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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





(Mark
      One)


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





For
      the
      quarterly period ended March
      31, 2006




OR





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




For
      the
      transition period from _______ to ________.





Commission
      file number:   1-10986




**MISONIX,
      INC.**


(Exact
      name of registrant as specified in its charter)





New
                York
            
            11-2148932(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)





1938
                New Highway, Farmingdale, NY
            
            11735(Address
                of principal executive offices)
            
            (Zip
                Code)




(631)
      694-9555





(Registrant’s
      telephone number, including area code)





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.





Yes
x No
o





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





Large
      accelerated filer o                  
      Accelerated filer o                  
      Non-accelerated filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange
      Act).





Yes o No
x





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of
      the
      latest practical date:





Outstanding
                atClass
                of Common Stock
            
            May
                9, 2006Common
                Stock, $.01 par value
            
            6,900,369









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**MISONIX,
      INC.**





**INDEX**





**Part
                I - FINANCIAL INFORMATION**
            **Page**Item
                1.
            Financial
                Statements:Consolidated
                Balance Sheets as of March 31, 2006 (Unaudited)
                and June 30, 2005
            3Consolidated
                Statements of Operations Nine months ended March
                31, 2006 and 2005 (Unaudited)
            4Consolidated
                Statements of Operations Three months ended
                March 31, 2006 and 2005 (Unaudited)
            5Consolidated
                Statements of Cash Flows Nine months ended March
                31, 2006 and 2005 (Unaudited)
            6Notes
                to Consolidated Financial
                Statements
            7Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            14Item
                3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            25Item
                4.
            Controls
                and Procedures
            25Part
                II - OTHER INFORMATIONItem
                6.
            Exhibits
            26Signatures








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PART
      I - FINANCIAL INFORMATION


Item
      1. Financial Statements.




**MISONIX,
      INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**March
                31,**
              **2006**
            
            June
                30,
              2005**Assets**
            
            **(unaudited)**Current
                assets:Cash
                and cash equivalents
            
            **$**
            **606,155**
            
            $
            2,484,534Accounts
                receivable, less allowance for doubtful accounts of$501,581
                and $405,998, respectively
            
            
            **7,195,229**
            
            
            11,757,827Inventories
            
            
            **11,365,341**
            
            
            9,780,501Income
                tax receivable
            
            
            **1,073,292**
            
            
            224,734Deferred
                income taxes
            
            
            **1,093,740**
            
            
            964,426Prepaid
                expenses and other current assets
            
            
            **1,464,073**
            
            
            1,336,104Total
                current assets
            
            
            **22,797,830**
            
            
            26,548,126Property,
                plant and equipment, net
            
            
            **6,205,689**
            
            
            6,409,835Deferred
                income taxes
            
            
            **37,903**
            
            
            244,769Goodwill
            
            
            **4,473,713**
            
            
            4,473,713Other
                assets
            
            
            **480,240**
            
            
            409,493Total
                assets
            
            **$**
            **33,995,375**
            
            $
            38,085,936**Liabilities
                and stockholders’ equity**Current
                liabilities:Revolving
                credit facilities
            
            **$**
            **1,483,786**
            
            $
            1,883,193Accounts
                payable
            
            
            **4,647,504**
            
            
            5,482,313Accrued
                expenses and other current liabilities
            
            
            **2,401,235**
            
            
            2,901,247Current
                maturities of long-term debt and capital lease obligations
            
            
            **345,544**
            
            
            376,148Total
                current liabilities
            
            
            **8,878,069**
            
            
            10,642,901Long-term
                debt and capital lease obligations
            
            
            **1,164,531**
            
            
            1,240,324Deferred
                income taxes
            
            
            **—**
            
            
            270,884Deferred
                income
            
            
            **373,422**
            
            
            508,582Minority
                interest
            
            
            **341,744**
            
            
            329,085Commitments
                and contingenciesStockholders’
                equity:Common
                stock, $.01 par value—shares authorized 10,000,000; 6,978,169 and6,902,752
                issued, and 6,900,369 and 6,824,952 outstanding,
                respectively
            
            
            **69,782**
            
            
            69,028Additional
                paid-in capital
            
            
            **24,479,939**
            
            
            23,619,281Retained
                (deficit) earnings
            
            
            **(1,040,420**
            **)**
            
            1,601,166Treasury
                stock, 77,800 shares
            
            
            **(412,424**
            **)**
            
            (412,424
            )Accumulated
                other comprehensive income
            
            
            **140,732**
            
            
            217,109Total
                stockholders’ equity
            
            
            **23,237,609**
            
            
            25,094,160Total
                liabilities and stockholders’ equity
            
            **$**
            **33,995,375**
            
            $
            38,085,936


*See
      Accompanying Notes to Consolidated Financial Statements.*




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**MISONIX,
      INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


**For
                the nine months
                ended****March
                31****2006**
            
            2005Net
                sales
            
            **$**
            **29,549,736**
            
            $
            32,016,885Cost
                of goods sold
            
            
            **18,296,682**
            
            
            18,610,337Gross
                profit
            
            
            **11,253,054**
            
            
            13,406,548Operating
                expenses:Selling
                expenses
            
            
            **5,014,110**
            
            
            4,407,551General
                and administrative expenses
            
            
            **7,528,168**
            
            
            6,026,911Research
                and development expenses
            
            
            **2,739,043**
            
            
            2,540,070Total
                operating expenses
            
            
            **15,281,321**
            
            
            12,974,532(Loss)
                income from operations
            
            
            (4,028,267
            )
            
            432,016Other
                income (expense):Interest
                income
            
            
            **65,857**
            
            
            45,194Interest
                expense
            
            
            (168,629
            )
            
            (165,457
            )Royalty
                income and license fees net of royalty expenseof
                ($75,775) and ($40,756)
            
            
            **571,769**
            
            
            689,011Other
            
            
            (10,663
            )
            
            (19,744
            )Total
                other income
            
            
            **458,334**
            
            
            549,004(Loss)
                income before minority interest and income taxes
            
            
            (3,569,933
            )
            
            981,020Minority
                interest in net income of consolidatedsubsidiary
            
            
            **12,659**
            
            
            56,329(Loss)
                income before income taxes
            
            
            (3,582,592
            )
            
            924,691Income
                tax (benefit) expense
            
            
            (941,006
            )
            
            326,727Net
                (loss) income
            
            
            ($2,641,586
            )
            $
            597,964Net
                (loss) income per share - Basic
            
            
            ($
                .39
            )
            $
            .09Net
                (loss) income per share - Diluted
            
            
            ($
                .39
            )
            $
            .09Weighted
                average common shares outstanding - Basic
            
            
            **6,857,924**
            
            
            6,776,137Weighted
                average common shares outstanding - Diluted
            
            
            **6,857,924**
            
            
            6,981,837





*See
      Accompanying Notes to Consolidated Financial Statements* .




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**MISONIX,
      INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


**For
                the three months ended****March
                31,****2006**
            
            2005Net
                sales
            
            **$**
            **10,169,778**
            
            $
            10,879,607Cost
                of goods sold
            
            
            **6,216,776**
            
            
            6,330,457Gross
                profit
            
            
            **3,953,002**
            
            
            4,549,150Operating
                expenses:Selling
                expenses
            
            
            **1,765,639**
            
            
            1,476,236General
                and administrative expenses
            
            
            **2,502,626**
            
            
            2,284,786Research
                and development expenses
            
            
            **975,307**
            
            
            918,112Total
                operating expenses
            
            
            **5,243,572**
            
            
            4,679,134(Loss)
                from operations
            
            
            **(1,290,570**
            **)**
            
            (129,984
            )Other
                income (expense):Interest
                income
            
            
            **17,742**
            
            
            15,462Interest
                expense
            
            
            **(54,019**
            **)**
            
            (52,735
            )Royalty
                income and license fees net of royalty expenseof
                ($38,376) and ($24,056)
            
            
            **177,702**
            
            
            241,715Other
            
            
            **2,718**
            
            
            (9,331
            )Total
                other income
            
            
            **144,143**
            
            
            195,111(Loss)
                income before minority interest and income taxes
            
            
            **(1,146,427**
            **)**
            
            65,127Minority
                interest in net (loss) income of consolidated subsidiary
            
            
            **(
                6,465**
            **)**
            
            29,083(Loss)
                income before income taxes
            
            
            **(1,139,962**
            **)**
            
            36,044Income
                tax (benefit) expense
            
            
            **(310,844**
            **)**
            
            32,683Net
                (loss) income
            
            
            **($829,118**
            **)**
            $
            3,361Net
                (loss) income per share - Basic
            
            
            **($
                .12**
            **)**
            $
            3⁄4Net
                (loss) income per share - Diluted
            
            
            **($
                .12**
            **)**
            $
            3⁄4Weighted
                average common shares outstanding - Basic
            
            
            **6,884,169**
            
            
            6,812,673Weighted
                average common shares outstanding - Diluted
            
            
            **6,884,169**
            
            
            7,037,501




*See
      Accompanying Notes to Consolidated Financial Statements* .




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**MISONIX,
      INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**For
                the nine months ended****March
                31,****2006**
            
            2005**Operating
                activities**Net
                (loss) income
            
            
            **($2,641,586**
            **)**
            $
            597,964Adjustments
                to reconcile net (loss) income to net cash used in operating
                activities:Bad
                debt expense (recovery)
            
            
            **209,084**
            
            
            (12,560
            )Deferred
                income tax benefit
            
            
            **(169,554**
            **)**
            
            9,874Depreciation
                and amortization
            
            
            **941,681**
            
            
            628,555Loss
                on disposal of equipment
            
            
            **141,857**
            
            
            153,552Minority
                interest in net income of subsidiaries
            
            
            **12,369**
            
            
            56,329Stock
                option compensation
            
            
            **440,060**
            
            
            3⁄4Other
            
            
            **6,131**
            
            
            19,744Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            **4,166,860**
            
            
            (374,014
            )Inventories
            
            
            **(1,633,752**
            **)**
            
            (1,561,418
            )Income
                taxes receivable
            
            
            **(771,716**
            **)**
            
            3⁄4Prepaid
                expenses and other current assets
            
            
            **(141,308**
            **)**
            
            (405,585
            )Other
                assets
            
            
            **(98,064**
            **)**
            
            (115,010
            )Accounts
                payable and accrued expenses
            
            
            **(1,103,063**
            **)**
            
            (100,476
            )Deferred
                income
            
            
            **(135,160**
            **)**
            
            (135,585
            )Income
                taxes payable
            
            
            **3⁄4**
            
            
            (36,502
            )Net
                cash used in operating activities
            
            
            **(776,161**
            **)**
            
            (1,275,132
            )**Investing
                activities**Acquisition
                of property, plant and equipment
            
            
            **(737,690**
            **)**
            
            (560,329
            )Net
                cash used in investing activities
            
            
            **(737,690**
            **)**
            
            (560,329
            )




(Continued
      on next page)




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**MISONIX,
      INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)**


**(UNAUDITED)**


**Financing
                activities**Proceeds
                from short-term borrowings
            
            
            **672,746**
            
            
            437,279Payments
                of short-term borrowings
            
            
            **(1,008,686**
            **)**
            
            (398,114
            )Principal
                payments on capital lease obligations
            
            
            **(325,087**
            **)**
            
            (255,090
            )Proceeds
                from stock options
            
            
            **381,511**
            
            
            349,117Income
                tax benefit - stock options
            
            
            **(39,841**
            **)**
            
            3⁄4Payments
                of long-term debt
            
            
            **(44,039**
            **)**
            
            (42,753
            )Net
                cash (used in) provided by financing activities
            
            
            **(363,396**
            **)**
            
            90,439Effect
                of exchange rate changes on cash
            
            
            **(1,132**
            **)**
            
            (34,020
            )Net
                decrease in cash and cash equivalents
            
            
            **(1,878,379**
            **)**
            
            (1,779,042
            )Cash
                and cash equivalents at beginning of period
            
            
            **2,484,534**
            
            
            4,839,866Cash
                and cash equivalents at end of period
            
            **$**
            **606,155**
            
            $
            3,060,824**Supplemental
                disclosure of cash flow information:**Cash
                paid forInterest
            
            **$**
            **168,629**
            
            $
            165,457Income
                taxes
            
            **$**
            **40,804**
            
            $
            351,227**Supplemental
                disclosure of noncash investing and financing
                activities:**Capital
                lease additions
            
            **$**
            **319,657**
            
            $
            397,685




*See
      Accompanying Notes to Consolidated Financial Statements* .




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**MISONIX,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


(Information
      with respect to interim periods is unaudited)





1.
            Basis
                of Presentation





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with generally accepted accounting principles for interim financial
      information and with the instructions to Form 10-Q and Article 10 of Regulation
      S-X. Accordingly, they do not include all of the information and footnotes
      required by accounting principles generally accepted in the United States for
      complete financial statements. In the opinion of management, all adjustments
      (consisting of normal recurring accruals) considered necessary for a fair
      presentation have been included. Operating results for the three and nine months
      ended March 31, 2006 are not necessarily indicative of the results that may
      be
      expected for the year ending June 30, 2006.





The
      balance sheet at June 30, 2005 has been derived from the audited financial
      statements at that date, but does not include all of the information and
      footnotes required by generally accepted accounting principles for complete
      financial statements.





For
      further information, refer to the consolidated financial statements and
      footnotes thereto included in the Company’s Annual Report on Form 10-K for the
      year ended June 30, 2005.




2.
            Net
                (Loss) Income Per Share





Basic
      (loss) income per common share excludes any dilution. It is based upon the
      weighted average number of common shares outstanding during the period. Dilutive
      earnings per share reflects the potential dilution that would occur if options
      to purchase common stock were exercised. For the nine and three month periods
      ended March 31, 2006, dilutive weighted average common shares outstanding of
      214,165 and 138,018, respectively, were excluded from the diluted loss per
      share
      calculation, since the effect of including these options would have been
      anti-dilutive. The following table sets forth the reconciliation of weighted
      average shares outstanding and diluted weighted average shares
      outstanding:


For
                    the Nine Months
                
                For
                    the Three MonthsEnded
                    March 31,
                
                Ended
                    March 31,**2006**
                
                2005
                
                **2006**
                
                2005Weighted
                    average common shares outstanding
                
                
                6,857,924
                
                
                6,776,137
                
                
                6,884,169
                
                
                6,812,673Dilutive
                    effect of stock options
                
                
                3⁄4
                
                
                205,700
                
                
                3⁄4
                
                
                224,828Diluted
                    weighted average common shares outstanding
                
                
                6,857,924
                
                
                6,981,837
                
                
                6,884,169
                
                
                7,037,501


3.
            Comprehensive
                Income





Total
      comprehensive (loss) income was ($2,717,963) and ($817,166) for the nine and
      three months ended March 31, 2006, respectively, and $713,774 and $56,015 for
      the nine and three months ended March 31, 2005, respectively. The components
      of
      comprehensive (loss) income are net (loss) income and foreign currency
      translation adjustments.




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**MISONIX,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


(Information
      with respect to interim periods is unaudited) (CONTINUED)





4.
            Stock-Based
                Compensation





Prior
      to
      July 1, 2005, the Company accounted for stock option plans under Statement
      of
      Financial Accounting Standards (“SFAS”) No. 123 (“SFAS No. 123”). As permitted
      under this standard, compensation cost was recognized using the intrinsic value
      method described in Accounting Principles Board Opinion No. 25 (“APB 25”).
      Effective July 1, 2005, the Company adopted the fair-value recognition
      provisions of SFAS No. 123R (“SFAS No. 123R”) and Securities and Exchange
      Commission Staff Accounting Bulletin No. 107 using the modified-prospective
      transition method; therefore, prior periods have not been restated. Compensation
      cost recognized in the nine and three-month periods ended March 31, 2006
      includes compensation cost for all share-based payments granted prior to, but
      not yet vested as of, July 1, 2005, based on the grant date fair value estimated
      in accordance with the original provisions of SFAS No. 123, and compensation
      cost for all share-based payments granted subsequent to July 1, 2005, based
      on
      the grant date fair value estimated in accordance with the provisions of SFAS
      No. 123R.





Stock
      options are granted with exercise prices not less than the fair market value
      of
      our common stock at the time of the grant, with an exercise term (as determined
      by the Committee administering the applicable option plan (the “Committee”)) not
      to exceed 10 years. The Committee determines the vesting period for the
      Company’s stock options. Generally, such stock options have vesting periods of
      immediate to four years. Certain option awards provide for accelerated vesting
      upon meeting specific retirement, death or disability criteria, and upon change
      of control. During the nine month periods ended March 31, 2006 and 2005, the
      Company granted options to purchase 89,560 and 293,500 shares of the Company’s
      common stock, respectively.





No
      stock-based compensation cost related to stock options was recognized in the
      statements of operations for the years ended June 30, 2005 and 2004 as all
      options granted in these periods had an exercise price equal to the market
      price
      at the date of grant. As a result of adopting SFAS No. 123R, the Company’s loss
      before income taxes and net loss for the nine months ended March 31, 2006 were
      approximately $440,000 and $349,000 higher, respectively, than if we had
      continued to account for stock-based compensation under APB No. 25. Loss before
      income taxes and net loss for the three months ended March 31, 2006 were $66,000
      and $61,000 higher, respectively, as a result of adopting SFAS No. 123R.
      Compensation expense is recognized in the general and administrative expenses
      line item of the Company’s statements of operations on a straight-line basis
      over the vesting periods. There are no capitalized stock-based compensation
      costs at March 31, 2006 and 2005. Basic and dilutive loss per share for the
      nine
      and three-month periods ended March 31, 2006 would have been ($.33) and ($.11),
      respectively, if the Company had not adopted SFAS No. 123R, compared to the
      reported basic and dilutive loss per share of ($.39) and ($.12), respectively.
      As of March 31, 2006, there was approximately $355,000 of total unrecognized
      compensation cost related to non-vested share-based compensation arrangements
      to
      be recognized over a weighted-average period of 3 years.





The
      total
      cash received from the exercise of stock options was $381,511 and $349,117
      for
      the nine-month periods ended March 31, 2006 and 2005, respectively, and are
      classified as financing cash flows. SFAS No. 123R requires that cash flows
      from
      tax benefits attributable to tax deductions in excess of the compensation cost
      recognized for those options (excess tax benefits) be classified as financing
      cash flows.




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          to Table of Contents**





**MISONIX,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


(Information
      with respect to interim periods is unaudited) (CONTINUED)





The
      fair
      values of the options granted during the nine-month periods ended March 31,
      2006
      and 2005 were estimated on the dates of their grants using the Black-Scholes
      option-pricing model on the basis of the following weighted average
      assumptions:





March
                31,
              2006
            
            March
                31,
              2005Risk-free
                interest rate
            
            
            4.43
            %
            
            3.75
            %Expected
                life
            
            
            5.7
                years
            
            
            5
                yearsExpected
                volatility
            
            
            54.7
            %
            
            86.5
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %Weighted-average
                fair value ofoptions
                granted
            
            $
            3.82
            
            $
            4.40





The
      expected life was based on historical exercises and terminations. The expected
      volatility for the periods with the expected life of the options is determined
      using historical volatilities based on historical stock prices. The expected
      dividend yield is 0% as the Company has historically not issued dividends and
      does not expect to issue any in the future.





Changes
      in outstanding options are as follows:





Options
            
            Weighted
                Average
              Exercise
                Price
            
            Aggregate
              Intrinsic
                ValueOutstanding
                at June 30, 2005
            
            
            1,908,075
            
            $
            5.66Granted
            
            
            89,560
            
            
            7.20Exercised
            
            
            (75,417
            )
            
            5.06
            
            $
            117,171Forfeited
            
            
            (73,460
            )
            
            6.52Options
                outstanding at March 31, 2006
            
            
            1,848,758
            
            $
            5.72
            
            $
            1,959,662Options
                vested at March 31, 2006
            
            
            1,695,019
            
            
            
            
            $
            1,728,919Options
                available for grant at March 31, 2006
            
            
            903,293Weighted
                average remaining contractual
                term
            
            
            7
                years





On
      December 14, 2005, the shareholders approved the adoption of the 2005 Employee
      Equity Incentive Plan (“Employee Plan”) and the 2005 Non-Employee Director Stock
      Option Plan (“Director’s Plan”). The Employee Plan makes 500,000 shares
      available for issuance. The Employee Plan permits the Company to grant either
      incentive stock options or non-qualified stock options. The exercise price
      will
      not be less than fair market value on the date of grant. The Employee Plan
      also
      permits the Company to grant restricted stock or restricted stock units.
      Restricted stock and restricted stock units will generally be subject to vesting
      and non-transferability restrictions that will lapse upon achievement of one
      or
      more goals relating to the completion of service by the participant, or the
      achievement of performance or other objectives determined by the Committee
      at
      the time of grant.





The
      Director’s Plan makes 200,000 shares available for issuance. Under the
      Director’s Plan, the exercise price will not be less than 100% of the fair
      market value of the common stock as of the date the option is granted. Options
      expire ten years from the date of grant.





The
      table
      below presents the pro forma effect on net income and basic and diluted loss
      per
      share if the Company had applied the fair value recognition provision to options
      granted under its stock option plans




-10-
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          to Table of Contents**




**MISONIX,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


(Information
      with respect to interim periods is unaudited) (CONTINUED)





for
      the
      nine and three-month periods ended March 31, 2006. For purposes of this pro
      forma disclosure, the value of the options is estimated using the Black-Scholes
      option-pricing model and amortized to expense over the options’ vesting periods.
      If the Company had adopted the fair value based method for the nine and three
      months ended March 31, 2005, additional compensation expense of approximately
      $1,082,000 and $495,000, respectively, would have been recognized in the
      statements of operations.





Nine-month
                period
              ended
                March 31,
              2005
            
            Three-month
                period ended March 31,
              2005Net
                income - As reported:
            
            $
            597,964
            
            $
            3,361Stock
                based compensation determinedunder
                SFAS No. 123 net of income tax
            
            
            (692,357
            )
            
            (327,498
            )Net
                income (loss) - Pro forma:
            
            
            ($
                94,393
            )
            
            ($324,137
            )Net
                income (loss) per share -Basic:As
                reported
            
            $
            .09
            
            $
            ---Pro
                forma
            
            
            ($
                .01
            )
            
            ($
                .05
            )Net
                income (loss) per share -Diluted:As
                reported
            
            $
            .09
            
            $
            ---Pro
                forma
            
            
            ($
                .01
            )
            
            ($
                .05
            )





5.
            Inventories




Inventories
      are summarized as follows:


**March
                31,**
              **2006**
            
            June
                30,
              2005Raw
                material
            
            **$**
            **4,902,191**
            
            $
            5,303,581Work-in-process
            
            
            **2,309,740**
            
            
            1,643,835Finished
                goods
            
            
            **4,153,410**
            
            
            2,833,085**$**
            **11,365,341**
            
            $
            9,780,501




6.    
          Debt
  The
        Company has a revolving credit facility with the Bank of America (the "Bank")
        to
        support future working capital needs. The revolving credit facility has interest
        rate options ranging from Libor plus 1.o% per annum to prime rate .25% per
        annum
        and expires on January 18, 2008. This facility is secured by the assets of
        the
        Company. The terms provide for the repayment of the debt in full on its maturity
        date. Certain financial covenants of the facility were amended effective
        February 14, 2006. The Company was not in compliance with these amended loan
        covenants at March 31, 2006. The Bank reduced the maximum amount available
        under
        the line of credit to $2,500,000 from $6,000,000 and issued a waiver for
        such
        non-compliance.


7.
            Accrued
                Expenses and Other Current
                Liabilities





The
      following summarizes accrued expenses and other current
      liabilities:




**March
                31,**
            
            June
                30,**2006**
            
            2005Customer
                deposits and deferred contracts
            
            **$**
            **652,996**
            
            $
            1,121,741Accrued
                payroll and vacation
            
            
            **393,227**
            
            
            356,850Accrued
                commissions and bonuses
            
            
            **355,978**
            
            
            255,400Accrued
                professional fees
            
            
            **161,266**
            
            
            226,235Accrued
                VAT and sales tax
            
            
            **134,704**
            
            
            246,170Litigation
            
            
            **419,000**
            
            
            419,000Other
            
            
            **284,064**
            
            
            275,851**$**
            **2,401,235**
            
            $
            2,901,247






-11-
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          to Table of Contents**





**MISONIX,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS** ****


(Information
      with respect to interim periods is unaudited) (CONTINUED)





8.
            Business
                Segments





The
      Company operates in two business segments which are organized by product types:
      medical devices and laboratory and scientific products. Medical devices include
      the Auto Sonix ultrasonic cutting and coagulatory system, the Sonoblate 500®
(used to treat prostate cancer), refurbishing of high-performance ultrasound
      systems and replacement transducers for the medical diagnostic ultrasound
      industry, ultrasonic lithotriptor, ultrasonic neuroaspirator (used for
      neurosurgery) and soft tissue aspirator (used primarily for the cosmetic surgery
      market). Laboratory and scientific products include the Sonicator Ultrasonic
      liquid processor, Aura ductless fume enclosure, the Labcaire Autoscope and
      Guardian endoscope disinfectant systems and the Mystaire wet scrubber. The
      Company evaluates the performance of the segments based upon income from
      operations before general and administrative expenses. The accounting policies
      of the segments are the same as those described in the summary of significant
      accounting policies (Note 1) in the Company’s Annual Report on Form 10-K for the
      year ended June 30, 2005. Certain items are maintained at the corporate
      headquarters (corporate) and are not allocated to the segments. They primarily
      include general and administrative expenses. General and administrative expenses
      at the Company’s Sonora and Labcaire subsidiaries are included in corporate and
      unallocated amounts in the tables below. The Company does not allocate assets
      by
      segment. Summarized financial information for each of the segments is as
      follows:





For
      the
      nine months ended March 31, 2006:





**Medical**
            
            **Laboratory**
            
            **Corporate****Device
                Products**
            
            **and**
              **Scientific
                Products**
            
            **and**
              **Unallocated**
            
            **Total**Net
                sales
            
            $
            15,526,996
            
            $
            14,022,740
            
            $
            3⁄4
            
            $
            29,549,736Cost
                of goods sold
            
            
            8,967,482
            
            
            9,329,200
            
            
            3⁄4
            
            
            18,296,682Gross
                profit
            
            
            6,559,514
            
            
            4,693,540
            
            
            3⁄4
            
            
            11,253,054Selling
                expenses
            
            
            3,127,838
            
            
            1,886,272
            
            
            3⁄4
            
            
            5,014,110Research
                and development expenses
            
            
            1,686,533
            
            
            1,052,510
            
            
            3⁄4
            
            
            2,739,043General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            7,528,168
            
            
            7,528,168Total
                operating expenses
            
            
            4,814,371
            
            
            2,938,782
            
            
            7,528,168
            
            
            15,281,321Income
                (loss) from operations
            
            $
            1,745,143
            
            $
            1,754,758
            
            
            ($
                7,528,168
            )
            
            ($
                4,028,267
            )





For
      the
      three months ended March 31, 2006:





**Medical**
            
            **Laboratory**
            
            **Corporate****Device
                Products**
            
            **and**
              **Scientific
                Products**
            
            **and**
              **Unallocated**
            
            **Total**Net
                sales
            
            $
            5,082,180
            
            $
            5,087,598
            
            $
            3⁄4
            
            $
            10,169,778Cost
                of goods sold
            
            
            2,856,373
            
            
            3,360,403
            
            
            3⁄4
            
            
            6,216,776Gross
                profit
            
            
            2,225,807
            
            
            1,727,195
            
            
            3⁄4
            
            
            3,953,002Selling
                expenses
            
            
            1,237,229
            
            
            528,410
            
            
            3⁄4
            
            
            1,765,639Research
                and development expenses
            
            
            587,535
            
            
            387,772
            
            
            3⁄4
            
            
            975,307General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            2,502,626
            
            
            2,502,626Total
                operating expenses
            
            
            1,824,764
            
            
            916,182
            
            
            2,502,626
            
            
            5,243,572Income
                (loss) from operations
            
            $
            401,043
            
            $
            811,013
            
            
            ($2,502,626
            )
            
            ($1,290,570
            )






-12-
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          to Table of Contents**





**MISONIX,
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


(Information
      with respect to interim periods is unaudited) (CONTINUED)





For
      the
      nine months ended March 31, 2005:





**Medical**
            
            **Laboratory**
            
            **Corporate****Device
                Products**
            
            **and**
              **Scientific
                Products**
            
            **and**
              **Unallocated**
            
            **Total**Net
                sales
            
            $
            17,317,800
            
            $
            14,699,085
            
            $
            3⁄4
            
            $
            32,016,885Cost
                of goods sold
            
            
            9,621,898
            
            
            8,988,439
            
            
            3⁄4
            
            
            18,610,337Gross
                profit
            
            
            7,695,902
            
            
            5,710,646
            
            
            3⁄4
            
            
            13,406,548Selling
                expenses
            
            
            2,284,383
            
            
            2,123,168
            
            
            3⁄4
            
            
            4,407,551Research
                and development expenses
            
            
            1,816,253
            
            
            723,817
            
            
            3⁄4
            
            
            2,540,070General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            6,026,911
            
            
            6,026,911Total
                operating expenses
            
            
            4,100,636
            
            
            2,846,985
            
            
            6,026,911
            
            
            12,974,532Income
                (loss) from operations
            
            $
            3,595,266
            
            $
            2,863,661
            
            
            ($
                6,026,911
            )
            $
            432,016





For
      the
      three months ended March 31, 2005:





**Medical**
            
            **Laboratory**
            
            **Corporate****Device
                Products**
            
            **and**
              **Scientific
                Products**
            
            **and**
              **Unallocated**
            
            **Total**Net
                sales
            
            $
            5,666,421
            
            $
            5,213,186
            
            $
            3⁄4
            
            $
            10,879,607Cost
                of goods sold
            
            
            3,083,901
            
            
            3,246,556
            
            
            3⁄4
            
            
            6,330,457Gross
                profit
            
            
            2,582,520
            
            
            1,966,630
            
            
            3⁄4
            
            
            4,549,150Selling
                expenses
            
            
            770,968
            
            
            705,268
            
            
            3⁄4
            
            
            1,476,236Research
                and development expenses
            
            
            640,498
            
            
            277,614
            
            
            3⁄4
            
            
            918,112General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            2,284,786
            
            
            2,284,786Total
                operating expenses
            
            
            1,411,466
            
            
            982,882
            
            
            2,284,786
            
            
            4,679,134Income
                (loss) from operations
            
            $
            1,171,054
            
            $
            983,748
            
            
            ($
                2,284,786
            )
            
            ($
                129,984
            )




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





For
      the
      nine months ended March 31:




**2006**
            
            2005United
                States
            
            **$**
            **18,629,700**
            
            **$**
            **19,806,026**United
                Kingdom
            
            
            **6,915,710**
            
            
            **7,389,117**Europe
            
            
            **1,748,641**
            
            
            **2,419,255**Asia
            
            
            **1,031,670**
            
            
            **775,694**Canada
            
            
            **515,986**
            
            
            **707,669**Middle
                East
            
            
            **268,640**
            
            
            **372,683**Other
            
            
            **439,389**
            
            
            **546,441****$**
            **29,549,736**
            
            **$**
            **32,016,885**





9.
            Subsequent
                Event





In
      April
      2006, Misonix Ltd., a wholly-owned subsidiary of the Company, acquired a 60%
      ownership interest in the Company’s UK distributor, UK-HIFU Limited, for the
      purchase price of $200,000.




-13-
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          to Table of Contents**


**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS**




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





Nine
      months Ended March 31, 2006 and 2005.





Net
      sales. Net sales decreased $2,467,149 to $29,549,736 for the nine months ended
      March 31, 2006 from $32,016,885 for the nine months ended March 31, 2005. This
      difference in net sales was due to a decrease in sales of medical device
      products of $1,790,804 to $15,526,996 for the nine months ended March 31, 2006
      from $17,317,800 for the nine months ended March 31, 2005. The decrease in
      medical device products revenues was attributable to a 26% reduction in
      therapeutic medical device products revenues to $6.8 million, partially offset
      by a 7.5% increase in diagnostic medical device products revenues to $8.7
      million. Decreased sales of therapeutic medical device products was primarily
      due to a $1,200,000 decrease in sales of Auto Sonix ultrasonic cutting and
      coagulatory systems due to volume decrease and a price reduction agreed to
      in a
      new 3-year manufacturing agreement which reduces the price to United States
      Surgical (“USS”) for new ultrasonic generation systems. Sales of ultrasonic
      surgical aspirator systems decreased $850,000. This difference in net sales
      is
      also due to a decrease in sales of laboratory and scientific products of
      $676,345 to $14,022,740 for the nine months ended March 31, 2006 from
      $14,699,085 for the nine months ended March 31, 2005. The decrease in sales
      of
      laboratory and scientific products was substantially due to a decrease in sales
      of ductless fume enclosure products of $493,000 and Labcaire Systems Limited
      (“Labcaire”) sales of $775,000, partially offset by an increase in laboratory
      ultrasonic product sales of $600,000. The decrease in Labcaire sales is
      primarily due to a reduction in sales of the Guardian (endoscopic cleaning)
      product, due to a temporary slow-down from the National Health System. Export
      sales from the United States are remitted in U.S. Dollars and export sales
      for
      Labcaire are remitted in English Pounds. During the nine months ended March
      31,
      2006 and 2005, the Company had foreign net sales of $10,920,036 and $12,210,859,
      respectively, representing 37% and 38% of net sales, respectively. The decrease
      in foreign sales during the nine months ended March 31, 2006 as compared to
      the
      nine months ended March 31, 2005 was due to decreased Labcaire sales and
      decreased sales of therapeutic and diagnostic medical device products to Europe
      and Canada. Labcaire represented 71% and 70% of foreign net sales during the
      nine months ended March 31, 2006 and 2005, respectively. The remaining 29%
      and
      30% represents net foreign sales remitted in U.S. Dollars during the nine months
      ended March 31, 2006 and 2005, respectively. Approximately 26% of the Company’s
      revenues for the nine months ended March 31, 2006 were received in English
      Pounds currency. To the extent that the Company’s revenues are generated in
      English Pounds, its operating results are translated for reporting purposes
      into
      U.S. Dollars using weighted average rates of 1.76 and 1.86 for the nine months
      ended March 31, 2006 and 2005, respectively. A strengthening of the English
      Pound, in relation to the U.S. Dollar, will have the effect of increasing
      reported revenues and profits, while a weakening of the English Pound will
      have
      the opposite effect. Since the Company’s operations in England generally set
      prices and bids for contracts in English Pounds, a strengthening of the English
      Pound, while increasing the value of its UK assets, might place the Company
      at a
      pricing disadvantage in bidding for work from manufacturers based overseas.
      The
      Company collects its receivables in the currency the subsidiary resides in.
      The
      Company has not engaged in foreign currency hedging transactions, which include
      forward exchange agreements.




-14-
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          to Table of Contents**





**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**





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




For
      the
      nine months ended March 31:





**2006**
            
            2005United
                States
            
            **$**
            **18,629,700**
            
            $
            19,806,026Canada
            
            
            **515,986**
            
            
            707,669United
                Kingdom
            
            
            **6,915,710**
            
            
            7,389,117Europe
            
            
            **1,748,641**
            
            
            2,419,255Asia
            
            
            **1,031,670**
            
            
            775,694Middle
                East
            
            
            **268,640**
            
            
            372,683Other
            
            
            **439,389**
            
            
            546,441**$**
            **29,549,736**
            
            $
            32,016,885








-15-
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          to Table of Contents**




**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**





Summarized
      financial information for each of the segments for the nine months ended March
      31, 2006 and 2005 are as follows:





For
      the
      nine months ended March 31, 2006:





**Medical**
            
            **Laboratory**
            
            **Corporate****Device
                  Products**
            
            **and**
              **Scientific
                Products**
            
            **and**
              **Unallocated**
            
            **Total**Net
                sales
            
            $
            15,526,996
            
            $
            14,022,740
            
            $
            3⁄4
            
            $
            29,549,736Cost
                of goods sold
            
            
            8,967,482
            
            
            9,329,200
            
            
            3⁄4
            
            
            18,296,682Gross
                profit
            
            
            6,559,514
            
            
            4,693,540
            
            
            3⁄4
            
            
            11,253,054Selling
                expenses
            
            
            3,127,838
            
            
            1,886,272
            
            
            3⁄4
            
            
            5,014,110Research
                and developmentexpenses
            
            
            1,686,533
            
            
            1,052,510
            
            
            3⁄4
            
            
            2,739,043General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            7,528,168
            
            
            7,528,168Total
                operating expenses
            
            
            4,814,371
            
            
            2,938,782
            
            
            7,528,168
            
            
            15,281,321Income
                (loss) from operations
            
            $
            1,745,143
            
            $
            1,754,758
            
            
            ($
                7,528,168
            )
            
            ($
                4,028,267
            )





For
      the
      nine months ended March 31, 2005:





**Medical**
            
            **Laboratory**
            
            **Corporate****Device
                Products**
            
            **and**
              **Scientific
                Products**
            
            **and**
              **Unallocated**
            
            **Total**Net
                sales
            
            $
            17,317,800
            
            $
            14,699,085
            
            $
            3⁄4
            
            $
            32,016,885Cost
                of goods sold
            
            
            9,621,898
            
            
            8,988,439
            
            
            3⁄4
            
            
            18,610,337Gross
                profit
            
            
            7,695,902
            
            
            5,710,646
            
            
            3⁄4
            
            
            13,406,548Selling
                expenses
            
            
            2,284,383
            
            
            2,123,168
            
            
            3⁄4
            
            
            4,407,551Research
                and developmentexpenses
            
            
            1,816,253
            
            
            723,817
            
            
            3⁄4
            
            
            2,540,070General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            6,026,911
            
            
            6,026,911Total
                operating expenses
            
            
            4,100,636
            
            
            2,846,985
            
            
            6,026,911
            
            
            12,974,532Income
                from operations
            
            $
            3,595,266
            
            $
            2,863,661
            
            
            ($
                6,026,911
            )
            $
            432,016






-16-
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          to Table of Contents**





**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**





**Gross
      profit:** Gross
      profit decreased to 38.1% as a percentage of sales for the nine months ended
      March 31, 2006 from 41.9% for the nine months ended March 31, 2005. Gross profit
      for medical device products decreased to 42.2% of sales in the nine months
      ended
      March 31, 2006 from 44.4% of sales in the nine months ended March 31, 2005.
      The
      decrease in gross profit for medical device products was negatively impacted
      by
      decreased volume, price reduction for Auto Sonix systems to USS and an
      unfavorable mix of high and low margin product deliveries. Gross profit for
      laboratory and scientific products decreased to 33.5% for the nine months ended
      March 31, 2006 from 38.9% for the nine months ended March 31, 2005. The decrease
      in gross profit for laboratory and scientific products was due to a decrease
      in
      gross profit margin for Labcaire, which was attributable to higher discounts
      to
      win business of Guardian endoscopic units, and decreased margins for wet
      scrubbers due to higher than expected costs on several jobs shipped this year.
      The Company manufactures and sells both medical device and laboratory and
      scientific products with a wide range of product costs and gross margin dollars
      as a percentage of revenues.





**Selling
      expenses:** Selling
      expenses increased $606,559 to $5,014,110 for the nine months ended March 31,
      2006 from $4,407,551 for the nine months ended March 31, 2005. Medical device
      products selling expenses increased $843,455, predominantly due to increased
      personnel expenses related to sales of diagnostic medical device products and
      increased clinical trial expense related to high intensity focused ultrasound
      (HIFU) therapeutic medical device products. Laboratory and scientific products
      selling expenses decreased $236,896, predominantly due to a decrease in
      marketing expenses and employees for the Company’s fume enclosure and Labcaire
      products.





**General
      and administrative expenses** :
      General
      and administrative expenses increased $1,501,257 from $6,026,911 in the nine
      months ended March 31, 2005 to $7,528,168 in the nine months ended March 31,
      2006. The implementation of SFAS No. 123R (as hereinafter defined), which
      requires companies to measure and record compensation cost for all share-based
      payments, increased general and administrative expenses by $440,000 in the
      March
      2006 period. Other expense increases were: insurance, $164,000; rent, $100,000;
      utilities, $44,000; and additional personnel costs of approximately $300,000.
      In
      addition, bad debt expense was approximately $213,000 higher in the March 2006
      period than the March 2005 period, due to the decrease in the 2005 period in
      the
      allowance for doubtful accounts specifically related to a reserve established
      against Focus Surgery, Inc. (“Focus Surgery”) which was no longer
      needed.





**Research
      and development expenses:** Research
      and development expenses increased $198,973 from $2,540,000 for the nine months
      ended March 31, 2005 to $2,739,043 for the nine months ended March 31, 2006.
      Laboratory and scientific products research and development expenses increased
      approximately $329,000 due to new product designs at Labcaire. Research and
      development expenses for medical device products decreased approximately
      $130,000. Therapeutic medical device products research and development expenses
      decreased approximately $208,000, primarily due to decreased consulting fees
      to
      Focus Surgery for the liver/kidney product. Research and development expenses
      for diagnostic medical device products increased approximately $78,000 related
      to developing new products which are expected to be introduced during the
      current fiscal year.





**Other
      income (expense):** Other
      income for the nine months ended March 31, 2006 was $458,334 as compared to
      $549,004 for the nine months ended March 31, 2005. The decrease of $90,670
      was
      primarily due to decreased royalty income of $82,000 and increased royalty
      expense of $35,000, which was partially offset by increased interest income
      of
      $21,000.




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**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**








**Income
      taxes:** The
      effective tax rate was 26.3% for the nine months ended March 31, 2006, as
      compared to an effective tax rate of 35.3% for the nine months ended March
      31,
      2005. The estimated effective tax rate for fiscal 2006 is lower than the
      statutory rate due to permanent tax items, such as the R&D credit and the
      extra territorial income exclusion, and lower tax rates in the United Kingdom,
      where Labcaire is domiciled.





Three
      Months Ended March 31, 2006 and 2005.





**Net
      sales:** Net
      sales of the Company’s medical device products and laboratory and scientific
      products decreased $709,829 to $10,169,778 for the three months ended March
      31,
      2006 from $10,879,607 for the three months ended March 31, 2005. This difference
      is due to a decrease in sales of laboratory and scientific products of $125,588
      to $5,087,598 for the three months ended March 31, 2006 from $5,213,186 for
      the
      three months ended March 31, 2005. This difference in net sales is also due
      to a
      decrease in sales of medical device products of $584,241 to $5,082,180 for
      the
      three months ended March 31, 2006 from $5,666,421 for the three months ended
      March 31, 2005. The decrease in laboratory and scientific products sales is
      due
      to a decrease in Labcaire sales of $442,728, partially offset by an increase
      in
      ultrasonic laboratory sales of $163,048 and wet scrubber sales of $160,100.
      The
      decrease in sales of medical device products is due to a decrease in sales
      of
      therapeutic medical device products of $315,813 and a decrease in sales of
      diagnostic medical device products of $268,428. The decrease in sales of
      therapeutic medical device products was mostly attributable to a decrease in
      surgical aspirator sales of approximately $123,000 and lithotriptor sales of
      $130,000. The decrease in sales of diagnostic medical products was not
      attributable to a single customer, distributor or any other specific factor.
      Export sales from the United States are remitted in U.S. Dollars and export
      sales for Labcaire are remitted in English Pounds. During the three months
      ended
      March 31, 2006 and 2005, the Company had foreign net sales of $4,190,889 and
      $4,465,793, respectively, representing 41% of net sales for both such years.
      The
      decrease in foreign sales during the three months ended March 31, 2006 as
      compared to the three months ended March 31, 2005 is substantially due to
      decreased Labcaire sales. In March 2005, the Company signed an exclusive
      distribution agreement with Focus Surgery for the sale of the Sonablate 500
      for
      the treatment of prostate cancer and other prostatic tumors in the geographic
      areas of Western Europe, Eastern Europe and Russia. The agreement is for a
      term
      of two years with automatic renewals for successive one-year terms as long
      as
      the specified minimum quantities are purchased. Labcaire represented 71% and
      77%
      of foreign net sales during the three months ended March 31, 2006 and 2005,
      respectively. The remaining 29% and 23% represents net foreign sales remitted
      in
      U.S. Dollars during the three months ended March 31, 2006 and 2005,
      respectively. Approximately 29% of the Company’s revenues for the three months
      ended March 31, 2006 were received in English Pounds currency. To the extent
      that the Company’s revenues are generated in English Pounds, its operating
      results are translated for reporting purposes into U.S. Dollars using weighted
      average rates of 1.75 and 1.89 for the three months ended March 31, 2006 and
      2005, respectively. A strengthening of the English Pound, in relation to the
      U.S. Dollar, will have the effect of increasing reported revenues and profits,
      while a weakening of the English Pound will have the opposite effect. Since
      the
      Company’s operations in England generally set prices and bids for contracts in
      English Pounds, a strengthening of the English Pound, while increasing the
      value
      of its UK assets, might place the Company at a pricing disadvantage in bidding
      for work from manufacturers based overseas. The Company collects its receivables
      in the currency the subsidiary resides in. The Company has not engaged in
      foreign currency hedging transactions, which include forward exchange
      agreements.




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**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**




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





For
      the
      three months ended March 31:




**2006**
            
            2005United
                States
            
            **$**
            **5**,978,889
            
            $
            6,413,814United
                Kingdom
            
            
            2,612,004
            
            
            2,966,475Europe
            
            
            608,701
            
            
            800,277Asia
            
            
            433,279
            
            
            109,352Canada
            
            
            280,221
            
            
            252,266Middle
                East
            
            
            138,085
            
            
            181,538Other
            
            
            118,599
            
            
            155,885**$**
            10,169,778
            
            $
            10,879,607





Summarized
      financial information for each of the segments for the three months ended March
      31, 2006 and 2005 are as follows:





For
      the
      three months ended March 31, 2006:




**Medical**
            
            **Laboratory**
              **and**
            
            **Corporate**
              **and****Device
                Products**
            
            **Scientific
                Products**
            
            **Unallocated**
            
            **Total**Net
                sales
            
            $
            5,082,180
            
            $
            5,087,598
            
            $
            3⁄4
            
            $
            10,169,778Cost
                of goods sold
            
            
            2,856,373
            
            
            3,360,403
            
            
            3⁄4
            
            
            6,216,776Gross
                profit
            
            
            2,225,807
            
            
            1,727,195
            
            
            3⁄4
            
            
            3,953,002Selling
                expenses
            
            
            1,237,229
            
            
            528,410
            
            
            3⁄4
            
            
            1,765,639Research
                and development expenses
            
            
            587,535
            
            
            387,772
            
            
            3⁄4
            
            
            975,307General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            2,502,626
            
            
            2,502,626Total
                operating expenses
            
            
            1,824,764
            
            
            916,182
            
            
            2,502,626
            
            
            5,243,572Income
                (loss) from operations
            
            $
            401,043
            
            $
            811,013
            
            
            ($2,502,626
            )
            
            ($1,290,570
            )






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**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**





For
      the
      three months ended March 31, 2005:




**Medical**
            
            **Laboratory**
              **and**
            
            **Corporate**
              **and****Device
                Products**
            
            **Scientific
                Products**
            
            **Unallocated**
            
            **Total**Net
                sales
            
            $
            5,666,421
            
            $
            5,213,186
            
            $
            3⁄4
            
            $
            10,879,607Cost
                of goods sold
            
            
            3,083,901
            
            
            3,246,556
            
            
            3⁄4
            
            
            6,330,457Gross
                profit
            
            
            2,582,520
            
            
            1,966,630
            
            
            3⁄4
            
            
            4,549,150Selling
                expenses
            
            
            770,968
            
            
            705,268
            
            
            3⁄4
            
            
            1,476,236Research
                and development expenses
            
            
            640,498
            
            
            277,614
            
            
            3⁄4
            
            
            918,112General
                and administrative
            
            
            3⁄4
            
            
            3⁄4
            
            
            2,284,786
            
            
            2,284,786Total
                operating expenses
            
            
            1,411,466
            
            
            982,882
            
            
            2,284,786
            
            
            4,679,134Income
                (loss) from operations
            
            $
            1,171,054
            
            $
            983,748
            
            
            ($
                2,284,786
            )
            
            ($
                129,984
            )




**Gross
      profit:** Gross
      profit decreased from 41.8% for the three months ended March 31, 2005 to 38.9%
      for the three months ended March 31, 2006. Gross profit for medical device
      products decreased to 43.8% of sales in the three months ended March 31, 2006
      from 45.6% of sales in the three months ended March 31, 2005. The gross profits
      decrease for medical device products was substantially due to price reductions
      agreed to with USS in a new 3-year manufacturing agreement. Gross profit for
      laboratory and scientific products decreased to 33.9% for the three months
      ended
      March 31, 2006 from 37.7% for the three months ended March 31, 2005. The
      decrease in gross profit for laboratory and scientific products was primarily
      due to increased costs at the Company’s wet scrubber operations, which is a
      result of cost overruns on several products. The Company manufactures and sells
      both medical device products and laboratory and scientific products with a
      wide
      range of product costs and gross margin dollars as a percentage of
      revenues.





**Selling
      expenses:** Selling
      expenses increased $289,403 to $1,765,639 for the three months ended March
      31,
      2006 from $1,476,236 for the three months ended March 31, 2005. Medical device
      products selling expenses increased $466,261, principally due to additional
      sales and marketing efforts for diagnostic medical device products and
      additional sales and marketing efforts for European distribution of the
      Sonablate 500 product used to treat prostate cancer and other prostatic
      afflictions. Laboratory and scientific products selling expenses decreased
      $176,858, predominantly due to a decrease in marketing expenses for Labcaire’s
      Guardian endoscopic cleaning product and decreased selling expenses for wet
      scrubbers.





**General
      and administrative expenses** :
      General
      and administrative expenses increased $217,840 to $2,502,626 in the three months
      ended March 31, 2006 from $2,284,786 in the three months ended March 31, 2005.
      The increase is predominantly due to implementation of SFAS 123R, which
      increased general and administrative expenses by $66,000 and an increase in
      general and administrative expenses of approximately $140,000 relating to
      salaries, rent and utility expenses at Sonora Medical Systems, Inc.





**Research
      and development expenses:** Research
      and development expenses increased $57,195 to $975,307 for the three months
      ended March 31, 2006 from $918,112 for the three months ended March 31, 2005.
      Medical device products research and development expenses decreased $52,963.
      Research and development expenses for laboratory and scientific products
      increased $110,158, primarily due to new product designs at
      Labcaire.




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**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**








**Other
      income (expense):** Other
      income for the three months ended March 31, 2006 was $144,143 as compared to
      $195,111 for the three months ended March 31, 2005. The decrease of $50,968
      was
      primarily due to a decrease in royalty income of $49,693 and an increase in
      royalty expense of $14,320, which was partially offset by other income (expense)
      of $12,049.





**Income
      taxes:** The
      effective tax rate is 27.3% for the three months ended March 31, 2006 as
      compared to an effective tax rate of 91% for the three months ended March 31,
      2005. The prior period’s consolidated effective tax rate was impacted by the
      large percentage of minority interest to total pre-tax income.





**Critical
      Accounting Policies:**





General: Financial Reporting Release No. 60, which was released by the Securities and
      Exchange Commission 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 the Company’s Annual Report on Form 10-K for the year
      ended June 30, 2005 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 are 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 considers certain accounting policies
      related to allowance for doubtful accounts, inventories, property, plant and
      equipment, goodwill and income taxes to be critical policies due to the
      estimation process involved in each.





Revenue
      Recognition: The
      Company records revenue upon shipment for products shipped F.O.B. shipping
      point. Products shipped F.O.B. destination point 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 contracts and royalty income is recognized when
      earned.





Allowance
      for Doubtful Accounts: The
      Company’s policy is to review its customers’ financial condition prior to
      extending credit and, generally, collateral is not required. The Company
      utilizes letters of credit on foreign or export sales where appropriate.





Inventories: Inventories are stated at the lower of cost (first-in, first-out) or market
      and
      consist of raw materials, work-in-process and finished goods. Management
      evaluates the need to record adjustments for impairments of inventory on a
      quarterly basis. The Company’s policy is to assess the valuation of all
      inventories, including raw materials, work-in-process and finished
      goods.




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**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**




Property,
      Plant and Equipment: Property, plant and equipment are recorded at cost. Depreciation of property
      and
      equipment is provided using the straight-line method over estimated useful
      lives
      ranging from 1 to 5 years. Depreciation of the Labcaire building is provided
      using the straight-line method over the estimated useful life of 50 years.
      Leasehold improvements are amortized over the life of the lease or the useful
      life of the related asset, whichever is shorter. The Company’s policy is to
      periodically evaluate the appropriateness of the lives assigned to property,
      plant and equipment and to make adjustments if necessary. Certain inventory
      products which are used for clinical trials, demo equipment, fee-for-service,
      or
      consignment are classified in property, plant and equipment and are depreciated
      over estimated useful lives of 2 to 4 years.





Goodwill: In July
      2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 141 (“SFAS 141”) and SFAS 142 (“SFAS
      142”), “Business Combinations” and “Goodwill and Other Intangible Assets”,
      respectively. SFAS 141 replaced Accounting Principles Board (“APB”) Opinion 16
“Business Combinations” and requires the use of the purchase method for all
      business combinations initiated after June 30, 2001. SFAS 142 requires goodwill
      and intangible assets with indefinite useful lives to no longer be amortized,
      but instead be tested for impairment at least annually and whenever events
      or
      circumstances occur that indicate goodwill might be impaired. With the adoption
      of SFAS 142, as of July 1, 2001, the Company reassessed the useful lives and
      residual values of all acquired intangible assets to make any necessary
      amortization period adjustments. Based on that assessment, only goodwill was
      determined to have an indefinite useful life and no adjustments were made to
      the
      amortization period or residual values of other intangible assets. The Company
      also completed its annual goodwill impairment tests for fiscal 2005 in the
      fourth quarter with no impairment noted.





Income
      Taxes: Income
      taxes are accounted for in accordance with SFAS No. 109, “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, operating loss and tax credit carry forwards.
      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 accounts for its stock-based compensation plans in accordance with
      SFAS
      123R.




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**MISONIX,
      INC.**


**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)**





**Recent
      Accounting Standards**





In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS No. 123R”). This statement supersedes SFAS No. 123, “Accounting
      for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based
      Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123”,
      and APB No. 25, “Accounting for Stock Issued to Employees.” The statement was
      effective for interim or annual periods beginning after June 15, 2005.
      Accordingly, effective July 1, 2005, the Company adopted the fair-value
      recognition provisions of SFAS No. 123R. Reference is hereby made to Note 4
      of
      the Notes to Consolidated Financial Statements contained in Part I - Item 1
      of
      this Report, Stock-Based Compensation, for further information regarding the
      implementation of SFAS No. 123R.





In
      June
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a
      replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No.
      3,
      Reporting Accounting Changes in Interim Financial Statements” (“SFAS 154”). SFAS
      No. 154 changes the requirements for the accounting for and reporting of a
      change in accounting principle. Previously, most voluntary changes in accounting
      principles required recognition via a cumulative effect adjustment within net
      income for the period of the change. SFAS No. 154 requires retrospective
      application to prior periods’ financial statements, unless it is impracticable
      to determine either the period-specific effects or the cumulative effect of
      the
      change. SFAS No. 154 is effective for accounting changes made in fiscal years
      beginning after December 15, 2005; however, SFAS No. 154 does not change the
      transition provisions of any existing accounting pronouncements. The Company
      does not believe that the adoption of SFAS No. 154 will have a material impact
      on its financial condition or results of operations.





In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs”, an amendment of
      APB No. 43, Chapter 4 (“SFAS 151”). The amendments made by SFAS No. 151 will
      improve financial reporting by clarifying that abnormal amounts of idle facility
      expense, freight, handling costs, and wasted materials (spoilage) should be
      recognized as current-period charges and by requiring the allocation of fixed
      production overhead to inventory based on the normal capacity of the production
      facilities. SFAS No. 151 was effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005. The Company adopted SFAS No. 151
      effective July 1, 2005, the adoption of which did not have a material impact
      on
      the Company’s financial condition or results of operations.





**Forward
      Looking Statements**





This
      Report contains certain forward looking statements within the meaning of Section
      27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange
      Act of 1934, as amended (the “Exchange Act”), which are intended to be covered
      by the safe harbors created thereby. Although the Company believes that the
      assumptions underlying the forward looking statements contained herein are
      reasonable, any of the assumptions could be inaccurate, and therefore, there
      can
      be no assurance that the forward looking statements contained in this Report
      will prove to be accurate. Factors that could cause actual results to differ
      from the results specifically discussed in the forward looking statements
      include, but are not limited to, the absence of anticipated contracts, higher
      than historical costs incurred in performance of contracts or in conducting
      other activities, product mix in sales, results of joint ventures and
      investments in related entities, future economic, competitive and market
      conditions, and the outcome of legal proceedings as well as management business
      decisions.




-23-
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**Liquidity
      and Capital Resources**





Working
      capital at March 31, 2006 and June 30, 2005 was approximately $13,920,000 and
      $15,905,000, respectively. In the nine months ended March 31, 2006, cash used
      in
      operating activities totaled $776,161, which was principally due to the net
      loss
      for the period, inventory increase, and decrease in accounts payable, partially
      offset by the collection of accounts receivable. In the nine months ended March
      31, 2006, cash used in investing activities was approximately $737,690, which
      primarily consisted of the purchase of property, plant and equipment in the
      regular course of business. In the nine months ended March 31, 2006, cash used
      in financing activities was approximately $363,396, primarily consisting of
      payments on short-term borrowings, capital lease obligations and long-term
      debt,
      partially offset by proceeds from short-term borrowings and receipts from the
      exercise of employee stock options.





**Revolving
      Credit Facilities**





Labcaire
      has a debt purchase agreement with Lloyds TSB Commercial Finance. The amount
      of
      this facility is approximately $1,670,000 (£950,000) and bears interest at the
      bank’s base rate of 5.25% plus 1.75% and a service charge of .15% of sales
      invoice value and fluctuates based upon the outstanding United Kingdom and
      European receivables. This agreement expires on June 30, 2006 and covers all
      United Kingdom and European sales. At March 31, 2006, approximately $1,100,000
      (£635,000) was outstanding under this agreement. Amounts available under the
      debt purchase agreement are determined as a percentage of eligible receivables
      and at March 31, 2006 no additional funds were available.





The
      Company has a revolving credit facility with the Bank of America (the “Bank”) to
      support future working capital needs. The revolving credit facility has interest
      rate options ranging from Libor plus 1.0% per annum to prime rate plus .25%
      per
      annum and expires on January 18, 2008. This facility is secured by the assets
      of
      the Company. The terms provide for the repayment of the debt in full on its
      maturity date. Certain financial covenants of the facility were amended
      effective February 14, 2006. The Company was not in compliance with these
      amended loan covenants at March 31, 2006. The Bank reduced the maximum amount
      available under the line of credit to $2,500,000 from $6,000,000 and issued
      a
      waiver for such non-compliance.





**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.




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Item
      3. 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 of Labcaire.





*Foreign
      Exchange Rates:*


Approximately
      26% of the Company’s revenues in the nine months ended March 31, 2006 were
      received in English Pounds currency. To the extent that the Company’s revenues
      are generated in English Pounds, its operating results are translated for
      reporting purposes into U.S. Dollars using rates of 1.76 and 1.86 for the nine
      months ended March 31, 2006 and 2005, respectively. A strengthening of the
      English Pound, in relation to the U.S. Dollar, will have the effect of
      increasing its reported revenues and profits, while a weakening of the English
      Pound will have the opposite effect. Since the Company’s operations in England
      generally sets 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 in the currency the
      subsidiary resides in. The Company has not engaged in foreign currency hedging
      transactions, which include forward exchange agreements.





Item
      4. Controls and Procedures.




Our
      disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e)
      under the Exchange Act are designed to ensure that information required to
      be
      disclosed in the reports that we file or submit under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the rules and forms of the Securities and Exchange Commission. The Company
      carried out an evaluation, under the supervision and with the participation
      of
      the Company's management, including the Company's Chief Executive Officer and
      Chief Financial Officer, of the effectiveness of the design and operation of
      the
      Company's disclosure controls and procedures as of March 31, 2006 and, based
      on
      their evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that the Company's disclosure controls and procedures are effective.




There
      has
      been no change in the Company's internal control over financial reporting (as
      defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred
      during the third quarter of fiscal 2006 that has materially affected, or is
      reasonable likely to materially affect, the Company’s internal control over
      financial reporting.




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**MISONIX,
      INC.**





**PART
      II -****OTHER
      INFORMATION**





Item
      6.   Exhibits





Exhibit
              31.1
            -
                Rule 13a-14(a)/15d-14(a)
                Certification


Exhibit
                  31.2
                -
                    Rule 13a-14(a)/15d-14(a)
                    Certification


Exhibit
                32.1
            -
                Section 1350 Certification of Chief Executive
                Officer


Exhibit
              32.2
            -
                Section 1350 Certification of Chief Financial
                Officer






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**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





Date:  May
      15,
      2006


MISONIX,
      INC.


(Registrant)




By: /s/
      Michael A. McManus, Jr.


Michael
      A. McManus, Jr.


President
      and Chief Executive Officer






By: /s/
      Richard Zaremba


Richard
      Zaremba


Senior
      Vice President, Chief Financial Officer,


Treasurer
      and Secretary




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