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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-10986
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MISONIX, INC.
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(Name of Small Business Issuer in its charter)
New York 11-2148932
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1938 New Highway, Farmingdale, New York 11735
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(Address of principal executive offices) Zip Code
Issuer's telephone number: (516) 694-9555
Securities registered under Section 12(b) of the Exchange Act:
Title of class Name of Each Exchange on Which Registered
- ---------------------------------- -----------------------------------------
Common Stock, $.01 par value Boston Stock Exchange
Redeemable Stock Purchase Warrants Boston Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained and no disclosure will be contained in this form, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $9,913,136
The aggregate market value of the voting stock held by non affiliates of the
registrant (computed by reference to the average bid and asked prices of such
stock) on September 18, 1995 was approximately: $5,280,000.
There were 2,800,000 shares of Common Stock outstanding at September 18, 1996.
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DOCUMENTS INCORPORATED BY REFERENCE
None
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This Report on Form 10-KSB and the Company's other periodic reports
and other documents incorporated by reference or incorporated herein as
exhibits, may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, general economic conditions,
competition, technological advances and the market's acceptance or
non-acceptance of the Company's products.
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PART I
Item 1. Description of Business.
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 environmen tal 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(R) ultrasonic liquid processor and
cell disruptor, the distribution of other ultrasonic equipment for scientific
and industrial purposes, the manufacture and sale of Mystaire(R) 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
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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.
In addition to the Sonicator, the Company also manufac tures
and sells an ultrasonic spray nozzle, marketed under the name Sonimist(R), and
distributes ultrasonic cleaners, marketed under the names Astrason(R) bench-top
cleaner and Astramax(R) industrial ultrasonic cleaner. The Sonimist ultrasonic
spray nozzles are used for, among other things, coating, cleaning, cooling and
disinfec ting 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 broad range
of contaminants and is par ticularly 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
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who had the right, under purchase a 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 (pound)62,388 (approximately $93,582). The effective date of this
transaction is expected to be 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 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 con
taminants, 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
agreement, the Company was reimbursed a maximum of $30,000 per month
(commencing September 1995) for product development expenditures (as defined in
the 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)
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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.
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 prospec tive
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 its joint
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venture partner, 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 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
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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 "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.
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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.
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 15, 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.
Item 2. Description of Property.
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.
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Item 3. Legal Proceedings.
The Company is not aware of any material pending legal
proceeding to which it or its subsidiary is a party or of which any of their
property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's security
holders during the last quarter of the fiscal year ended June 30, 1996.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
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 1996 High Low
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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: High Low
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First Quarter..................... $ 1-1/2 $ 3/4
Second Quarter.................... 1-1/2 3/4
Third Quarter..................... 13/16 9/16
Fourth Quarter.................... 21/32 1/2
As of September 15, 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. The
Company has not paid any dividends since its inception. The Company currently
does not intend to pay any cash dividends in the foreseeable future, but
intends to retain all earnings, if any, in its business operations.
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Item 6. Management's Discussion and Analysis
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 licence 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 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 agreement, the Company was reimbursed a
maximum of $30,000 per month (commencing September 1995) for product
development expenditures (as defined in the 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:
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Fiscal years ended
June 30,
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1996 1995
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Net sales ............................................. 100.0% 100.0%
Cost of goods sold .................................... 52.3 54.2
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Gross profit .......................................... 47.7 45.8
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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
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Total operating expenses .............................. 43.8 56.9
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Income (loss) from operations ......................... 3.9 (11.1)
Other income .......................................... .7 .3
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Net income (loss) before minority interest ............ 4.6 (10.8)
Minority interest ..................................... (.7) .1
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Net income (loss)...................................... 3.9 (10.9)
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The following table provides a breakdown of net sales by major
category for the periods indicated:
Fiscal years ended
June 30,
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1996 1995
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(in thousands)
Ultrasonic products ................................. $2,632 $2,575
Scrubbers ........................................... 1,156 1,081
Ductless fume enclosures ............................ 6,125 4,896
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Net sales ...................................... $9,913 $8,552
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The following table provides a breakdown of foreign sales by
geographic area during the periods indicated:
Fiscal years ended
June 30,
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1996 1995
---- ----
(in thousands)
Canada & Mexico .................................... $ 95 $ 71
Europe ............................................. 4,533 3,860
Asia ............................................... 703 424
Middle East ........................................ 146 67
Other .............................................. 166 62
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$ 5,643 $ 4,484
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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.
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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.
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 carryfor wards will be restricted.
Liquidity and Capital Resources:
At June 30, 1996, the Company had a cash balance of
$1,153,999 and investments held to maturity of $353,053.
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 and, 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.
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Other:
In the opinion of management, inflation has not had a
material effect on the operations of the Company.
Item 7. Financial Statements
The response to Item 7 is submitted as a separate section of
this report following the exhibits.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None
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PART III
Item 9. 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, 1971
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
Misonix, Inc.
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
16
<PAGE>
and Sonic Needle Corp.) from 1986 to September 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 ThermexThermatron, 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 nonmilitary 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.
Item 10. 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:
17
<PAGE>
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Securities
Name and Principal Fiscal Underlying
Position Year Salary Options/SARS
- ------------------ ------ ------ ------------
Joseph Librizzi 1996 $ 183,971 -
President, Chief 1995 135,000 -
Executive Officer, 1994 135,000 -
Treasurer and Secretary
Howard Alliger 1996 $ - -
Chairman of the 1995 135,000 -
Board 1994 135,000 -
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.
18
<PAGE>
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
- ------------
(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.
19
<PAGE>
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. (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.
Item 11. Security Ownership of Certain Beneficial
Owners and Management.
The following table sets forth as of the Record Date certain
information with regard to ownership of the Company's Common Shares by (i) each
beneficial owner of 5% or more 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) 26.0%
Joseph Librizzi............................ 161,661 (3) 5.8%
Gary Gelman................................ 352,930 (4) 12.6%
Arthur Gerstenfeld......................... 14,800 (5) *
All executive officers and
Directors as a group
(eight persons)......................... 1,352,426 (6) 48.3%
- ------------
*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 shares held by Mr. Alliger's daughter, of
which he disclaims all beneficial interest.
(3) Includes 60,000 shares which Dr. Librizzi has the right to acquire upon
exercise of stock options which are currently exercisable.
(4) Includes 41,000 shares which Mr. Gelman has the right to
20
<PAGE>
acquire upon exercise of stock options which are currently
exercisable.
(5) Includes 2,000 shares which Mr. Gerstenfeld has the right to acquire
upon exercise of stock options which are currently exercisable.
(6) Includes (i) the shares indicated in notes (2), (3),(4), and
(5), (ii) 46,263 shares which are beneficially owned by an
executive officer of the Company (30,000 of which he has a
right to acquire upon exercise of stock options which are
currently exercisable), (iii) 31,000 shares which are
beneficially owned by another executive officer (30,000 shares
of which he has the right to acquire upon exercise of stock
options which are currently exercisable), and (iv) 17,700
shares which are beneficially owned by another executive
officer (10,000 shares of which he has the right to acquire
upon exercise of stock options which are currently exercisable
and 4,000 of which he has the right to acquire upon exercise
of stock warrants which are currently exercisable).
Item 12. Certain Relationships and Related Transactions.
None
21
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
a. Exhibits
3(a) Restated Certificate of Incorporation of the
Company. (Incorporated by reference to Exhibit 3.1
to the registrant's Registration Statement on Form
S-1, File No. 33-43585 (the "Registration
Statement").
3(b) By-laws of the Company. (Incorporated by reference
to Exhibit 3.2 to the Registration Statement.)
4(a) Warrant Agreement. (Incorporated by reference to
Exhibit 4.1 to the Registration Statement.)
4(b) Specimen of Redeemable Warrant Certificate. (Inco
rporated by reference to Exhibit 4.2 to the
Registration Statement.)
10(a) Lease extension and modification agreement dated
October 31, 1992.
10(b) Stock Option Plan. (Incorporated by reference to
Exhibit 10.2 to the Registration Statement.)
10(c) Employment Agreement dated September 1, 1991
between the Company and Michael Juliano.
(Incorporated by reference to Exhibit 10.4 to the
Registration Statement.)
10(d) Employment Agreement dated September 1, 1991
between the Company and Howard Alliger.
(Incorporated by reference to Exhibit 10.5 to the
Registration Statement.)
10(e) Employment Agreement dated September 1, 1991
between the Company and Joseph Librizzi.
(Incorporated by reference to Exhibit 10.6 to the
Registration Statement.)
10(f) Financial Advisory and Investment Banking
Agreement between the Company and Josephthal
Lyon & Ross Incorporated. (Incorporated by
reference to Exhibit 10.7 to the Registration
Statement.)
10(g) Settlement and License Agreement dated March 12,
1984 between the Company and Mettler Electronics
Corporation. (Incorporated by reference to Exhibit
22
<PAGE>
10.11 to the Registration Statement.)
10(h) Know-How, Trademark and License Agreement
dated July 25, 1983, between the Company and
Astec Environmental Systems, Ltd. (Incorporated by
reference to Exhibit 10.12 to the Registration
Statement.)
10(j) Assignment Agreement between the Company and Robert
Ginsburg. (Incorporated by reference to exhibit
10(j) of Form 10-K for the fiscal year ended June
30, 1992)
10(k) Subscription Agreement between the Company and
Labcaire. (Incorporated by reference to exhibit
10(k) of Form 10-K for the fiscal year ended June
30, 1992)
10(l) Option Agreements between the Company and each of
Graham Kear, Geoffrey Spear, John Haugh, Martin
Keeshan and David Stanley. (Incorporated by
reference to exhibit 10(l) of Form 10-K for the
fiscal year ended June 30, 1992)
10(m) Stock Option Contract between the Company and
Michael Juliano (Incorporated by reference to
exhibit 10(m) of Form 10-K for the fiscal year
ended June 30, 1992)
10(n) Stock Option Contract between the Company and
Joseph Librizzi (Incorporated by reference to
exhibit 10(n) of Form 10-K for the fiscal year
ended June 30, 1992)
10(o) Form of Director's Indemnification Agreement.
(Incorporated by reference to exhibit 10(o) of Form
10-K for the fiscal year ended June 30, 1992)
10(p) Stock Option Contract between the Company and Peter
Gerstheimer.
10(q) Stock Option Contract between the Company and
Ronald Manna.
10(r) Severance Agreement between the Company and Peter
Gerstheimer.
10(s) Severance Agreement between the Company and Ronald
Manna.
10(t) Employee Agreement dated September 1, 1995 between
the Company and Joseph Librizzi.
10(u) Option Agreement dated September 11, 1995 between
the Company and Medical Device Alliance Inc.
23
<PAGE>
10(v) Consent of independent public accountants to
inclusion of report in Form S-8 Registration
Statement.
10(w) Amendment to agreement with principal shareholders
of Labcaire Systems Ltd.
10(x) Employee Agreement dated July 24, 1996 between the
company and Joseph Librizzi.
22 Subsidiaries of the Company (Incorporated by
reference to exhibit 22 of Form 10-K for the fiscal
year ended June 30, 1992)
b. No reports on Form 8-K have been filed by the registrant
during the fiscal quarter ended June 30, 1996.
24
<PAGE>
Annual Report on Form 10-KSB
Item 7
Consolidated Financial Statements
Misonix, Inc. and Subsidiaries
Farmingdale, New York
Year ended June 30, 1996
<PAGE>
Misonix, Inc. and Subsidiaries
Form 10-KSB
Item 7
Financial Statements
Year ended June 30, 1996
Contents
The following consolidated financial statements of Misonix, Inc. and
Subsidiaries are included in Item 7:
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
<PAGE>
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
<PAGE>
Misonix, Inc. and Subsidiaries
Consolidated Balance Sheet
June 30, 1996
<TABLE>
<S> <C>
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
====================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Misonix, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended June 30
1996 1995
------------------------------------
<S> <C> <C>
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
====================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Misonix, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
$.01 Par Value Foreign
----------------------------- Additional Currency Total
Number Paid-in Translation Stockholders'
of Shares Amount Capital (Deficit) Adjustment Equity
-------------- -------------- --------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
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 (Note 8) 30,000 300 14,700 - - 15,000
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
============== ============== =============== ============== =============== ================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Misonix, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended June 30
1996 1995
----------------------------------
<S> <C> <C>
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
==================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Options Warrants
----------------------------------------------------------------------
Exercise Price Exercise Price
Shares Per Share Shares Per Share
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
======================================================================
</TABLE>
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
<PAGE>
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
<PAGE>
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
F-18
<PAGE>
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
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Date: September 26, 1996
Misonix, Inc.
By: /s/ Joseph Librizzi
------------------------
Joseph Librizzi,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Gary Gelman Chairman of the Board September 26, 1996
- ---------------------- Director
Gary Gelman
/s/ Joseph Librizzi President, Chief Executive September 26, 1996
- ---------------------- Officer, and Director
Joseph Librizzi (principal executive
officer)
/s/ Peter Gerstheimer Vice President, Chief September 26, 1996
- ---------------------- Financial Officer,
Peter Gerstheimer and Director
(principal financial and
accounting officer)
/s/ Howard Alliger Director September 26, 1996
- ----------------------
Howard Alliger
/s/ Arthur Gerstenfeld Director September 26, 1996
- ----------------------
Arthur Gerstenfeld
<PAGE>
EXHIBIT 10 (W)
Amendment To Agreement with Principal Shareholders of Labcaire Systems, Ltd.
This Agreement entered into on the 28th day of June, 1996 is supplemental to a
certain agreement dated May 21, 1992 (the "Original Agreement") between
Misonix, Inc., [previously known as Medsonic, Inc.] with principal offices at
1938 New Highway, Farmingdale, New York 11735 ("Investor" or "Misonix") and
each of David Patrick Stanley, John Anthony Haugh, Graham Mostyn Kear, Martin
Joseph Keeshan, Geoffrey William Spear and Labcaire Systems Limited ("Labcaire"
or the "Company").
W I T N E S S E T H
1. Reference is made to the Original Agreement, the
provisions of which are hereby incorporated by reference
and made a part hereof; unless otherwise specified, the
definitions in the Original Agreement shall have the same
meanings when used herein except that "the Management
Team" shall not include John Anthony Haugh.
2. John Anthony Haugh, having sold the balance of his shares
of Labcaire to the Investor, is not becoming a party to
this Agreement and is not affected hereby.
3. Clause 6 of the Original Agreement, referring to
"Management Team Options," is hereby modified by striking
out clauses 6.1, 6.2 and 6.4 in their entirety, retaining
Clause 6.3 and adding certain new clauses, so that Clause
6, as hereby amended and restated, shall read as follows
in its entirety:
"Purchase of Management Team Shares
Each of the Management Team hereby agrees to sell his Total Holding of
Labcaire shares to the Investor and the Investor hereby agrees to
purchase the same in accordance with the following: one-seventh
(1/7th) of the Total Holding of each person is to be sold (the
"Partial Purchase") in each of the next seven consecutive years,
commencing with 1996 and ending in 2002, so that the final 1/7th of
the Total Holding shall be sold in the Partial Purchase taking place
in 2002.
6.1 Each Partial Purchase shall occur on a date which is 60 days
from the adoption of financial statements for the preceding
financial period. One-seventh (1/7th) of the Total Holding of
each member of the Management Team, whose name and shares are
as set forth on Schedule A attached hereto, shall be
purchased by the Investor at the Deemed Value thereof.
6.2 At closing, the Investor shall, upon receipt of a duly
completed share transfer form and the relevant share
certificate, pay to that member of the Management Team the
Deemed Value of the Labcaire ordinary shares being purchased
pursuant to such Partial Purchase.
6.3 The parties hereto will do all such acts and things as may be
required to effect such transfer of shares including but not
limited to the appropriate exercise or waiver of their rights
under the Articles of Association of the Company.
<PAGE>
6.4 The first Partial Purchase shall occur in 1996 based upon the
audited accounts of the Company for the financial period
ending June 30, 1996 (the "1996 Purchase").
The purchase price for the 1996 Purchase shall be paid by the
Investor to each selling member of the Management Team in
cash at the closing, against delivery of certificates
representing the Labcaire Ordinary shares being sold.
The purchase price to be paid for each Partial Purchase shall
be computed as follows: The Deemed Value of each Labcaire
Ordinary share, as defined in Clause 1(1), shall refer to the
Company's earnings before interest, tax and management
charges shown in the audited statements for the immediately
preceding fiscal period.
In no event, however, shall the price to be paid by the
Investor for an Ordinary share at any Partial Purchase after
the 1996 Purchase be less than 50% of the price per Ordinary
share in the 1996 Purchase, as calculated upon a like number
of Labcaire shares in issue and fully paid on each such date.
6.5 Any one or more members of the Management Team may, at his
sole election, transfer his Total Holding of Labcaire
Ordinary shares, only to the extent of the shares to be
included in the current year's Partial Purchase, for any
consideration or for no consideration, to his spouse and/or
children provided, however, that any transferee agrees to be
bound by this Agreement (including the obligations of sale of
such Ordinary shares pursuant hereto) as if one of the
Management Team in the respect of the Labcaire Ordinary
shares so transferred.
4. The provisions of Clause 7, denominated as "Investor's
Option," are hereby stricken in their entirety.
5. The Option Agreements described in Clause 2.7 of the
Original Agreement, relating to the purchase of Misonix
shares, are hereby cancelled.
6. In Clause 1 of the Service Agreements dated May 21, 1992
between the Company, on the one hand, and each of Messrs.
Kear, Keeshan and Spear, on the other, the reference to
"three calendar months" is hereby changed to "six
calendar months."
IN WITNESS HEREOF, this Agreement has been signed by or on behalf of
the parties on and as of the day and year first above written.
<PAGE>
Misonix, Inc.
By:
--------------------------------
Joseph Librizzi, President - duly
authorized for Misonix Inc. in the presence of:
--------------------------------
- ----------------------- -----------------------
David Patrick Stanley Martin Joseph Keeshan
- ----------------------- -----------------------
Graham Mostyn Kear Geoffrey William Spear
Labcaire Systems Limited
By:
------------------------------------
Duly authorized for Labcaire Systems
Limited in the presence of:
------------------------------------
<PAGE>
SCHEDULE A
Shares covered by each partial
purchase (1/7th of total)*
------------------------------
Percentage ownership of Each Partial
Labcaire shares at date of 1996 Purchase after
Management Team amended agreement Purchase 1996 Purchase
- --------------- ------------------- -------- -------------
Patrick Stanley 30.76% (20,000 shares) 2,858 2,857
Graham Kear 23.08% (15,000 shares) 2,142 2,143
Martin Keeshan 23.08% (15,000 shares) 2,142 2,143
Geoffrey Spear 23.08% (15,000 shares) 2,142 2,143
Total issued and
outstanding shares
of Labcaire: 350,000 shares
All shares repurchased by Investor are to be regarded as issued and
outstanding for purposes of calculation of total number of shares in issue and
fully paid on the last day of a financial period for purposes of calculation of
the Deemed Value.
*In order to eliminate fractional shares, the numbers being
purchased in the 1996 Purchase and in each Partial Purchase subsequent thereto
will vary slightly.
<PAGE>
EXHIBIT 10(X)
Amendment to Employment Agreement
Amendment entered into on the 24th day of July, 1996 ("Amendment")
to a certain Employment Agreement dated September 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:
<PAGE>
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 and including
royalties and license fees, 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.
MISONIX, INC.
BY:
--------------------------
--------------------------
JOSEPH LIBRIZZI
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,153,999
<SECURITIES> 353,053
<RECEIVABLES> 2,039,673
<ALLOWANCES> 58,468
<INVENTORY> 1,202,314
<CURRENT-ASSETS> 5,196,463
<PP&E> 1,995,448
<DEPRECIATION> 1,373,021
<TOTAL-ASSETS> 6,074,957
<CURRENT-LIABILITIES> 2,139,434
<BONDS> 0
0
0
<COMMON> 28,000
<OTHER-SE> 3,369,648
<TOTAL-LIABILITY-AND-EQUITY> 6,074,957
<SALES> 9,913,136
<TOTAL-REVENUES> 9,913,136
<CGS> 5,181,222
<TOTAL-COSTS> 9,524,591
<OTHER-EXPENSES> 11,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,529
<INCOME-PRETAX> 389,427
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 389,427
<EPS-PRIMARY> .14
<EPS-DILUTED> .13
</TABLE>
