal to five percent (5%) of Net Sales of a Product for a period of five (5) years after the Unilateral Termination Date, provided, and for so long as, in either case, USSC has the License; or 5 (ii) if USSC terminates this Agreement under Section 14.1(c) and on the Unilateral Termination Date either Misonix or any Affiliate of Misonix owns or has exclusive license rights to a issued patent covering the Product, which patent is unexpired and has not been held invalid by a court of competent jurisdiction from which no appeal can be taken, an amount equal to five percent (5%) of Net Sales of a Product for the Unilateral Termination Patent Protected Period (defined below), provided and for so long as, in either case, USSC has the License. For purposes of the immediately preceding sentence the "Unilateral Termination Patent Protected Period" shall mean the number of years following the Unilateral Termination Date which shall be equal to (x) five years, minus (y) the longest number of years, not to exceed five years, which remain on the life of a patent which (aa) as of the Unilateral Termination Date either Misonix or any Affiliate of Misonix owns or under which either Misonix or any Affiliate of Misonix has exclusive license rights, and (bb) which patent covers the Product. The Unilateral Termination Patent Protected Period and USSC's rights granted by Misonix under this Agreement to sell Products shall in no event extend longer than five (5) years from the Unilateral Termination Date. 4.5 The Royalty shall accrue as and when a sale subject to a royalty is recorded by USSC in accordance with Section 1.1(e), and shall be paid to Misonix quarterly on or before forty-five (45) days after each calendar quarter during which a sale is recorded. ARTICLE 5 - PAYMENT, REPORTING AND RECORDS 5.1 USSC agrees to deliver quarterly written reports to Misonix for each three (3) month period ending on the last day of the months of March, June, September, and December of each year, within forty-five (45) days after the end of each such period. The report shall set forth the number of Products sold by USSC, its Subsidiaries, Affiliates, Sublicensees and permitted assignees during the immediately preceding calendar quarter, Net Sales applicable to all such Products, and the amount of License Fees and Royalties (and including any catchup adjustments) then payable to Misonix. AR information contained in such quarterly reports shall be treated as USSC's Confidential Information (defined below) subject to Article 6. 5.2 Simultaneously with the submission of each report, USSC shall pay to Misonix by check or bank transfer the full amount of License Fees and Royalties due to Misonix for the report period under the terms of this 6 Agreement. USSC shall maintain records in sufficient detail and, upon reasonable notice, allow any independent certified public accounting firm of nationally recognized standing, appointed by Misonix, and reasonably acceptable to USSC, to examine its consolidated books and records, and the books and records of its Sublicensees and permitted assignees pertaining to the Products. Such examinations shall occur on or after February 15 of any calendar year (or, if Misonix appoints for purposes of such examination the accounting firm employed by USSC to conduct its regular annual audit, prior to February 15,) only during business hours, and not more than once a year, and shall be solely for the purpose of verifying the calculation of License Fees and Royalties due under this Agreement. A final such examination may occur once during the year immediately succeeding termination of this Agreement. In the event Misonix appoints for the purpose of examining USSC's consolidated books and records the accounting firm employed by USSC to conduct its regular annual audit, and if the examination provided for herein is performed at substantially the same time as such regular annual audit, the fees and expenses of the accounting firm performing the examination shall be borne by USSC. In any other event, the fees and expenses of the accounting firm performing the examination shall be borne by Misonix. Unless written objection is made by Misonix and delivered to USSC within thirty (30) days after completion of such examinations, the calculation of License Fees and Royalties paid by USSC prior to the date of such examination shall be final and binding on the parties, except insofar as adjusted or corrected as a result of USSC's regular annual audit. It is understood that USSC shall not be required to furnish or permit the examination of the identities, at any time, of customers or prices or other information as to specific sales. Any information provided to Misonix or its accountants pursuant hereto shall be treated as USSC's Confidential Information subject to Article 6. ARTICLE 6 - PROPRIETARY INFORMATION 6.1 USSC hereby represents and warrants that it will not, directly or indirectly, disclose, either during or for three (3) years subsequent to the term of this Agreement, any Confidential Information of Misonix to any other person or entity, except to its attorneys and accountants as may be required in connection with this Agreement who have been or will be instructed to maintain its confidentiality and to third parties who shall execute binding written agreements requiring such third parties not to disclose Confidential Information disclosed to 7 them by USSC. Notwithstanding the foregoing, USSC shall have the right to use Confidential Information of Misonix without obtaining such written agreements in connection with any regulatory and patent filings involving or relating to matters covered by this Agreement. 6.2 Misonix hereby agrees that it will not, directly or indirectly, disclose during or for three (3) years subsequent to the term of this Agreement, any Confidential Information of USSC, to any other person or entity, except to the Misonix's attorneys and accountants as may be required in connection with this Agreement who have been and will be instructed to maintain its confidentiality and, to the extent necessary in the reasonable opinion of Misonix's counsel, to be publicly disclosed and/or included in any filings required under applicable securities laws involving or relating to matters covered by this Agreement, provided, that in any such event, Misonix shall advise USSC thereof as far in advance as is reasonably possible under the circumstances to permit USSC to comment thereon and to take any action which it may deem appropriate to limit the scope and extent of such disclosure. 6.3 It is not intended by this Article 6 that USSC or Misonix shall be required to obtain specific written commitments in relation to this Agreement from materials and/or component suppliers where only specifications are disclosed to said materials and/or component suppliers by USSC or Misonix. 6.4 For purposes of this Agreement, "Confidential Information" shall mean verbal and written disclosures from Misonix, on the one hand, or USSC, on the other hand, (the "Discloser") to the other party (the "Disclosee"), which concern the Discloser including, without limitation, information which concerns the Discloser's business, operations, products or research and development efforts, or which concern the Products or Know-How, but shall not include information which: (a) at the time of disclosure is published or otherwise becomes a part of the public domain through no fault of Disclosee (but only after, and only to the extent that, it is published or otherwise becomes a part of the public domain); (b) Disclosee can show was known to it at the time of disclosure, free of restriction; (c) has been or hereafter is disclosed to Disclosee without any obligation of confidentiality by a third party who is in lawful possession of such information and has the right to disclose it to Disclosee; (d) has been or hereafter is disclosed by Discloser to a third party free of any obligations of confidentiality; (e) is independently developed by Disclosee; or (f) is 8 disclosed by Disclosee pursuant to the order or requirement of a court, administrative agency or other governmental body, provided that the Disclosee promptly informs the Discloser of its intent to make such disclosure, takes all reasonable steps to limit such disclosure and does not inhibit the Discloser in taking whatever lawful steps the Discloser considers necessary to attempt to preserve the confidentiality of such information. Disclosures made to Disclosee by Discloser which are specific shall not be deemed to be within the foregoing exceptions merely because they are embraced by general disclosures in the public domain or in the possession of Disclosee. The existence, terms and conditions of this Agreement shall be deemed Confidential Information of the parties to this Agreement. 6.5 The parties hereby acknowledge and agree that any breach of this Article 6 by Misonix, on the one hand, or USSC, on the other hand, would likely cause irreparable injury to the other party and that such other party's remedy at law for any such breach would be inadequate. Accordingly, the parties agree that, in addition to any other remedies provided for herein or otherwise available at law, temporary and permanent injunctive relief and other equitable relief may be granted in any action, suit or proceeding which may be brought by either party to enforce the provisions of this Article 6 without the necessity of proof of actual damage. Each party agrees promptly to seek temporary and permanent injunctive relief against any of its directors, officers, employees or consultants who breach the aforesaid obligations with respect to any matter relating to this Agreement. 6.6 The provisions of this Article 6 shall survive termination of this Agreement for three (3) years. ARTICLE 7 - INVENTIONS 7.1 All patentable and unpatentable inventions, discoveries and ideas ("Inventions") relating to Products which are made or conceived solely by employees of USSC or other persons or entities or retained by USSC during the term of this Agreement shall be the property of USSC. All Inventions which are made or conceived solely by Misonix or by other persons or entities retained by Misonix shall be the property of Misonix, but subject to USSC's rights set forth in this Agreement. All Inventions which are made or conceived by Misonix (and/or other persons or entities retained by Misonix), on the one hand, and USSC (and/or other persons or entities retained by USSC), on the other hand, 9 shall be owned jointly by Misonix and USSC, but subject to USSC's rights set forth in this Agreement. ARTICLE 8 - NON-COMPETE 8.1 Misonix agrees that during the term of this Agreement, except as expressly permitted by this Agreement, it shall not, directly or indirectly, develop, manufacture, or sell any Product, or similar or related instrument, device or system, or Know-How to any third person or entity, or to consult with or provide technical assistance or advice to any third person or entity with respect to the design, development, manufacture or sale of any Product or similar instrument, device, or system without USSC's prior written consent in USSC's sole and absolute discretion. The foregoing shall not be construed to prohibit Misonix from engaging in its own development of Products and Know How, subject to the rights of USSC with respect thereto as set forth in this Agreement. In addition, Misonix shall have the right to continue its undertaking with Medical Device Alliance, Inc. ("MDA") in connection with the development of devices used in ultrasonic soft tissue aspiration and related endeavors provided it does not involve the Technology or violate Article 6 above. 8.2 The parties acknowledge and agree that any breach of this Article 8 by Misonix would likely cause irreparable injury to USSC and that USSC's remedy at law for any such breach would be inadequate. Accordingly, the parties agree that, in addition to any other remedies provided for herein or otherwise available at law, temporary and permanent injunctive relief and other equitable relief may be granted in any action, suit or proceeding which may be brought by USSC to enforce any provision of this Article 8 without the necessity of proof of actual damage. ARTICLE 9 - INDEMNIFICATION 9.1 Subject to the fulfillment by Misonix of its obligations pursuant to Section 9.2 below, USSC agrees to defend, indemnify and hold harmless Misonix and each of Misonix's directors, officers, employees, agents, and representatives, from and against any claims, demands, judgments, executions, awards, or damages, including reasonable attorney's fees and expenses incurred by USSC in defending the same, constituting a product liability action or other action, suit or proceeding arising as a result of the design, manufacture, use or sale of a Product by USSC, its Subsidiaries, Affiliates, Sublicensees or permitted assigns. In 10 furtherance of the foregoing, USSC shall include Misonix as a covered person on USSC's product liability insurance in an amount of at least $5,000,000, with waiver of subrogation. In satisfaction of the foregoing indemnification and hold harmless agreement, USSC may pay directly to the claimant or plaintiff in any such claim, action, suit or proceeding, the amount of any award, judgment, settlement or recover, or execution rendered thereon, and may pay to Misonix and Misonix's directors, officers, employees, agents, and representatives, any other damages or reasonable expenses sustained by them in defending any such claim, action, suit or proceeding. USSC shall have the right to conduct the legal defense, or to enter into any settlement agreement, as it, in its sole discretion, deems appropriate. Misonix may participate in such action, suit or proceeding through its own attorneys at their sole cost and expense. 9.2 In the event that any claim is asserted against Misonix or Misonix's directors, officers, employees, agents or representatives, or such person is made a defendant in any action, suit or proceeding involving a matter which is the subject of USSC's indemnification and hold harmless agreement as set forth above, then within ten (10) days of such person's receipt of notice of such event and within seven (7) days of receipt of a complaint or other formal pleading regarding such event, such persons shall give written notice of such claim, action, suit or proceeding to USSC, and USSC shall be given an opportunity to assume the defense and control any settlement on behalf of such persons. Misonix shall provide their full cooperation to USSC in connection with the defense of such claim, action, suit or proceeding. 9.3 Misonix shall provide indemnifications to USSC with respect to product liability (on any legal theory) actions, suits and proceedings to the same extent as set forth above in this Article 9 for Products which Misonix may, in Misonix's discretion, sell or transfer to USSC. For purposes of this Section 9.3, Misonix's collection of royalties hereunder shall not be deemed to constitute the sale or transfer of Products. 9.4 The provisions of this Article 9 shall survive termination of this Agreement. ARTICLE 10 - FDA INTERACTION 10.1 Interaction with the regulatory agencies in any country including, but not limited to, the U.S. Food and Drug Administration (collectively, "FDA") 11 concerning the Products shall be conducted by USSC, and for purposes of any filings with the FDA concerning the Products USSC shall be the official company sponsor. In the event of a dispute between USSC and Misonix concerning any matter relating to interaction with the FDA, USSC shall have final authority to act as USSC, in its sole discretion, deems appropriate with respect to the matter in dispute. 10.2 During this term of this Agreement, Misonix shall, at USSC's request, assist USSC during FDA interaction concerning the Products; provided that USSC shall reimburse Misonix for all out-of-pocket expenses, other than attorneys fees, incurred by Misonix in providing such assistance. 10.3 Notwithstanding any provision of this Agreement to the contrary, USSC shall not be obligated to, and shall have no liability to Misonix for failure to evaluate, develop, test, conduct clinical trials, make, have made, use, practice, manufacture or have manufactured any Product or practice or use the Know How or for failure to seek or pursue any FDA or other regulatory approvals. USSC shall have the unqualified right, at any time to cease or suspend all marketing efforts and all efforts to obtain FDA or other regulatory approvals. Nothing herein shall prevent USSC from setting its own prices for Products or determining USSC's marketing policies and practices in its sole discretion. ARTICLE 11 - PATENT AND TRADEMARK PROSECUTION AND INFRINGEMENT 11.1 Upon or prior to the date of this Agreement, Misonix shall deliver to USSC copies of all Patents and Trademarks in its possession or control and all related documents and correspondence in its possession or control to the extent not delivered by the date of this Agreement. During the term of this Agreement and subject to Section 11.3, USSC shall, at its own expense, use reasonable efforts to obtain and maintain patents and trademark registration based on the Patents and Trademarks in the United States. USSC shall also assume prosecution and all future costs incurred and due during the term of this Agreement in connection with the Patents and Trademarks filed prior to the date hereof set forth in Schedule 1. Misonix agrees to fully cooperate with USSC in the preparation, filing and prosecution of all applications for letters patent and trademark registrations which USSC may in its sole discretion file and prosecute in the United States and foreign countries in accordance with this Section 11.1, and in the prosecution of the Patents and Trademarks, and, in connection with 12 such applications and the Patents and Trademarks, Misonix further agrees to execute and deliver all documents which USSC may deem necessary or desirable. 11.2 Misonix, on the one hand, and USSC, on the other hand, shall promptly give written notice to the other of any apparent infringement discovered by it with respect to any patent or trademark issuing from the Patents and Trademarks. Such notice shall set forth the facts of the apparent infringement in reasonable detail. USSC shall have the right to bring or settle, in USSC's sole discretion, any action, suit or proceeding with respect to such apparent infringement at its own expense and for its own benefit; provided, however, that after recovery by USSC of its litigation costs, including reasonable outside attorneys fees, USSC shall pay to Misonix at the Royalty rate set forth in Article 4 from the amount actually received by USSC in connection with the settlement or a judgment in such litigation. In such event, Misonix agrees to cooperate with USSC and to join in such action, suit or proceeding as a party plaintiff if requested to do so by USSC and to give USSC all needed information, assistance and authority to file and prosecute such suit; provided that USSC shall reimburse Misonix for all out-of-pocket expenses incurred by it in providing such assistance, other than attorneys' fees and expenses, incurred by Misonix. 11.3 If USSC or Misonix receives notice of a claim, action, suit or proceeding by a third party alleging infringement of such third party's rights in connection with the manufacture, use or sale of a Product by USSC, its Affiliates, Subsidiaries, Sublicensees or permitted assignees, USSC shall have the right to conduct the legal defense, and to enter into any disposition with respect thereto, as USSC in its sole discretion deems desirable. Misonix shall fully cooperate with USSC in its defense of such infringement claim, provided that USSC shall reimburse Misonix for all out-of-pocket expenses, other than attorneys' fees and expenses, incurred by it in providing such cooperation. 11.4 Subject to the fulfillment by Misonix of its obligations pursuant to Section 11.6 below, USSC shall defend Misonix against a third party infringement claim which results from the manufacture, use or sale of a Product by USSC, its Affiliates, Subsidiaries, Sublicensees or permitted assignees, and indemnify Misonix against the cost of such defense undertaken by USSC, including reasonable attorneys' fees and court costs, and damages awarded or amounts paid in settlement in any such action. However, notwithstanding the foregoing, if Misonix had actual knowledge on or prior to the date of the Development and 13 Option Agreement of a claim by a third party for infringement, USSC shall have no obligation to defend or indemnify Misonix. USSC shall at all times keep Misonix apprised of the status of any such claim, action, suit or proceeding and allow Misonix to participate in all major decisions regarding the conduct of such litigation including without limitation any decision to settle or pursue the case to trial, provided, however, that USSC shall retain exclusive authority to make all decisions regarding the conduct of such litigation or the negotiation and consummation of any settlement. 11.5 The cost of USSC's defense of any claim referred to in Section 11.4 above, and any damages awarded or any amount paid in settlement or other disposition of such claim, shall be set off against and, thereby, reduce, as set forth in this Section 11.5, fifty percent (50%) the outstanding and future Royalties due from USSC to Misonix. (a) Except with respect to circumstances set forth in Section 11.5(b) during the pendency of any such claim, action, suit or proceeding, USSC shall have the right to deposit with a bank escrow agent the payments then due and thereafter becoming due 14 under the terms of this Agreement. USSC shall instruct such escrow agent to deposit such payments in an interest-bearing account and t release the same to the third party(s), if any, awarded damages in such action, sui or proceeding pursuant to such award of damages, or to the third party(s), if any, with whom USSC settles pursuant to this Section 11.5(a), to the extent required by the terms of such settlement, and pay USSC's legal costs and expenses as and when billed to USSC in connection with any such claim, action, suit or proceeding and the balance, ff any, of the principal and interest to Misonix after final determination of and any reduction for all of the foregoing. Such future Royalties share be subject to escrow in accordance with this Section 11.5(a). (b) Notwithstanding Section 11.5(a) above, in the event that Misonix commits or has committed any fraud upon USSC in connection with this Agreement or misrepresentation or breach of warranty of any matter which is the subject of any of Misonix's representations and warranties contained herein, in addition to all other remedies available to it at law or in equity, USSC shall have the right upon the receipt of any claim or the commencement of any action, suit or proceeding, by either party hereto or any third party, relating to or arising out of such fraud or misrepresentation or breach of warranty, deposit then due and thereafter becoming due under the terms of this Agreement. USSC shall instruct such escrow agent to deposit such payment in an interest-bearing account and to release the same to the third party(s), if any, awarded damages in such action, suit or proceeding pursuant to such award of damages or to the third party(s), if any, with whom USSC settles pursuant to this Section 11.5(b), to the extent required by the terms of such settlement, and to pay USSC's legal costs and expenses as and when billed to USSC in connection with any such claim, action, suit or proceeding and the balance, if any, of the principal and interest to Misonix after final determination if and any reduction for all of the foregoing, the liability of Misonix and the Principals for such award, amounts paid in settlement and USSC's legal costs and expenses shall be up to the entire amount in escrow pursuant to this Section 11.5(b), plus all future Royalties payable by USSC under this Agreement. Such future Royalties shall be subject to escrow in accordance with this Section 11.5(b). Notwithstanding the foregoing, the parties agree that any such withholding of payments shall not limit the liability of Misonix for damages in the event of any fraud, misrepresentation or breach of warranty specified in this Section 11.5(b) or in the event of any other breach of this Agreement by any of them, and shall not affect any right or license granted to USSC hereunder or any other provisions of this Agreement or any party's available remedies. 11.6 In the event that any claim is asserted against Misonix or USSC, or any of their respective officers, directors, employees, agents or representatives, or such person is made a party defendant in any action or proceeding involving a matter which is the subject of USSC's indemnification and hold harmless agreement as set forth above, or Misonix becomes the subject of a claim of infringement against USSC, its Subsidiaries, Affiliates, Sublicensees or permitted assignees as a result of their manufacture, use or sale of a Product, then within 10 days of receipt by any Misonix or by USSC of notice of any such event, and within 7 days of such party's receipt of a written complaint or other formal pleading regarding any such event, such party shall give the other party hereto written notice of such claim, action, suit, proceeding, patent or patent application. ARTICLE 12 - RIGHT OF FIRST REFUSAL 12.1 Misonix hereby grants to USSC, and USSC hereby accepts, the right of first refusal set forth herein. In accordance with such right of first 15 refusal, Misonix hereby agrees that, during the term of this Agreement and except pursuant to this Article 12, it shall not, directly or indirectly, transfer, by sale, license or otherwise, to any third person or entity, a) any interest in any of the Patents and Trademarks, a Product or the Know-How. No such sale, license or other transfer shall be made without the prior written consent of USSC, which may be withheld in its sole and absolute discretion. Prior to offering or responding to an offer for such sale, license or other transfer, Misonix hall have complied with all of their respective obligations under this Agreement to be complied with prior to such offer or response. Prior to any sale, license or other transfer, Misonix shall obtain a bona fide written offer (the "Outside Offer") from such third party describing the subject of such sale, licensee or other transfer, the interest to be sold, licensed or otherwise transferred, and a stated cash consideration at which the third party offers to acquire, and Misonix desires to sell, license or otherwise transfer, said interest. After obtaining the Outside Offer, Misonix shall promptly, and before accepting the Outside Offer, deliver to USSC an offer, irrevocable for forty five (45) days from its receipt, to sell, license or otherwise transfer to USSC the interest which is the subject of the Outside Offer for the cash consideration and upon all other terms and conditions stated in the Outside Offer. A copy of the Outside Offer shall accompany the offer to USSC. If USSC accepts such offer within said forty five (45) days, Misonix shall transfer the relevant interest to USSC pursuant to the terms and conditions of such offer. Otherwise, subject to the confidentiality and non-compete provisions of Articles 6 and 10, Misonix may transfer such interest to the third party who made the Outside Offer in accordance with its terms and conditions during the sixty (60) days immediately following expiration of the aforesaid forty-five (45) day period. Notwithstanding the foregoing, nothing herein contained shall be construed to limit the right of Misonix (or to give USSC any rights with respect to any sale of shares of capital stock of Misonix or the merger or combination of Misonix with or into any other firm, corporation or entity, but the rights of USSC set forth in this Agreement shall survive any such sale, merger or combination. Notwithstanding, Misonix shall not have the right, and nothing in this Section 12.1 or anything else in this Agreement shall be construed to authorize Misonix to sell, license or otherwise transfer any of the license or other rights granted to USSC under this Agreement. 16 12.2 The parties acknowledge and agree that any breach of this Article 12 by Misonix would likely cause irreparable injury to USSC and that USSC's remedy at law for any such breach would be inadequate. Accordingly, the parties agree that in addition to any other remedies provided for herein or otherwise available at law, temporary and permanent injunctive relief and other equitable relief may be granted in any action, suit or proceeding which may be brought by USSC to enforce any provision of this Article 12 without the necessity of proof of actual damages. ARTICLE 12A - DEVELOPMENT FUNDING 12A.1 Subject to the terms of this Section 12A.1, development funding for Products which USSC. may in its sole discretion desire to have developed by Misonix hereunder ("Development Funding") shall be at the cost of USSC. Prior to Misonix incurring any Development Funding costs or expenses, Misonix shall notify USSC in writing of the proposed project and proposed expenditures in reasonable detail and USSC shall have a period of ten business days within which to approve or reject the same, in writing, in USSC's sole discretion. If such proposed expenditures are approved by USSC, the acceptance by USSC shall be accompanied by a check to Misonix in the approved amount of the agreed upon Development Funding. If such proposed expenditures are rejected, such rejection shall be reasonably detailed. Misonix shall maintain books and records concerning Development Funding during the term of this Agreement and for five (5) years thereafter. USSC and its representatives shall have the right to review such books and records during normal business hours upon prior notice. Nothing hereinabove in this Section 12A.1 commits USSC to any Development Funding or prohibit or limitt USSC from engaging in development of Products by itself or with any third party at the cost of USSC. 12A.2 The provisions of this Article 12A shall survive termination of this Agreement. ARTICLE 13 - REPRESENTATIONS AND WARRANTIES 13.1 Each of the parties hereby represents and warrants that (a) it has full right, power and authority to enter into and by bound by the terms and conditions of this Agreement, to transfer the rights and to carry out their respective obligations under this Agreement, without the approval or consent of any other person or entity; (b) the entering into of this Agreement, the transfer of rights and the carrying out of their respective obligations under tills Agreement 17 is not prohibited, restricted or otherwise limited by any contract, agreement or understanding entered into by any of them or Misonix's directors, officers, employees or consultants, or by which any of such persons or entities is bound, with any other person or entity, including, without limitation, any federal, state or local governmental body, agency or authority; (c) there is no contract, agreement or understanding entered into by them or Misonix's directors, officers, employees or consultants, or by which any of such persons or entities is bound, which if enforced, terminated or modified, would be in derogation of, contrary to, or adversely affect the rights acquired or to be acquired hereunder by USSC; and (d) there is no action, suit, proceeding or investigation pending or currently threatened against any of them which, if adversely determined, would restrict or limit the right of any of them to enter into this Agreement, transfer the rights or carry out their respective obligations under this Agreement. 13.2 Misonix hereby further represents, warrants and covenants that (a) it has not granted, assigned, sold or otherwise transferred, and it is not obligated to grant, assign, sell or otherwise transfer, and they shall not, except to the extent and in the manner expressly permitted by this Agreement, grant, assign, sell or otherwise transfer during the term of this Agreement any right, title, interest, license, or option, in, to, and under any Patents and Trademarks, Products, Know-How to any other person or entity including, without limitation, any federal, state or local governmental body, agency or authority; (b) no other person or entity has, or during the term of this Agreement shall have, the right to acquire, except to the extent and in the manner expressly permitted by this Agreement, any right, title, interest, license or option in, to or under any Patents and Trademarks, Products, Know-How; (c) it has not filed any patent application or trademark application or been issued or assigned any patent or registered trademark on or prior to the date of this Agreement for any instrument, device or system similar to a Product, other than the Patents and Trademarks; and (d) to the best of their knowledge, without special review for this purpose, USSC's manufacture, use or sale of a Product substantially as described in the Patents and Trademarks which exist as of the date of the Development and Option Agreement dated as of August 27, 1996 by and between Misonix and USSC, would not infringe the patent rights or trademark rights of any third person or entity. 18 13.3 All representations, warranties and covenants made by the parties shall be considered to have been relied upon by the other parties hereto regardless of any discussion, review or investigation made by, or on behalf of, the other parties, and shall survive termination of this Agreement. 13.4 The provisions of this Article 12 shall survive termination of this Agreement. ARTICLE 14 - TERM AND TERMINATION 14.1 The term of this Agreement shall commence upon the date hereof and shall terminate upon last of the following: (a) With respect to all of the provisions of this Agreement (i) insofar as the same relate to Products which embody at least one valid claim included in a patent within the Patents and Trademarks, the last day upon which all such valid claims covering an invention embodied in such Product expire, or (ii) twenty (20) years, whichever is later; (b) Upon the written agreement of USSC and Misonix; and (c) Notwithstanding any other provision of this Agreement, USSC at all times shall have the right for any or no reason to terminate this Agreement upon ten (10) days prior written notice to Misonix. In the event USSC effects termination in accordance with this Section 14.1(c), there shall not be due to the Principals any termination penalty or similar payment but, in such event, the parties shall have the rights and obligations set forth in Section 4.4(b) above. ARTICLE 15-RIGHTS AFTER TERMINATION 15.1 All rights and obligations of the parties which accrue on or before the effective termination date shall be fully enforceable by either party after termination. 15.2 If this Agreement terminates and, as a result thereof, USSC is required to cease making,.Products at the end of the term of this Agreement or after the Unilateral Termination Period, as the case may be, USSC may, nonetheless, for a period not to exceed six (6) months after such termination, and subject to the periodic royalty provisions set forth herein, dispose of inventory of Products, complete and dispose of any Products in the process of manufacture, and utilize materials then on order. 15.3 All Know-How, inventions, developments and improvements, whether patentable or not, are and, after termination of this Agreement, shall (i) remain the property of Misonix insofar as the same were conceived, made and 19 developed solely by Misonix prior to, or in performance of, this Agreement; and (ii) the property of USSC insofar as the same were conceived, made and developed solely by USSC prior to, or in performance of, this Agreement or jointly by Misonix and USSC ("Joint Results") in the performance of this Agreement. USSC shall retain exclusive ownership of all Know-How, inventions, developments and improvements which were its property as of or prior to the date of this Agreement or which were conceived, made and developed during the term of the Agreement solely by USSC, whether or not the same is necessary to reduce to practice any Joint Results. 15.4 Following termination of this Agreement, USSC shall assign to Misonix, to the extent permissible by law, all filings with the FDA concerning Products on which a royalty would be payable hereunder. 15.5 The provisions of this Article 15 shall survive termination of this Agreement. ARTICLE 16 - WAIVER 16.1 No waiver by any party, express or implied, or any breach of any term, condition, or obligation of this Agreement by any party shall be construed as a waiver of any subsequent breach of any term, condition, or obligation of this Agreement, whether of the same or different nature. ARTICLE 17 - NOTICES 17.1 Any notice required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, or delivered by messenger or air courier, and all payments shall be delivered, to the party to whom such notice or payment is required or permitted to be given at its address set forth as follows: if given to Misonix, to: Misonix Incorporated, 1838 New Highway, Farmingdale, New York 11735; or, if given to USSC, to: Attn.: Thomas R. Bremer, Vice President and General Counsel, United States Surgical Corporation, 150 Glover Avenue, Norwalk, CT 06856. Any such notice shall be considered given when delivered, as indicated by signed receipt or other written delivery record. A party may change that address to which notice to it is to be given by notice as provided herein. ARTICLE 18 - ASSIGNMENT 18.1 Neither this Agreement nor the performance of any part hereof may be assigned or transferred by any one or more of Misonix and any one or 20 more of the Principals, on the one hand, and USSC, on the other hand, without the prior written consent of the other party in its sole and absolute discretion, except that (a) USSC may assign this Agreement and the performance of any part hereof without such consent to an Affiliate of USSC, and (b) USSC may enter into one or more sublicenses with any third persons or entities on terms and conditions as USSC shall determine in its sole and absolute discretion provided, however, that any such sublicense is not inconsistent with the terms of this Agreement. ARTICLE 19 - CONSTRUCTION 19.1 This Agreement shall be construed and enforced in accordance with the Laws of the State of New York and any action, suit or proceeding brought under this Agreement shall be brought only in, and the parties hereby consent to the jurisdiction of, the federal and state courts located in the State of New York. 19.2 The provisions of this Article 19 shall survive termination of this Agreement. ARTICLE 20 - ENTIRE UNDERSTANDING/AMENDMENT 20.1 This Agreement and the attached schedules constitute the entire understanding and agreement between the parties, and supersedes all previous agreements (whether written or oral) concerning the subject matter hereof. This Agreement shall not be modified, amended, or supplemented except by a written document executed by both parties. ARTICLE 21 - HEADINGS 21.1 The headings in this document are for information purposes only and are not meant to have any legal effect in interpreting this document. ARTICLE 22 - SEVERABILITY; FURTHER ASSURANCES 22.1 The invalidity or unenforceability of any Articles, Section or provision of this document shall not affect the validity or enforceability of any one or more of the other Article 5, Sections or provisions. 22.2 The parties hereto will execute any further instruments or perform any acts which are or may be necessary to effectuate each of the terms and provisions of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. 21 MISONIX INCORPORATED By: s/Joseph Librizzi ----------------- Name: Joseph Librizzi Title: President & CEO UNITED STATES SURGICAL CORPORATION By: s/Eitan Nahum ------------- Name: Eitan Nahum Title: V.P Strategic Planning & Business Development 22 SCHEDULE 1 Patent/Trademark Title Country No. Status Date - ----- ------- --- ------ ---- 23 EX-10.17 4 LETTER OF AGREEMENT LETTER OF AGREEMENT THIS LETTER AGREEMENT is made and entered into as of the 11th day of September, 1995 by and between MISONIX, INC., a New York Corporation with its principal offices at 1938 New Highway, Farmingdale, New York 11735 (hereinafter referred to as "MISONIX") and MEDICAL DEVICE ALLIANCE, INC., ("MDA") a Nevada Corporation having its principal offices at 3315 East Russell Road, Suite H-193, Las Vegas, Nevada 89120 (hereinafter referred to as "MDA"). W I T N E S S E T H: WHEREAS, MISONIX has a business which is, in part, based on the research, development, and manufacturing of ultrasonic equipment for scientific and industrial purposes; and WHEREAS, MDA has a business that has been organized to market and sell, on a worldwide basis, medical devices specifically designed to improve the treatment of patients desiring a surgical procedure commonly referred to as "Liposuction" or "Liposculpturing" (hereinafter referred to as the "Procedure"); and WHEREAS, MISONIX has already utilized its engineering experience, ultrasonic technology, and prototype manufacturing capabilities to design and assemble one or more ultrasonic systems (hereinafter referred to as the "System") specifically for use in performing the Procedure; and WHEREAS, MDA has experience in identifying various needs in marketing and selling to the medical fields on a worldwide basis, especially the specialties of Plastic and Reconstructive Surgery, Cosmetic Surgery and Surgical Dermatology; and WHEREAS, MISONIX desires to continue further technical and application engineering directed to advanced designs of the System utilizing its patented technology and, in addition, manufacture the finished product; and WHEREAS, MDA desires to use its market and selling skills to market the System on an exclusive worldwide basis. NOW THEREFORE, in consideration of the premises and promises, warranties and representations herein contained, the parties hereto agree as follows: I. Exclusive Option Period: MISONIX will provide MDA an exclusive option period to evaluate the System under the following conditions: A. Length of exclusive option period to be ninety (90) calendar days, commencing on September 11, 1995. B. MISONIX shall deliver to MDA a functional prototype System, of the latest design, as soon as possible, but in no case, later than September 24, 1995. C. MDA will pay MISONIX twenty-five thousand dollars ($25,000.00) upon executing this Letter Agreement for the Exclusive Option Period. D. Development funding for the autoclavability (i.e. sterilization) of the converter and umbilical cable and the manufacturability of the System will be provided by MDA. It is estimated at a maximum of thirty thousand ($30,000.00) per month until the start of production. A fifteen thousand dollar ($15,000) advance will be made by MDA to MISONIX against future billings (the "Advance") for the purpose of assuring that MISONIX will implement the start of the subject development work as soon as possible: MISONIX will invoice MDA following the end of each month for the actual amount expended, which is to be paid by MDA within ten (10) working days of invoicing by MISONIX. In this manner, the Advance will continue to remain with MISONIX, on a month-to-month basis, as a credit balance in favor of MDA, until the start of production, when the credit provisions of the License Agreement (II.D) come into effect. Estimated time frame will be six months, subject to suggestions of, and modifications by, technicians for both parties. E. MDA will pay MISONIX an additional twenty-five thousand dollars ($25,000.00) on November 11, 1995, for the last thirty (30) days of the Exclusive Option Period unless: 1. MDA notifies MISONIX that it is terminating this Letter of Agreement and thus forgoing any further rights to market and sell the System; or 2. MISONIX and MDA have mutually agreed to the final terms and conditions of the License Agreement that forgoes the remainder of the Option Agreement, and is effective when an executed original of the License Agreement, is delivered to both parties. II. License Agreement: The License Agreement between MISONIX and MDA shall be executed prior to the conclusion of the ninety (90) day option period and no later than December 11, 1995, and will be good for a period of ten (10) years ending on December 31, 2005. The basic terms and conditions of the License Agreement shall be: A. MDA To Receive: 1. Exclusive worldwide marketing and sales rights to the System utilizing MISONIX Ultrasonic Liposuction technology (including Patent No. 5,419,761; and all improvement patents and foreign patents now or hereafter held by MISONIX). MISONIX retains the rights to ultrasonic technologies for non-medical applications. -2- 2. Exclusive rights to utilize MISONIX letter, dated October 15, 1993, from the U.S. Food and Drug Administration, which provides for marketing the System under Section 510(K), based on substantial equivalence to devices marketed prior to enactment of the Medical Device Act of 1976. 3. Access to MISONIX technical support and the design history of the System. 4. Right to modify specifications to meet clinical/market needs at MDA's cost. 5. Right of name and logo selection by MDA. 6. Commitment by MISONIX to designate and supply a dedicated product development team to work with MDA market development team and support staffs for successful project development. 7. First right of license for existing technology improvements or future medical technology developed by MISONIX (except for angioplasty) while the License Agreement is in force. B. MISONIX to Receive: 1. A License Fee payment of three hundred thousand dollars ($300,000.00) upon execution of the License Agreement. 2. MDA will provide market and application development, and a clinical and marketing plan (milestones) to MISONIX. MDA to be responsible for planning and funding clinical tests of the System. 3. Upon delivery of five (5) prototype units, MDA will pay the cost of the Systems which is four thousand dollars ($4,000.00) per unit, plus an additional License Fee of one hundred thousand dollars ($100,000.00). 4. At the start of regular production, or one year from the date of the License Agreement, the additional License Fee of one hundred thousand dollars ($100,000.00) will be paid by MDA for a total license fee payment of five hundred thousand dollars ($500,000.00). 5. Furthermore a Royalty Fee of five percent (5%) will be paid on net sales of the System and accessories sold. -3- 6. MDA to grant MISONIX a security interest in this License Agreement to secure performance by MDA of its obligations thereunder. C. Both to Agree: 1. Mutual non-competition clause in Ultrasonic Assisted Liposuction for the life of this Agreement. D. Quantity and Price. MISONIX agrees to sell to MDA and MDA agrees to buy from MISONIX one hundred percent (100%) of MDA's requirement of the aforesaid Ultrasonic Assemblies in accordance with the specifications set forth in Schedule A. Technological changes and variations from the prototype specifications shall increase the cost appropriately. The prices can be increased by MISONIX only under one of the following circumstances: MISONIX may, with written notification to MDA, increase the price in accordance with the rise in the Official Consumer Price Index (CPI). Such increase in the price in accordance with the CPI, can be made once each year during the term of the Agreement, except during the first year, and whenever the cost of labor and/or raw material to MISONIX changes substantially, MISONIX may change the price of the Ultrasonic Units, with a ninety (90) day advance written notice to MDA, to reflect such substantially changing and/or raw material costs. All Ultrasonic Units for MDA will be manufactured in accordance with the specifications set forth in Schedule B. All shipments will be F.O.B. point of origin. MDA will remit payment within thirty (30) days from the date each invoice is received by MDA with respect to shipments of Ultrasonic Units. Credit terms: (a) open account for up to 20 Units at any time (b) balance by Letter of Credit or fifty percent (50%) cash payment at time of order. MDA has no obligation to pay for any shipment of Ultrasonic Units that does not meet the specifications as set forth in Schedule B and have been returned to, and accepted by, MISONIX for credit. E. Delivery. MDA shall submit purchase orders setting forth the quantities, delivery date and shipping instructions with respect to each shipment such purchase order to be received by MISONIX at least ninety (90) days prior to the stipulated delivery date. MISONIX shall ship each order to MDA or MDA's designee to the location specified, as instructed by MDA. F. Quality. It is understood and agreed that all Ultrasonic Units sold to MDA hereunder will meet the established specifications, as described in the attached Schedule B, which Schedule may be revised from time to time by agreement of the parties hereunder. Furthermore, MISONIX shall be responsible to adhere to current good manufacturing practice (GMP) and to all applicable U.S. governmental laws and regulations, as may be amended from time to time relating to the manufacture, sale and shipment of Ultrasonic Units sold hereunder. Cost of future filings and modifications of units necessitated thereby to be borne by MDA, which shall receive prior notice of proposed actions and expenditures and shall participate in the decision making process. -4- G. Quality Assurance. MISONIX will provide MDA with the test results of all Ultrasonic Units to be shipped to MDA. Furthermore, MISONIX shall advise MDA of any changes in the manufacturing process or in materials which have an impact on the quality or performance of, or regulatory issues relating to, the Ultrasonic Units purchase hereunder. All Ultrasonic Units delivered to MDA shall be subject to acceptance by MDA's quality assurance staff acting reasonable. Unless MDA gives MISONIX notice to the contrary within ten (10) working days after receipt of a shipment of a Product, such shipment shall be deemed to be accepted by MDA. MDA or MDA's designee shall have the right to reject any shipment made to it hereunder which does not meet such quality assurance specifications when such products are received. In the event that any such shipment is not approved by MDA because it does not meet said specification, MDA shall advise MISONIX in writing and MISONIX agrees to replace such shipment at its expense including charges incurred by MDA for freight and customs clearance if application, and resubmit to MDA within forty-five (45) days. At MISONIX'S option, MDA shall return any such rejected shipment to MISONIX at MISONIX'S expense. H. Taxes. Any and all taxes imposed upon or with respect to or measured by the sale or delivery by MISONIX to MDA of Ultrasonic Units in accordance with MDA's instructions shall be for MDA's account. I. Force Majeure. MISONIX'S obligations and any delays in deliveries hereunder or portion thereof, and MDA's obligations to take delivery hereunder when due, shall be excused by strikes, riots, war, invasion, acts of God, fire, explosion, floods, delay of carrier, shortages or failures in the supply of materials, acts of government agencies or instrumentality's, judicial action, delay in constructing manufacturing facilities, and other contingencies beyond the reasonable control of the party to be excused. In such event(s), MISONIX will make reasonable efforts to fulfill MDA's requirements for and MDA will make reasonable efforts to take delivery of Ultrasonic Units as defined herein, If for any of the reasons set forth above, MISONIX shall be unable to delivery any of the agreed upon quantities of MISONIX Ultrasonic Units when due, MISONIX shall immediately notify MDA of such inability and of the period for which such inability is expected to continue. In the event MDA elects to manufacture or have Ultrasonic Units manufactured by a third party, MDA may use or release to said third party MISONIX'S confidential technical information and know-how relating to Ultrasonic Units under a confidentiality agreement acceptable to MISONIX, which shall not be unreasonably withheld, to enable MDA or said third party to manufacture Ultrasonic Unit for MDA's account. J. Term. This Agreement shall be effective when signed by both parties, and shall continue in effect for a period of ten (10) years. MDA shall have the option to renew this Agreement for five (5) successive one (1) year periods on the same terms and conditions, and the price of Ultrasonic Units to be purchased during each one (1) year period shall also be determined pursuant to the terms and conditions of this Agreement. MDA must notify MISONIX that it intends to -5- exercise the option at least sixty (60) days prior to the expiration of the ten (10) year term of the present Agreement, and thereafter in each successive year at least sixty (60) days prior to the expiration of the year in which the option is being exercised. K. Termination for Cause. If either party shall at any time fail to abide by any of the provisions of the Agreement, the other party shall have the right to terminate this Agreement on sixty (60) days prior written notice to the defaulting party specifying the default complained of, provided, however, if said defaulting party cures the default complained of within the said sixty (60) day period, or if a non- monetary default which reasonably would take more than 60 days to cure and the defaulting party is actively taking steps to cure the same, the Agreement shall continue in full force and effect as if no default has occurred. The right of either party to terminate this Agreement, as hereinabove provided, shall not be affected in any way by its waiver of, or its failure to take action with respect to, any previous default. This Agreement may also be terminated by the other party in the event that a petition of bankruptcy is filed by or against a party and not dismissed within 30 days, or a receiver or trustee is appointed for all or a part of the property of a party or a party makes an assignment for the benefit of creditors. L. Rights of Termination. Any termination of this Agreement as provided herein shall not relieve either party of any obligation arising hereunder prior to such termination. M. Inability To Supply Full Requirements. In the event that MISONIX cannot supply one hundred percent (100%) of MDA's requirement of Ultrasonic Units, after reasonable prior notice and time to gear up for this, MDA may either itself manufacture or have a third party manufacture the amount not supplied by MISONIX during the period that MISONIX cannot supply the same. MDA may release to said third party MISONIX'S confidential information and know-how relating to Ultrasonic Units under a confidentiality agreement acceptable to MISONIX which shall not be unreasonably withheld, to enable the third party to manufacture the amount of Ultrasonic Units not supplied by MISONIX for MDA. N. Purchase Orders. The provisions of this Agreement shall prevail over any inconsistent statements of provisions contained in any document related to this Agreement previously passing between companies. This Agreement shall supersede and prevail over any other agreement applicable to the subject matter of this Agreement between the parties which may be in effect at the time this Agreement is executed. O. Limited Warranty and Liability 1. MISONIX warrants that the materials described herein shall meet the specifications as set forth in Schedule B, but DOES NOT WARRANT THE SUITABILITY OR USES WHICH MAY BE MADE OF THE SAME OR THE UNITS TO BE PRODUCED HEREUNDER. -6- 2. Except as provided in Paragraph (3) hereafter, MISONIX shall not be liable for , and MDA assumes responsibility for, and hereby agrees to indemnify and hold harmless MISONIX for and against all costs, expenses and damages (including reasonable attorney's fees arising from any claim for personal injury and property damage resulting from the handling of the Ultrasonic Units, following MDA's acceptance of the Ultrasonic Units after it has completed its testing as provided in Quality Assurance. 3. Except as provided in paragraph (5) hereof, MDA shall not be liable for, and MISONIX assumes responsibility for and agrees to indemnify and save harmless, MDA, for all personal injury and property damages which occur during MISONIX'S manufacturing process of Ultrasonic Units or which Ultrasonic Units are being delivered to MDA or its designees or for claims based on violations of Federal, State or local laws or regulations applicable to employee or environmental protection in such manufacture or delivery by MISONIX; e.g., a claim based on MISONIX'S violations of environmental standards, standards dealing with providing a safe place to work, or the transportation of hazardous materials. 4. Either party, upon learning of the claim or lawsuit, under Paragraphs (2) or (3) of this Article, shall notify the other, but MDA's attorneys shall handle and control such claims or suits which fall under Paragraph on Limited Warranty and Liability (2) and MISONIX'S attorneys shall handle and control such claims or suits which fall under Paragraph on Limited Warranty and Liability (3). 5. Notwithstanding the foregoing provisions hereof, MDA shall secure product liability insurance coverage covering personal injury and property damage for the products produced hereunder, at the full cost and expense of MDA, in an amount of not less than five million dollars ($5,000,000) with a deductible of approximately two hundred thousand dollars ($200,000), covering both MISONIX and MDA for any and all liability. P. Arbitration. All disputes between the parties arising hereunder shall be finally settled by arbitration in the City of New York, by the American Arbitration Association, by a board of three arbitrators one of whom is selected by each party and the third selected by the two arbitrators, or if they cannot agree, from the lists of the American Arbitration Association. Q. Notices. Any notice or request required or permitted to be given under or in connection with this Agreement shall be deemed to have been sufficiently given if in writing and delivered to an officer of such party or sent by registered airmail, telex or telegram, prepaid, to the party for which such notice is intended, at the address set forth for such party below: -7- In the case of MDA: President Medical Device Alliance, Inc. 3515 East Russell Road Suite H-393 Las Vegas, Nevada 89120 In the case of MISONIX: President Misonix, Incorporated 1938 New Highway Farmingdale, NY 11735 or to such other address for such party as it shall have therefore furnished in writing to the other party. If sent by mail, telex or telegram, the date of mailing or transmission shall be deemed to be the date on which such notice or request has been given. R. Assignment. MDA or MISONIX may assign rights under this Agreement in whole or in part to any of their respective affiliates or subsidiaries. Upon the other party's request, the assigning party shall enter into a separate counterpart agreement with any such affiliate or subsidiary, it being expressly agreed that assignor shall remain bound by the obligations hereof. Such counterpart agreement shall be in the same form as this Agreement, except for necessary changes to reflect the extent of the assignment, the substitution of the affiliate's or subsidiary's name, the effective date of the assignment and the inclusion of a new provision enabling the non-assigning party to terminate such separate counterpart agreement in the event that the assignee ceases to be an affiliate or subsidiary of the assigning party. This Agreement shall not otherwise be assignable by either party without the prior written consent of the other party. S. Entire Agreement. This Agreement sets forth the entire Agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions and negotiations between them, and neither of the parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set for the on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the party to be bound thereby. T. Governing Law. This Agreement shall be construed in accordance with the laws of the Sate of New York. U. Confidentiality. After execution of the License Agreement, MISONIX shall disclose to MDA all technical information reasonably necessary to use Ultrasonic Units or their equivalents, and MDA shall hold such information except as provided in Paragraphs dealing with Force Majeure and Inability To Supply Full Requirement of this Agreement. MISONIX shall also release to MDA all technical information and know-how which are reasonably necessary to -8- manufacture Ultrasonic Units, and MDA may use such information the manner set forth in the aforementioned Paragraphs of this License Agreement to manufacture Ultrasonic Units or to have such devices manufactured by a third party only as permitted in this License Agreement. In addition to and not in lieu hereof, the parties re-affirm the provisions of the confidential Disclosure Agreement dated 8/11/95 which remains in effect and is annexed as Schedule C hereto. Information which is necessary for obtaining or maintaining approval of Ultrasonic Units or its equivalents by any regulatory agency of any foreign country shall be an exception to the above confidentiality obligations, but only to the extent necessary and provided said confidentiality is maintained to the fullest extent possible by MDA. IN WITNESS WHEREOF, this Letter Agreement has been entered into as of the day and year first above written. Very truly yours, ACCEPTED AND AGREED: MISONIX, INCORPORATED MEDICAL DEVICE ALLIANCE, INC. By: s/Joseph Librizzi By: Donald K. McGhan ----------------- ---------------- Joseph Librizzi Donald K. McGhan Its: President and CEO Its: Chairman -9- SCHEDULE A -10- Schedule A Breakdown of estimated pricing of System components =============================================================================== Item Price - ------------------------------------------------------------------------------- For Minimum of 200 or more Units 100 or more Units ------------- ----------------- Generator $ 2,330 $ 2,950 Convertor 1,400 2050 RF Cable 700 700 Tools 50 50 Manuals 20 20 ------- ------- Total System Cost $ 4,500* $ 5,770* * Estimate as of 8/10/95 Tips and Sheaths 5MM Probe 500 750 5MM Sheath 100 150 7MM Probe 500 750 7MM Sheath 100 150 o Costs based upon initial commitment of 200 units o All prices based upon designs and costs developed as of 9/94 o Costs subject to change as design is finalized -11- SCHEDULE B -12- Specifications of Ultrasonic system Generator Model xxxx ================================================================================ Controls and Displays Timer: elapse time with US on resettable Output power+/-3% Power Setting On/Off switch with pilot light Fault indicator/shut down (possible audible) Time Totalizer (rear) - -------------------------------------------------------------------------------- Output Control Adjusts amplitude of power output 0 to 100% Rear Connector foot switch control - -------------------------------------------------------------------------------- Horn Frequency 20Khz+/-__ Khz and Output power ultrasonic __ Watts - -------------------------------------------------------------------------------- Line Voltage Line Selectable Models for World Wide Distribution 100/120/220/240 VAC 48-60 Hz _____VA UL approval - -------------------------------------------------------------------------------- Mechanical Weight __lbs _____in. L x ___ in. W x ___ in. H - -------------------------------------------------------------------------------- Temperature Operating 10(degree) C to 40(degree) C - -------------------------------------------------------------------------------- Tuning Factor Set with Matched converter & probe - -------------------------------------------------------------------------------- Converter Weight ___ ozs. __ in. max dia. w/o cable Autoclavable* - --------- - -------------------------------------------------------------------------------- Probe style Type 7mm>25cm length Weight ___ ozs. Autoclavable* - ----------- Titanium Type 5mm>25cm length Weight ___ ozs. Autoclavable* ELI alloy Type 7mm>16cm length Weight ___ ozs. Autoclavable* Type 5mm>16cm length Weight ___ ozs. Autoclavable* - -------------------------------------------------------------------------------- Sheath style Type 7mm-25cm__ ozs. 16cm ___ ozs. Autoclavable* - ------------ Type 5mm-25cm__ ozs. 16cm ___ ozs. Autoclavable* - -------------------------------------------------------------------------------- Umbilical cable Weight ___ lbs Length 12 Ft. Autoclavable* - --------------- - -------------------------------------------------------------------------------- * Autoclavable 200 cycles (500 cycle goal) by Flash sterilizer for 3 minutes at 270(degree)and 30 PSI or Normal cycle sterilizer for 30 minutes at 250(degree)F and 15 PSI ================================================================================ -13- EX-10.19 5 AMENDMENT TO EMPLOYMENT AGREEMENT Amendment to Employment Agreement Amendment entered into on the 24th day of July, 1996 ("Amendment") to a certain Employment Agreement dated 9/1, 1995 the ("Employment Agreement") between MISONIX, INC., a New York corporation (hereinafter called the "Company") with offices at 1938 New Highway, Farmingdale, New York 11735 and JOSEPH LIBRIZZI, residing at 10 Indian Trace, Kings Park, New York 11754 (hereinafter called the "Employee"). W I T N E S S E T H: WHEREAS, the Company and the Employee desire to continue the services of Employee upon the terms and conditions contained in the Employment Agreement, as hereby amended. NOW, THEREFORE, in consideration of the mutual covenants, conditions and promises contained herein, the parties hereby agree as follows: 1. Terms and References Unless otherwise expressly provided in this Amendment, all terms, definitions and references in the Employment Agreement shall have the same meanings when used herein. 2. Terms of Employment The term of employment provided in this Amendment shall be for the 12 months commencing September 1, 1996 and ending August 31, 1997. Accordingly, the reference in paragraph 1 of the Employment Agreement in the third line thereof shall be to the 12 month period ending August 31, 1997; the balance of paragraph 1 of the Employment Agreement shall remain in effect. 3. Paragraph 4 of the Employment Agreement, dealing with Compensation, is hereby amended as follows: (a) The base salary provided in paragraph 4(a) shall be $160,000 per annum; (b) The incentive compensation provided in paragraph 4(b) of the Employment Agreement shall be modified to read as follows for all years after Fiscal 1996: "(b) Not later than one hundred twenty (120) days after the end of the fiscal year of the Company ending on the 30th day of June immediately prior to the August 31st expiration date of that year for employment (so that, for example, the results of the Company's fiscal year ending June 30, 1997 shall be applicable to the initial year of employment under this Amendment) the Company shall pay to Employee, as incentive compensation: If Pretax Operating Earnings for fiscal year are: Incentive Compensation Payment less than $1,000,000 - None $1,000,000 to $1,400,000 - 5% of pretax operating earnings in this range In excess of $1,400,000 - 10% of such excess pretax operating earnings For purposes hereof, "Pretax Operating Earnings" of the Company shall mean, with respect to any fiscal year, the operating income*, if any, of the Company for such fiscal year as set forth in the audited, financial statements of the Company included in its Annual Report to Stockholders for such fiscal year, before deduction of (i) taxes based on income or (ii) of the incentive compensation to be paid to Employee for such fiscal year under this Agreement. For each Renewal Period hereunder, the calculation of incentive compensation shall be made upon the results of the Company's fiscal year expiring on the 30th day of June during such Renewal Period. In the event of a change of the Company's fiscal year, the calculation period for the incentive bonus shall be equitably adjusted. Subparagraphs (c) and (d) of paragraph 4 shall remain as presently stated in the Agreement. 4. Change of Control Paragraph 12 of the Employment Agreement, dealing with change of control of the Company, is hereby stricken in its entirety. 5. Except as expressly modified by this Amendment, the terms and conditions of the Employment Agreement shall remain in full force and effect. In the event of any conflict or inconsistency between the Employment Agreement and this Amendment, the terms of this Amendment shall prevail. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment on the day and year first above written. *including royalties and license fees MISONIX, INC. BY: s/Gary Gelman ------------- s/Joseph Librizzi ----------------- JOSEPH LIBRIZZI EX-24.6 6 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated August 9, 1996, in Amendment No. 1 to the Registration Statement (Form S-1 No. 33-43585) and related Prospectus of Misonix, Inc. dated January 17, 1997. s/Ernst & Young LLP Melville, New York January 16, 1997 -----END PRIVACY-ENHANCED MESSAGE-----