UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2010

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _____  to  _____ 

Commission file number: 1-10986

MISONIX, INC.

New York		11-2148932
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1938 New Highway, Farmingdale, New York		11735
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (631) 694-9555

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, $.01 par value		Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

The aggregate market value of the voting stock held by non-affiliates of the registrant on December 31, 2009 (computed by reference to the closing price of such stock on such date) was approximately $12,288,189.

There were 7,001,369 shares of Common Stock outstanding at September 24, 2010.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

None

With the exception of historical information contained in this Form-10K, content herein may contain “forward looking statements” that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the statements made. The factors include general economic conditions, delays and risks associated with the performance of contracts, risks associated with international sales and currency fluctuations, uncertainties as a result of research and development, acceptable results from clinical studies, including publication of results and patient/procedure data with varying levels of statistical relevance, risks involved in introducing and marketing new products, potential acquisitions, consumer and industry acceptance, litigation and/or contemplated 510 (k) filings, the ability to achieve and maintain profitability in the Company’s business lines, and other factors discussed in this Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company disclaims any obligation to update its forward-looking statements.

PART I

Item 1. Business.

Overview

MISONIX, INC. (“Misonix” or the “Company”) is a New York corporation which, through its predecessors, was first organized in 1959. The Company designs, manufactures, develops and markets minimally invasive ultrasonic medical device products. These products include the BoneScalpel^TM cutting system which is used among other things for surgical procedures of the spine, the SonaStar^® Surgical Aspirator which is used to emulsify and remove soft and hard tumors, the SonicOne^® Wound Cleansing and Debridement System that offers tissue specific debridement and cleansing of wounds for effective removal of devitalized tissue and fibrin deposits while sparing viable cells, and the AutoSonix ultrasound cutting and coagulating system which is marketed by Misonix through an agreement with Covidien Ltd. Misonix also markets its Lysonix ultrasound assisted liposuction device with Mentor Corporation, a subsidiary of Johnson & Johnson. The Company also develops and markets ductless fume enclosures for filtration of gaseous contaminates in the laboratory and forensic markets.

The Company’s 100% owned subsidiary, Hearing Innovations, Inc. (“Hearing Innovations”), is a development company with patented HiSonic ultrasonic technology for the treatment of profound deafness and tinnitus.

In fiscal 2010, approximately 22% of the Company’s net sales were to foreign markets. These sales had no additional risks as most sales are secured by letters of credit and are remitted to Misonix in U.S. currency.

Discontinued Operations

On April 7, 2009, the Company sold the assets of its Ultrasonics Laboratory Products (“Ultrasonics”) business to iSonix LLC, a wholly owned subsidiary of Sonics and Materials, Inc., for a cash payment of $3.5 million. The results of operations from the Ultrasonic business are shown net of tax from discontinued operations. The net assets and results of Ultrasonics operations have been reported as a discontinued operation for all periods presented.

On August 5, 2009, the Company sold its Labcaire Systems, Ltd. (“Labcaire”) subsidiary to PuriCore International Limited for a total purchase price of up to $5.6 million. The Company received $3.6 million at closing and a promissory note in the principal amount of $1 million, payable in equal installments of $250,000 on the next four anniversaries of the closing. As of September 28, 2010, the Company has received the first installment. The note receivable was discounted over the four years using a 4% imputed interest rate. This rate is consistent with published discounts. The discounted value of the note ($900,000) is used to determine gain or loss on the sale, and is included in other assets in the consolidated balance sheet. The Company will also receive a commission paid on sales for the period commencing on the date of closing and ending on December 31, 2013 of 8% of the pass through Automated Endoscope Reprocessing (“AER”) and Drying Cabinet products, and 5% of license fees from any chemical licenses marketed by Labcaire directly associated with sale of AERs, specifically for the disinfection of the endoscope. The aggregate commission payable to the Company is subject to a maximum payment of $1,000,000. The aggregate commission has zero value in determining the current gain or loss on the sale of Labcaire until the commission is paid. As of June 30, 2010, there were no commissions paid. For the twelve months ended June 30, 2010, the Company recorded an after tax loss on the sale of Labcaire of $376,461. Results of Labcaire operations have been reported as a discontinued operation for all periods presented. On July 19, 2010, the Company received a Dispute Notice from PuriCore PLC (“PuriCore”) with respect to the Agreement for the sale and purchase of shares of Labcaire Systems Limited which was completed on August 4, 2009. The dispute alleges that Misonix breached certain representations and warranties that could result in a reduction to the purchase price of approximately £1.6 million or approximately $2.5 million. The Company believes the notice is without merit and will vigorously defend any claim instituted by PuriCore. There can be no assurance, however, that the Company may not have to pay some amount to resolve PuriCore’s claims.

On October 2, 2009, Acoustic Marketing Research, Inc. d/b/a Sonora Medical Systems (“Sonora”) sold substantially all of its assets to Medical Imaging Holdings, Inc. (“Medical Imaging”) for a cash payment of $8,000,000 (subject to a future adjustment based on net working capital at the closing). On April 6, 2010, the Company paid $257,029 to Medical Imaging for the net difference of adjustments of working capital and the effect of income taxes. These amounts are reflected in discontinued operations in the June 30, 2010 financial statements. The Company also purchased at the closing of such transaction, utilizing $1,200,000 of the proceeds, the remaining outstanding 5% of Sonora’s shares. Sonora is engaged in the business of (i) selling, repairing and servicing new and used diagnostic ultrasound systems and consumable accessories used in conjunction therewith, (ii) selling, repairing, servicing and testing diagnostic ultrasound transducers, (iii) developing and selling equipment for testing ultrasound transducers, (iv) selling equipment used for cleaning and disinfecting ultrasound transducers including, but not limited to, transesophogeal echocardiography probes, (v) selling equipment used for testing endoscopic probes, (vi) repairing and servicing MRI systems and parts and subsystems used therein, and (vii) performing training for the service and maintenance of diagnostic ultrasound and MRI systems, in each instance throughout the world. The net assets and results of Sonora operations have been reported as a discontinued operation for all periods presented.

On March 3, 2008, the Company, USHIFU, LLC (“USHIFU”), FS Acquisition Company and certain other stockholders of Focus Surgery, Inc. (“Focus”) entered into a Stock Purchase Agreement (the “Focus Agreement”). The closing of the transactions contemplated by the Focus Agreement took place on July 1, 2008. Pursuant to the Focus Agreement, the Company sold to USHIFU the 2,500 shares of Series M Preferred Stock of Focus owned by the Company for a cash payment of $837,500. The Company also received $679,366, fifty percent (50%) of the outstanding principal and accrued interest of loans previously made by the Company to Focus, with the remaining fifty percent (50%) of such amount of $679,366 paid on January 4, 2010. Upon collection, payment was recognized as a gain in other income.

On May 28, 2010, Misonix announced the sale to USHIFU of all of the rights to the High Intensity Focused Ultrasound (“HIFU”) technology previously obtained from Focus, a wholly owned subsidiary of USHIFU, together with other HIFU related assets. In consideration for the sale Misonix will receive up to approximately $5.8 million, paid out of an earn-out of 7% of gross revenues received by USHIFU related to the businesses being sold, up to the time we have received the first $3 million, and thereafter 5% of gross revenues up to the $5.8 million. Misonix will also be paid for 3 units in inventory of new Sonablate^®500 machines. The obligation to pay for such machines is secured by a note due December 31, 2010. At the closing of such transaction, USHIFU paid Misonix for inventory associated with manufacturing the Sonablate 500 and reimbursed Misonix for certain monies expended in connection with the HIFU Registry. USHIFU paid Misonix $155,000 in August 2010 for one such Sonablate 500 unit, thereby reducing the outstanding principal of the note. The net assets and results of HIFU operations have been reported as a discontinued operation for all periods presented.

Misonix retained all of its rights associated with the HIFU related intellectual property and development assets recently purchased from ProRhythm. This intellectual property involves the development of new transducers and lenses to be used in the treatment of tissue using HIFU. This technology may be applied on a worldwide basis to a variety of organs not limited to kidney, liver, or breast tissue treatment.

Medical Devices

In October 1996, the Company entered into a twenty-year license agreement (the “USS License”) with United States Surgical, now a unit of Covidien Ltd. (“USS”). The USS License covers the further development of the Company’s medical technology relating to ultrasonic cutting, which uses high frequency sound waves to coagulate and divide tissue for both open and laproscopic surgery. The USS License gives USS exclusive worldwide marketing and sales rights for this technology and device. Total sales of this device were approximately $3,172,000 and $3,467,000 for the fiscal years ended June 30, 2010 and 2009, respectively. Total royalties from sales of this device were approximately $576,000 and $590,000 for the fiscal years ended June 30, 2010 and 2009, respectively.

In September 2007, the Company entered into a worldwide, royalty-free, distribution agreement with Mentor Corporation, a wholly owned subsidiary of Johnson & Johnson (“Mentor”), for the sale, marketing and distribution of the Lysonix soft tissue aspirator used for cosmetic surgery. Total sales of this device were approximately $919,000 and $818,000 for the fiscal years ended June 30, 2010 and 2009, respectively.

Laboratory and Scientific Products

The Company’s other revenue producing activities consist of the manufacture and sale of Aura™ ductless fume hood products. The Aura ductless fume hood products offer 40 years of experience in providing safe work environments to medical, pharmaceutical, biotech, semiconductor, law enforcement, federal and local government laboratories. We manufacture a complete line of ductless fume enclosures to control and eliminate hazardous vapors, noxious odors and particulates in the laboratory. All fume enclosure products utilize either activated carbon or HEPA filters to capture contaminants and are a cost effective alternative to standard laboratory fume hoods that require expensive ductwork to vent contaminants to the outside. Misonix also offers laminar airflow stations and PCR enclosures. Misonix Ductless Fume Hoods meet or exceed applicable OSHA, ANSI, NFPA, SEFA and ASHRAE standards for ductless fume hoods. School Demonstration Ductless Fume Hoods have proven to be a valuable addition to hundreds of high school science laboratories. Multiple application filters allow for the use of a variety of chemicals and a clear back panel enables students to view demonstrations from all sides.

The technology used in the Aura ductless fume enclosures has also been adapted for specific uses in crime laboratories. The Forensic Evidence Cabinet protects wet evidence from contamination while it is drying and simultaneously protects law enforcement personnel from evidence that can be noxious and hazardous. The Cyanoacrylate (liquid glue) Fuming Chamber is used by fingerprinting experts to develop fingerprints on non-porous surfaces while providing protection from hazardous cyanoacrylate fumes.

Market and Customers

Medical Devices

The Company relies on its licensee, USS, a significant customer, for marketing the ultrasonic AutoSonix surgical device. The Company also relies on other distributors such as Mentor, Aesculap and independent distributors for the marketing of its medical products such as SonaStar, BoneScalpel, and Lysonix 3000, exclusively in the United States. The Company sells its SonicOne Wound Cleansing and Debridement System, and when clinical evaluations are completed the Ultrasonic BoneScalpel, for certain other applications through direct sales persons throughout the United States. All products are sold through distributors outside the United States.

In September 2007, the Company completed an agreement with Mentor for domestic sales of its ultrasound assisted liposuction product, the Lysonix 3000. Mentor agreed to minimum purchase order provisions for the Lysonix 3000 for a one year term commencing September 30, 2007, and successive annual renewals upon mutual agreement by the companies. The agreement with Mentor for the Lysonix 3000 in the United States is in the process of being negotiated for renewal.

The Company also has an exclusive distribution agreement with Aesculap, a member of the B. Braun group of companies, to distribute the BoneScalpel in the United States.

Laboratory and Scientific Products

The Company relies on direct salespersons, distributors, manufacturing representatives and catalog listings for the marketing of its laboratory and scientific products.

The market for the Company’s ductless fume enclosures includes laboratory or scientific 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.

In fiscal 2010, approximately 22% of the Company’s net sales were to foreign markets. These sales had no additional risks as most sales are secured by letters of credit and are remitted to Misonix in U.S. currency.

Manufacturing and Supply

Medical Devices

The Company manufactures and assembles its medical device 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 is not dependent upon any single source of supply and has no long-term supply agreements. The Company believes that it will not encounter difficulty in obtaining materials, supplies and components adequate for its anticipated short-term needs.

Laboratory and Scientific Products

The Company manufactures and assembles the majority of its laboratory and scientific 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 is not dependent upon any single source of supply and has no long-term supply agreements. The Company believes that it will not encounter difficulty in obtaining materials, supplies and components adequate for its anticipated short-term needs.

Competition

Medical Devices

Competition in the medical device products and the medical repair and refurbishment industry is rigorous with many companies having significant capital resources, large research laboratories and extensive distribution systems in excess of the Company’s. Some of the Company’s major competitors are Johnson & Johnson, Valley Lab, a division of Tyco Healthcare, Integra Life Sciences, Inc., and Sööring.

Laboratory and Scientific Products

The Company believes that specific advantages of its fume enclosures include efficiency and other product features, such as durability and ease of operation. Ductless fume enclosure advantages are the quality of the product and versatility of applications. The principal competitors for the Company’s ductless fume enclosure are Captair, Inc., Air Science Technologies, and Air Cleaning Systems, Inc.

Regulatory Requirements

The Company’s medical device products are subject to the regulatory requirements of the U.S. Food and Drug Administration (“FDA”). A medical device as defined by the FDA is an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component, part, or accessory which is recognized in the official National Formulary or the United States Pharmacopoeia, or any supplement to such listings, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or animals, or intended to affect the structure or any function of the body of man or animals, and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes (a “medical device”). The Company’s products that are subject to FDA regulations for product labeling and promotion comply with all applicable regulations. The Company is listed with the FDA as a Medical Device manufacturer and has the appropriate FDA Establishment Numbers in place. The Company has a post-market monitoring system in place such as Complaint Handling and Medical Device Reporting procedures. All current devices manufactured and sold by the Company have all the necessary regulatory approvals. The Company is not aware of any situations which would be materially adverse at this time and neither has the FDA sought legal remedies available, nor have there been any violations of its regulations alleged, against the Company at present.

Patents, Trademarks, Trade Secrets and Licenses

The Company also owns trademark registrations for Mystaire in both England and Germany.

The following is a list of the U.S. patents which have been issued to the Company:

Number				Description		Issue Date		Expiration Date
	5,248,296			Wire with sheath — relating to the Company’s Alliger System for reducing transverse motion in its catheters.		09/23/1993		12/24/2010
	5,306,261			Guidewire guides — relating to the Company’s Alliger System for a catheter with collapsible wire guide.		04/26/1994		01/22/2013
	5,443,456			Guidewire guides — relating to the Company’s Alliger System for a catheter with collapsible wire guide.		08/22/1995		02/10/2014
	5,371,429	*		Flow-thru transducer — relating to the Company’s liposuction system and its ultrasonic laboratory and scientific products for an electromechanical transducer device.		12/06/1994		09/28/2013
	5,397,293			Catheter sheath — relating to the Company’s Alliger System for an ultrasonic device with sheath and transverse motion damping.		03/14/1995		11/25/2012
	5,419,761	*		Liposuction — relating to the Company’s liposuction apparatus and associated method.		05/30/1995		08/03/2013
	D409 746			Cannula for ultrasonic probe.		05/11/1999		05/11/2013
	D408 529			Cannula for ultrasonic probe.		04/20/1989		04/20/2013
	D478165			Cannula for ultrasonic probe.		08/05/2003		08/05/2017
	5,465,468			Flow-thru transducer — relating to the method of making an electromechanical transducer device to be used in conjunction with the Company’s soft tissue aspiration system and ultrasonic laboratory and scientific products.		11/14/1995		12/06/2014
	5,527,273	*		Ultrasonic probes — relating to an ultrasonic lipectomy probe to be used with the Company’s soft tissue aspiration technology.		06/18/1996		10/6/2014
	5,769,211			Autoclavable switch — relating to a medical handpiece with autoclavable rotary switch to be used in medical procedures.		06/23/1998		01/21/2017
	5,562,609			Ultrasonic surgical probe.		10/08/1996		10/07/2014
	5,562,610			Needle for ultrasonic surgical probe.		10/08/1996		10/07/2014

Number				Description		Issue Date		Expiration Date
	6,033,375			Ultrasonic probe with isolated and Teflon coated outer cannula.		03/07/2000		12/23/2017
	6,270,471			Ultrasonic probe with isolated outer cannula.		08/07/2001		12/23/2017
	6,443,969			Ultrasonic blade with cooling.		09/03/2002		08/15/2020
	6,379,371			Ultrasonic blade with cooling.		04/30/2002		11/15/2019
	6,375,648			Infiltration cannula with Teflon coated outer surface.		04/23/2002		10/02/2018
	6,063,050			Ultrasonic dissection and coagulation system.		05/16/2000		10/16/2017
	6,036,667			Ultrasonic dissection and coagulation system.		03/14/2000		08/14/2017
	6,582,440			Non-clogging catheter for lithotrity.		06/24/2003		12/26/2016
	6,454,730			Thermal film ultrasonic dose indicator.		09/24/2002		04/02/2019
	6,613,056			Ultrasonic probe with low-friction bushings.		09/02/2003		02/17/2019
	6,648,839			Ultrasonic medical treatment device for RF cauterization and related method.		11/18/2003		05/08/2022
	6,660,054			Fingerprint processing chamber with airborne contaminant containment and adsorption.		12/09/2003		09/10/2021
	6,736,814			Ultrasonic medical treatment device for bipolar RF cauterization and related method.		05/18/2004		02/28/2022
	6,799,729			Ultrasonic cleaning probe.		10/05/2004		10/05/2021
	6,869,439			Ultrasonic dissector.		03/22/2005		03/22/2022
	6,902,536			RF cauterization and ultrasonic ablation.		06/07/2005		06/07/2022
	6,377,693	**		Tinnitus masking using ultrasonic signals.		06/23/1994		06/23/2014
	6,173,062	**		Frequency transpositional hearing aid with digital and single sideband modulation.		03/16/1994		03/16/2014
	6,169,813	**		Frequency transpositional hearing aid with single sideband modulation.		03/16/1994		03/16/2014
	5,663,727	**		Frequency response analyzer and shaping apparatus and digital hearing enhancement apparatus and method utilizing the same.		06/23/1995		06/23/2015
	7,442,168			High efficiency medical transducer with ergonomic shape and method manufacture.		10/28/2008		04/01/2023
	7,223,267			Ultrasonic probe with detachable slidable cauterization forceps.		02/06/2004		02/06/2024
	7,717,913			Cauterization and ultrasonic ablation instrument with multi hole collar and electrode MTG sleeve.		05/18/2010		11/04/2024

The following is a list of the U.S. trademarks which have been issued to the Company:

Registration				Registration
Number				Date		Mark		Goods		Renewal Date
	2,611,532			08/27/2002		Mystaire		Scrubbers Employing Fine Sprays Passing Through Mesh for Eliminating Fumes and Odors from Gases.		08/27/2012
	1,219,008			12/07/1982		Sonimist		Ultrasonic and Sonic Spray Nozzle for Vaporizing Fluid for Commercial, Industrial and Laboratory Use.		03/22/2013
	1,200,359			04/03/2002		Water Web		Lamination of Screens to Provide Mesh to be Inserted in Fluid Stream for Mixing or Filtering of Fluids.		04/03/2013
	2,320,805			02/22/2000		Aura		Ductless Fume Enclosures.		02/22/2020
	2,812,718			02/10/2004		Misonix		Ultrasonic medical devices, namely, ultrasonic surgical aspirators, ultrasonic lithotripters, ultrasonic phacoemulsifiers.		02/10/2014
	1,195,570			07/14/2002		Astrason		Portable Ultrasonic Cleaners featuring Microscopic Shock Waves.		07/14/2012
	3,373,435			01/22/2008		SonicOne		Ultrasonic Surgical Systems.		01/22/2018
	3,637,456			06/16/2009		Misonix		Ultrasonic cleaning units and ultrasonic liquid processors for industrial, domestic and/or laboratory use.		06/16/2012
	3,583,091			03/03/2009		Osteosculpt		Surgical devices and instruments, namely, ultrasonic cutters and ablators.		03/03/2019
	3,775,329			04/13/2010		Sonastar		Ultrasonic medical devices namely ultrasonic surgical aspirators, ultrasonic scalpels and ultrasonic bone shavers.		04/13/2020

Backlog

As of June 30, 2010, the Company’s backlog (firm orders that have not yet been shipped) was $1,630,824, as compared to $1,959,712 as of June 30, 2009. The Company’s backlog relating to laboratory and scientific products was $172,153 at June 30, 2010, as compared to $211,000 as of June 30, 2009. The Company’s backlog relating to medical devices was $1,458,671 as compared to $1,748,000 at June 30, 2009.

Employees

As of June 30, 2010, the Company, employed a total of 82 full-time employees, including 26 in management and supervisory positions. The Company considers its relationship with its employees to be good.

Business Segments

The following table provides a breakdown of net sales by business segment for the periods indicated:

		Fiscal year ended June 30,
		2010				2009
Medical devices		$	10,737,379			$	9,688,294
Laboratory and scientific products			2,633,896				3,024,979
Net sales		$	13,371,275			$	12,713,273

The following table provides a breakdown of foreign sales by geographic area during the periods indicated:

		Fiscal year ended June 30,
		2010				2009
United States		$	10,452,705			$	9,167,834
United Kingdom			59,628				1,417,685
Europe			1,244,527				1,312,599
Asia			756,722				372,929
Canada and Mexico			241,045				167,272
Middle East			267,929				89,212
Other			348,719				185,742
		$	13,371,275			$	12,713,273

Website Access Disclosure

The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are available free of charge on the Company’s website at www.MISONIX.COM as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).

Also, copies of the Company’s annual report will be made available, free of charge, upon written request.

Item 1A. Risk Factors.

In addition to the other information contained in this Annual Report on Form 10-K and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements set forth immediately prior to the beginning of Item 1 of this Annual Report on Form 10-K. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition or results of operations.

Risks Related to Our Business

We are subject to extensive medical device regulation which may impede or hinder the approval process for our products and, in some cases, may not ultimately result in approval or may result in the recall or seizure of previously approved products.

Our products, development activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic Act (the “FDC Act”), by comparable agencies in foreign countries, and by other regulatory agencies and governing bodies. Under the FDC Act, medical devices must receive FDA clearance or approval before they can be commercially marketed in the U.S. In addition, most major markets for medical devices outside the U.S. require clearance, approval or compliance with certain standards before a product can be commercially marketed. The process of obtaining marketing approval or clearance from the FDA for new products, or with respect to enhancements or modifications to existing products, could:

•

take a significant period of time;

•

require the expenditure of substantial resources;

•

involve rigorous pre-clinical and clinical testing;

•

require changes to the products; and

•

result in limitations on the indicated uses of the products.

Even after products have received marketing approval or clearance, product approvals and clearances by the FDA can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial approval. There can be no assurance that we will receive the required clearances from the FDA for new products or modifications to existing products on a timely basis or that any FDA approval will not be subsequently withdrawn. Later discovery of previously unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory clearances, seizures or recalls of products, operating restrictions and/or criminal prosecution. The failure to receive product approval clearance on a timely basis, suspensions of regulatory clearances, seizures or recalls of products or the withdrawal of product approval by the FDA could have a material adverse effect on our business, financial condition or results of operations.

We may not meet regulatory quality standards applicable to our manufacturing and quality processes, which could have an adverse effect on our business, financial condition or results of operations.

As a medical device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. In addition, the Federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a medical device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA. In the European Community, we are required to maintain certain ISO certifications in order to sell our products and must undergo periodic inspections by notified bodies to obtain and maintain these certifications.

Future intellectual property litigation could be costly and disruptive to us.

We operate in an industry that is susceptible to significant intellectual property litigation and, in recent years, it has been common for companies in the medical device field to aggressively challenge the patent rights of other companies in order to prevent the marketing of new devices. Intellectual property litigation is expensive, complex and lengthy and its outcome is difficult to predict. Future patent litigation may result in significant royalty or other payments or injunctions that can prevent the sale of products and may significantly divert the attention of our technical and management personnel. In the event that our right to market any of our products is successfully challenged, and if we fail to obtain a required license or are unable to design around a patent, our business, financial condition or results of operations could be materially adversely affected.

We may not be able to effectively protect our intellectual property rights.

Patents and other proprietary rights are and will be essential to our business, and our ability to compete effectively with other companies will be dependent upon the proprietary nature of our technologies. We rely upon trade secrets, know-how, continuing technological innovations, strategic alliances and licensing opportunities to develop, maintain and strengthen our competitive position. We pursue a policy of generally obtaining patent protection in both the U.S. and abroad for patentable subject matter in our proprietary devices and also attempt to review third-party patents and patent applications to the extent publicly available to develop an effective patent strategy, avoid infringement of third-party patents, identify licensing opportunities and monitor the patent claims of others. We currently own numerous U.S. and foreign patents. We also are party to various license agreements pursuant to which patent rights have been obtained or granted in consideration for cash or royalty payments. No assurance can be made that any pending or future patent applications will result in issued patents, that any current or future patents issued to, or licensed by, us will not be challenged or circumvented by our competitors, or that our patents will not be found invalid.

In addition, we may have to take legal action in the future to protect our patents, trade secrets or know-how or to assert them against claimed infringement by others. Any legal action of that type could be costly and time consuming to us and no assurances can be made that any lawsuit will be successful.

The invalidation of key patents or proprietary rights that we own, or an unsuccessful outcome in lawsuits to protect our intellectual property, could have a material adverse effect on our business, financial condition or results of operations.

Future product liability claims and other litigation, including private securities litigation and shareholder derivative suits, may adversely affect our business, reputation and ability to attract and retain customers.

The design, manufacture and marketing of medical device products of the types that we produce entail an inherent risk of product liability claims. A number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to these or other products that we manufacture or sell, including component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information. These factors could result in product liability claims, a recall of one or more of our products or a safety alert relating to one or more of our products. Product liability claims may be brought by individuals or by groups seeking to represent a class.

We may not be successful in our strategic initiatives to become primarily a medical device company.

Our strategic initiatives intend to further expand our ability to offer customers effective, quality medical devices that satisfy their needs, as well as focus the Company on our medical device platform. If we are unsuccessful in our strategic initiatives, we may be unable to continue to grow our business significantly or may record asset impairment charges in the future.

Our future growth is dependent upon the development of new products, which requires significant research and development, clinical trials and regulatory approvals, all of which are very expensive and time-consuming and may not result in a commercially viable product.

In order to develop new products and improve current product offerings, we focus our research and development programs largely on the development of next-generation and novel technology offerings across multiple programs and opportunities.

As a part of the regulatory process of obtaining marketing clearance from the FDA for new products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations and trial endpoints. Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors or by third parties, or the market’s perception of this clinical data, may adversely impact our ability to obtain product approvals from the FDA, our position in, and share of, the markets in which we participate and our business, financial condition, results of operations or future prospects.

New products may not be accepted in the market.

We are now, and will continue to be, developing new products and introducing them into the market. There can be no assurance that any new product will be accepted by the market. New products are sometimes introduced into the market in a prototype format and may need later revisions or design changes before they operate in a manner to be accepted in the market. As a result of the introduction of new products, there is some risk that revenue expectations may not be met and in some cases the product may not achieve market acceptance.

We face intense competition and may not be able to keep pace with the rapid technological changes in the medical devices industry, which could have an adverse effect on our business, financial condition or results of operations.

The medical device product market is highly competitive. We encounter significant competition across our product lines and in each market in which our products are sold from various medical device companies, some of which have greater financial and marketing resources than we do.

Additionally, the medical device product market is characterized by extensive research and development and rapid technological change. Developments by other companies of new or improved products, processes or technologies, in particular in the cancer treatment market, may make our products or proposed products obsolete or less competitive and may negatively impact our revenues. We are required to devote continued efforts and financial resources to develop or acquire scientifically advanced technologies and products, apply our technologies cost-effectively across product lines and markets, attract and retain skilled development personnel, obtain patent and other protection for our technologies and products, obtain required regulatory and reimbursement approvals and successfully manufacture and market our products. Failure to develop new products or enhance existing products could have a material adverse effect on our business, financial condition or results of operations.

Consolidation in the healthcare industry could lead to demands for price concessions or the exclusion of some suppliers from certain of our significant market segments, which could have an adverse effect on our business, financial condition or results of operations.

The cost of healthcare has risen significantly over the past decade and numerous initiatives and reforms initiated by legislators, regulators and third-party payers to curb these costs have resulted in a consolidation trend in the healthcare industry, including hospitals. This in turn has resulted in greater pricing pressures and the exclusion of certain suppliers from important market segments as group purchasing organizations, independent delivery networks and large single accounts continue to consolidate purchasing decisions for some of our hospital customers. We expect that market demand, government regulation, third-party reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers and competitors, which may reduce competition, exert further downward pressure on the prices of our products and may adversely impact our business, financial condition or results of operations.

We may experience disruption in supply due to our dependence on our suppliers to continue to ship product requirements and our inability to obtain suppliers of certain components for our products.

Our suppliers may encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunctions, labor shortages or environmental factors. In addition, we purchase both raw materials used in our products and finished goods from various suppliers and may have to rely on a single source supplier for certain components of our products where there are no alternatives are available. Although we anticipate that we have adequate sources of supply and/or inventory of these components to handle our production needs for the foreseeable future, if we are unable to secure on a timely basis sufficient quantities of the materials we depend on to manufacture our products, if we encounter delays or contractual or other difficulties in our relationships with these suppliers, or if we cannot find suppliers at an acceptable cost, then the manufacture of our products may be disrupted, which could increase our costs and have a material adverse effect on our business.

If we fail to manage any expansion or acquisition, our business could be impaired.

We may in the future acquire one or more technologies, products or companies that complement our business. We may not be able to effectively integrate these into our business and any such acquisition could bring additional risks, exposures and challenges to our company. In addition, acquisitions may dilute our earnings per share, disrupt our ongoing business, distract our management and employees, increase our expenses, subject us to liabilities and increase our risk of litigation, all of which could harm our business. If we use cash to acquire technologies, products, or companies, such use may divert resources otherwise available for other purposes. If we use our common stock to acquire technologies, products, or companies, our shareholders may experience substantial dilution. If we fail to manage any expansions or acquisition, our business could be impaired.

Our agreements and contracts entered into with partners and other third parties may not be successful.

We signed in the past and may pursue in the future contracts and agreements with third parties that would assist our marketing, manufacturing, selling, and distribution efforts. We cannot assure you that any agreements or arrangements entered into will be successful.

The current disruptions in the financial markets could affect our ability to obtain debt financing on favorable terms (or at all) and have other adverse effects on us.

The United States credit markets have recently experienced historic dislocations and liquidity disruptions which have caused financing to be unavailable in many cases and even if available caused spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the debt markets, making financing terms for borrowers able to find financing less attractive, and in many cases have resulted in the unavailability of certain types of debt financing. Continued uncertainty in the credit markets may negatively impact our ability to access debt financing on favorable terms or at all. In addition, Federal legislation to deal with the current disruptions in the financial markets could have an adverse affect on our financial condition and results of operations.

The fluctuation of our quarterly results may adversely affect the trading price of our common stock.

Our revenues and results of operations have in the past and will likely vary in the future from quarter to quarter due to a number of factors, many of which are outside of our control and any of which may cause our stock price to fluctuate. You should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance. It is likely that in some future quarters, our results of operations may be below the expectations of public market analysts and investors. In this event, the price of our common stock may fall.

We may not be able to attract and retain additional key management, sales and marketing and technical personnel, or we may lose existing key management, sales and marketing or technical personnel, which may delay our development and marketing efforts.

We depend on a number of key management, sales and marketing and technical personnel. The loss of the services of one or more key employees could delay the achievement of our development and marketing objectives. Our success will also depend on our ability to attract and retain additional highly qualified management, sales and marketing and technical personnel to meet our growth goals. We face intense competition for qualified personnel, many of whom are often subject to competing employment offers, and we do not know whether we will be able to attract and retain such personnel.

Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse or unexpected revenue fluctuations and affect our reported results of operations.

A change in accounting standards or practices or a change in existing taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and taxation rules and varying interpretations of accounting pronouncements and taxation practice have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

Litigation can be lengthy, expensive and disruptive to our operations, and results cannot be predicted with certainty. An adverse decision could result in monetary damages or injunctive relief that could affect our financial condition, results of operations and cash flows.

On March 21, 2010, the House of Representatives passed the Affordable Health Care for America Act, which President Obama signed into law on March 23, 2010. While we are continuing to evaluate this legislation and its potential impact on the Company, it may adversely affect our business and results of operations, possibly materially.

Specifically, one of the new law’s components is a 2.3% excise tax on sales of most medical devices, starting in 2013. This tax may put increased cost pressure on medical device companies, including our customers, and may lead our customers to reduce their orders for products we produce or to request that we reduce the prices we charge for products we produce in order to offset the tax.

Item 1B. Unresolved Staff Comments.

Not Applicable.

Item 2. Properties.

Effective September 1, 2010, the Company occupies approximately 34,400 square feet at 1938 New Highway, Farmingdale, New York. The rental amount is approximately $23,000 a month and includes a pro rata share of real estate taxes, water, sewer and other charges which are assessed on the leased premises or the land upon which the leased premises are situated. The Company believes that the leased facilities are adequate for its present needs.

Item 3. Legal Proceedings.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

Removed.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)

The Company’s common stock, $.01 par value (“Common Stock”), is listed on the Nasdaq Global Market (“Nasdaq”) under the symbol “MSON”.

The following table sets forth the high and low sales prices for the Common Stock during the periods indicated as reported by Nasdaq.

		High				Low
Fiscal 2010:
First Quarter		$	2.63			$	1.60
Second Quarter			2.75				1.74
Third Quarter			2.74				1.77
Fourth Quarter			2.99				2.08

		High				Low
Fiscal 2009:
First Quarter		$	3.77			$	1.91
Second Quarter			2.35				.58
Third Quarter			1.50				.66
Fourth Quarter			2.94				.75

(b)		As of September 24, 2010, the Company had 7,001,369 shares of Common Stock outstanding and 74 shareholders of record. This does not take into account shareholders whose shares are held in “street name” by brokerage houses.
(c)		The Company has not paid any cash dividends since its inception. The Company does not intend to pay any cash dividends in the foreseeable future, but intends to retain all earnings, if any, for use in its business operations.

Equity Compensation Plan Information:

										Number of securities
										remaining for future
		Number of securities to be				Weighted average exercise				issuance under equity
		issued upon exercise of				price of outstanding				compensation plans
		outstanding options,				options, warrants and				(excluding securities
Plan category		warrants and rights				rights				reflected in column (a))
		(a)				(b)				(c)
Equity compensation plans approved by security holders
I. 1991 Plan			30,000			$	7.38				—
II. 1996 Director’s Plan			160,000				5.56				—
III. 1996 Plan			71,000				6.48				—
IV. 1998 Plan			275,200				7.25				—
V. 2001 Plan			788,010				5.34				83,684
VI. 2005 Plan			374,300				4.85				125,700
VII. 2005 Director’s Plan			150,000				4.04				50,000
VIII. 2009 Plan			—				—				500,000
IX. 2009 Director’s Plan			—				—				200,000
Equity compensation plans not approved by security holders			—				—				—
Total			1,848,510			$	4.99				959,384

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations:

The following discussion and analysis provides information which the Company’s management believes is relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein. Unless otherwise specified, this discussion relates solely to the Company’s continuing operations.

All of the Company’s sales to date have been derived from the sale of medical device products, which include manufacture and distribution of ultrasonic medical device products, and laboratory and scientific products, which include ductless fume enclosures for filtration of gaseous emissions in laboratories and hospitals.

Fiscal years ended June 30, 2010 and 2009:

Net sales: Net sales increased $658,002 to $13,371,275 in fiscal 2010 from $12,713,273 in fiscal 2009. This difference in net sales is principally due to an increase in medical device products sales of $1,049,085 to $10,737,379 in fiscal 2010 from $9,688,294 in fiscal 2009. The increase in sales of medical device products is principally due to an increase in BoneScalpel revenues of $2,218,352, partially offset by lower Misonix Limited revenues of $1,125,000. This increase was partially offset by a decrease in sales of laboratory and scientific products of $391,083 to $2,633,896 in fiscal 2010 from $3,024,979 in fiscal 2009. The decrease in sales of laboratory and scientific products is due to a decrease in forensic ductless fume enclosure sales and due to current economic conditions in the United States, particularly affecting municipalities to which these products are sold.

Export sales from the United States are remitted in U.S. dollars and export sales for UKHIFU Limited (“UKHIFU”) are remitted in English Pounds and Misonix, Ltd. sales to date have been remitted in English pounds and Euros. To the extent that the Company’s revenues are generated in English Pounds, operating results were translated for reporting purposes into U.S. dollars using weighted average rates of 1.58 and 1.62 for the years ended June 30, 2010 and 2009, respectively. The operating results from UKHIFU and Misonix Limited’s HIFU business LTD are shown in discontinued operations. A weakening of the English Pound and Euro, in relation to the U.S. dollar, will have the effect of increasing recorded revenues and profits, while a weakening of the English Pound and Euro will have the opposite effect. Since the Company’s operations in England generally set prices and bids for contracts in English Pounds, a strengthening of the English Pound, while increasing the value of its UK assets, might place the Company at a pricing disadvantage in bidding for work from manufacturers based overseas. The Company collects its receivables predominately in the currency of the country the subsidiary resides in. The Company has not engaged in foreign currency hedging transactions, which include forward exchange agreements. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”

The Company’s revenues are generated from various geographic regions. The following is an analysis of net sales by geographic region:

		Year ended June 30,
		2010				2009
United States		$	10,452,705			$	9,167,834
United Kingdom			59,628				1,417,685
Europe			1,244,527				1,312,599
Asia			756,722				372,929
Canada and Mexico			241,045				167,272
Middle East			267,929				89,212
Other			348,719				185,742
		$	13,371,275			$	12,713,273

Summarized financial information for each of the segments for the years ended June 30, 2010 and 2009 are as follows:

For the year ended June 30, 2010:

		Medical				Laboratory and				Corporate and
		Devices				Scientific Products				Unallocated				Total
Net sales		$	10,737,379			$	2,633,896			$	—			$	13,371,275
Cost of goods sold			4,937,666				1,907,114				—				6,844,780
Gross profit			5,799,713				726,782				—				6,526,495
Selling expenses			3,103,019				522,053				—				3,625,072
Research and development			1,457,373				346,151				—				1,803,524
General and administrative			—				—				5,055,848				5,055,848
Total operating expenses			4,560,392				868,204				5,055,848				10,484,444
Income (loss) from continuing operations		$	1,239,321			$	(141,122	)		$	(5,055,848	)		$	(3,957,949	)
Income (loss) from discontinued operations		$	(720,325	)		$	49,307			$	—			$	(671,018	)

For the year ended June 30, 2009:

		Medical				Laboratory and				Corporate and
		Devices				Scientific Products				Unallocated				Total
Net sales		$	9,688,294			$	3,024,979			$	—			$	12,713,273
Cost of goods sold			5,368,899				2,126,103				—				7,495,002
Gross profit			4,319,395				898,876				—				5,218,271
Selling expenses			2,177,000				442,510				—				2,619,510
Research and development			1,150,477				227,330				—				1,377,807
General and administrative			—				—				5,018,143				5,018,143
Total operating expenses			3,327,477				669,840				5,018,143				9,015,460
Income (loss) from continuing operations		$	991,919			$	229,036			$	(5,018,143	)		$	(3,797,189	)
Income from discontinued operations		$	978,930			$	2,689,848			$	—			$	3,668,778

Net sales for the three months ended June 30, 2010 were $4,278,953 compared to $2,994,704 for the three months ended June 30, 2009. The increase of $1,284,249 is due to an increase in medical device products sales of $1,351,418, primarily due to an increase in BoneScalpel sales of $1,043,589 and higher Neuroaspirator sales of $170,676. Laboratory and scientific products sales decreased $67,170 due primarily to a decrease in forensic fume enclosure product sales resulting from the weakened economy and funds available to local law enforcement.

Summarized financial information for each of the segments for the three months ended June 30, 2010 and 2009 are as follows:

For the three months ended June 30, 2010:

		Medical				Laboratory and				Corporate and
		Devices				Scientific Products				Unallocated				Total
Net sales		$	3,604,886			$	674,067			$	—			$	4,278,953
Cost of goods sold			1,530,866				453,375				—				1,984,241
Gross profit			2,074,020				220,691				—				2,294,712
Selling expenses			832,548				142,825				—				975,373
Research and development			319,691				96,700				—				416,391
General and administrative			—				—				1,231,208				1,231,208
Total operating expenses			1,152,239				239,525				1,231,208				2,622,972
Operating income (loss) from continuing operations		$	921,781			$	(18,834	)		$	(1,231,208	)		$	(328,260	)
Net income from discontinued operations, net of tax		$	(596,186	)		$	(277,552	)		$	—			$	(873,738	)

For the three months ended June 30, 2009:

		Medical				Laboratory and				Corporate and
		Devices				Scientific Products				Unallocated				Total
Net sales		$	2,253,467			$	741,237			$	—			$	2,994,704
Cost of goods sold			1,163,517				483,950				—				1,647,467
Gross profit			1,089,950				257,287				—				1,347,237
Selling expenses			601,850				78,387				—				680,237
Research and development			258,278				61,850				—				320,128
General and administrative			—				—				1,173,958				1,173,958
Total operating expenses			860,128				140,237				1,173,958				2,174,323
Operating income (loss) from continuing operations		$	229,822			$	117,050			$	(1,173,958	)		$	(827,086	)
Net income from discontinued operations, net of tax		$	553,201			$	3,053,952			$	—			$	3,607,153

Gross profit: Gross profit increased to 48.8% in fiscal 2010 from 41% in fiscal 2009. Gross profit for medical device products increased to 54% in fiscal 2010 from 44.6% in fiscal 2009. Gross profit for therapeutic medical device products was positively impacted by a favorable product mix due to increased sales of the BoneScalpel product in the United States. Gross profit for laboratory and scientific products decreased to 27.6% in fiscal 2010 from 29.7% in fiscal 2009 due to lower volume. Gross profit for the three months ended June 30, 2010 was 53.6% as compared to 45% for the three months ended June 30, 2009. Gross margins for medical device products was 57.5% for the three months ended June 30, 2010 as compared to 48.4% for the three months ended June 30, 2009. Laboratory and scientific products gross margins were 32.7% for the three months ended June 30, 2010 and 34.7% for the three months ended June 30, 2009.

Selling expenses: Selling expenses increased $1,005,562 to $3,625,072 (27.1% of net sales) in fiscal 2010 from $2,619,510 (20.6% of net sales) in fiscal 2009. Laboratory and scientific products selling expenses increased approximately $79,543, primarily due to higher advertising and salary related expenses. Selling expenses for medical device products increased approximately $926,019, principally due to salary expenses for increased personnel of $581,206, increased advertising expense of $100,955, higher travel expenses of $254,131, partially offset by a decrease in other selling expenses of $10,271. Selling expenses for the three months ended June 30, 2010 increased $295,136 to $975,373 (22.8% of net sales) from $680,237 (22.7% of net sales) in the three months ended June 30, 2009. Selling expenses related to medical device products sales increased approximately $230,699 due to increased salary expenses for increased personnel of $166,416, higher travel expenses of $50,918 and clinical expenses of $12,646. Laboratory and scientific products selling expenses increased approximately $64,438 due to increased salary related expenses of $37,437, advertising expenses of $23,281 and other selling expenses of $3,720.

General and administrative expenses: Total general and administrative expenses increased $37,705 in fiscal 2010 to $5,055,848 from $5,018,143 in fiscal 2009 due to increased accounting expense. General and administrative expenses for the three months ended June 30, 2010 increased $57,250 to $1,175,208 from $1,173,958 for the three months ended June 30, 2009 due to increased accounting expense.

Research and development expenses: Research and development expenses increased $425,717 to $1,803,524 in fiscal 2010 from $1,377,807 in fiscal 2009. Research and development expenses for medical device products increased $306,896. Laboratory and scientific products research and development expenses increased $118,821. The increase in research and development expenses related to medical products is mainly related to increased salary related costs of $247,160 relating to increased research and development efforts on developing new technology, legal costs of $28,689, product development material costs of $27,985 and other research and development costs of $3,062. Research and development expenses for the three months ended June 30, 2010 increased $96,263 to $416,391 from $320,128 for the three months ended June 30, 2009. Medical device products research and development costs increased $61,413 and expenses for laboratory and scientific products increased $34,850, primarily due to higher salary related costs relating to increased research and development efforts on developing new technology.

Other income: Other income decreased $1,227,953 in fiscal 2010 to $1,072,311 from $2,300,264 in fiscal 2009. The decrease in other income is due to the receipt in the first quarter of fiscal year 2009 of $1,516,866 from USHIFU pursuant to the Focus tranaction between the Company and USHIFU. This payment consisted of $837,500 for the 2,500 shares of Series M Preferred Stock of Focus owned by the Company and fifty (50%) percent of the outstanding principal and accrued interest of loans previously made by the Company to Focus. During the year, the remaining fifty (50%) of the outsanding principal and accrued interest on the loan was paid which resulted in a gain of $679,336 that was recorded in the third quarter. Other income (expense) decreased $346,613 to $22,094 for the three months ended June 30, 2010 from $368,707 for the three months ended June 30, 2009. The decrease is due to unfavorable foreign exchange of $154,667, gain on disposal of fixed assets at Misonix in fiscal 2009 of $107,639, lower net royalty income of $44,289, lower interest income of $29,596 and other unfavorable expenses of $10,422.

Income taxes: In fiscal 2010 the income tax expense effective tax rate was 24%. The Company established a full valuation allowance against all deferred tax assets due to the net loss from operations over the past 5 years which caused management to conclude that it is more likely than not its deferred tax assets will not be realized.

Discontinued operations:

The following represents the results of Ultrasonics, Sonora, Labcaire, UKHIFU and Misonix HIFU Technologies, which were disposed of during the year and have been reported as a discontinued operation:

		For the year ended
		June 30,
		2010				2009
Revenues		$	5,195,005			$	30,865,551
Income from discontinued operations, before tax		$	1,256,425			$	1,102,429
Gain on sale of Ultrasonics products			—				2,670,777
Loss on sale of Labcaire			(295,879	)			—
Gain on sale of Sonora			947,374				—
Loss on sale of HIFU			(782,286	)			—
Income tax expense			(1,816,324	)			(79,798	)
Income (loss) from discontinued operations, net of tax			(690,690	)			3,693,408
Noncontrolling interest in discontinued operation			19,672				(24,630	)
Income (loss) from discontinued operations, net of tax attributable to Misonix, Inc. shareholders			(671,018	)			3,668,778

Liquidity and Capital Resources:

Working capital at June 30, 2010 and June 30, 2009 was $14,460,000 and $7,744,000, respectively. For the year ended June 30, 2010, cash used in operations totaled $2,344,000. The major use of cash from operations was related to the net loss from continuing operations of $2,191,000 during the year ended June 30, 2010. For the fiscal year 2010, cash used in investing activities totaled $354,000, primarily consisting of the purchase of property, plant and equipment during the regular course of business offset by the proceeds from the collection of the Focus note. For the fiscal year 2010, cash used in financing activities was $2,730,000, primarily consisting of net proceeds from short-term borrowings of $9,515,000, offset by principal payments of approximately $12,232,000 and lease obligations of $13,600. Cash provided by discontinued operations was $11,923,000 primarily relating to the proceeds from the sale of the Sonora and Labcaire operations.

The Company maintains cash balances at various financial institutions. At June 30, 2010, these financial institutions held cash that was approximately $9,526,000 in excess of amounts insured by the Federal Deposit Insurance Corporation and other government agencies.

The Company’s line of credit with Wells Fargo Bank N.A. expired December 28, 2009. There is no present intention to enter into another credit facility with any financial institution.

Commitments

The Company has commitments under a note payable and capital and operating leases that will be funded from operating sources. At June 30, 2010, the Company’s contractual cash obligations and commitments relating to the revolving credit facilities, note payable and capital and operating leases are as follows:

		Less than												After
Commitment		1 year				1-3 years				4-5 years				5 years				Total
Note payable			177,679				—				—				—				177,679
Capital leases			14,533				14,274				—				—				28,807
Operating leases			348,461				617,528				614,988				—				1,580,977
		$	540,673			$	631,802			$	614,988			$	—			$	1,787,463

Off-Balance Sheet Arrangements

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

Other

The Company believes that its existing capital resources will enable it to maintain its current and planned operations for at least 18 months from the date hereof.

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

Critical Accounting Policies:

General: Financial Reporting Release No. 60, which was released by the SEC in December 2001, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of the financial statements. Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report includes a summary of the Company’s significant accounting policies and methods used in the preparation of its financial statements. The Company’s discussion and analysis of its financial condition and results of operations is based upon the Company’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts, inventories, goodwill, property, plant and equipment and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that the following are our more critical estimates and assumptions used in the preparation of our consolidated financial statements:

Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable, principally trade, are generally due within 30 to 90 days and are stated at amounts due from customers, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by a review of their current credit information. The Company continuously monitors aging reports, collections and payments from customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within expectations and the provisions established, the Company cannot guarantee the same credit loss rates will be experienced in the future. The Company writes off accounts receivable when they become uncollectible.

Inventories: Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost (determined by the first-in, first-out method) or market. At each balance sheet date, we evaluate ending inventories for excess quantities and obsolescence. Our evaluation includes an analysis of historical sales by product, projections of future demand by product, the risk of technological or competitive obsolescence for our products, general market conditions, and the feasibility of reworking or using excess or obsolete products or components in the production or assembly of other products that are not obsolete or for which we do not have excess quantities in inventory. To the extent that we determine there are excess or obsolete quantities, we record valuation reserves against all or a portion of the value of the related products to adjust their carrying value to estimated net realizable value. If future demand or market conditions are different from our projections, or if we are unable to rework excess or obsolete quantities into other products, we may change the recorded amount of inventory valuation reserves through a charge or reduction in cost of product revenues in the period the revision is made.

Long Lived Assets: Property, plant and equipment are recorded at cost. The Company capitalizes items in excess of $1,000. Minor replacements and maintenance and repair expenses are charged to expense as incurred. Depreciation of property and equipment is provided using the straight-line method over estimated useful lives ranging from 3 to 5 years. Leasehold improvements are amortized over the life of the lease or the useful life of the related asset, whichever is shorter. Inventory items included in property, plant and equipment are depreciated using the straight line method over estimated useful lives of 3 to 5 years. We evaluate long-lived assets, including property, plant and equipment and intangible assets other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amounts of specific assets or group of assets may not be recoverable. When an evaluation is required, we estimate the future undiscounted cash flows associated with the specific asset or group of assets. If the cost of the asset or group of assets cannot be recovered by these undiscounted cash flows, an impairment charge would be recorded. Our estimates of future cash flows are based on our experience and internal business plans. Our internal business plans require judgments regarding future economic conditions, product demand and pricing. Although we believe our estimates are appropriate, significant differences in the actual performance of an asset or group of assets may materially affect our evaluation of the recoverability of the asset values currently recorded.

Revenue Recognition: The Company records revenue upon shipment for products shipped F.O.B. shipping point. Products shipped F.O.B. destination points are recorded as revenue when received at the point of destination. Shipments under agreements with distributors are not subject to return, and payment for these shipments is not contingent on sales by the distributor. The Company recognizes revenue on shipments to distributors in the same manner as with other customers. Fees from exclusive license agreements are recognized ratably over the terms of the respective agreements. Service contract and royalty income are recognized when earned.

Goodwill: Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in connection with the Company’s acquisitions of assets of Fibra Sonics, Inc.

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Nos. 805 (“ASC 805”) and 350 (“ASC 350”), “Business Combinations” and “Goodwill and Other Intangible Assets,” respectively.

Goodwill and intangible assets with indefinite useful lives are not amortized. We review goodwill and identifiable intangible assets with indefinite lives for impairment annually and whenever events or changes indicate that the carrying value of an asset may not be recoverable. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of significant assets or products. Application of these impairment tests requires significant judgments, including estimation of cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, the useful life over which cash flows will occur and determination of our weighted-average cost of capital. Changes in the projected cash flows and discount rate estimates and assumptions underlying the valuation of identifiable intangible assets, in-process research and development, and goodwill could materially affect the determination of fair value at acquisition or during subsequent periods when tested for impairment. The Company completed its annual goodwill impairment tests for fiscal 2010 and 2009 in the respective fourth quarter. There were no indicators that goodwill recorded was impaired.

Income Taxes: Income taxes are accounted for in accordance with ASC No. 740, “Accounting for Income Taxes”. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Stock-Based Compensation: The Company previously accounted for stock option plans under ASC No. 817. As permitted under this standard, compensation cost was recognized using the intrinsic value method described in APB No. 25. The Company subsequently adopted the fair-value recognition provisions of ASC No. 817 “Share-Based Payment” (“ASC 817”) and SEC Staff Accounting Bulletin No. 107 using the modified-prospective transition method; therefore, prior periods have not been restated. The fair value of the stock options is estimated based upon option price, volatility, the risk free rate, and the average time the shares are held. It is then amortized over the vesting period. See Note 9 of the Company’s consolidated financial statements for additional information regarding stock-based compensation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk:

The principal market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which the Company is exposed are interest rates on short-term investments and foreign exchange rates, which generate translation gains and losses due to the English Pound to U.S. Dollar conversion.

Foreign Exchange Rates:

Since approximately 0.4% of the Company’s revenues in fiscal 2010 were received in British Pounds and the remaining foreign sales are remitted in U.S. Dollars, the Company does not face foreign exchange risks.

Item 8. Financial Statements and Supplemental Data.

The report of the independent registered public accounting firm and consolidated financial statements listed in the accompanying index is filed as part of this Report. See “Index to Consolidated Financial Statements” on page 34.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not Applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this Annual Report, under the supervision and with the participation of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of that date. This is in accordance with Section 404(a) of the Sarbanes-Oxley Act of 2002 (“SOX”) because the Company is a smaller reporting company under the SEC’s rules. We are not required to be in compliance with SOX 404(b), which requires attestation by a company’s independent auditors.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, the principal executive officer and principal financial officer, and effected by the board of directors and management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US Generally Accepted Accounting Principles (“GAAP”) including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and the directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies and procedures may deteriorate.

Management conducted an evaluation of the effectiveness of the internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that internal control over financial reporting was effective as of June 30, 2010.

This Annual Report does not include an attestation report of the Company’s current independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s current independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.

The Company currently has six Directors. Their term expires at the next Annual Meeting of Shareholders. The following table contains information regarding all Directors and executive officers of the Company:

								Director
Name		Age				Principal Occupation		Since
John Gildea			67			Director			2004
Howard Alliger			83			Director			1971
Dr. Charles Miner III			59			Director			2005
T. Guy Minetti			59			Director			2003
Thomas F. O’Neill			64			Director			2003
Michael A. McManus, Jr.			67			Director, President and Chief Executive Officer			1998
Richard Zaremba			55			Senior Vice President, Chief Financial Officer, Secretary and Treasurer		—
Michael C. Ryan			64			Senior Vice President, Medical Division
Dan Voic			48			Vice President of Research and Development and Engineering		—
Ronald Manna			56			Vice President of New Product Development and Regulatory Affairs		—
Frank Napoli			53			Vice President of Operations		—

The following is a brief account of the business experience of the Company’s Directors and executive officers:

John W. Gildea is the founding principal of Gildea Management Co., a management company of special situations with middle market companies in the United States and Central Europe. From 2000 to 2003 Gildea Management Co. formed a joint venture with J.O. Hambro Capital Management Co. to manage accounts targeting high yield debt and small capitalization equities. From 1996 to 2000 Gildea Management Co. formed and founded Latona Europe, a joint venture between Latona U.S., Lazard Co., and Gildea Management Co. to restructure several Czech Republic companies. Before forming Gildea Management Co. in 1990, Mr. Gildea managed the Corporate Series Group at Donaldson, Lufkin and Jenrette, an investment banking firm. Mr. Gildea is a graduate of the University of Pittsburgh.

Mr. Gildea has extensive experience as an investment banker. The Board believes this experience qualifies him to serve as a director.

Howard Alliger founded the Company’s predecessor in 1955 and the Company was a sole proprietorship until 1960. The Company name then was Heat Systems-Ultrasonics. Mr. Alliger was President of the Company until 1982 and Chairman of the Board until 1996. In 1996 Mr. Alliger stepped down as Chairman and ceased to be a corporate officer. He has been awarded 23 patents and has published various papers on ultrasonic technology. For three years, ending in 1991, Mr. Alliger was the President of the Ultrasonic Industry Association. Mr. Alliger holds a B.A. degree in economics from Allegheny College and also attended Cornell University School of Engineering for four years. He has also established, and is President of, two privately held entities which are engaged in pharmaceutical research and development.

Mr. Alliger has extensive experience as an inventor and is the founder of the Company. The Board believes this experience qualifies him to serve as a director.

Dr. Charles Miner III currently practices internal medicine in Darien, Connecticut. Dr. Miner is on staff at Stamford and Newark Hospitals and since 1982 has held a teaching position at Columbia Presbyterian Hospital. Dr. Miner received his M.D. from the University Of Cincinnati College Of Medicine in 1979 and received a Bachelor of Science from Lehigh University in 1974.

Dr. Miner is an experienced physician. The Board believes this experience qualifies him to serve as a director.

T. Guy Minetti is Chief Executive Officer of TwigTek, LLC, which is engaged in the remarketing and recycling of used electronics. Prior to joining TwigTek in November 2009, he founded and was the Managing Director of Senior Resource Advisors LLC, a management consulting firm, from 2005 through 2008. Prior to being Managing Director of Senior Resource Advisors LLC, Mr. Minetti served as the Vice Chairman of the Board of Directors of 1-800-Flowers.Com, a publicly-held specialty gift retailer based in Westbury, New York. Before joining 1-800-Flowers.Com in 2000, Mr. Minetti was the Managing Director of Bayberry Advisors, an investment-banking boutique he founded in 1989 to provide corporate finance advisory services to small-to-medium-sized businesses. From 1981 through 1989, Mr. Minetti was a Managing Director of the investment banking firm, Kidder, Peabody & Company. While at Kidder, Peabody, Mr. Minetti worked in the investment banking and high yield bond departments. Mr. Minetti is a graduate of St. Michael’s College.

Mr. Minetti has extensive experience as an investment banker and as a director of a public company. The Board believes this experience qualifies him to serve as a director.

Thomas F. O’Neill, a founding principal of Sandler O’Neill & Partners, L.P., an investment banking firm, began his Wall Street career at L.F. Rothschild. Mr. O’Neill specialized in working with financial institutions in Rothschild’s Bank Service Group from 1972. He was appointed Managing Director of the Bank Service Group, a group consisting of fifty-five professionals, in 1984. In 1985, he became a Managing Director at Bear Stearns and Co-Manager of the Financial Services Group. Mr. O’Neill serves on the Board of Directors of Archer-Daniels-Midland Company and The Nasdaq Stock Market, Inc. Mr. O’Neill is a graduate of New York University and a veteran of the United States Air Force.

Mr. O’Neill has extensive experience as an investment banker and as a director of public companies. The Board believes this experience qualifies him to serve as a director.

Michael A. McManus, Jr. became President and Chief Executive Officer of the Company in November 1999. From November 1991 to March 1999, Mr. McManus was President and Chief Executive Officer of New York Bancorp, Inc. Prior to New York Bancorp, Inc., Mr. McManus held senior positions with Jamcor Pharmaceutical, Inc., Pfizer, Inc. and Revlon Corp. Mr. McManus also spent several years as an Assistant to President Reagan. Mr. McManus serves on the Board of Directors of the following publicly traded companies: A. Schulman, Inc. and Novavax, Inc. Mr. McManus holds a B.A. degree in Economics from the University of Notre Dame and a Juris Doctorate from Georgetown University Law Center.

Mr. McManus’ extensive first-hand knowledge of the business and historical development of the Company, as well as his executive, management and leadership experience and achievement, give him highly valued insights into our Company’s challenges, opportunities and business. Mr. McManus also possesses broad knowledge related to equity and capital markets that the Board believes are invaluable to the Board’s discussions of the Company’s capital and liquidity needs and qualify him to serve on the Board.

Richard Zaremba became Senior Vice President in 2004. He became Vice President and Chief Financial Officer in February 1999. From March 1995 to February 1999, he was the Vice President and Chief Financial Officer of Converse Information Systems, Inc., a manufacturer of digital voice recording systems. Previously, Mr. Zaremba was Vice President and Chief Financial Officer of Miltope Group, Inc., a manufacturer of electronic equipment. Mr. Zaremba is a licensed certified public accountant in the state of New York and holds BBA and MBA degrees in Accounting from Hofstra University.

Michael C. Ryan became Senior Vice President, Medical Division in October 2007. Prior thereto, he served as Senior Vice President and General Manager for Nomos Radiation Oncology from 2006 to October 2007. From 1992 to 2005, Mr. Ryan was Executive Vice President, Business Development for Inter V. Mr. Ryan holds a Bachelor of Arts in Economics from John F. Kennedy College.

Dan Voic became Vice President of Research and Development and Engineering in January 2002. Prior thereto, he served as Engineering Manager and Director of Engineering with the Company. Mr. Voic has approximately 15 years experience in both medical and laboratory and scientific products development. Mr. Voic holds an M.S. degree in mechanical engineering from Polytechnic University “Traian Vuia” of Timisoara, Romania and an MS degree in applied mechanics from Polytechnic University of New York.

Ronald Manna became Vice President of New Product Development and Regulatory Affairs of the Company in January 2002. Prior thereto, Mr. Manna served as Vice President of Research and Development and Engineering, Vice President of Operations and Director of Engineering of the Company. Mr. Manna holds a B.S. degree in mechanical engineering from Hofstra University.

Frank Napoli became Vice President of Operations in September 2004. From March 2004 to September 2004, Mr. Napoli was Vice President of Manufacturing for Spellman High Voltage Electronics Corp. Previously, Mr. Napoli was Director of Manufacturing for Telephonics Corporation. Mr. Napoli holds a B.S. degree in Mechanical Engineering from the New York Institute of Technology.

Executive officers are elected annually by, and serve at the discretion of, the board of directors.

		DIRECTOR COMPENSATION FOR THE 2010
		FISCAL YEAR
		Fees Earned or Paid in				Option
Name		Cash ($)				Awards ($)				Total
Michael A. McManus, Jr.			—				—				—
John Gildea			18,500				—				18,500
Howard Alliger			13,500				—				13,500
Dr. Charles Miner III			18,500				—				18,500
T. Guy Minetti			23,500				—				23,500
Thomas F. O’Neill			18,500				—				18,500

Outstanding options at fiscal year end for Messrs. O’Neill and Minetti are 75,000 shares each; Mr. Alliger is 70,000 shares and Messrs. Gildea and Miner are 45,000 shares each. Each non-employee director receives an annual fee of $15,000. The Chairman of the Audit Committee receives an additional $10,000 per year cash compensation and other members of the Audit Committee receive an additional $5,000 per year cash compensation. Each non-employee director is also reimbursed for reasonable expenses incurred while traveling to attend meetings of the Board of Directors or while traveling in furtherance of the business of the Company.

Section 16 (a) Beneficial Ownership Reporting Compliance of the Securities Exchange Act

Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who own more than 10% 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 SEC. 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. 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 2010.

Code of Ethics

The Company has adopted a code of ethics that applies to all of its directors, officers (including its Chief Executive Officer, Chief Financial Officer, Controller and any person performing similar functions) and employees. The Company has filed a copy of this Code of Ethics as Exhibit 14 to this Form 10-K. The Company has also made the Code of Ethics available on its website at www.MISONIX.COM.

Audit Committee

The Company has a separately-designated standing audit committee established in accordance with section 3(a) (58) (A) of the Exchange Act. The members of the Audit Committee are Messrs. Gildea, Miner, Minetti and O’Neill. The Board of Directors has determined that each member of the Audit Committee is “independent” not only under the Corporate Governance Requirements applicable to Nasdaq listed companies but also within the definition contained in a final rule of the SEC. Furthermore, the Board of Directors has determined that Messrs. Gildea, Minetti and O’Neill are “audit committee financial experts” within the definition contained in a final rule adopted by the SEC.

Item 11. Executive Compensation.

Compensation Discussion and Analysis

Overview of Compensation Program and Philosophy

Our compensation program is intended to:

	•		Attract, motivate, retain and reward employees of outstanding ability;
	•		Link changes in employee compensation to individual and corporate performance;
	•		Align employees’ interests with those of the Company’s shareholders.

The ultimate objective of our compensation program is to increase shareholder value. We seek to achieve these objectives with a total compensation approach which takes into account a competitive base salary, bonus pay based on the annual performance of the Company and individual goals and stock option awards.

Base Salaries

Base salaries paid to executives are intended to attract and retain highly talented individuals. In setting base salaries, individual experience, individual performance, the Company’s performance and job responsibilities during the year are considered. Executive salaries are reconciled by Human Resources and evaluated against local companies of similar size and nature.

Annual Bonus Plan Compensation

The Compensation Committee of the Board of Directors approves annual performance-based compensation. The purpose of the annual bonus-based compensation is to motivate executive officers and key employees. Target bonuses, based upon recommendations from the Chief Executive Officer are evaluated and approved by the Compensation Committee for all employees other than the Chief Executive Officer. The bonus recommendations are derived from individual and Company performance but not based on a specific formula and is discretionary. The Chief Executive Officer’s bonus compensation is derived from the Board of Directors’ recommendation to the Compensation Committee based upon the Chief Executive Officer’s performance and Company performance but is not based on a specific formula and is discretionary.

Stock Option Awards

Stock option awards are intended to attract and retain highly talented executives, to provide an opportunity for significant compensation when overall Company performance is reflected in the stock price, and to help align executives’ and shareholders’ interests. Stock options are typically granted at the time of hire to key new employees and annually to a broad group of existing key employees, including executive officers.

Annual option grants to executive officers are made in the form of incentive stock options (“ISO’s”) to the fullest extent permitted under tax rules, with the balance granted in the form of nonqualified stock options. ISO’s have potential income tax advantage for executives if the executive disposes of the acquired shares after satisfying certain holding periods. Tax laws provide that the aggregate grant at date of grant for market value of ISO’s that become exercisable for any employee in any year may not exceed $100,000.

Our current standard vesting schedule for all employees is 25% on the first anniversary of the date of grant, 50% on the second anniversary of the date of grant, 75% on the third anniversary of the date of grant and 100% on the fourth anniversary of the date of grant.

401 (k) Plan

Our Individual Deferred Tax and Savings Plan (the “401 (k) plan”) is a tax qualified retirement savings plan pursuant to which all of the Company’s U.S. employees may defer compensation under Section 401 (k) of the Internal Revenue Code of 1986, as amended (the “Code”). The Company contributes an amount equal to 10% of salary contributed under the 401 (k) plan by an eligible employee, up to the maximum allowed under the Code. We do not provide any supplemental retirement benefits to executive officers.

Change in Control benefits

Change in control benefits are intended to diminish the distraction that executives would face by virtue of the personal uncertainties created by a pending or threatened change in control and to assure that the Company will continue to have the executive’s full attention and services at all time. Our change in control benefits are designed to be competitive with similar benefits available at companies with which we compete for executives’ talent. These benefits, as one element of our total compensation program, help the Company attract, retain and motivate highly talented executives.

Mr. McManus’ employment agreement provides that after a change in control of the Company, he is entitled to a one-time additional compensation payment equal to two times his total compensation (annual salary plus bonuses) at the highest rate paid during his employment payable within 60 days of termination. Mr. Zaremba has an agreement for the payment of six months of annual base salary upon a change in control of the Company.

Tax deductibility of Executive Compensation

Section 162 (m) of the Code limits to $1,000,000 per person the amount that we may deduct for compensation paid to any of our most highly compensated officers in any year. In fiscal 2010, there was no executive officer’s compensation that exceeded $1,000,000.

The following table sets forth information concerning the compensation awarded to, earned by or paid to our named executive officers during fiscal 2010 for services rendered to the Company:

SUMMARY COMPENSATION TABLE FOR THE 2010 FISCAL YEAR

Name and Principal		Fiscal Year												Options
Position		Ended June 30,				Salary ($)				Bonus ($)				Awards ($)				Total ($)
Michael A. McManus, Jr.			2010				286,458				200,000				101,075				587,533
President and Chief			2009				275,000				11,458				107,000				393,458
Executive Officer			2008				275,000				200,000				—				475,000
Richard Zaremba			2010				196,154				34,000				48,516				278,670
Senior Vice President,			2009				192,100				8,000				23,032				223,132
Chief Financial Officer,			2008				189,303				24,000				23,430				236,733
Secretary and Treasurer
Michael Ryan			2010				236,001				12,000				48,516				296,517
Senior Vice President-Medical			2009				225,000				8,000				23,032				256,032
Division			2008				152,677				—				43,500				196,177

Employment Agreements

Effective July 1, 2008, the Company entered into an amended and restated employment agreement with its President and Chief Executive Officer. The agreement was amended effective January 1, 2010. The agreement is in effect through June 30, 2011 and is automatically renewable for one-year periods unless notice is given by the Company or Mr. McManus that it or he declines to renew the agreement. The agreement provides for an annual base compensation of $283,250 and a Company-provided automobile. The agreement also provides for a discretionary bonus based upon achievement of his annual goals and objectives as determined by the Compensation Committee of the Board of Directors.

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 the prior approval of the Company. Mr. Zaremba has an agreement for the payment of six months’ annual base salary upon a change in control of the Company. Mr. McManus is entitled in the event of a change of control to payment of two times his total compensation (annual base salary plus bonus) at the highest rate paid during the period of employment, payable in a lump sum written 60 days of termination of employment. The Company’s employment agreement with Mr. McManus also contains non-competition provisions that preclude him from competing with the Company for a period of 18 months from the date of his termination of employment.

OUTSTANDING EQUITY AWARDS FOR THE 2010 FISCAL YEAR

		Number of Securities				Number of Securities
		Underlying Unexercised				Underlying Unexercised
		Options (#)				Options (#)				Option Exercise
Name		Exercisable				Unexercisable				Price ($)				Option Expiration Date
Michael A. McManus, Jr.			250,000				—				7.375				10/13/10
			150,000				—				6.07				10/17/11
			150,000				—				5.10				09/30/12
			125,000				—				4.66				11/01/13
			125,000				—				5.18				11/01/14
			50,000				50,000	(5)			1.91				11/04/18
			12,500				37,500	(7)			2.44				09/09/19
			—				100,000	(1)			1.82				09/07/20
Richard Zaremba			7,500				—				7.3125				08/09/10
			7,500				—				6.12				05/08/11
			16,000				—				6.07				10/17/11
			20,000				—				5.10				09/30/12
			15,000				—				4.70				09/16/13
			12,000				—				8.00				09/15/14
			8,000				—				7.60				09/27/15
			4,000				—				5.82				02/07/16
			12,000				—	(1)			3.45				10/20/16
			7,500				2,500	(2)			4.04				09/04/17
			9,000				9,000	(4)			2.04				09/26/18
			2,500				2,500	(6)			.85				12/11/18
			8,000				16,000	(7)			2.44				09/09/19
							30,000	(1)			1.82				09/07/20
Dan Voic			7,500				—				7.3125				08/09/10
			2,210				—				6.07				10/17/11
			6,700				—				5.10				09/30/12
			15,000				—				4.70				09/16/13
			12,000				—				8.00				09/15/14
			5,000				—				7.60				09/26/15
			2,500				—				5.82				02/07/16
			8,000				—				3.45				10/20/16
			2,500				2,500	(2)			4.04				09/04/17
			2,000				2,000	(4)			2.04				09/26/18
			2,000				2,000	(6)			.85				12/11/18
			4,500				13,500	(7)			2.44				09/09/19
							25,000	(1)			1.82				09/07/20
Ronald Manna			15,000				—				7.3125				08/09/10
			10,000				—				6.07				10/17/11
			5,000				—				5.10				09/30/12
			5,000				—				4.70				09/16/13
			4,000				—				8.00				09/15/14
			2,000				—				7.60				09/15/15
			1,000				—				5.82				02/07/16
			3,000				—				3.45				10/20/16
			3,750				1,250	(2)			4.04				09/04/17
			3,500				3,500	(4)			2.04				09/26/18
			500				500	(6)			.85				12/11/18
			1,250				3,750	(7)			2.44				09/09/19
							5,000	(1)			1.82				09/07/20
Frank Napoli			2,000				—				7.60				09/26/15
			1,000				—				5.82				02/07/16
			4,000				—				3.45				10/20/16
			3,000				1,000	(2)			4.04				09/04/17
			3,000				1,500	(4)			2.04				09/26/18
			500				500	(6)			.85				12/11/18
			1,750				5,250	(7)			2.44				09/09/19
							6,000	(1)			1.82				09/07/20
Michael Ryan			11,250				3,750	(3)			4.98				11/06/17
			9,000				9,000	(4)			2.04				09/26/18
			2,500				2,500	(6)			.85				12/11/18
			6,000				18,000	(7)			2.44				09/09/19
							30,000	(1)			1.82				09/07/20

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 “1991 Plan”) which covers up to 375,000 shares of Common Stock. Pursuant to the 1991 Plan, officers, directors, consultants and key employees of the Company are eligible to receive incentive and/or non-incentive stock options. At June 30, 2010, options to purchase 30,000 shares were outstanding under the 1991 Plan at an exercise price of $7.38 per share with a vesting period of two years, options to purchase 327,750 shares had been exercised and options to purchase 47,250 shares have been forfeited (of which options to purchase 30,000 shares have been reissued). There are no shares available for future grants.

In March 1996, the Board of Directors adopted and, in February 1997, the shareholders approved the 1996 Employee Incentive Stock Option Plan covering an aggregate of 450,000 shares (the “1996 Plan”) and the 1996 Non-Employee Director Stock Option Plan (the “1996 Directors Plan”) covering an aggregate of 1,125,000 shares of Common Stock. At June 30, 2010, options to purchase 71,000 shares were outstanding at exercise prices ranging from $5.18 to $7.60 per share with a vesting period of immediate to three years under the 1996 Plan and options to acquire 160,000 shares were outstanding at exercise prices ranging from $3.21 to $7.60 per share with a vesting period of immediate to three years under the 1996 Directors Plan. At June 30, 2010, options to purchase 138,295 shares under the 1996 Plan have been exercised and options to purchase 392,650 shares have been forfeited (of which options to purchase 182,945 shares have been reissued). At June 30, 2010, options to purchase 808,500 shares under the 1996 Directors Plan have been exercised and options to purchase 90,000 shares have been forfeited (of which none have been reissued). There are no shares available for future grants.

In October 1998, the Board of Directors adopted and, in January 1999, the shareholders approved the 1998 Employee Stock Option Plan (the “1998 Plan”) covering an aggregate of 500,000 shares of Common Stock. At June 30, 2010, options to purchase 275,200 shares were outstanding under the 1998 Plan at exercise prices ranging from $3.45 to $7.60 per share with a vesting period of immediate to three years. At June 30, 2010, options to purchase 72,848 shares under the 1998 Plan have been exercised and options to purchase 217,227 shares under the 1998 Plan have been forfeited (of which options to purchase 79,702 shares have been reissued). At June 30, 2010, there were no shares available for future grants.

In October 2000, the Board of Directors adopted and, in February 2001, the shareholders approved the 2001 Employee Stock Option Plan (the “2001 Plan”) covering an aggregate of 1,000,000 shares of Common Stock. At June 30, 2010, options to purchase 788,010 shares were outstanding under the 2001 Plan at exercise prices ranging from $3.45 to $8.00 per share with a vesting period of one to four years. At June 30, 2010, options to purchase 128,306 shares under the 2001 Plan have been exercised and options to purchase 251,950 shares under the 2001 Plan have been forfeited (of which 159,577 options have been reissued). At June 30, 2010, there were 83,684 shares available for future grants.

In September 2005, the Board of Directors adopted, and in December 2005, the shareholders approved, the 2005 Employee Equity Incentive Plan (the “2005 Plan”) covering an aggregate of 500,000 shares of Common Stock and the 2005 Non-Employee Director Stock Option Plan (the “2005 Directors Plan”) covering an aggregate of 200,000 shares of Common Stock. At June 30, 2010, there were options to purchase 374,300 shares outstanding under the 2005 Plan at exercise prices ranging from $.85 to $4.98 per share with a vesting period of four years. At June 30, 2010, there were no options exercised under the 2005 Plan and 34,000 shares have been forfeited (of which no options have been reissued). At June 30, 2010, 125,700 shares were available for future grants under the 2005 Plan. At June 30, 2010, options to purchase 150,000 shares were outstanding under the 2005 Directors Plan at an exercise price ranging from $2.66 to $5.42 with a vesting period over three years. At June 30, 2010, there were no options exercised and 50,000 shares were available for future grants under the 2005 Directors Plan.

In December 2009, the Board of Directors and shareholders adopted the 2009 Employee Equity Incentive Plan (the “2009 Plan”) covering an aggregate of 500,000 shares of Common Stock and the 2009 Non-Employee Director Stock Option Plan (the “2009 Directors Plan”) covering an aggregate of 200,000 shares of Common Stock. At June 30, 2010 there were no options outstanding, exercised, or forfeited under the 2009 Plan. At June 30, 2010, 500,000 shares were available for future grants under the 2009 plan. At June 30, 2010 there were no options outstanding, exercised, or forfeited under the 2009 Directors Plan. At June 30, 2010, 200,000 shares were available for future grants under the 2009 Directors Plan.

The selection of participants, allotments of shares and determination of price and other conditions relating to options are determined by the Board of Directors or a committee thereof, depending on the Plan, and in accordance with Rule 4350(c) of the Corporate Governance Requirements applicable to Nasdaq-listed companies. Incentive stock options granted under the plans are exercisable for a period of up to ten years from the date of grant at an exercise price which is not less than the fair market value of the Common Stock on the date of the grant, except that the term of an incentive stock option granted under the plans to a shareholder owning more than 10% of the outstanding Common Stock may not exceed five years and its exercise price may not be less than 110% of the fair market value of the Common Stock on the date of grant. Options shall become exercisable at such time and in such installments as provided in the terms of each individual option agreement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth as of September 24, 2010, certain information with regard to the ownership of the Company’s Common Stock by (i) each beneficial owner of 5% or more of the Company’s Common Stock; (ii) each director; (iii) each executive officer named in the “Summary Compensation Table” above; 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 Stock shown as beneficially owned by them.

						Percent
		Common Stock				of
Name and Address (1)		Beneficially Owned				Class
Michael A. McManus, Jr.			1,086,751	(2)			13.4
Dimensional Fund Advisors LP			511,011				6.8
Howard Alliger			251,508	(3)			3.5
Richard Zaremba			161,500	(4)			2.3
T. Guy Minetti			102,000	(5)			1.4
Dan Voic			101,658	(6)			1.4
Thomas F. O’Neill			77,000	(7)			1.1
Ronald Manna			79,394	(8)			1.1
John W. Gildea			40,000	(9)			*
Charles Miner			40,000	(10)			*
Michael Ryan			38,750	(11)			*
Frank Napoli			16,250	(12)			*
All executive officers and Directors as a group (eleven people)
			1,994,811	(13)			22.2

Item 13. Certain Relationships and Related Transactions.

None.

Item 14. Principal Accountant Fees and Services.

Audit Fees:

Grant Thornton LLP (“Grant Thornton”) billed the Company $383,467 and $379,361 in the aggregate for services rendered for the audit of the Company’s 2010 and 2009 fiscal years, respectively, and the review of the Company’s interim financial statements included in the Company’s Quarterly Reports on Form 10-Q for the Company’s 2010 and 2009 fiscal years, respectively.

Audit-Related Fees:

Grant Thornton did not render any audit-related services, as defined by the SEC, to the Company for the fiscal years 2010 and 2009.

Tax Fees:

Grant Thornton did not render any tax related services, as defined by the SEC, to the Company for the fiscal years 2010 and 2009.

All Other Fees:

Grant Thornton did not render any other services to the Company for the fiscal years 2010 and 2009.

Policy on Pre-approval of Independent Registered Public Accounting Firm Services:

The charter of the Audit Committee provides for the pre-approval of all audit services and all permitted non-audit services to be performed for Misonix by the independent registered public accounting firm, subject to the requirements of applicable law. The procedures for pre-approving all audit and non-audit services provided by the independent registered public accounting firm include the Audit Committee reviewing audit-related services, tax services, and other services. The Audit Committee periodically monitors the services rendered by and actual fees paid to the independent registered public accounting firm to ensure that such services are within the parameters approved by the Audit Committee.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)

1. The response to this portion of Item 15 is submitted as a separate section of this Report.

	2.		Financial Statement Schedules
			Schedule II — Valuation and Qualifying Accounts and Reserves.
	3.		Exhibits

	3	(a)		Restated Certificate of Incorporation of the Company. (1)
	3	(b)		By-laws of the Company. (2)
	10.1			Stock Option Plan. (3)
	10.2			Form of Director’s Indemnification Agreement.
	10.3			Development and Option Agreement dated August 27, 1996 between the Company and United States Surgical Corporation. (4)
	10.4			License Agreement dated October 16, 1996 between the Company and United States Surgical Corporation. (4)
	10.5			1996 Non-Employee Director Stock Option Plan. (5)
	10.6			1996 Employee Incentive Stock Option Plan. (5)
	10.7			1998 Employee Stock Option Plan. (6)
	10.8			2005 Employee Equity Incentive Plan. (7)
	10.9			2005 Non-Employee Director Stock Option Plan. (7)
	10.10			Asset Purchase Agreement, dated as of April 7, 2009, between iSONIX LLC, MISONIX, INC. and Sonics & Materials, Inc. (8)
	10.11			Employment Agreement dated as of July 1, 2009, by and between MISONIX, INC. and Michael A. McManus, Jr. (9)
	10.12			Share Purchase Agreement, dated August 4, 2009, between MISONIX, INC., Puricore International Limited and Puricore Plc. (10)
	10.13			Loan Note Instrument, dated August 4, 2009, between Puricore International Limited and Labcaire Systems Limited and Puricore Plc. (10)
	10.14			2009 Employee Equity Incentive Plan. (11)
	10.15			2009 Non-Employee Director Stock Option Plan. (11)
	10.16			Asset Purchase Agreement, dated October 2, 2009, among Acoustic Marketing Research, Inc., MISONIX, INC. and Medical Imaging Holdings, Inc. (12)

	10.17			Asset Purchase Agreement, dated as of May 28, 2010, among MISONIX, INC., MISONIX HIFU TECHNOLOGIES LIMITED, MISONIX LIMITED and USHIFU, LLC. (13)
	10.18			First Amendment to Amended and Restated Employment Agreement between the Company and Michael A. McManus, Jr.
	10.19			Lease Modification Agreement, dated as of June 30, 2010, between Sanwood Realty Co. and the Company.
	14			Code of Ethics. (14)
	21			Subsidiaries of the Company.
	23.1			Consent of Grant Thornton LLP.
	31.1			Rule 13a-14(a)/15d-14(a) Certification.
	31.2			Rule 13a-14(a)/15d-14(a) Certification.
	32.1			Section 1350 Certification.
	32.2			Section 1350 Certification.