Document:

Exhibit 10.1

Exhibit 10.1

Special Report

This report is published by Misonix, Inc. (“Misonix” or the “Company”) to provide the investor with
a general review of the Company’s technology and growth prospects for various products. This
report supplements some of the information that is available in the Company’s Form 10-K and related
documents. Except for historical information contained herein, the matters discussed in this report
contain forward-looking statements.  The accuracy of these statements is subject to significant
risks and uncertainties.  Actual results could differ materially from those contained in the
forward-looking statements.

December 1, 2010

Technology and Growth Status Report

Misonix develops, manufactures and markets ultrasonic medical devices for special surgery and
laboratory equipment. The Company’s medical systems are used for spine surgery, neurosurgery,
general surgery, maxillofacial surgery, cosmetic surgery and surgical wound debridement. The
company was founded in 1959 and has executive offices and production facilities in Farmingdale,
N.Y.

	 	 	 	 	 
	Symbol: MSON — Price:
	 	$	2.30	 
	52-Week price range:
	 	$	1.61 - $3.84	 
	Shares outstanding:
	 	 	7,000,000	 
	Market capitalization:
	 	$16.1 million	 
	Shares held by insiders:
	 	Approx. 21	%*
	% held by institutions:
	 	 	10.1	%
	Daily trading vol. (avg):
	 	7,000 sh	 
	Cash/share (9/31/10)
	 	$	1.35	 
	Book val./share (9/31/10)
	 	$	2.45	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	FY	 	 	FY	 	 	1Q	 	 	1Q	 
	FY ends 6/30	 	2009	 	 	2010	 	 	(9/09)	 	 	(9/10)	 
	• Device sales (000)
	 	$	9,688	 	 	$	10,737	 	 	$	2,003	 	 	$	2,692	 
	• Lab/other (000)
	 	 	3,025	 	 	 	2,634	 	 	$	628	 	 	$	566	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total sales
	 	$	12,713	 	 	$	13,371	 	 	$	2,631	 	 	$	3,258	 
	Gross profit (000)
	 	$	5,218	 	 	 	6,526	 	 	 	1,009	 	 	 	1,637	 
	Gross margin:
	 	 	41.0	%	 	 	48.8	%	 	 	38.4	%	 	 	50.3	%
	Net income (000)**:
	 	$	(1,573	)	 	$	(2,191	)	 	$	(1,247	)	 	$	(843	)
	EPS**
	 	$	(0.22	)	 	$	(0.31	)	 	$	(0.18	)	 	$	(0.12	)

	 	 	 
	*	 	Includes 1,164,410 shares which are issuable upon the exercise of presently vested options.

	 
	**	 	Continuing operations

Introduction

The worldwide market for ultrasonic tissue removal products is approximately $3.8 billion in
annual sales and is one of the fastest growing sectors of the medical device field. Misonix is a
technological leader in ultrasonic surgical devices and markets a wide range of products for
orthopedic surgery including spine and maxillofacial procedures, as well as neurosurgery, general
surgery, cosmetic surgery, wound debridement, etc.

We have recently undertaken a reorganization program that is now largely complete. A central
feature has been the divestiture of non-core assets over the past
18 months which — along with
other changes that have been put into place — has produced a more focused company, with over
$9 million in cash and a strong potential for growth and profit margin expansion. Other aspects
include expense belt-tightening, product rationalization, the launch of additional disposable
products, establishment of a U.S. sales force selling Misonix-labeled products direct to
hospitals, and expansion of international distribution including important new contracts in
Brazil, China, France, Germany and the Russian Federation.

Our share price is near the low end of the 3-5 year range. Price recovery depends on whether
recent revenue and profit margin trends continue in the coming quarters, and the extent to which
the Company begins to attract broader interest and attention. The current valuation is modest by
medical device standards as a multiple of annual sales. Our top three products — in bone
cutting, wound debridement and surgical aspiration systems — are strong entries in an
addressable world market of over $1 billion in annual sales. We expect significant market share
expansion in each of these areas in the years ahead.

 

 

 

	 	 	 
	Senior Management	 	 
	 
	 	 
	Michael A. McManus, Jr.

President, Chief Executive Officer

	 	CEO since 1999. Former President and CEO of New York Bancorp, Inc.,
prior to which he held senior positions with Jamcor Pharmaceutical,
Pfizer and Revlon. Former Assistant to President Ronald Reagan.
	 
	 	 
	Richard Zaremba 

Senior VP, CFO, Treasurer, Secretary

	 	With Company since 1999. Former VP and CFO of Comverse
Information Systems, a manufacturer of digital voice recording
systems, prior to which he was VP and CFO of Miltope Group, Inc.
	 
	 	 
	Michael C. Ryan 

Senior VP, Medical Division

	 	Joined in 2007. Former Senior VP and General Manager for Nomos
Radiation Oncology and Executive VP Business Development for Inter V,
Inc., a medical device company marketing specialty products for
interventional radiology, interventional cardiology and oncology.
	 
	 	 
	Dan Voic 

VP, R&D and Engineering

	 	Approximately 15 years of senior scientific and product development
experience at Misonix with demonstrated expertise in all phases of
ultrasound technology.
	 
	 	 
	Ronald Manna 

VP, Regulatory Affairs

	 	Present position since 2002. Former VP of R&D and Engineering,
VP of Operations and Director of Engineering of the Company.
	 
	 	 
	Frank Napoli 

VP, Operations

	 	Joined in 2004. Former VP of Manufacturing for Spellman High Voltage
Electronics Corp. Prior Director of Manufacturing for Telephonics
Corporation.

	 	 	 
	Board of Directors	 	 
	 
	 	 
	Michael A. McManus, Jr.

	 	Chairman, President and Chief Executive Officer of Misonix (see above).
	 
	 	 
	Howard Alliger

	 	Chairman of the Board and CEO of Frontier Pharmaceutical, Inc.
Founded the predecessor company to Misonix in 1955. Former president
of the Ultrasonic Industry Association
	 
	 	 
	T. Guy Minetti

	 	CEO of Twig Tek, LLC, which is engaged in the recirculation and
recycling of used electronics; prior to which he founded and was
Managing Director of Senior Resource Advisors LLC, a management
consulting firm; prior to which Mr. Minetti served as the Vice
Chairman of the Board of Directors of 1-800- Flowers.Com, Inc.; prior
to which he was the Managing Director of Bayberry Advisors, an
investment banking firm he founded in 1989. From 1981 through 1989,
Mr. Minetti was a Managing Director of Kidder, Peabody & Company where
he worked in the investment banking and high yield bond departments.
	 
	 	 
	Thomas F. O’Neill

	 	Founding principal of Sandler O’Neill & Partners, LP, an investment
banking firm. Serves on the Board of Archer-Daniels-Midland Company
and The Nasdaq Stock Market, Inc.
	 
	 	 
	John Gildea

	 	Founding principal of Gildea Management Company, a management company
focusing on special situations in the U.S. and Central Europe.
Previously managed the Corporate Series Group at Donaldson Lufkin
Jenrette.
	 
	 	 
	Dr. Charles Miner III

	 	Currently practices internal medicine in Darien, Connecticut. Serves
on staff at Stamford and Norwalk Hospitals; Instructor in clinical
medicine at
Columbia University College of Physicians and Surgeons.
	 
	 	 
	Executive
Offices

	 	1938 New Highway, Farmingdale, NY 11735

Tel: (631) 694-9555
	 
	 	 
	Auditors

	 	Grant Thornton LLP

Melville, NY
	 
	 	 
	Corporate Counsel

	 	Joel I. Frank, Esq.

Wilk Auslander LLP  — New York, NY

 

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page	 
	Executive Summary
	 	 	4	 
	 
	 	 	 	 
	Company Overview and Growth Strategy
	 	 	6	 
	 
	 	 	 	 
	Leading Products
	 	 	9	 
	 
	 	 	 	 
	• Misonix BoneScalpelTM
	 	 	9	 
	 
	 	 	 	 
	• SonicOne®
	 	 	11	 
	 
	 	 	 	 
	• SonaStar®
	 	 	14	 
	 
	 	 	 	 
	Testimonials
	 	 	16	 
	 
	 	 	 	 
	Other Products
	 	 	17	 
	 
	 	 	 	 
	• AutoSonixTM
	 	 	17	 
	 
	 	 	 	 
	• LySonixTM
	 	 	17	 
	 
	 	 	 	 
	• Laboratory Filtration
	 	 	17	 
	 
	 	 	 	 
	• High Intensity Focused Ultrasound (HIFU)
	 	 	18	 
	 
	 	 	 	 
	Stock Analysis and Valuation
	 	 	20	 
	 
	 	 	 	 
	Financial Statements
	 	 	21	 
	 
	 	 	 	 
	Issued U.S. Patents
	 	 	23	 
	 
	 	 	 	 
	Risk Factors
	 	 	25	 

 

 

 

Executive Summary

	•	 	Misonix is believed to be one of a limited number of companies in the world that has
the ability to apply ultrasound technology to a broad range of specialty surgical
devices. We develop, produce, and sell proprietary and patented products. All R&D,
engineering, product development and manufacturing is done at the Misonix headquarters
facility in Farmingdale, Long Island, New York.

	•	 	The Misonix advantage is comprised of our large patent portfolio along with the skills
and know-how of our scientists accumulated over the last 20 years. Misonix is a leader
in ultrasonic surgical specialty systems with a wide range of products for general
surgery, neurosurgery, spine surgery, surgical wound debridement and liposuction. We
believe there are very few companies in the ultrasound field that know as much about the
design and manufacture of high-quality therapeutic medical devices than does Misonix.

	•	 	We sell our surgical products on a private label or OEM basis through large partners
like Johnson & Johnson, Aesculap and Covidien and most recently,
through our own network of sales agencies and specialty distributors selling direct to
hospitals. International distribution has expanded throughout Europe, the Middle East,
Latin America and selected markets in Asia. Important contracts in Brazil, China,
France, Germany and Russia have recently been executed.

	•	 	Each Misonix surgical product includes an ultrasonic generator and a disposable
component, which allows for continued sales after the placement of a unit at consistently
high profit margins.

	•	 	Through our recently completed program of selling off non-core business units, we have
become a more focused surgical device company. Misonix has amassed over $9 million in
cash. With no debt on the balance sheet, the Company is in a strong position to acquire
additional products, develop new products or acquire distribution rights for products to
be sold to its present customer base.

	 
	•	 	Misonix has a focused strategy to:

	 	•	 	Build a profitable high margin surgical device business.

	 	•	 	Expand its channels of distribution throughout the world.

	 	•	 	Build brand awareness for the Misonix name.

	 	•	 	Focus on cost control, manufacturing efficiencies and expense reduction.

	 	•	 	Increase margins and generate respectable net income.

The following illustrates many of the expected drivers of our revised growth strategy.

Misonix Growth Model

 

- 4 -

 

	•	 	Fiscal year 2010 was a transitional year owing to new initiatives and the phasing out
of former businesses, which in some cases distorted year-to-year quarterly comparisons.
Encouraging patterns have begun to emerge as seen by strong sales growth for medical
devices in the last three quarters.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Fiscal 2011	 
	Fiscal 2010	 	1Q (Sep.)	 	 	2Q (Dec.)	 	 	3Q (Mar.)	 	 	4Q (Jun.)	 	 	1Q (Sep.)	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Medical Device Sales (000)
	 	$	2,003	 	 	 	2,494	 	 	 	2,635	 	 	 	3,605	 	 	$	2,692	 
	% Gain
	 	 	(12	%)	 	 	(31	%)	 	 	73	%	 	 	60	%	 	 	34.0	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross Margin – Company
	 	 	38.4	%	 	 	47.8	%	 	 	51.8	%	 	 	53.6	%	 	 	50.3	%
	Prior year
	 	 	37.0	%	 	 	40.0	%	 	 	42.8	%	 	 	45.0	%	 	 	38.4	%

	•	 	Profit margin improvement is partly the result of tighter control of corporate
overhead costs. On a more fundamental level, it reflects a series of initiatives that
are starting to take hold:

	 	•	 	The Company is transitioning from our historic reliance on private label and OEM
customers to promotion of our own products under the Misonix brand name. Brand
name products now account for 46% of our sales, up from 33% over the course of the
past 12 months.

	 	•	 	We are expanding direct to hospital marketing and sales through smaller,
specialty agencies and distributor organizations, which typically earn lower
commissions or discounts than is the case with exclusive contracts with large
distribution houses.

	 	•	 	We are starting to shift from reusable products to reusable products with
disposable components. This should be beneficial not only for margins but building
customer loyalty and repeat business. The following table illustrates approximate
average hospital list prices for disposable components for some of the major
applications.

	 	 	 	 	 	 	 
	 	 	Surgical	 	Bone Cutting	 	 
	 	 	Aspiration	 	and Sculpting	 	Wound Debridement
	 	 	 	 	 	 	(in the OR)
	Avg. Sales Price:
	 	$500	 	$450	 	$400
	Expected use
frequency:
	 	5x/month	 	8x/month	 	5x/month

	•	 	The Company’s technology base consists of over 45 issued patents covering a wide
spectrum of products, methods and procedures, as well as extensive know-how and product
design skills that have been accumulating over the past 20 years. These skills range from
knowing how to work with the complexities of acoustical waves in order to optimize
performance, to in-house control of all phases of electronic design, which is a rare
capability in medical device manufacturing.

	•	 	Misonix shares continue to trade near the bottom of the 3-5 year price range. Price
recovery depends on whether recent revenue and profit trends continue over the coming
quarters and the extent to which the Company begins to attract broader interest and
attention. The current valuation modestly exceeds trailing revenues and book value.

 

- 5 -

 

	•	 	Our top three products — BoneScalpelÔ, 
SonicOne® and
SonaStar® — are strong entries in an addressable world market with over $1
billion in annual sales. M&A activity in the ultrasound device field has been strong and
has left relatively few independent companies in the sector.

	•	 	Another potential valuation driver for MSON is the development of promising HIFU
technology described in this report. Recently, the French company EDAP, which is the
current market leader in HIFU, reported favorable clinical outcomes for over 800 patients
with localized prostate cancer that were treated with its Ablatherm®-HIFU system. It was
reported that for a representative number of patients, the cancer specific survival rate
and the freedom from metastatic disease rate were 99% and 97%, respectively, at eight
years. We believe this further validation of HIFU as a cancer tumor ablation technology
may help to explain the recent rise in investor interest in EDAP shares.

52- Week Shock Chart

Source: Big Charts

Company Overview and Growth Strategy

The total market for ultrasonic tissue removal encompasses $3.8 billion on a worldwide basis.
Misonix participates in both hard and soft tissue sectors with a broad range of products, as
summarized in the following diagram. The use of ultrasound for tissue ablation is still in early
stage market development and potential for new uses abound.

	 	 	 	 	 	 	 
	Hard Tissue	 	Soft Tissue
	Misonix Products	 	Misonix Products
	BoneScalpel	 	SonicOne, SonaStar, LySonix, AutoSonix
	Addressable Market: $1.45 billion	 	Addressable Market: $2.3 billion
	Current Markets	 	Potential Markets	 	Current Markets	 	Potential Markets
	 
	 	 	 	 	 	 
	•    Spine

	 	•    ENT
	 	•    Wound debridement
	 	•    Tumor ablation
	•    Maxillofacial

	 	•    Neurosurgery
	 	•    Neurosurgery
	 	•    Vascular
	 

	 	•    Cartilage
	 	•    General surgery
	 	•    HIFU
	 

	 	•    Arm and hand
	 	•    Liposuction	 	 
	 

	 	•    Foot and ankle	 	 	 	 

 

- 6 -

 

Revised Misonix Growth Strategy

Misonix is rapidly moving from its historical diversified products orientation towards becoming
a focused medical device company. We are also moving from a historical reliance on reusable
products by adding high margin disposables, from private label and OEM customers to greater
emphasis on Misonix as a brand name, from sales to large distribution houses with relatively low
margins to more direct to hospital sales in the U.S. and significant expansion in international
distribution agreements. These are classic growth strategies in the medical device sector and
we can now pursue them without the encumbrances of the past.

The following table summarizes the various non-core products and businesses that have been
divested over the past 15 months. The proceeds from these divestitures have helped to raise
cash to over $9 million and enabled us to not have to renew a former $8 million bank line of
credit. We expect net cash to climb towards $14 million if all of the proceeds from the
divestiture program are realized, which cannot be guaranteed.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Proceeds	 
	 	 	 	 	 	 	 	 	Total	 	 	Proceeds at	 	 	Proceeds	 	 	Released	 
	 	 	 	 	Closing	 	 	Proceeds	 	 	Closing	 	 	Pending	 	 	Post Closing	 
	 	 	 	 	 	 	 	(mil)	 	 	(mil)	 	 	(mil)	 	 	 	 
	Labcaire Systems, Ltd.*
	 	Hospital products	 	 	8/5/09	 	 	$	5.6	 	 	$	3.6	 	 	$	2.0	 	 	 	.250	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Laboratory Ultrasonics
	 	Lab products	 	 	4/7/09	 	 	 	3.5	 	 	 	3.5	 	 	 	—	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sonora Medical Systems
	 	Hospital Product refurbishment	 	 	10/2/09	 	 	 	8.0	 	 	 	6.4	 	 	 	0.4	 	 	 	.400	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Equity stake in Focus Surgery**
	 	HIFU	 	 	5/28/10	 	 	 	5.8	 	 	 	—	 	 	 	5.8	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	Total	 	$	21.7	 	 	$	13.5	 	 	$	8.2	 	 	 	.650	 

	 	 	 
	*	 	$1.0m note payable in equal $250,000 installments over 4 years and up to $1.0m in
commissions based on product sales

	 
	**	 	Paid by USHIFU, LLC on basis of earn-out mostly as a percentage of gross revenues

We expect savings from the sale of these businesses and the reduction of associated overhead to
generate over $1 million in cost savings over the next 12 months. This includes a $750,000
reduction in personnel costs, $200,000 annual savings due to lower insurance premiums, and
$150,000 in savings from no longer having bank credit line carrying costs.

Shift to Misonix as a brand name. Misonix has historically had a heavy component of
private label and OEM business or has licensed our technology to others. While this has usually
resulted in less expensive product launches and quick launch times, it has often been to the
detriment of business predictability, quarter-by-quarter growth continuity and profit margins.
The progress that Misonix has recently made in promoting Misonix as a brand name is seen in the
accelerating sales growth of the BoneScalpel, SonicOne and SonaStar products. Brand name
products now account for 46% of Company sales, up from 33% roughly 12 months ago.

 

- 7 -

 

Shift from reuseables to disposables. The Company’s gross profit margin for
continuing operations, which has reached 49%, should significantly benefit to the extent that
disposable products as a percent of total sales continue to climb. This is partly a function
of manufacturing efficiencies that are lowering unit costs, thus making disposables more price
competitive, but also reflects entry into market sectors where the use of disposables is more
commonplace — such as in hospital operating rooms. The following table illustrates
approximate average list prices for disposable components of some lead products:

	 	 	 	 	 	 	 
	 	 	SonaStar	 	BoneScalpel	 	SonicOne
	 
	 	 	 	 	 	 
	Avg. List Price:
	 	$500	 	$450	 	$400
	Expected use frequency:
	 	5x/month	 	8x/month	 	5x/month

More direct sales and more profitable contracts. There is a positive trend currently
underway with respect to distribution channels. More growth is being generated through direct to
hospital and specialty distributor sales than is taking place through contracts with large
OEM/private label distribution partners like J&J, Aesculap and Covidien. The fact that
distributor pricing and profits are improving adds another dimension to the Company’s growth
potential — not unlike an effective price increase that could continue over the course of the
next several years.

Future Development and Growth

Misonix will continue its internal development of unique, ultrasonic medical devices using its
proprietary IP and knowhow, while adding to its worldwide distribution organization. It is
anticipated that growth may come from a number of diverse sources such as:

	 	•	 	Misonix expects to build on its present platform by adding new disposable probes
aimed at increasing product utilization in present markets.

	 
	 	•	 	Misonix will look for opportunities to use the present products in new markets or
for different procedures. Examples would be taking the BoneScalpelTM into the small
bone hand and foot markets.

	 
	 	•	 	Misonix expects to develop new ultrasound product applications for both soft and
hard tissue.

	 
	 	•	 	Misonix expects to negotiate business opportunities with companies that produce
products used in the same procedures as current Misonix products or products that can
be sold to the same Misonix customers. Misonix wants to be in a position where it is
selling multiple products to the same customers. These opportunities for growth would
come in the form of distribution agreements or product line acquisitions.

	 
	 	•	 	Misonix expects to meet with investment bankers and business brokers to find
synergistic product acquisition opportunities.

	 
	 	•	 	In some cases, Misonix may look at a new distribution capability for acquisition.
This could be in the form of a unique domestic or international sales force.

	 
	 	•	 	As noted previously, Misonix expects to meet with companies and investors interested
in working with Misonix to continue the development of its own unique HIFU technology.

 

- 8 -

 

Leading Products

Misonix BoneScalpelÔ

Ultrasonic Bone Cutting System

The BoneScalpel has consistently generated strong growth since its U.S. introduction more than
two years ago. This product gives Misonix a unique niche in the dynamic field of spinal surgery,
and an opportunity to enter other areas of small bone orthopedic and maxillofacial surgery.

The BoneScalpel is a novel ultrasonic bone cutting
tool capable of making a 0.5mm clean cut with
minimal necrosis or burn artifacts, little
inflammation, and minimal effect on soft tissue.
The device can make linear and curved cuts, on any
plane, with precision previously unavailable.

The BoneScalpel is so precise that it can cut a
window in an eggshell while leaving the membrane
intact. The product is ideally suited for surgical
small bone applications involving the spine, the
maxillofacial area (facial, nasal and jawbones),
the skull, and the hand and foot. Minimal damage
to surrounding soft tissue is an important
feature, especially in spine surgery, and in other
areas of the body where critical nerve tissue and
vasculature may be in close proximity to the
surgical site.

BoneScalpel

Traditional powered cutting instruments like high-speed burrs or oscillating saws are far more
aggressive, do not distinguish between hard and soft tissue and are often less precise.
Additional opportunities may exist in selected indications for large bone surgery, i.e. the knee.

The BoneScalpel will compete mainly against pneumatic and electronic bone cutters, where the
largest companies in the sector include Stryker, Synthes and Medtronic.
The product addresses an estimated $600 million global market for spine, maxillofacial, ENT, foot
and ankle, and plastic surgery/reconstructive procedures.

Comparison of Bone-Cutting Technology

	 	 	 	 	 	 	 
	 	 	BoneScalpel	 	High-Speed Drill	 	Micro Saw
	 
	 	 	 	 	 	 
	Cutting Frequency

	 	23 kHz
	 	80,000 rpm
	 	20,000 cpm
	Tip Characteristic

	 	Blunt blade
	 	Abrasive surface
	 	Sharp teeth
	Cutting mode

	 	Longitudinal
	 	Rotational
	 	Traverse
	Minimum kerf size

	 	0.54 mm
	 	2 mm
	 	0.4 mm
	Tip start/stop

	 	Near instant
	 	Delayed
	 	Minor delay
	Tip cooling

	 	Direct to vibrating edge
	 	Indirect/ancillary
	 	Indirect/ancillary
	Effect on soft tissue

	 	Minimal
	 	Very aggressive

(wrapping, tearing)
	 	Very Aggressive

(tearing)

 

- 9 -

 

Additional Product Features

The BoneScalpel offers the speed and convenience of a powered instrument without the dangers
associated with conventional rotary instruments. With the BoneScalpel, bone yields to recurring
impacts resulting in a high-precision compression cut while the blade is being irrigated by a
patented jet nozzle that directs irrigation fluid over the blade to prevent bone necrosis. The
effect on soft tissue is substantially muted because the elastic and flexible structure of this
tissue tends to absorb the impact energy like a spring. This is a big advantage in anatomical
regions like the spinal dura, where accidental perforation of the spinal cord is not an uncommon
mishap, especially in revision procedures. Another feature of the BoneScalpel is that the
linear motion of the blunt tip avoids accidental trapping of soft tissue while eliminating the
spinning and tearing associated with rotary power instruments. Surgeons are able to improve on
existing techniques and design new approaches to performing osteotomies and removing bone, which
can lead to substantial time savings and increased efficiency in the operating room.

The BoneScalpel enables the reduction of bone resection times in laminectomies by up to 60
minutes, and more extensive spinal procedures by as much as 2 hours. According to the American
Association of Neurological Surgeons, there are 250,000 laminectomies performed in the U.S. each
year and the number of procedures continues to grow due mainly to expansion in the population of
elderly Americans and technological advances. It is possible that the BoneScalpel will become a
universal tool in spine surgery for nerve decompression, implant site preparation and the
correction of deformities like scoliosis. Spine surgery is only one aspect of the potential
market for the BoneScalpel. Current commercial opportunities exist in craniofacial surgery for
the correction of facial and jaw deformities and the treatment of sleep apnea, as well as for
pediatric and small bone surgery.

	 	 	 
	BoneScalpel Product Summary
	 	 
	 
	 	 
	Current addressable market

	 	$600 million
	 
	 	 
	Potential future applications
	 	 
	1) Cartilage

	 	$400 million – spine
	2) Large bone

	 	$400 million – hip, knee
	 
	 	 
	Target medical practitioners:

	 	Orthopedic surgeons, neurosurgeons, plastic surgeons
	Primary user sites:

	 	Specialty/ General/ VA hospitals, Day Surgery Centers
	 
	 	 
	Marketed by:

	 	Domestic: Aesculap (Spine), Specialty Agencies 
International: Specialty Distributors
	 
	 	 
	Average unit price

	 	$30,000 per system and $450 for disposables
	 
	 	 
	Reimbursement status

	 	Reimbursement varies by country and procedure
	 
	 	 
	Primary competitors
	 	 
	•   High-speed burrs

	 	Medtronic, Anspach, Stryker, Aesculap
	Spine, neuro and ENT
	 	 
	•   Small bone power saws

	 	Synthes, Stryker,
MicroAire
	Maxillofacial, hand, foot, ankle
	 	 

 

- 10 -

 

SonicOne®

Ultrasonic Wound Care System

The SonicOne is an innovative system that offers tissue specific debridement and cleansing of
wounds for effective removal of devitalized tissue and fibrin deposits while sparing viable
cells. This tissue specific capability is in part due to the fact that healthy and viable tissue
structures have a higher elasticity and flexibility than necrotic cells and are more resistant to
destruction from ultrasound effects. This ultrasound debridement process separates infected from
viable layers for a more defined treatment and reduced pain sensation. Clinical applications
include, but are not limited to, the debridement of diabetic foot ulcers, venous ulcers, pressure
sores, burns and bone. Ease of use and portability make the SonicOne suitable for a broad variety
of wound care settings: acute care, operating rooms, extended care facilities, outpatient
facilities and wound care clinics. The SonicOne is a new approach to advanced wound care and
progression towards patient healing.

The SonicOne facilitates an extremely thorough
debridement, by successfully removing necrotic materials
and devitalized tissue with minimal pain sensation and
excellent preservation of healthy, soft tissue.

The Debridement Probes are designed to address the needs
of different wound types. The unique shape of each probe
allows the clinician to choose the most appropriate probe
based upon the wound characteristics. The ultrasonic probe
allows for deep tissue penetration and causes cell
destruction within the wound bed. Continuous irrigation
(via the built in pump) provides a medium for cavitation
and flushes the wound of fibrin deposits and bacterial
growth while preserving most healthy tissue.

SonicOne

All of the ultrasonic probes are designed for direct contact with the wound surface, providing
maximum wound debridement efficacy.

Clinical experience with the SonicOne suggests exceptional wound bed granulation, accompanied by
significantly reduced bleeding and tissue trauma.

The standard of care for wound debridement procedures (the use of the traditional scalpel or
curette) has not changed in decades. Currently, in the USA, the use of the SonicOne can be billed
under certain existing codes for wound debridement, but no additional reimbursement is given for
use of ultrasound energy. Reimbursement codes can be expanded with published clinical evidence that
supports improved clinical efficacy and cost-effectiveness of advanced wound debridement options
like the SonicOne. With technology specific reimbursement as the ultimate goal, a randomized trial
involving a statistically significant number of patients will be submitted for publication in a
leading medical journal in the near future, comparing ultrasonic wound debridement with standard
manual approaches, focusing on reduction of wound area and incidence of complete healing.
Ultimately, this study will be the basis for the Company’s petition to the applicable agencies that
control healthcare reimbursements.

 

- 11 -

 

Market data indicates that chronic wounds afflict more than 8 million Americans. A large segment
of the chronic wound market is comprised of diabetics with foot ulcers (3-5 million in the U.S.).
Healthcare costs for the treatment of diabetic ulcers ranges from $7,400 — $20,600 per episode.
Close to 20% of diabetic patients with ulcers will require some type of lower extremity
amputation during their lifetime, accounting for more than 80,000 amputations per year in the
U.S. One of the main factors in this is poor wound care management. Another large segment is
the chronic leg ulcer. 2.5 million Americans have venous leg ulcers and the prevalence level is
3.5% in people over age 65. Cost of care per episode can exceed $40,000 and recurrence rates can
be as high as 70%. Total U.S. healthcare spending approximates $3 billion. The global market for
advanced wound management is valued at $3.7-4.0 billion and continues to expand primarily due to
the growth of the elderly population, sedentary lifestyles and the rising incidence of diabetes.
Secondary wound care market priorities include hospital-acquired pressure ulcers, which afflict
up to 28% of patients in long-term care facilities.

The SonicOne has been marketed to wound care clinics and outpatient facilities for quite some time,
but recently the emphasis has expanded to include long-term acute care hospitals and government
funded facilities (military, VA Hospitals and Indian reservations), where patient populations are
large and reimbursement is generally favorable.

	•	 	Long-term acute care hospitals. There are approximately 400 long-term acute
care hospitals in the U.S. with many owned by corporate entities such as Vibra
Healthcare and Triumph Healthcare. These institutions specialize in the
treatment and rehabilitation of medically complex patients who require an extended stay in
a hospital setting (25-30 days or longer). Reimbursement in these facilities is based on a
flat-fee, so using technologies that may reduce the length of stay, such as SonicOne, are
of great interest. Much of the Company’s business in this sector has been generated
through monthly rental programs where customers can pay as little as $2,000 per month for
the use of a SonicOne System. It is expected that most rentals will ultimately
convert to capital purchases.

	 
	•	 	Acute care general hospitals and Government Funded Facilities. Acute care
general, Veterans Administration (VA) and military hospitals present prime opportunities
for Misonix. The patient population of chronic and traumatic wounds is large. Misonix has
developed a line of disposable procedural trays for surgical debridement that are expected
to launch in early calendar 2011. The primary competitive product in the surgical wound
debridement space is the VersaJetTM (Smith & Nephew). This product uses a high-pressure
stream of saline, which, as compared to the SonicOne, is relatively dated technology.

SonicOne will be available for purchase on a GSA contract for all government facilities in the near
future. Misonix has entered into an agreement with a strategic partner to place its products onto
a GSA contract. The strategic partner will generate sales leads, process bids and take orders for
Misonix through its own client base. This is an efficient way for Misonix to sell into the
government segment because it allows government accounts to easily access our products and reduces
the time to purchase.

 

- 12 -

 

The revenue prospects for SonicOne should substantially improve as the focus expands into the
operating room (“OR”) for wound debridement procedures. This will be accompanied by the launch of a
full line of disposable procedure trays to address the needs of the OR as compared to the
outpatient setting.

Domestically, the SonicOne is marketed through a network of specialty sales agencies. As marketing
and product developments expand into the OR many of the clinicians that are part of the current
call pattern in the wound care clinics and long-term acute care hospitals are the same people that
we will focus on with the OR based debridement initiative.
 

	 	 	 
	SonicOne Product Summary
	 	 
	 
	 	 
	Addressable U.S. market:

	 	$250 million in the U.S.
	1) Outpatient/ wound care clinics

	 	Approximately. 2,000 facilities in U.S.
	2) Long Term acute care hospitals

	 	Approximately 400 facilities in U.S.
	3) Hospital (OR)

	 	Over 7,000 facilities in U.S.
	4) VA Locations

	 	Over 500 facilities in the U.S.
	 
	 	 
	Average unit selling price

	 	$40,000 per system and $400 for operating procedure disposables
	 
	 	 
	Marketed by:

	 	Domestic: Specialty Agencies 
International: Specialty Distributors
	 
	 	 
	CMS reimbursement for outpatient

	 	Reimbursed using established CPT codes for wound debridement
	CMS reimbursement 

for inpatient/OR use

	 	Reimbursed using established codes for wound debridement.
	 
	 
	Principal competitors

	 	Ultrasonic Debridement in
Clinic: Söring Sonoca (Germany),
Arobella Qoustic (U.S.)
	 

	 	Surgical Debridement in OR: Smith & Nephew VersaJetTM

 

- 13 -

 

SonaStar®

Ultrasonic Surgical Aspiration System

SonaStar is primarily marketed for use in neurosurgery. A secondary market, liver resection,
presents a segment where growth prospects are believed to be particularly attractive for this
product. In the U.S., Misonix sells this product directly to hospitals using a network of
specialty sales agencies that employ more than 75 salespeople. In other countries, the SonaStar is
represented by a specialty distributor organization selling direct to hospitals. Direct to
hospital sales in the U.S. translates to higher profit margins with better account control and
steadily improving brand equity.

SonaStar is engineered to provide powerful and precise
ultrasonic soft tissue aspiration as well as fragmentation of
hard and soft tissues. It is indicated for open to minimally
invasive surgery; and can be used for neuro, general, thoracic
and gynecologic surgical procedures. SonaStar is also capable of
precise shaving of bony structures to gain access to the softer
tissue behind the bones.

The SonaStar operates at a powerful 23kHz frequency and allows
for quick and efficient removal of hard and calcified tumors.
The system brings surgical aspiration technology to a high
level. Active process control maintains all performance
parameters such as ultrasound, irrigation and aspiration at
optimum settings. Hand instruments are well-balanced and
ergonomically designed.

SonaStar

Dynamic tissue management enables intuitive control over loading characteristics from delicate
tumor removal to de-bulking of calcified tumors. Load adjustments are as intuitive as altering
automotive speed with a gas pedal. A wireless footswitch, the only wireless footswitch available
for an ultrasonic surgical aspirator, controls up to four functions: ultrasound, ultrasound + COAG,
COAG and fluid infiltration while offering the convenience of a cordless device. The system
includes a wide variety of single-use sterile products, including aspiration probes and associated
tubing.

Management believes that the SonaStar is highly competitive with, and in some respects superior to,
comparable products sold by Integra Life Sciences, which is the largest supplier of ultrasonic
surgical tissue ablation systems and has a market share in excess of 50%. The market for
ultrasound instruments continues to grow at the expense of older manual approaches to tumor
removal. Misonix is focusing its marketing on two surgical procedures that are believed to be
prime targets for expanded use of the SonaStar—the removal of brain tumors and liver resections.

 

- 14 -

 

Brain tumors. Approximately 20,000 primary brain tumors are diagnosed in the U.S. each
year. Secondary brain cancer occurs in 20–30% of patients with metastatic disease. In the United
States, about 100,000 cases of secondary brain cancer are diagnosed each year. Many tumor or cancer
types can spread to the brain, the most common being cancer of the lung, breast, kidney, bladder
and melanoma. Surgery is the most widely used treatment modality and is often done concurrently
with radiation and or chemotherapy. Surgery may be used for metastatic brain tumors when there is
a single lesion and when there is no cancer elsewhere in the body. Some may be completely removed.
Tumors that are deep or that infiltrate brain tissue may be de-bulked in order to reduce pressure
and relieve symptoms in cases when the tumor cannot be removed.

Liver Cancer. Liver cancer is the third most common cause of cancer-related death and the
liver is a common site for metastatic disease from cancer arising in other organs. In the U.S.,
liver metastases are much more common than primary liver cancer. The liver’s large size, high
volume of blood flow, and dual blood supply (the hepatic artery and portal vein) make it
particularly vulnerable to invasion by cancerous cells, especially those originating in the colon,
rectum, lung and breast. Surgical removal of the tumor is standard treatment for liver cancer.

Marketing. SonaStar marketing is focused on neurosurgery and liver surgery, supported by
specialty sales agents in the U.S. and specialty distributors worldwide.

	 	 	 
	SonaStar Product
Summary
	 	 
	 
	 	 
	Addressable market:

	 	$120 million in the U.S.
	Procedure size of
addressable market:

	 	5,000 brain tumor surgeries per year / 7,000 liver resections
	 
	 	 
	Marketed by:

	 	Domestic: Specialty Agencies 
International: Specialty Distributors
	 
	 	 
	Average unit price

	 	$115,000 per system and $500 per procedure disposables
	 
	 	 
	Primary competitors

	 	Integra Life Sciences, Stryker, Soering

 

- 15 -

 

Testimonials

BoneScalpel

• “I have performed over 100 laminectomies for single and multilevel cases and
including revisions. It saves me 30-60 min per case when performing decompressions. The
BoneScalpel gives me a high level of control in cutting bone structures with ease and
precision while being able to stop right on the ligamentum flavum. It offers a
considerable improvement in safety. The learning curve has been minimal and it is very
intuitive to use.”

Arnold M. Schwartz, MD, Orthopedic Spine Surgeon, Huntington Hospital, Huntington, NY

• “The device cuts through bone quickly and precisely. I observed no damage to
soft tissue once it comes in contact. The ultrasonic energy is dispersed. The system
qualities are essential for spinal bone incisions in close proximity to spinal nerve
roots and the dura such as laminectomies. With growing experience with the device. I
have observed shorter duration of surgery and a decrease in bleeding.”

Nachshon Knoller, MD, Sheba Medical Center, Tel-Hashomer, NA, Israel

• “I have utilized the device in over 90 patients in cervical, thoracic and lumbar
applications. Its major advantage is the ability to cut bone while preserving underlying
neural and non-bony structures. This greatly reduces the risk of dural laceration. The
ultrasonic cut reduces bleeding from the bone edges and efficiently eliminates soft tissue
bleeding.”

William C. Welch — MD, FACS, FICS, Chief of Neurosurgery, The Pennsylvania Hospital,
Philadelphia, PA

SonicOne

• “SonicOne is an extremely useful tool in our out-patient clinic to safely and
effectively debride wounds when other methods were totally ineffective. The SonicOne has now
become a standard of care in our wound care center for rapid wound healing. Bio-burden is a
significant contributor to non-healing chronic wounds. With routine use of SonicOne, I have
observed a significant improvement to overall healing when bio-burden was a factor or issue
to non-healing”.

Joseph P. Cavorsi, M.D., Medical Director,The Center for Advanced Wound Care

• “The SonicOne is indispensible in our clinic. There is a great sense of security to
be able to achieve reduction in necrosis, debris, and bacteria from our patient’s wounds
with minimal to no discomfort, as well as the satisfaction of promoting wound healing at the
same time.”

Dot Weir, RN, CWON, CWS, Program Director, Wound Healing Center, Osceola Regional Medical
Center

 

- 16 -

 

Other Products

AutoSonixTM

Soft Tissue Tran-section and Cauterization

Misonix has been a pioneer in the development of ultrasonic instruments to transect and fragment
soft tissue, and to coagulate and seal blood vessels through a process that is generally regarded
as superior to electro-cauterization. This ultrasonically powered “cut and coagulate” approach has
grown sharply in parallel with the number of minimally invasive procedures, especially those done
laparoscopically. Misonix markets this product exclusively, worldwide, through Covidien. The
market is large, however, market leadership has gone to the Harmonic Scalpel® sold by
the Ethicon Division of Johnson & Johnson.

LySonixTM

Ultrasound Assisted Liposuction

The LySonix 3000 Ultrasound Assisted Liposuction System (UAL) is distributed by Mentor
Corporation, now a division of Johnson & Johnson. The product will be emphasized by J&J and
growth in the large cosmetic and body sculpting markets should accelerate.

In UAL, ultrasonic waves emitted by a probe are used to break up the fat and liquefy it into an
emulsion. As the fat is emulsified, it can then be easily suctioned with the tumescent fluid.
The use of ultrasound reduces tissue damage and bleeding because no mechanical action is
necessary to break up the fat. Moreover, less suction is needed to pull out the fat when it is
in a liquid state. As stated by the American Society of Plastic Surgeons, “Ultrasonic Assisted
Lipoplasty has been shown to improve the ease and effectiveness of liposuction in fibrous areas
of the body and is commonly used in secondary procedures when enhanced precision is needed.”

UAL systems can be especially useful in removing large volumes of fat in a single operation with
up to 50% less bleeding. There have been reports that ultrasound methods actually contract the
skin as the procedure is underway. Ultrasound can also help break up fat in the face, neck,
abdomen, back, buttocks, and calf where tough and fibrous deposits cannot be removed with
traditional methods without significant damage to the surrounding tissue. The primary competitor
in UAL is Sound Surgical, Inc. which markets the Vaser SystemÔ.

Laboratory Air Filtration and Forensic Analysis

We manufacture and sell portable ductless fume hood systems to hospitals and laboratories, as well
as related forensic testing equipment, mainly to law enforcement agencies. Misonix has been in
this business since the mid-1990s and it is the only part of the industrial products side of the
Company that management has chosen to retain. This business generates roughly $3 million in annual
revenues and makes a solid contribution both to profits and the absorption of corporate overhead.

 

- 17 -

 

The Company’s portable ductless fume hoods are mostly self-contained carbon or HEPA filtered
enclosures that remove hazardous fumes, vapors and particles from virtually any laboratory
application. Ductless hoods require no installation and are deployed simply by placing a unit on an
existing countertop or cart in order to immediately improve the air quality. Misonix also designs
and manufactures related products for forensic analysis that are used for fingerprinting, evidence
drying or DNA testing and are used by law enforcement departments throughout the U.S.

High-Intensity Focused Ultrasound (“HIFU”)

After roughly a decade of involvement in the HIFU sector as a joint venture partner with others,
Misonix has recently changed tactics and, in so doing, has carved out its own franchise in the
sector and enhanced its long-term growth potential. In June of 2009 Misonix acquired three HIFU
patents from ProRhythm, Inc. for a relatively small investment. Approximately 10 months later,
Misonix exited its distribution agreement with USHIFU, LLC in the best interests of both companies’
growth strategies. Since the purchase, Misonix has filed for five additional patent claims. The
focused objective of the Company’s continuing product development effort is to market new HIFU
transducer technology either individually or in concert with a strategic partner.

One of the ProRhythm patents centers around the
use of a flat, novel HIFU transducer design
consisting of a flat shape transducer, and a
focusing Fresnel lens. The Fresnel lens was
developed in France more than a century ago, and
was first widely used in lighthouses to transmit
navigational lights further than was possible
before. Substantially thinner than a
conventional lens, the Fresnel lens is comprised
of concentric sections known as Fresnel zones.
The lens can effectively focus acoustical energy
many centimeters away from the surface to create
tissue ablation. This flat shape
transducer-Fresnel lens combination is highly
promising for use in HIFU applications in at
least the following respect:

Fresnel Lens (1)

Vs. Conventional Lens (2)

	•	 	It raises the possibility of developing much smaller, simpler, and less expensive HIFU
systems — especially the HIFU probe component containing the transducer and lens, which is
currently priced in the $5,000 — $8,000 range. By using less costly lens components and
transducers that are currently available from multiple suppliers, the HIFU probe could
conceivably open the door to a new generation of disposable products.

 

- 18 -

 

Baseline evaluation tests of a new HIFU transducer design covered by our IP have recently been
completed successfully. Bench tests show that the transducer can create lesions up to 45mm in
depth and fully developed all the way back to the tissue surface. Reduced manufacturing costs
make the HIFU transducer suitable for use as a disposable component.

HIFU Background.

HIFU is a concentration of continuous beam ultrasound energy that raises the tissue in a
pre-determined focal zone to a high temperature sufficient to ensure coagulative necrosis without
blood loss or damage to the surrounding tissue. HIFU has significant clinical acceptance potential
due in part to its minimally invasive character, single-session treatment, minimal anesthesia, and
perceived short recovery period and quick return to daily activity.

The potential clinical efficacy for ablation of cancer tumors has not yet been thoroughly
investigated. The “piecemeal” nature of an ablation process in which the volume of lesion destroyed
at any given time is small (i.e. 1-3 mm wide / 5-20 mm high) makes it difficult to achieve complete
and homogeneous ablation of the entire gland. Another limiting factor is the relatively high cost
of current generation HIFU systems.

The world market for HIFU systems approximates $100 million in annual sales, and is fragmented both
regionally and by medical specialty — for example, Chinese surgeons and European urologists. The
two principal suppliers of ultrasound-guided transrectal HIFU devices for prostate cancer are
EDAP of France (Ablatherm®) and USHIFU, LLC (Sonablate® 500). Although
these devices are approved in Europe and the Far East, their use is currently limited in the U.S.
to the treatment of uterine fibroids. HIFU is still investigational in the U.S. for cancer tumor
ablation and Phase III trials are underway. China Medical Technologies (CMED) of Beijing,
is a dominant supplier in China, which presently accounts for roughly half of all worldwide HIFU
orders. Meanwhile, GE Healthcare has been a principal investor in Insightec, Ltd.
(Israel) which is selling HIFU systems, mainly for treating uterine fibroids, in many large markets
except Japan and Russia.

Future growth of HIFU will in large part be determined by FDA approval for ablation of cancer
tumors, and the development of new technologies that can lower costs and increase the therapeutic
range of HIFU as a treatment modality.

 

- 19 -

 

Stock Analysis and Valuation

Misonix has had a difficult time attracting investor or Wall Street interest while our story was
confused by a mix of laboratory and medical device businesses. The sale of the non-core businesses,
the focus on large market medical products, the international distribution, and the recurring
revenues from the sale of disposables are expected to attract more interest.

52- Week Shock Chart

Source: Big Charts

The stock price remains at the lower end of its historic range. The market capitalization is only
modestly higher trailing 12-month revenues and the Company’s book value. Our three leading
medical devices — BoneScalpelÔ, SonicOneÔ and SonaStar®
— are believed to be strong entries in a $1 billion addressable market and each of these
products is believed by our management to have outstanding growth potential.

A potential valuation driver for the Company could be the development of promising HIFU technology
described in this report. Recently, the French company EDAP reported favorable clinical outcomes
for over 800 patients with localized prostate cancer that were treated with its HIFU system. It
was reported that for a representative number of patients, the cancer specific survival rate and
the freedom from metastatic disease rate were 99% and 97%, respectively, at 8 years.

Management and directors control 20.7% of the Company’s shares while most of the remainder is
held in the form of small institutional holdings or by individual investors.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Shares Beneficially	 	 	 	 
	Name	 	Affiliation	 	Owned on 11/02/2010	 	 	% of Class	 
	 
	 
	Michael A. McManus, Jr.
	 	CEO and Chairman	 	 	836,751	 	 	 	11.0	 
	Dimensional Fund Advisors LP
	 	 	 	 	 	 	511,508	 	 	 	6.8	 
	Howard Alliger
	 	Director	 	 	251,508	 	 	 	3.5	 
	Richard Zaremba
	 	Officer	 	 	148,000	 	 	 	2.1	 
	Other Officers and Directors (8)
	 	 	 	 	 	 	292,750	 	 	 	4.1	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	All Officers and Directors (11)
	 	 	 	 	 	 	1,693,111	 	 	 	20.7	%*

	 	 	 
	*	 	Includes 1,164,410 shares which are issuable upon the exercise of presently vested options

 

- 20 -

 

Financial Statements

Misonix, Inc. and Subsidiaries

Consolidated Balance Sheets

	 	 	 	 	 	 	 	 	 
	 	 	June 30,	 	 	September 30,	 
	 	 	2010	 	 	2010	 
	 	 	(Derived from	 	 	 	 
	 	 	audited	 	 	 	 
	 	 	statements)	 	 	(Unaudited)	 
	Assets
	 	 	 	 	 	 	 	 
	Current assets
	 	 	 	 	 	 	 	 
	Cash and cash equivalents
	 	$	9,900,605	 	 	$	9,413,437	 
	Accounts receivable, less doubtful account allowance
	 	 	2,335,653	 	 	 	1,920,689	 
	Investments, net
	 	 	2,699,717	 	 	 	2,919,243	 
	Prepaid expenses and other current assets
	 	 	515,427	 	 	 	362,283	 
	Note receivable
	 	 	1,075,105	 	 	 	920,145	 
	 
	 	 	 	 	 	 
	Total current assets
	 	 	16,526,507	 	 	 	15,535,797	 
	 
	 	 	 	 	 	 	 	 
	Property, plant and equipment, net
	 	 	500,215	 	 	 	526,084	 
	Goodwill
	 	 	1,701,094	 	 	 	1,701,094	 
	Other assets
	 	 	1,730,339	 	 	 	1,465,004	 
	 
	 	 	 	 	 	 
	Total assets
	 	$	20,458,155	 	 	$	19,227,979	 
	 
	 	 	 	 	 	 	 	 
	Liabilities and stockholders’ equity
	 	 	 	 	 	 	 	 
	Current liabilities
	 	 	 	 	 	 	 	 
	Notes payable
	 	 	177,679	 	 	 	84,491	 
	Accounts payable
	 	 	888,654	 	 	 	832,940	 
	Accrued expenses and current liabilities
	 	 	1,000,523	 	 	 	915,704	 
	 
	 	 	 	 	 	 
	Total current liabilities
	 	 	2,066,856	 	 	 	1,833,135	 
	 
	 	 	 	 	 	 	 	 
	Capital lease obligations
	 	 	14,274	 	 	 	10,474	 
	Deferred lease liability
	 	 	—	 	 	 	1,404	 
	Deferred income
	 	 	250,739	 	 	 	214,420	 
	 
	 	 	 	 	 	 
	Total liabilities
	 	 	2,331,869	 	 	 	2,059,433	 
	 
	 	 	 	 	 	 	 	 
	Stockholders’ equity
	 	 	 	 	 	 	 	 
	Common stock ($0.01 par value shares, 20,000,00 authorized)
	 	 	70,792	 	 	 	70,792	 
	Additional paid-in capital
	 	 	25,502,717	 	 	 	25,562,823	 
	Accumulated deficit
	 	 	(7,034,799	)	 	 	(8,052.645	)
	Treasury stock, at cost, 77,800 shares
	 	 	(412,424	)	 	 	(412,424	)
	Total stockholders’ equity
	 	 	18,126,286	 	 	 	17,168,546	 
	 
	 	 	 	 	 	 
	Total liabilities and stockholders’ equity
	 	$	20,458,155	 	 	$	19,227,979	 

 

- 21 -

 

Misonix, Inc. and Subsidiaries

Income Statement

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	FY 2010	 	 	FY 2009	 	 	Fiscal 1Q	 	 	Fiscal 1Q	 
	 	 	(ended 6/30)	 	 	(ended 6/30)	 	 	(9/30/10)	 	 	(9/30/09)	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net sales — total
	 	$	13,371,275	 	 	$	12,713,273	 	 	$	3,257,988	 	 	$	2,631,017	 
	Medical devices
	 	 	10,737,379	 	 	 	9,688,294	 	 	 	2,692,268	 	 	 	2,003,284	 
	Laboratory and other
	 	 	2,633,896	 	 	 	3,024,979	 	 	 	565,720	 	 	 	627,733	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross profit — total
	 	$	6,526,495	 	 	$	5,218,271	 	 	 	1,637,285	 	 	 	1,009,124	 
	Medical devices
	 	 	5,799,713	 	 	 	4,319,395	 	 	 	1,472,571	 	 	 	908,585	 
	Laboratory and other
	 	 	726,782	 	 	 	898,876	 	 	 	164,714	 	 	 	100,539	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Selling
	 	$	3,625,072	 	 	$	2,619,510	 	 	 	965,007	 	 	 	919,607	 
	General & administrative
	 	 	5,055,848	 	 	 	5,018,143	 	 	 	1,217,805	 	 	 	1,312,680	 
	Research & development
	 	 	1,803,524	 	 	 	1,377,807	 	 	 	460,494	 	 	 	422,469	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating expenses
	 	$	10,484,444	 	 	$	9,015,460	 	 	 	2,643,306	 	 	 	2,654,756	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss from operations
	 	 	(3,957,949	)	 	 	(3,797,189	)	 	 	(1,006,021	)	 	 	(1,645,632	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other income (expenses)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Interest income
	 	 	28,227	 	 	 	67,170	 	 	 	50	 	 	 	14,025	 
	Interest expense
	 	 	(53,194	)	 	 	(158,007	)	 	 	(3,641	)	 	 	(28,088	)
	Royalty income and
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	licensing fees
	 	 	614,663	 	 	 	616,336	 	 	 	179,115	 	 	 	156,623	 
	Royalty expense
	 	 	(117,630	)	 	 	(24,822	)	 	 	(19,343	)	 	 	—	 
	Recovery of Focus
Surgery, Inc.
Investment
	 	 	693,044	 	 	 	1,516,866	 	 	 	—	 	 	 	—	 
	Other
	 	 	(92,799	)	 	 	282,721	 	 	 	45,409	 	 	 	10,164	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total other income
	 	$	1,072,311	 	 	$	2,300,264	 	 	 	201,590	 	 	 	152,724	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss from continuing
operations
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Before income tax (benefit)
	 	 	(2,885,638	)	 	 	(1,496,925	)	 	 	(804,431	)	 	 	(1,492,908	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Income tax (benefit)
	 	 	(694,796	)	 	 	76,329	 	 	 	38,100	 	 	 	(245,764	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss from
continuing operations
	 	$	(2,190,842	)	 	$	(1,573,254	)	 	 	(842,531	)	 	 	(1,247,144	)
	Net loss from cont.
operations attributed to
Misonix
shareholders—Diluted
	 	$	(0.31	)	 	$	(0.22	)	 	$	(0.12	)	 	$	(0.18	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average shares
	 	 	7,001,369	 	 	 	7,001,369	 	 	 	7,001,369	 	 	 	7,001,369	 

 

- 22 -

 

Issued U.S. Patents

June 30, 2010

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Expiration
	Number	 	 	Description	 	Date
	 	5,248,296	 	 	Wire with sheath — relating to the
Company’s Alliger System for
reducing transverse motion in its
catheters.
	 	12/24/10
	 	 	 	 	 
	 	 
	 	5,306,261	 	 	Guidewire guides — relating to the
Company’s Alliger System for a
catheter with collapsible wire
guide.
	 	1/22/13
	 	 	 	 	 
	 	 
	 	5,443,456	 	 	Guidewire guides — relating to the
Company’s Alliger System for a
catheter with collapsible wire
guide.
	 	2/10/14
	 	 	 	 	 
	 	 
	 	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.

	 	09/28/13
	 	 	 	 	 
	 	 
	 	5,397,293	 	 	Catheter sheath — relating to the
Company’s Alliger System for an
ultrasonic device with sheath and
transverse motion damping.
	 	11/25/12
	 	 	 	 	 
	 	 
	 	5,419,761	 	 	Liposuction — relating to the
Company’s liposuction apparatus and
associated method.
	 	8/03/13
	 	 	 	 	 
	 	 
	 	D409 746	 	 	Cannula for ultrasonic probe.
	 	5/11/13
	 	 	 	 	 
	 	 
	 	D408 529	 	 	Cannula for ultrasonic probe.
	 	4/20/13
	 	 	 	 	 
	 	 
	 	D478165	 	 	Cannula for ultrasonic probe.
	 	8/05/17
	 	 	 	 	 
	 	 
	 	5,465,468	 	 	Flow-thru transducer — relating to
the method of making an
electro-mechanical transducer device
to be used in conjunction with the
Company’s soft tissue aspiration
system and ultrasonic laboratory and
scientific products.
	 	12/06/14
	 	 	 	 	 
	 	 
	 	5,527,273	 	 	Ultrasonic probes — relating to an
ultrasonic lipectomy probe to be
used with the Company’s soft tissue
aspiration technology.
	 	10/6/14
	 	 	 	 	 
	 	 
	 	5,769,211	 	 	Autoclavable switch — relating to a
medical handpiece with autoclavable
rotary switch to be used in medical
procedures.
	 	1/21/17
	 	 	 	 	 
	 	 
	 	5,562,609	 	 	Ultrasonic surgical probe.
	 	10/07/14
	 	 	 	 	 
	 	 
	 	5,562,610	 	 	Needle for ultrasonic surgical probe.
	 	10/07/14

 

- 23 -

 

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Expiration
	Number	 	 	Description	 	Date
	 	6,033,375	 	 	Ultrasonic probe with isolated and Teflon coated outer cannula.
	 	12/23/17
	 	 	 	 	 
	 	 
	 	6,270,471	 	 	Ultrasonic probe with isolated outer cannula.
	 	12/23/17
	 	 	 	 	 
	 	 
	 	6,443,969	 	 	Ultrasonic blade with cooling.
	 	8/15/20
	 	 	 	 	 
	 	 
	 	6,379,371	 	 	Ultrasonic blade with cooling.
	 	11/15/19
	 	 	 	 	 
	 	 
	 	6,375,648	 	 	Infiltration cannula with Teflon coated outer surface.
	 	10/02/18
	 	 	 	 	 
	 	 
	 	6,063,050	 	 	Ultrasonic dissection and coagulation system.
	 	10/16/17
	 	 	 	 	 
	 	 
	 	6,036,667	 	 	Ultrasonic dissection and coagulation system.
	 	08/14/17
	 	 	 	 	 
	 	 
	 	6,582,440	 	 	Non-clogging catheter for lithotripsy.
	 	12/26/16
	 	 	 	 	 
	 	 
	 	6,454,730	 	 	Thermal film ultrasonic dose indicator.
	 	04/02/19
	 	 	 	 	 
	 	 
	 	6,613,056	 	 	Ultrasonic probe with low-friction bushings.
	 	02/17/19
	 	 	 	 	 
	 	 
	 	6,648,839	 	 	Ultrasonic medical treatment device for RF cauterization and related
method.
	 	05/08/22
	 	 	 	 	 
	 	 
	 	6,660,054	 	 	Fingerprint processing chamber with airborne contaminant containment
and adsorption.
	 	09/10/21
	 	 	 	 	 
	 	 
	 	6,736,814	 	 	Ultrasonic medical treatment device for bipolar RF cauterization and
related method.
	 	02/28/22
	 	 	 	 	 
	 	 
	 	6,799,729	 	 	Ultrasonic cleaning and atomizing probe.
	 	10/05/21
	 	 	 	 	 
	 	 
	 	6,869,439	 	 	Ultrasonic dissector.
	 	03/22/22
	 	 	 	 	 
	 	 
	 	6,902,536	 	 	RF cauterization and ultrasonic ablation.
	 	06/07/22
	 	 	 	 	 
	 	 
	 	6,377,693	 	 	Tinnitus masking using ultrasonic signals.
	 	06/23/14
	 	 	 	 	 
	 	 
	 	6,173,062	 	 	Frequency transpositional hearing aid with digital and single
sideband modulation.
	 	03/16/14
	 	 	 	 	 
	 	 
	 	6,169,813	 	 	Frequency transpositional hearing aid with single sideband modulation.
	 	03/16/14
	 	 	 	 	 
	 	 
	 	5,663,727	 	 	Frequency response analyzer and shaping apparatus and digital hearing
enhancement apparatus and method utilizing the same.
	 	06/23/15
	 	 	 	 	 
	 	 
	 	7,442,168	 	 	High efficiency medical transducer with ergonomic shape and method
manufacture.
	 	04/01/23
	 	 	 	 	 
	 	 
	 	7,223,267	 	 	Ultrasonic probe with detachable slidable cauterization forceps.
	 	02/06/24
	 	 	 	 	 
	 	 
	 	7,717,913	 	 	Cauterization and ultrasonic ablation instrument with multi hole
collar and electrode MTG sleeve.
	 	11/04/24
	 	 	 	 	 
	 	 
	 	7,776,027	 	 	Medical Handpiece with automatic power switching means
	 	7/11/22
	 	 	 	 	 
	 	 
	 	6,492,762	 	 	Ultrasonic Transducer, Transducer Array, And Fabrication Method
	 	3/22/20
	 	 	 	 	 
	 	 
	 	6,787,974	 	 	Ultrasound Transducer Unit And Planar Ultrasound Lens
	 	11/21/21
	 	 	 	 	 
	 	 
	 	6,461,314	 	 	Intrabody HIFU Applicator
	 	2/2/20

 

- 24 -

 

Risk Factors

An investment in Misonix involves risk. This report supplements information available in the
Company’s Annual Report on Form 10-K for the year ended June 30, 2010 (the “10-K”) and related
documents. Our business financial condition or results of operations could be materially adversely
affected by any of these risks. These risks are more specifically set forth in the Risk Factors
section of the 10-K. You should refer to the qualification and limitations of forward looking
statements set forth immediately prior to the beginning of Item 1 of the 10-K. An investor should
also refer to our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We
disclaim any obligation to update our forward- looking statements. 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.

 

- 25 -

 

Published by:

Misonix, Inc.

1938 New Highway

Farmingdale, NY 11735

Phone: 631-694-9555

Fax: 631-694-9412

Website:

http://www.misonix.comexv4w1

    Exhibit 4.1

 

    AMENDMENT NO. 1 TO

    SECOND AMENDED AND RESTATED WARRANT AGREEMENT

 

    This Amendment (this “Amendment”) is made as of
    November 29,
    2010 by and among Liberty Acquisition Holdings Corp., a Delaware
    corporation (the “Company”), Liberty
    Acquisition Holdings Virginia, Inc., a Virginia corporation
    (“Liberty Virginia”), Continental Stock
    Transfer & Trust Company, a New York corporation
    (the “Warrant Agent”), and Promotora de
    Informaciones, S.A., a sociedad anónima organized under the
    laws of Spain (“PRISA”).

 

    WHEREAS, the Company and the Warrant Agent are parties to that
    certain Second Amended and Restated Warrant Agreement, dated as
    of December 6, 2007 and filed with the United States
    Securities and Exchange Commission on December 12, 2007
    (the “Existing Warrant Agreement”), pursuant to
    which the Company has issued Warrants to purchase
    76,687,500 shares of Common Stock (collectively, the
    “Warrants”);

 

    WHEREAS, the terms of the Warrants are governed by the Existing
    Warrant Agreement and capitalized terms used herein, but not
    otherwise defined, shall have the meanings given to such terms
    in the Existing Warrant Agreement;

 

    WHEREAS, on August 4, 2010, the Company, Liberty Virginia
    and PRISA entered into an Amended and Restated Business
    Combination Agreement (as amended from time to time, the
    “Business Combination Agreement”), pursuant to
    which, upon the consummation of the transactions contemplated by
    the Business Combination Agreement, the stockholders of the
    Company will come to own newly issued American Depositary
    Receipts representing newly issued (i) Class A
    Ordinary Shares of PRISA and (ii) convertible non-voting
    shares (acción sin voto convertible) of PRISA;

 

    WHEREAS, the Business Combination Agreement provides for the
    merger of the Company with and into Liberty Virginia, its wholly
    owned subsidiary, upon consummation of which, as provided in
    Section 4.4 of the Existing Warrant Agreement, the Warrants
    will no longer be exercisable for shares of Common Stock but
    instead will be exercisable (subject to the terms and conditions
    of the Existing Warrant Agreement as amended hereby) for shares
    of common stock, par value $0.0001 per share, of Liberty
    Virginia;

 

    WHEREAS, the Board of Directors of the Company has determined
    that the consummation of the transactions contemplated by the
    Business Combination Agreement will constitute a Business
    Combination between the Company and PRISA;

 

    WHEREAS, pursuant to the Business Combination Agreement, the
    Company agreed to seek the approval of this Amendment by the
    Registered Holders of a majority of the outstanding Warrants
    (the “Warrant Proposal”) such that, in
    connection with the transactions contemplated by the Business
    Combination Agreement, PRISA will be required to purchase, and
    the holders of Warrants will be required to exchange, all of the
    outstanding Warrants for the Consideration (as defined below)
    and on such other terms and subject to such conditions as are
    set forth herein;

 

    WHEREAS, Section 9.8 of the Existing Warrant Agreement
    provides that the Company and the Warrant Agent may amend the
    Existing Warrant Agreement with the written consent of the
    Registered Holders of a majority of the outstanding Warrants;

 

    WHEREAS, the Registered Holders of a majority of the outstanding
    Warrants have approved the Warrant Proposal; and

 

    WHEREAS, the representative of the underwriters has waived any
    and all rights to consent to any modification or amendment of
    the Existing Warrant Agreement contemplated by Section 9.8
    of the Existing Warrant Agreement.

 

    NOW, THEREFORE, in consideration of the mutual agreements
    contained herein and other good and valuable consideration, the
    receipt and sufficiency of which are hereby acknowledged, and
    intending to be legally bound hereby, the parties hereto agree
    to amend the Existing Warrant Agreement as set forth herein.

    

 

 

    1. Amendment of Existing Warrant Agreement.

 

    1.1 Mandatory Exchange of
    Securities.  Section 6 of the Existing
    Warrant Agreement is hereby amended and restated in its entirety
    so that it now reads in full as follows:

 

    “6 Mandatory Exchange of Securities.

 

    6.1 Definitions.

 

    Capitalized terms used in this Section 6, but not
    otherwise defined in this Agreement, shall have the meanings
    given to such terms in the Amended and Restated Business
    Combination Agreement, dated as of August 4, 2010,
    among Promotora de Informaciones, S.A., a sociedad
    anónima organized under the laws of Spain
    (“PRISA”), Liberty Acquisition Holdings Corp.
    and Liberty Acquisition Holdings Virginia, Inc., a Virginia
    corporation (“Liberty Virginia”) (the
    “Business Combination Agreement”), a copy of
    which is included in the PRISA prospectus dated
    October 25,
    2010 and previously delivered to Registered Holders in
    connection with soliciting consents for Amendment No. 1 to
    this Agreement.

 

    6.2 Exchange.

 

    6.2.1 Notwithstanding anything contained in this Agreement
    to the contrary, at the Exchange Effective Time, and subject to
    the Share Exchange being consummated, except as provided in
    Section 6.3 herein or as such consideration may be
    changed as occasioned by the last paragraph of
    Section 3.5(a) of the Business Combination Agreement, each
    Warrant issued and outstanding immediately prior to the Exchange
    Effective Time shall, automatically and without any action by
    the Registered Holder thereof, be exchanged by PRISA and
    transferred by such Registered Holder to PRISA (the
    “Warrant Exchange”), in consideration for:

 

    (i) a payment by Liberty Virginia in cash in the amount of
    US$0.90 (the “Cash Consideration”) to be
    delivered by or at the direction of Liberty Virginia; and

 

    (ii) the exchange by PRISA of 0.450 newly issued PRISA
    Class A Ordinary Shares (the “Ordinary Share
    Consideration,” and together with the Cash
    Consideration, the “Consideration”) to be
    delivered by PRISA to the Depositary as provided for herein.

 

    6.2.2 Notwithstanding anything contained in this Agreement
    to the contrary, upon consummation of the Share Exchange, and
    without any action by the Registered Holder thereof, each
    Registered Holder of Warrants (other than Prisa) shall cease to
    have any rights with respect to the Warrants other than the
    right to receive the Consideration.

 

    6.3 Delivery of Consideration.

 

    6.3.1 Each PRISA Share issued as part of the Consideration
    shall be registered in the name of the Depositary by Iberclear
    and then delivered in the form of PRISA ADSs evidenced by ADRs,
    with each PRISA ADS-A representing
    four
    PRISA Class A Ordinary Shares. Each PRISA ADS shall be
    issued in accordance with the Deposit Agreement.

 

    6.3.2 The aggregate Cash Consideration payable to each
    former Registered Holder shall be rounded down to the nearest
    whole cent after multiplying the aggregate number of outstanding
    Warrants held by such former Registered Holder by the Cash
    Consideration.

 

    6.3.3 If, between the date of this Agreement and the
    Exchange Effective Time, PRISA, Liberty or Liberty Virginia
    undergoes a change in capitalization affecting the Warrants, an
    appropriate and proportionate adjustment shall be made to the
    Ordinary Share Consideration in order to preserve the economic
    benefits of the Warrant Exchange to the parties.

 

    6.3.4 In so far as the provisions of Article IV of the
    Business Combination Agreement relate to the obligations and
    rights of the parties to this Agreement regarding the Warrant
    Exchange, such provisions are hereby incorporated herein by
    reference; provided, however, that nothing in this
    Section 6.3.4 or this Agreement, whether expressed
    or implied, is intended to confer upon any Person, including any
    beneficial owner or Registered Holder of Warrants, any rights or
    remedies under or by reason of the Business Combination
    Agreement enforceable against the parties thereto or their
    successors or assigns.

    

    2

 

    6.3.5 Notwithstanding anything herein to the contrary, the
    Company shall not be required to provide any prior notice of the
    Warrant Exchange to any Registered Holder.

 

    6.4 Each of the parties hereto acknowledges and agrees that
    the obligations under this Section 6 to deliver the
    Ordinary Share Consideration shall be satisfied by PRISA.

 

    6.5 Each of the parties hereto acknowledges and agrees that
    the obligations under this Section 6 to deliver the
    Cash Consideration shall be satisfied by or at the direction of
    Liberty Virginia.”

 

    1.2 Appointment of Warrant
    Agent.  Existing Warrant Agreement is hereby
    amended to add a new Section 1.2, which shall read in full
    as follows:

 

    “1.2 Appointment of Warrant Agent at Exchange
    Time.  Notwithstanding anything contained in
    this Agreement to contrary (including that the Warrant Agent be
    a New York Corporation), at the Exchange Effective Time, PRISA
    shall act as agent for the Company, its successors and assigns
    for the Warrants, and PRISA agrees to perform in accordance with
    the terms and conditions set forth in this Agreement. At such
    time as PRISA is appointed, Continental Stock
    Transfer & Trust Company shall have no further
    rights or obligations under the Agreement, and the term
    “Warrant Agent,” as used in this Agreement,
    shall refer exclusively to PRISA.”

 

    2. Miscellaneous Provisions.

 

    2.1 PRISA Obligation.  Each of the
    parties hereto acknowledges and agrees that the obligations
    under Section 6.2 of the Existing Warrant Agreement (as
    amended by this Amendment) to deliver the Ordinary Share
    Consideration and Convertible Non-Voting Share Consideration
    shall be satisfied by PRISA

 

    2.2 Liberty Virginia
    Obligation.  Each of the parties hereto
    acknowledges and agrees that the obligations under
    Section 6.2 of the Existing Warrant Agreement (as amended
    by this Amendment) to deliver the Cash Consideration shall be
    satisfied by or at the direction of Liberty Virginia.

 

    2.3 Effectiveness of Warrant.  Each
    of the parties hereto acknowledges and agrees that the
    effectiveness of this Amendment shall be expressly subject to
    the occurrence of the Share Exchange (as defined in the Business
    Combination Agreement) and shall automatically be terminated and
    shall be null and void if the Business Combination Agreement
    shall be terminated.

 

    2.4 Successors.  All the covenants
    and provisions of this Amendment by or for the benefit of the
    Company or the Warrant Agent shall bind and inure to the benefit
    of their permitted respective successors and assigns.

 

    2.5 Severability.  This Amendment
    shall be deemed severable, and the invalidity or
    unenforceability of any term or provision hereof shall not
    affect the validity or enforceability of this Amendment or of
    any other term or provision hereof. Furthermore, in lieu of any
    such invalid or unenforceable term or provision, the parties
    hereto intend that there shall be added as a part of this
    Amendment a provision as similar in terms to such invalid or
    unenforceable provision as may be possible and be valid and
    enforceable.

 

    2.6 Applicable Law.  The validity,
    interpretation and performance of this Amendment shall be
    governed in all respects by the laws of the State of New York,
    without giving effect to conflict of laws. The parties hereby
    agree that any action, proceeding or claim against it arising
    out of or relating in any way to this Amendment shall be brought
    and enforced in the courts of the State of New York or the
    United States District Court for the Southern District of New
    York, and irrevocably submits to such jurisdiction, which
    jurisdiction shall be exclusive. Each of the parties hereby
    waives any objection to such exclusive jurisdiction and that
    such courts represent an inconvenient forum.

 

    2.7 Counterparts.  This Amendment
    may be executed in any number of counterparts, and by facsimile
    or portable document format (pdf) transmission, and each of such
    counterparts shall for all purposes be deemed to be an original
    and all such counterparts shall together constitute but one and
    the same instrument.

 

    2.8 Effect of Headings.  The
    Section headings herein are for convenience only and are not
    part of this Amendment and shall not affect the interpretation
    thereof.

    

    3

 

    2.9 Entire Agreement.  The Existing
    Warrant Agreement, as modified by this Amendment, constitutes
    the entire understanding of the parties and supersedes all prior
    agreements, understandings, arrangements, promises and
    commitments, whether written or oral, express or implied,
    relating to the subject matter hereof, and all such prior
    agreements, understandings, arrangements, promises and
    commitments are hereby canceled and terminated.

 

    [Signatures
    Appear on Following Page]

    

    4

 

    IN WITNESS WHEREOF, each of the parties has caused this
    Amendment to be duly executed as of the date first above written.

 

    LIBERTY ACQUISITION HOLDINGS CORP.

 

			
	 	    By: 
	/s/ Jared Bluestein
    

    Name:  Jared Bluestein

    Title:    Secretary

 

    LIBERTY ACQUISITION HOLDINGS VIRGINIA, INC.

 

			
	 	    By: 
	/s/ Jared Bluestein
        

    Name:  Jared Bluestein

    Title:    Secretary

 

    CONTINENTAL STOCK TRANSFER & TRUST COMPANY

 

			
	 	    By: 
	/s/ Alexandra Albrecht
        

    Name:  Alexandra Albrecht

    Title:    Vice President

 

    PROMOTORA DE INFORMACIONES, S.A.

 

			
	 	    By: 
	/s/ Iñigo Dago Elorza
        

    Name:  Iñigo Dago Elorza

    Title:    Chief Legal Officer and Secretary

             of the Board of Directors

 

    [Signature
    Page to Warrant Agreement Amendment]

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