**FORM
      10-Q**





**SECURITIES
      AND EXCHANGE COMMISSION**





Washington,
      D.C. 20549





(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, 2008




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  oNon-accelerated
                filer o
            Smaller
                reporting company 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
                12, 2008Common
                Stock, $.01 par value
            
            
            7,001,369










**MISONIX,
      INC.**




**INDEX**


PagePart
                    I -FINANCIAL
                    INFORMATIONItem
                    1.Financial
                    Statements:Consolidated
                    Balance Sheets as of March 31, 2008 (Unaudited) and June 30,
                    2007
                3Consolidated
                    Statements of Operations Nine months ended March 31, 2008 and
                    2007
                    (Unaudited)
                4Consolidated
                    Statements of Operations Three months ended March 31, 2008 and
                    2007
                    (Unaudited)
                5Consolidated
                    Statement of Stockholders’ Equity Nine months ended March 31, 2008
                    (Unaudited)
                6Consolidated
                    Statements of Cash Flows Nine months ended March 31, 2008 and
                    2007
                    (Unaudited)
                7Notes
                    to Consolidated Financial Statements
                8Item
                    2.Management’s
                    Discussion and Analysis of Financial Conditionand
                    Results of Operations
                17Item
                    3.Quantitative
                    and Qualitative Disclosures About Market Risk
                23Item
                    4.Controls
                    and Procedures
                24Part
                    II-OTHER
                    INFORMATIONItem
                    1A.Risk
                    Factors
                25Item
                    6.Exhibits
                25Signatures
                26


2




**PART
      I – FINANCIAL INFORMATION**




**Item
      1. Financial Statements** .





**MISONIX,
      INC. and Subsidiaries**


**C** **onsolidated** **Balance Sheets**





**March 31,
                2008**
            
            June 30,
              2007**unaudited**
            
            Derived fromaudited
                financialstatements**Assets**Current
                assets:Cash
            
            **$**
            **1,607,529**
            
            $
            2,900,358Accounts
                receivable, less allowance for doubtful accounts of$222,708
                and $313,981, respectively
            
            
            **8,334,961**
            
            
            7,679,466Inventories,
                net
            
            
            **12,401,011**
            
            
            11,903,294Deferred
                income taxes
            
            
            **1,028,988**
            
            
            1,028,988Prepaid
                expenses and other current assets
            
            
            **1,277,836**
            
            
            1,936,243Total
                current assets
            
            
            **24,650,325**
            
            
            25,448,349Property,
                plant and equipment, net
            
            
            **4,341,773**
            
            
            4,728,367Deferred
                income taxes
            
            
            **3,068,901**
            
            
            2,827,009Goodwill
            
            
            **5,772,022**
            
            
            5,008,549Other
                assets
            
            
            **738,317**
            
            
            733,470Total
                assets
            
            **$**
            **38,571,338**
            
            $
            38,745,744**Liabilities
                and stockholders’ equity**Current
                liabilities:Revolving
                credit facilities and notes payable
            
            **$**
            **4,801,356**
            
            $
            4,326,088Accounts
                payable
            
            
            **4,965,851**
            
            
            4,872,941Accrued
                expenses and other current liabilities
            
            
            **3,884,377**
            
            
            3,957,643Foreign
                income taxes payable
            
            
            **690,942**
            
            
            672,330Current
                portion of deferred gain from sale and leaseback of
                building
            
            
            **159,195**
            
            
            160,000Current
                maturities of capital lease obligations
            
            
            **296,508**
            
            
            294,257Total
                current liabilities
            
            
            **14,798,229**
            
            
            14,283,259Capital
                lease obligations
            
            
            **215,810**
            
            
            177,059Deferred
                lease liability
            
            
            **356,419**
            
            
            380,068Deferred
                income taxes
            
            
            **534,761**
            
            
            300,206Deferred
                gain from sale and leaseback of building
            
            
            **1,313,354**
            
            
            1,438,966Deferred
                income
            
            
            **397,992**
            
            
            494,261Total
                liabilities
            
            
            **17,616,565**
            
            
            17,073,819Commitments
                and contingenciesMinority
                interest
            
            
            **200,628**
            
            
            265,284Stockholders’
                equity:Common
                stock, $.01 par value—shares authorized 10,000,000;7,079,169
                issued and 7,001,369 outstanding
            
            
            **70,792**
            
            
            70,792Additional
                paid-in capital
            
            
            **25,022,706**
            
            
            24,871,444Accumulated
                deficit
            
            
            **(4,279,840**
            **)**
            
            (3,507,788
            )Accumulated
                other comprehensive income
            
            
            **352,911**
            
            
            384,617Treasury
                stock, 77,800 shares
            
            
            **(412,424**
            **)**
            
            (412,424
            )Total
                stockholders’ equity
            
            
            **20,754,145**
            
            
            21,406,641Total
                liabilities and stockholders’ equity
            
            **$**
            **38,571,338**
            
            $
            38,745,744




*See
      Accompanying Notes to Consolidated Financial Statements.*




3




**MISONIX,
      INC.** **and Subsidiaries**


**C** **onsolidated** **Statements of Operations**


**(Unaudited)**




**For the nine months ended**
                **March
                    31,****2008**
            
            2007Net
                sales
            
            **$**
            **33,935,316**
            
            $
            30,865,888Cost
                of goods sold
            
            
            **19,222,501**
            
            
            17,687,270Gross
                profit
            
            
            **14,712,815**
            
            
            13,178,618Operating
                expenses:Selling
                expenses
            
            
            **5,580,322**
            
            
            5,524,786General
                and administrative expenses
            
            
            **7,596,223**
            
            
            7,321,668Research
                and development expenses
            
            
            **2,369,683**
            
            
            2,383,903Total
                operating expenses
            
            
            **15,546,228**
            
            
            15,230,357Loss
                from operations
            
            
            **(833,413**
            **)**
            
            (2,051,739
            )Other
                income:Interest
                income
            
            
            **35,345**
            
            
            53,225Interest
                expense
            
            
            **(353,070**
            **)**
            
            (357,075
            )Royalty
                income and license fees
            
            
            **539,413**
            
            
            672,263Royalty
                expense
            
            
            **(262,867**
            **)**
            
            (16,928
            )Other
            
            
            **179,129**
            
            
            4,857Total
                other income
            
            
            **137,950**
            
            
            356,342Loss
                before minority interest and income taxes
            
            
            **(695,463**
            **)**
            
            (1,695,397
            )Minority
                interest in net income (loss) of consolidatedsubsidiaries
            
            
            **47,580**
            
            
            (12,819
            )Loss
                before income taxes
            
            
            **(743,043**
            **)**
            
            (1,682,578
            )Income
                tax benefit
            
            
            **(205,562**
            **)**
            
            (634,680
            )Net
                loss
            
            $
            **(537,481**
            **)**
            $
            (1,047,898
            )Net
                loss per share – Basic
            
            $
            **(.08**
            **)**
            $
            (.15
            )Net
                loss per share – Diluted
            
            $
            **(.08**
            **)**
            $
            (.15
            )Weighted
                average common shares outstanding – Basic
            
            
            **7,001,369**
            
            
            6,923,044Weighted
                average common shares outstanding – Diluted
            
            
            **7,001,369**
            
            
            6,923,044





*See
      Accompanying Notes to Consolidated Financial Statements* .





4





**MISONIX,
      INC.** **and Subsidiaries**


**C** **onsolidated** **Statements of Operations**


**(Unaudited)**




**For
                the three months
                ended**
                **March
                  31,****2008**
            
            2007Net
                sales
            
            **$**
            **11,803,026**
            
            $
            10,583,924Cost
                of goods sold
            
            
            **6,920,580**
            
            
            6,123,927Gross
                profit
            
            
            **4,882,446**
            
            
            4,459,997Operating
                expenses:Selling
                expenses
            
            
            **1,993,137**
            
            
            2,003,430General
                and administrative expenses
            
            
            **2,470,147**
            
            
            2,614,237Research
                and development expenses
            
            
            **724,131**
            
            
            735,518Total
                operating expenses
            
            
            **5,187,415**
            
            
            5,353,185Loss
                from operations
            
            
            **(304,969**
            **)**
            
            (893,188
            )Other
                income:Interest
                income
            
            
            **10,759**
            
            
            11,111Interest
                expense
            
            
            **(101,890**
            **)**
            
            (130,582
            )Royalty
                income and license fees
            
            
            **206,695**
            
            
            213,788Royalty
                expense
            
            
            **(99,399**
            **)**
            
            (5,577
            )Other
            
            
            **57,005**
            
            
            (7,473
            )Total
                other income
            
            
            **73,170**
            
            
            81,267Loss
                before minority interest and income taxes
            
            
            **(231,799**
            **)**
            
            (811,921
            )Minority
                interest in net income (loss) of consolidatedsubsidiaries
            
            
            **24,269**
            
            
            (38,318
            )Loss
                before income taxes
            
            
            **(256,068**
            **)**
            
            (773,603
            )Income
                tax benefit
            
            
            **(62,031**
            **)**
            
            (244,567
            )Net
                loss
            
            
            **(194,037**
            **)**
            
            (529,036
            )Net
                loss per share – Basic
            
            $
            **(.03**
            **)**
            $
            (0.08
            )Net
                loss per share – Diluted
            
            $
            **(.03**
            **)**
            $
            (0.08
            )Weighted
                average common shares outstanding – Basic
            
            
            **7,001,369**
            
            
            6,962,802Weighted
                average common shares outstanding – Diluted
            
            
            **7,001,369**
            
            
            6,962,802





*See
      Accompanying Notes to Consolidated Financial Statements* .




5


**MISONIX,
      INC.** **and Subsidiaries**


**Consolidated
      Statement of Stockholders’ Equity**


**(Unaudited)**




Nine
        months ended March 31, 2008




**Common
                    Stock,$.01****Par
                    Value**
                
                **Treasury
                    Stock****Number
                    of shares**
                
                **Amount**
                
                **Number of
                    shares**
                
                **Amount**
                
                **Additional
                    paid-in capital**
                
                **Accumulated
                    deficit**
                
                **Accumulated
                    other comprehensive income**
                
                **Total
                    stockholders’ equity**Balance,
                    June 30, 2007
                
                
                7,079,169
                
                $
                70,792
                
                
                (77,800
                )
                $
                (412,424
                )
                $
                24,871,444
                
                $
                (3,507,788
                )
                $
                384,617
                
                $
                21,406,641Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (537,481
                )
                
                -
                
                
                (537,481
                )Foreign
                    currency translation adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (31,706
                )
                
                (31,706
                )Comprehensive loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (569,187
                )Cumulative
                    transition adjustment for FIN 48
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (234,571
                )
                
                -
                
                
                (234,571
                )Stock-based
                    compensation
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                151,262
                
                
                -
                
                
                -
                
                
                151,262**Balance,
                    March 31, 2008**
                
                
                **7,079,169**
                
                **$**
                **70,792**
                
                
                **(77,800**
                **)**
                **$**
                **(412,424**
                **)**
                **$**
                **25,022,706**
                
                **$**
                **(4,279,840**
                **)**
                **$**
                **352,911**
                
                **$**
                **20,754,145**




*See
        Accompanying Notes to Consolidated Financial Statements* .


6





**MISONIX,
      INC.** **and Subsidiaries**


**Consolidated
      Statements of Cash Flows**


**(Unaudited)**


**For the nine months ended**
                  **March 31,****2008**
              
              2007**Operating
                  activities**Net
                  loss
              
              **$**
              **(537,481**
              **)**
              $
              (1,047,898
              )Adjustments
                  to reconcile net loss to net cash used inoperating
                  activities:Depreciation
                  and amortization and other non-cash items
              
              
              **1,268,696**
              
              
              1,467,533Bad
                  debt expense (recovery)
              
              
              **(56,405**
              **)**
              
              81,807Deferred
                  income tax benefit
              
              
              **(246,753**
              **)**
              
              (739,076
              )Loss
                  on disposal of property, plant and equipment
              
              
              **63,159**
              
              
              117,054Minority
                  interest in net income (loss) of subsidiaries
              
              
              **47,580**
              
              
              (12,819
              )Stock-based
                  compensation
              
              
              **151,262**
              
              
              140,341Deferred
                  income
              
              
              **(96,269**
              **)**
              
              (75,013
              )Deferred
                  leasehold costs
              
              
              **(144,233**
              **)**
              
              17,791Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              **(624,458**
              **)**
              
              (1,369,184
              )Inventories
              
              
              **(669,705**
              **)**
              
              (847,951
              )Income
                  taxes
              
              
              **21,584**
              
              
              826,813Prepaid
                  expenses and other current assets
              
              
              **615,601**
              
              
              (174,766
              )Accounts
                  payable and accrued expenses
              
              
              **40,369**
              
              
              (40,726
              )Foreign
                  income taxes payable
              
              
              **-**
              
              
              39,894Other
              
              
              **(19,944**
              **)**
              
              (803,461
              )Net
                  cash used in operating activities
              
              
              **(186,997**
              **)**
              
              (2,419,661
              )**Investing
                  activities**Acquisition
                  of property, plant and equipment
              
              
              **(367,958**
              **)**
              
              (559,279
              )Investment
                  in UKHIFU Limited
              
              
              **(37,781**
              **)**
              
              -Acquisition
                  of minority interest
              
              
              **(839,653**
              **)**
              
              -Net
                  cash used in investing activities
              
              
              **(1,245,392**
              **)**
              
              (559,279
              )**Financing
                  activities**Proceeds
                  from short-term borrowings
              
              
              **18,519,219**
              
              
              5,648,062Payments
                  of short-term borrowings
              
              
              **(18,032,773**
              **)**
              
              (2,302,175
              )Principal
                  payments on capital lease obligations
              
              
              **(348,398**
              **)**
              
              (273,066
              )Proceeds
                  from exercise of stock options
              
              
              **-**
              
              
              134,570Payments
                  of long-term debt
              
              
              **-**
              
              
              (44,556
              )Net
                  cash provided by financing activities
              
              
              **138,048**
              
              
              3,162,835Effect
                  of exchange rate changes on cash
              
              
              **1,512**
              
              
              7,703Net
                  (decrease) increase in cash
              
              
              **(1,292,829**
              **)**
              
              191,598Cash
                  at beginning of period
              
              
              **2,900,358**
              
              
              675,400Cash
                  at end of period
              
              **$**
              **1,607,529**
              
              $
              866,998**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for:Interest
              
              **$**
              **363,311**
              
              $
              330,621Income
                  taxes
              
              **$**
              **19,607**
              
              $
              (762,309
              )**Supplemental
                  disclosure of noncash investing****and
                  financing activities:**Capital
                  lease additions
              
              **$**
              **391,900**
              
              $
              133,146Inventory
                  transferred to property, plant and equipment
              
              
              **-**
              
              $
              413,567




*See
      Accompanying Notes to Consolidated Financial Statements* .




7




**MISONIX,
      INC.** **and Subsidiaries**


**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 nine months ended
      March 31, 2008 are not necessarily indicative of the results that may be
      expected for the year ending June 30, 2008 or any interim period.





The
      balance sheet at June 30, 2007 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, 2007.





2. Net
      Loss Per Share of Common Stock





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128,
“Earnings Per Share”, basic net loss per common share (“basic EPS”) is computed
      by dividing net loss by the weighted average number of common shares
      outstanding. Diluted net loss per common share (“diluted EPS”) is computed by
      dividing net loss by the weighted average number of common shares and dilutive
      common share equivalents outstanding. Diluted EPS for periods with a net loss
      is
      the same as basic EPS, as the inclusion of the effect of common stock
      equivalents then outstanding would be anti-dilutive. For this reason, we
      excluded from the calculation of diluted EPS all outstanding options for the
      nine and three-month periods ended March 31, 2008 and 2007.





3.  Comprehensive
      (Loss) Income





Total
      comprehensive loss was $569,187 and $199,652 for the nine months and three
      months ended March 31, 2008 and $779,723 and $547,901 for the nine months and
      three months ended March 31, 2007, respectively. The components of comprehensive
      loss are net loss and foreign currency translation adjustments.





4.  Stock-Based
      Compensation





The
      Company adopted the fair-value recognition provisions of SFAS 123R, “Share-Based
      Payment” (“SFAS No. 123R”), effective July 1, 2005. Compensation cost recognized
      in the nine and three-month periods ended March 31, 2008 and 2007 include
      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
      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 a change in control. During
      the three-month periods ended March 31, 2008 and 2007, the Company granted
      options to purchase 0 and 75,000 shares of the Company’s common stock,
      respectively, and during the nine month-periods ended March 31, 2008 and 2007,
      the Company granted options to purchase 61,850 and 127,400 shares of the
      Company’s common stock, respectively.




8
 
 **MISONIX,
        INC.** **and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 (Information
        with respect to interim periods is unaudited)


Stock-based
      compensation expense for the nine month-periods ended March 31, 2008 and 2007
      was approximately $151,000 and $140,000, respectively. Stock-based compensation
      expense for the three- month periods ended March 31, 2008 and 2007 was $53,000
      and $40,000, respectively. 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. As of March 31, 2008, there was
      $392,208 of total unrecognized compensation cost related to non-vested
      share-based compensation arrangements to be recognized over a weighted-average
      period of 2.3 years.





Total
      cash received from the exercise of stock options was $0 and $134,570 for the
      nine-month periods ended March 31, 2008 and 2007, respectively. 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.





We
      estimated the fair value of stock options using the following
      assumptions:





For the Nine Months
              March 31,
            
            For the Three Months
              March
                31,2008
            
            2007
            
            2007Risk-free
                interest rate
            
            
            4.3
            %
            
            4.67
            %
            
            4.48
            %Expected
                option life in years
            
            
            6.5
            
            
            6.0
            
            
            6.0Expected
                stock price volatility
            
            
            54.7
            %
            
            53.8
            %
            
            52.3
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %Weighted-average
                fair value of options granted
            
            $
            2.51
            
            $
            2.57
            
            $
            2.99





The
      expected life was based on historical exercises and terminations. The expected
      volatility over 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 declared dividends and does not expect
      to
      declare any in the future.




9





**MISONIX,
      INC.** **and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


(Information
      with respect to interim periods is unaudited)





Changes
      in outstanding stock options during the nine months ended March 31, 2008 were
      as
      follows:




OptionsNumber
                ofShares
            
            WeightedAverage
              ExercisePrice
            
            WeightedAverageRemainingContractualLife
                (years)
            
            AggregateIntrinsicValueOutstanding
                as of June 30, 2007
            
            
            1,802,566
            
            $
            5.88
            
            
            5.4Granted
            
            
            61,850
            
            
            4.33Exercised
            
            
            —
            
            
            —Forfeited
            
            
            11,380
            
            
            6.04Expired
            
            
            25,000
            
            
            14.80Outstanding
                as of March 31, 2008
            
            
            1,828,036
            
            $
            5.70
            
            
            5.1
            
            $
            106,719Exercisable
                and vested at March 31, 2008
            
            
            1,663,912
            
            $
            5.79
            
            
            4.5
            
            $
            74,380Available
                for grant at March 31, 2008
            
            
            604,627





5. Income
      Taxes





The
      Company adopted the provisions of Financial Accounting Standards Board (“FASB”)
      Interpretation No. 48 (“FIN 48”), an interpretation of SFAS 109, effective July
      1, 2007. In response to the issuance of FIN 48, the Company reviewed its
      uncertain tax positions in accordance with the recognition standards established
      by FIN 48. As a result of this review, the Company has adjusted its estimate
      of
      its uncertain tax positions by recognizing an additional liability (including
      interest) of approximately $235,000 through a charge to accumulated deficit.
      The
      liability is included in deferred income taxes payable. There have not been
      any
      new uncertain income tax positions identified in the nine and three month
      periods ended March 31, 2008. The Company does not expect any material changes
      to the estimated amount of liability associated with its uncertain tax positions
      through July 1, 2008.





The
      Company generally recognizes interest and penalties related to uncertain tax
      positions through income tax expense. As of July 1, 2007, the Company had
      accrued approximately $32,000 for the payment of tax-related interest. An
      additional $12,000 was accrued during the nine months ended March 31,
      2008.





There
      are
      no federal, state or foreign income tax audits in process as of March 31, 2008.
      Open tax years related to federal and state income tax filings are for the
      years
      ended June 30, 2005, 2006 and 2007. The Company files state tax returns in
      New
      York and Colorado and its tax returns in those states have never been examined.
      The Company’s foreign subsidiaries, Labcaire Systems Ltd. (“Labcaire”), Misonix,
      Ltd. and UKHIFU Limited (“UKHIFU”) file tax returns in England. The England
      Inland Revenue Service has not examined these tax returns.





In
      June
      2006, the FASB ratified the consensus reached by the Emerging Issues Tax Force
      in Issue No. 06-3 (“EITF 06-3”), “How Taxes Collected from Customers and
      Remitted to Governmental Authorities Should Be Presented in the Income Statement
      (That is, Gross versus Net Presentation).” The scope of EITF 06-3 includes any
      tax assessed by a governmental authority that is directly imposed on a
      revenue-producing activity between a seller and a customer and may include,
      but
      is not limited to, sales, use, value added, and some excise taxes. EITF 06-3
      also concluded that the presentation of taxes within its scope on either a
      gross
      (included in revenues and costs) or net (excluded from revenues) basis is an
      accounting policy decision subject to appropriate disclosure. EITF 06-3 is
      effective for periods beginning after December 15, 2006. The Company currently
      presents these taxes on a net basis and has elected not to change its
      presentation method.




10




**MISONIX,
      INC.** **** **and
      Subsidiaries**


**Notes
      to Consolidated Financial Statements**


(Information
      with respect to interim periods is unaudited)





6.  Inventories




Inventories
      are summarized as follows:





**March
                31,**
              **2008**
            
            June
                30,
              2007Raw
                material
            
            **$**
            **6,453,615**
            
            $
            6,593,458Work–in–process
            
            
            **3,153,288**
            
            
            2,624,212Finished
                goods
            
            
            **4,845,888**
            
            
            4,599,040**14,452,791**
            
            
            13,816,710Less
                valuation reserve
            
            
            **2,051,780**
            
            
            1,913,416**$**
            **12,401,011**
            
            $
            11,903,294





7. Accrued
      Expenses and Other Current Liabilities





The
      following summarizes accrued expenses and other current
      liabilities:




**March
                31,**
              **2008**
            
            June
                  30,
                2007Customer
                deposits and deferred contracts
            
            **$**
            **1,020,109**
            
            $
            1,084,412Accrued
                payroll and vacation
            
            
            **1,212,680**
            
            
            567,296Accrued
                VAT on sale of Labcaire building
            
            
            **-**
            
            
            631,229Accrued
                VAT and sales tax
            
            
            **483,386**
            
            
            118,176Accrued
                commissions and bonuses
            
            
            **416,074**
            
            
            484,022Accrued
                professional fees
            
            
            **127,353**
            
            
            47,413Litigation
            
            
            **324,000**
            
            
            419,000Other
            
            
            **300,775**
            
            
            606,095**$**
            **3,884,377**
            
            $
            3,957,643





8. Revolving
      Credit Facilities





On
      December 29, 2006, the Company and its subsidiaries, Acoustic Marketing
      Research, Inc. d/b/a Sonora Medical Systems (“Sonora”) and Hearing Innovations,
      Inc. (“Hearing Innovations”) (the Company, Sonora and Hearing Innovations
      collectively referred to as the “Borrowers”) and Wells Fargo Bank entered into a
      (i) Credit and Security Agreement and a (ii) Credit and Security Agreement
      Export-Import Subfacility (collectively referred to as the “Credit Agreements”).
      The aggregate credit limit under the Credit Agreements is $8,000,000 consisting
      of a revolving facility in the amount of up to $8,000,000. Up to $1,000,000
      of
      the revolving facility is available under the Export-Import Agreement as a
      subfacility for Export-Import working capital financing. All credit facilities
      under the Credit Agreements mature on December 29, 2009. Payment of amounts
      outstanding under the Credit Agreements may be accelerated upon the occurrence
      of an Event of Default (as defined in the Credit Agreements). All loans and
      advances under the Credit Agreements are secured by a first priority security
      interest in all of the Borrowers’ accounts receivable, letter-of-credit rights,
      and all other business assets. The Borrowers have the right to terminate or
      reduce the credit facility prior to December 29, 2009 by paying a fee based
      on
      the aggregate credit limit (or reduction, as the case may be) as follows: (i)
      during year one of the Credit Agreements, 3%; (ii) during year two of the Credit
      Agreements, 2%; and (iii) during year three of the Credit Agreements,
      1%.





11





**MISONIX,
      INC.** **and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


(Information
      with respect to interim periods is unaudited)





The
      Credit Agreements, as amended, contain financial covenants requiring that the
      Borrowers (i) on a consolidated basis not have a Net Loss (as defined in the
      Credit Agreements) of more than (a) $40,000 for the fiscal quarter ended March
      31, 2008 and (b) $175,000 for the fiscal quarter ending June 30, 2008; and
      (ii)
      not incur or contract to incur Capital Expenditures (as defined in the Credit
      Agreements) of more than $1,000,000 in the aggregate in any fiscal year or
      more
      than $1,000,000 in any one transaction. At March 31, 2008, the Borrowers were
      in
      compliance with all financial covenants under the Credit
      Agreements.





The
      available amount under the Credit Agreements is the lesser of $8,000,000 or
      the
      amount calculated under the Borrowing Base (as defined in the Credit
      Agreements). The Borrowers must maintain a minimum outstanding amount of
      $1,250,000 under the Credit Agreements at all times and pay a fee equal to
      the
      interest rate set forth on any such shortfall. Interest on amounts borrowed
      under the Credit Agreements is payable at Wells Fargo’s prime rate of interest
      plus 1% per annum floating, payable monthly in arrears. The default rate of
      interest is 3% higher than the rate otherwise payable. A fee of 1⁄2 % per annum on
      the Unused Amount (as defined in the Credit Agreements) is payable monthly
      in
      arrears. At March 31, 2008, the balance outstanding under the Credit Agreement
      was $2,830,656 and an additional $833,496 was available under this line of
      credit.





Labcaire
      has a debt purchase agreement with Lloyds TSB Commercial Finance (“Lloyds”). The
      amount of this facility bears interest at Lloyd’s base rate (5.5%) at March 31,
      2008 plus 2.0% and fluctuates based on the outstanding United Kingdom and
      European receivables. The agreement expires September 28, 2008. The agreement
      covers all United Kingdom and European sales. At March 31, 2008, the balance
      outstanding under this credit facility was $1,619,949 and Labcaire was in
      compliance with all financial covenants.





9. Commitments
      and Contingencies





A
      jury in
      the District Court of Boulder County, Colorado has returned a verdict against
      Sonora in the amount of $419,000 which was recorded by the Company during the
      fourth quarter of fiscal 2005. The judgment was decreased to $324,000 and the
      $95,000 reduction is included in other income during the three months ended
      March 31, 2008. The case involved royalties claimed on recoating of
      transesophogeal probes, which is a process performed by Sonora. Approximately
      80% of the judgment was based on the jury’s estimate of royalties for potential
      sales of the product in the future. Sonora has moved for judgment
      notwithstanding the verdict based on, among other things, the award of damages
      for future royalties. Sonora has also moved for a new trial in the
      case.





The
      Company is a defendant in claims and lawsuits arising in the ordinary course
      of
      business. The Company believes that it has meritorious defenses to such claims
      and lawsuits and is vigorously contesting them. Although the outcome of
      litigation cannot be predicted with certainty, the Company believes
      that these actions will not have a material adverse effect on the Company’s
      consolidated financial position or results of operations.





On
      September 6, 2007, but effective as of August 30, 2007, the Company and William
      H. Phillips (“Phillips”) entered into a Settlement Agreement (the “Agreement”).
      Pursuant to the Agreement, the Company and Phillips resolved certain disputes
      between them concerning the purchase price to be paid by the Company for shares
      of the common stock of Sonora owned by Phillips. The Company owned ninety (90%)
      percent of the outstanding shares of Sonora prior to the execution of the
      Agreement.





Pursuant
      to the Agreement, the Company paid Phillips the aggregate sum of $1,214,780
      (the
“Purchase Price”). The Company paid Phillips $296,118 on June 7, 2007, $311,272
      on August 30, 2007 and $306,220 on November 28, 2007. The Company paid the
      final
      installment of $301,169 on February 28, 2008. As of March 1, 2008, the Company
      owns 95% of the outstanding shares of Sonora.





12




**MISONIX,
      INC.** **and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


(Information
      with respect to interim periods is unaudited)





The
      effect of this transaction was to increase goodwill by $969,800, decrease
      minority interest by $149,737 and record interest expense of
      $95,242.





10. Recent
      Accounting Standards





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets” (“SFAS 156”), an amendment of SFAS 140, “Accounting for Transfers and
      Servicing of Financial Assets and Extinguishment of Liabilities”. SFAS 156
      requires all separately recognized servicing assets and servicing liabilities
      to
      be initially measured at fair value, if practicable, and permits an entity
      to
      subsequently measure those servicing assets and servicing liabilities at fair
      value. SFAS 156 is effective for fiscal years beginning after September 15,
      2006. The Company adopted SFAS 156 effective July 1, 2007 and the adoption
      of
      SFAS 156 did not have a material effect on the Company’s consolidated financial
      position or results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”). SFAS 157 provides a new single authoritative definition of fair value and
      provides enhanced guidance for measuring the fair value of assets and
      liabilities and requires additional disclosures related to the extent to which
      companies measure assets and liabilities at fair value, the information used
      to
      measure fair value, and the effect of fair value measurements on earnings.
      This
      Statement is effective as of the beginning of an entity’s first fiscal year
      beginning after November 15, 2007. The Company is currently evaluating the
      impact that the adoption of SFAS 157 may have on the Company’s consolidated
      financial position and results of operations.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”), which provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value in an attempt to reduce both complexity in accounting for financial
      instruments and the volatility in earnings caused by measuring related assets
      and liabilities differently. This Statement is effective as of the beginning
      of
      an entity’s first fiscal year beginning after November 15, 2007. The Company is
      currently evaluating the impact that the adoption of SFAS 159 may have on the
      Company’s consolidated financial position and results of
      operations.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 amends ARB No. 51 to establish accounting and reporting standards
      for
      the noncontrolling interest in a subsidiary and for the deconsolidation of
      a
      subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which
      is sometimes referred to as a minority interest, is an ownership interest in
      the
      consolidated entity that should be reported as equity in the consolidated
      financial statements. Among other requirements, this Statement requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and noncontrolling interest. It also requires
      disclosure, on the face of the consolidated statement of operations, of the
      amounts of consolidated net income (loss) attributable to the parent and to
      the
      noncontrolling interest. SFAS 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008.
      Earlier adoption is prohibited. The Company is currently evaluating the impact
      that the adoption of SFAS 160 may have on the Company’s consolidated financial
      position and results of operations.





11. Related
      Party





The
      Company has subcontracted Focus Surgery, Inc. (“Focus”) to perform research and
      development activities for which the Company recorded expenses of $229,200
      and
      $44,000 to Focus during the nine months ended March 31, 2008 and 2007,
      respectively, which amounts are recorded as research and development expenses
      in
      the accompanying statements of operations. During fiscal 2004, Focus entered
      into an exclusive agreement with the Company to distribute the Sonablate® 500 in
      the European market.




13




**MISONIX,
      INC.** **** **and
      Subsidiaries**


**Notes
      to Consolidated Financial Statements**


(Information
      with respect to interim periods is unaudited)





The
      Company purchased approximately $510,000 and $578,000 of product from Focus
      during the nine months ended March 31, 2008 and 2007, respectively. Total sales
      to Focus were approximately $407,000
      and $584,000 for the nine months ended March 31, 2008 and 2007, respectively.
      Accounts receivable due from Focus at March 31, 2008 and June 30, 2007 were
      approximately $149,000 and $4,000, respectively. Accounts payable to Focus
      totaled approximately $497,000 and $508,000 at March 31, 2008 and June 30,
      2007,
      respectively.





On
      March
      3, 2008 the Company, USHIFU, LLC (“USHIFU”), FS Acquisition Company and certain
      other stockholders of Focus entered into a Stock Purchase Agreement (the “Focus
      Agreement”). Pursuant to the Focus Agreement, the Company agreed to sell to
      USHIFU the 2,500 shares of Series M Preferred Stock of Focus owned by the
      Company for a cash payment of $837,500. The Company will also receive at the
      closing of the transactions contemplated by the Focus Agreement (the “Closing”)
      fifty percent (50%) of the outstanding principal and accrued interest of loans
      previously made by the Company to Focus with the remaining fifty percent (50%)
      of such amount due eighteen (18) months from the Closing. The balance of the
      debt owed to the Company by Focus at March 31, 2008 is approximately
      $1,335,000.





Consummation
      of the transactions contemplated by the Focus Agreement is subject to
      fulfillment of customary conditions as well as (i) USHIFU obtaining no less
      than
      $10,000,000.00 of new financing through the issuance of equity in USHIFU or
      an
      affiliate thereof; (ii) repayment of fifty percent (50%) of the debt due to
      the
      Company and to Takai Hospital Supply Co., Ltd (“THS”); (iii) dismissal of the
      pending arbitration between USHIFU and Focus; (iv) the execution of amendments
      to certain distributorship and license agreements between Focus and an affiliate
      of THS; (v) the execution of amendments to and/or agreements concerning certain
      distributorship, license and manufacturing arrangements between Focus and the
      Company; and (vi) the execution of employment and joint venture agreements
      between the President of Focus and Focus.





The
      Company’s investments in Focus for both equity and debt were totally written
      down in 2001 as a result of both the debt and equity being deemed impaired.
      Under the impairment treatment, the equity and debt have been carried on our
      balance sheet at a zero value since 2001, therefore this amount will be totally
      incremental to earnings. Additionally, since in 2001 we were not certain of
      any
      capital gain offset, we established a tax valuation reserve which will also
      be
      partially reversed at Closing. Upon the Closing, we will realize approximately
      $1,500,000 in non-recurring income or approximately $.21 per share.





12. 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 AutoSonixTM ultrasonic cutting and coagulatory system, the Sonablate 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), soft tissue aspirator (used primarily for the cosmetic surgery
      market) and the wound debrider. Laboratory and scientific products include
      the
      Sonicator Ultrasonic liquid processor, Aura ductless fume enclosure and the
      Labcaire ISIS and Guardian endoscope disinfectant systems. 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, 2007.





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, Labcaire,
      UKHIFU and Misonix, Ltd. 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:




14


**MISONIX,
                INC. and Subsidiaries****Notes
                to Consolidated Financial Statements**(Information
                with respect to interim periods is
                unaudited)




For
      the
      nine months ended March 31, 2008





**Medical DeviceProducts**
            
            **Laboratory and****ScientificProducts**
            
            **Corporate and****Unallocated**
            
            **Total**Net sales
            
            $
            17,854,832
            
            $
            16,080,484
            
            $
            -
            
            $
            33,935,316Cost
                of goods sold
            
            
            9,053,042
            
            
            10,169,459
            
            
            -
            
            
            19,222,501Gross
                profit
            
            
            8,801,790
            
            
            5,911,025
            
            
            -
            
            
            14,712,815Selling
                expenses
            
            
            3,566,860
            
            
            2,013,462
            
            
            -
            
            
            5,580,322Research
                and development
            
            
            1,569,483
            
            
            800,200
            
            
            -
            
            
            2,369,683General
                and administrative
            
            
            -
            
            
            -
            
            
            7,596,223
            
            
            7,596,223Total
                operating expenses
            
            
            5,136,343
            
            
            2,813,662
            
            
            7,596,223
            
            
            15,546,228Income
                (loss) from operations
            
            $
            3,665,447
            
            $
            3,097,362
            
            $
            (7,596,223
            )
            $
            (833,413
            )











For
      the
      nine months ended March 31, 2007





**Medical Device Products**
            
            **Laboratory and****Scientific**
              **Products**
            
            **Corporate and****Unallocated**
            
            **Total**Net
                sales
            
            $
            17,082,915
            
            $
            13,782,973
            
            $
            -
            
            $
            30,865,888Cost
                of goods sold
            
            
            9,595,991
            
            
            8,091,279
            
            
            -
            
            
            17,687,270Gross
                profit
            
            
            7,486,924
            
            
            5,691,694
            
            
            -
            
            
            13,178,618Selling
                expenses
            
            
            3,701,453
            
            
            1,823,333
            
            
            -
            
            
            5,524,786Research
                and development
            
            
            1,503,853
            
            
            880,050
            
            
            -
            
            
            2,383,903General
                and administrative
            
            
            -
            
            
            -
            
            
            7,321,668
            
            
            7,321,668Total
                operating expenses
            
            
            5,205,306
            
            
            2,703,383
            
            
            7,321,668
            
            
            15,230,357Income
                (loss) from operations
            
            $
            2,281,618
            
            $
            2,988,311
            
            $
            (7,321,668
            )
            $
            (2,051,739
            )




15





**MISONIX,
                INC. and Subsidiaries****Notes
                to Consolidated Financial Statements**(Information
                with respect to interim periods is
                unaudited)




For
      the
      three months ended March 31, 2008





**Medical DeviceProducts**
            
            **Laboratory and********ScientificProducts**
            
            **Corporate and****Unallocated**
            
            **Total**Net
                sales
            
            $
            6,518,512
            
            $
            5,284,514
            
            $
            -
            
            $
            11,803,026Cost
                of goods sold
            
            
            3,389,720
            
            
            3,530,860
            
            
            -
            
            
            6,920,580Gross
                profit
            
            
            3,128,792
            
            
            1,753,654
            
            
            -
            
            
            4,882,446Selling
                expenses
            
            
            1,271,232
            
            
            721,905
            
            
            -
            
            
            1,993,137Research
                and development
            
            
            450,418
            
            
            273,713
            
            
            -
            
            
            724,131General
                and administrative
            
            
            -
            
            
            -
            
            
            2,470,147
            
            
            2,470,147Total
                operating expenses
            
            
            1,721,650
            
            
            995,618
            
            
            2,470,147
            
            
            5,187,415Income
                (loss) from operations
            
            $
            1,407,142
            
            $
            758,036
            
            $
            (2,470,147
            )
            $
            (304,969
            )





For
      the
      three months ended March 31, 2007:





**Medical DeviceProducts**
            
            **Laboratory and****ScientificProducts**
            
            **Corporate and****Unallocated**
            
            **Total**Net
                sales
            
            $
            6,031,451
            
            $
            4,552,473
            
            $
            -
            
            $
            10,583,924Cost
                of goods sold
            
            
            3,415,415
            
            
            2,708,512
            
            
            -
            
            
            6,123,927Gross
                profit
            
            
            2,616,036
            
            
            1,843,961
            
            
            -
            
            
            4,459,997Selling
                expenses
            
            
            1,357,631
            
            
            645,799
            
            
            -
            
            
            2,003,430Research
                and development
            
            
            454,827
            
            
            280,691
            
            
            -
            
            
            735,518General
                and administrative
            
            
            -
            
            
            -
            
            
            2,614,237
            
            
            2,614,237Total
                operating expenses
            
            
            1,812,458
            
            
            926,490
            
            
            2,614,237
            
            
            5,353,185Income
                (loss) from operations
            
            $
            803,578
            
            $
            917,471
            
            $
            (2,614,237
            )
            $
            (893,188
            )





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





Nine
                Months ended March 31,
            
            Three
                Months ended March 31,**2008**
            
            2007
            
            **2008**
            
            2007United
                States
            
            **$**
            **18,394,922**
            
            $
            17,913,069
            
            **$**
            **6,500,446**
            
            $
            5,988,210United
                Kingdom
            
            
            **10,643,913**
            
            
            8,275,812
            
            
            **3,606,265**
            
            
            2,835,142Europe
            
            
            **1,854,825**
            
            
            2,536,617
            
            
            **664,350**
            
            
            843,293Asia
            
            
            **1,454,322**
            
            
            1,394,017
            
            
            **310,971**
            
            
            640,683Canada
                and Mexico
            
            
            **513,151**
            
            
            331,296
            
            
            **242,265**
            
            
            149,163Middle
                East
            
            
            **230,488**
            
            
            87,413
            
            
            **93,577**
            
            
            31,176Other
            
            
            **843,695**
            
            
            327,664
            
            
            **385,152**
            
            
            95,627**$**
            **33,935,316**
            
            $
            30,865,888
            
            **$**
            **11,803,026**
            
            $
            10,583,924




16




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





Nine
      months ended March 31, 2008 and 2007





**Net
      sales** **:** Net
      sales increased $3,069,428 to $33,935,316 for the nine months ended March 31,
      2008 from $30,865,888 for the nine months ended March 31, 2007. This difference
      in net sales is principally due to an increase in laboratory and scientific
      products sales of $2,297,511 to $16,080,484 for the nine months ended March
      31,
      2008 from $13,782,973 for the nine months ended March 31, 2007. This difference
      in net sales is also due to an increase in sales of medical device products
      of
      $771,917 to $17,854,832 for the nine months ended March 31, 2008 from
      $17,082,915 for the nine months ended March 31, 2007. The increase in sales
      of
      medical device products is due to an increase in sales of therapeutic medical
      device products of $237,704 plus an increase of $534,213 in sales of diagnostic
      medical device products. The increase in sales of therapeutic medical device
      products was primarily attributable to the increased sales of the Company’s
      ultrasonic surgical aspirator of $1,087,376, an increase in sales of the
      Company’s ultrasonic assisted liposuction product of $971,670, and an increase
      in sales of the Company’s wound debridement product of $85,157, which were
      partially offset by a decrease in AutoSonix sales to United States Surgical
      (“USS”), a subsidiary of Covidien Ltd., of $561,492, a decrease in Sonablate
      500® unit sales of $1,343,479 and a decrease in sales of other therapeutic
      medical device products of $1,526. The increase in sales of diagnostic medical
      device products was attributable to several new customers, an increase in
      customer demand for several new products and increased repair capability. The
      increase in sales of laboratory and scientific products is due to a $2,025,941
      increase in Labcaire Systems, Ltd. (“Labcaire”) products sales, an increase of
      ultrasonic product sales of $436,923 and an increase of $382,767 in ductless
      fume enclosure product sales, partially offset by a $548,118 decrease in sales
      of wet scrubber products. The Company has limited the opportunities it pursues
      for wet scrubber products. The increase in Labcaire sales of $2,025,941 is
      due
      to shipments of its new ISIS endoscope cleaning system and the strengthening
      of
      the English Pound versus the U.S. dollar which accounted for approximately
      $510,000 of the sales increase. The increase in ductless fume enclosure product
      sales and ultrasonic product sales is due to an increase in customer demand
      for
      several products and is 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. UKHIFU Limited (“UKHIFU”) sales are
      remitted in English Pounds and Misonix, Ltd. sales to date have been remitted
      in
      English pounds and Euros. To the extent that the Company’s revenues are
      generated in English Pounds, its operating results were translated for reporting
      purposes into U.S. dollars using weighted average rates of 2.01 and 1.91 for
      the
      nine months ended March 31, 2008 and 2007, respectively. A strengthening of
      the
      English Pound and Euro, in relation to the U.S. dollar, will have the effect
      of
      increasing recorded revenues and profits, while a weakening of the English
      Pound
      and Euro will have the opposite effect. Since the Company’s operations in
      England generally set prices and bids for contracts in English Pounds, a
      strengthening of the English Pound, while increasing the value of its UK assets,
      might place the Company at a pricing disadvantage in bidding for work from
      manufacturers based overseas. The Company collects its receivables predominately
      in the currency of the country the subsidiary resides in. The Company has not
      engaged in foreign currency hedging transactions, which include forward exchange
      agreements. See Item 3. “Quantitative and Qualitative Disclosures About Market
      Risk.”





**Gross
      profit:** Gross
      profit increased to 43.4% for the nine months ended March 31, 2008 from 42.7%
      for the nine months ended March 31, 2007. Gross profit for laboratory and
      scientific products decreased to 36.8% for the nine months ended March 31,
      2008
      from 41.3% for the nine months ended March 31, 2007 due to lower margins at
      Labcaire due to higher costs related to the ISIS units shipped. Gross profit
      for
      medical device products increased to 49.3% for the nine months ended March
      31,
      2008 from 43.8% for the nine months ended March 31, 2007. Gross profit for
      therapeutic medical device products was positively impacted by a favorable
      product mix due to increased sales of ultrasonic surgical aspirator products
      in
      foreign markets which have higher selling prices, increased sales of the
      ultrasonic surgical aspirator products in the United States and increased sales
      of ultrasonic assisted liposuction products which have higher gross profits
      than
      the AutoSonix products. The March 2008 period also benefited from a favorable
      mix of diagnostic medical device products sales.





17


**Selling
      expenses:** Selling
      expenses increased $55,536 to $5,580,322 for the nine months ended March 31,
      2008 from $5,524,786 for the nine months ended March 31, 2007. Laboratory and
      scientific products selling expenses increased $190,128, predominately due
      to
      increased selling and service expenses at Labcaire related to higher sales
      and
      the impact of the stronger English Pound of approximately $68,000. Selling
      expenses for therapeutic medical device products decreased $82,477, principally
      due to decreased clinical trial expenses, consulting fees and exhibition
      expenses, which were partially offset by increased salaries related to
      additional staff. Selling expenses related to diagnostic medical device products
      decreased $52,116, principally due to decreased costs associated with
      consignment equipment.





**General
      and administrative expenses** :
      General
      and administrative expenses increased $274,555 from $7,321,668 in the nine
      months ended March 31, 2007 to $7,596,223 in the nine months ended March 31,
      2008. General and administrative expenses increased for the nine months ended
      March 31, 2008, principally due to increased staffing expense of $225,428,
      increased depreciation expense of $134,986, increased recruiting fees of
      $104,109, increased bank fees of $64,452 and higher consulting fees of $90,740,
      which were partially offset by decreased insurance expense of $170,703,
      decreased bad debt expense of $135,500 and lower rent expense of $26,982. The
      decrease in bad debt expense was due to receiving a check in April 2008 from
      a
      customer to pay a past due balance which was reserved for in prior periods.
      The
      higher consulting fees include approximately $150,000 related
      to the implementation of Section 404(a) of the Sarbanes-Oxley Act of
      2002 .
      The
      Company entered into revolving credit facility with Wells Fargo Bank on December
      29, 2006 and bank fees in the 2008 period are for nine months compared to three
      months in the 2007 period.




**Research
      and development expenses** **:**  Research
      and development expenses decreased $14,220 from $2,383,903 for the nine months
      ended March 31, 2007 to $2,369,683 for the nine months ended March 31, 2008.
      Research and development expenses for medical device products increased $65,630.
      Therapeutic medical device products research and development expenses increased
      approximately $13,000, primarily due to milestone charges of $210,000 from
      Focus
      Surgery, Inc. (“Focus”) related to the High Intensity Focused Ultrasound kidney
      cancer research project, and increased amortization expense of $23,000, which
      was partially offset by reduced salary, consulting and other expenses of
      approximately $139,000, and approximately $81,000 of decreased other expenses.
      Research and development expenses for diagnostic medical device products
      increased $52,812 related to developing new products and services which were
      introduced during the current fiscal year. Laboratory and scientific products
      research and development expenses decreased $79,850 due to reduced efforts
      on
      the Labcaire ISIS product which was introduced and launched in the fourth
      quarter of fiscal 2007 and completing the S-4000 digital Sonicator product
      introduced during the first quarter of fiscal 2008.





**Other
      income:** Other
      income for the nine months ended March 31, 2008 was $137,950 as compared to
      other income of $356,342 for the nine months ended March 31, 2007. The decrease
      of $218,392 was primarily due to decreased royalty income and license fees
      of
      $132,850 from USS, increased royalty expense of $167,751 at Acoustic Marketing
      Research, Inc. d/b/a Sonora Medical Systems (“Sonora”) related to licensed probe
      repair technology and sale of Acoustic Power tanks, increased royalty expense
      related to the Company’s Lysonix product of $78,188, decreased interest expense
      of $4,005 and decreased interest income of $17,880. The March 2008 period
      includes $150,000 in income from the realization of a previously impaired
      Secured Cumulative Convertible Debenture from Focus. Other expense in the March
      31, 2008 period includes a $65,000 legal expense related to the settlement
      of a
      lawsuit by a former employee of the Company and a reduction in legal liability
      of $95,000 relating to litigation against Sonora.





**Income
      taxes:** The
      effective tax rate was 27.7% for the nine months ended March 31, 2008, as
      compared to an effective tax rate of 37.7% for the nine months ended March
      31,
      2007. The effective tax rate for the nine months ended March 31, 2007 was
      favorably impacted by an additional $98,000 of Research and Experimentation
      Credits provided by the enactment of the Tax Relief and Healthcare Act of 2006
      (HR6111) which retroactively extended the tax credit for Research and
      Experimentation expenditures. The March 2008 effective income tax rate differs
      from the statutory rate due to the impact of permanent differences related
      to
      SFAS123R stock-based compensation and non-deductible entertainment expenses
      on
      taxable income. In addition, the $150,000 income from the realization of a
      previously written off debt from Focus was not tax effected because the Company
      did not record an income tax benefit when the debt was originally written
      off.





18




Three
      months ended March 31, 2008 and 2007





**Net
      sales** **:** Net
      sales increased $1,219,102 to $11,803,026 for the three months ended March
      31,
      2008 from $10,583,924 for the three months ended March 31, 2007. The increase
      in
      net sales is due to an increase in laboratory and scientific products sales
      of
      $732,041 to $5,284,514 for the three months ended March 31, 2008 from $4,552,473
      for the three months ended March 31, 2007. Sales of medical device products
      increased $487,061 to $6,518,512 for the three months ended March 31, 2008
      from
      $6,031,451 for the three months ended March 31, 2007. The increase in sales
      of
      medical device products is due to an increase in sales of therapeutic medical
      device products of $230,702 plus an increase of $256,359 in sales of diagnostic
      medical device products. The increase in sales of therapeutic medical device
      products was primarily attributable to an increase in sales of the Company’s
      surgical aspirator product of $238,945 and an increase in the sales of the
      ultrasonic assisted liposuction product of $477,227, partially offset by a
      decrease in sales of other therapeutic medical device products of $485,470,
      primarily related to a decrease in sales of the Company’s Sonablate 500® of
      $310,000 and a decrease in sales of the Company’s lithotriptor medical device
      products of $163,000. The increase in sales of diagnostic medical device
      products was not attributable to a single customer, distributor or any other
      specific factor. The increase in sales of laboratory and scientific products
      is
      due to a $512,045 increase in Labcaire products sales, an increase of $167,355
      in ultrasonic product sales and an increase of $52,641 ductless fume enclosure
      product sales. The increase in Labcaire sales of $512,045 is due to shipments
      of
      its new ISIS endoscope cleaning system and the strengthening of the English
      Pound versus the U.S. dollar which accounted for approximately $50,000 of the
      sales increase. The increase in ductless fume enclosure product sales and
      ultrasonic product sales is due to an increase in customer demand for several
      products and is 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. UKHIFU sales are remitted in English
      Pounds and Misonix, Ltd. sales to date have been remitted in Euros. To the
      extent that the Company’s revenues are generated in English Pounds, its
      operating results were translated for reporting purposes into U.S. dollars
      using
      weighted average rates of 1.98 and 1.95 for the three months ended March 31,
      2008 and 2007, respectively. A strengthening of the English Pound and Euro,
      in
      relation to the U.S. dollar, will have the effect of increasing recorded
      revenues and profits, while a weakening of the English Pound and Euro will
      have
      the opposite effect. Since the Company’s operations in England generally set
      prices and bids for contracts in English Pounds, a strengthening of the English
      Pound, while increasing the value of its UK assets, might place the Company
      at a
      pricing disadvantage in bidding for work from manufacturers based overseas.
      The
      Company collects its receivables predominately in the currency of the country
      the subsidiary resides in. The Company has not engaged in foreign currency
      hedging transactions, which include forward exchange agreements. See Item 3.
      “Quantitative and Qualitative Disclosures About Market Risk.”





**Gross
      profit:** Gross
      profit decreased to 41.4% for the three months ended March 31, 2008 from 42.1%
      for the three months ended March 31, 2007. Gross profit for medical device
      products increased to 48.0% for the three months ended March 31, 2008 from
      43.4%
      for the three months ended March 31, 2007. Gross profit for laboratory and
      scientific products decreased to 33.2% for the three months ended March 31,
      2008
      from 40.5% for the three months ended March 31, 2007. Gross profit for medical
      device products was favorably impacted by increased sales of Lysonix and
      neuroaspirator products and a decrease in AutoSonix products sales. The
      neuroaspirator and ultrasonic assisted liposuction products have higher gross
      profits than the AutoSonix products. The increased margin from increased sales
      of neuroaspirator and ultrasonic assisted liposuction products was partially
      offset by decreased sales of the Sonablate 500®. The March 2008 quarter also
      benefited from a favorable mix of high and low margin product deliveries of
      diagnostic medical device products sales. The decrease in gross profit in the
      March 2008 quarter for laboratory and scientific products is due to lower
      margins at Labcaire due to higher costs related to the first ISIS units shipped,
      and an unfavorable mix of high and low margin product deliveries of fume
      products.





19


**Selling
      expenses:** Selling
      expenses decreased $10,293 to $1,993,137 for the three months ended March 31,
      2008 from $2,003,430 for the three months ended March 31, 2007. Laboratory
      and
      scientific products selling expenses increased $76,106, predominantly due to
      an
      increase in commissions and advertising expenses of approximately $33,000
      related to increased sales of the Company’s ultrasonic and fume products and
      increased selling and servicing expenses of approximately $43,000 at Labcaire
      related to increased sales. Medical device products selling expenses decreased
      $86,399, principally due to a decrease in consulting expenses of $215,000,
      exhibition expenses of $44,000, and clinical expenses of $32,000, partially
      offset by increased salary expense of $114,000 relocation expenses of $44,000
      and advertising expenses of $22,000 and increased travel expense of
      $23,000.





**General
      and administrative expenses** :
      General
      and administrative expenses decreased $144,090 from $2,614,237 in the three
      months ended March 31, 2007 to $2,470,147 in the three months ended March 31,
      2008. General and administrative expenses decreased for the three months ended
      March 31, 2008 primarily due to reversing a bad debt expense of $226,000 due
      to
      receiving a check in April 2008 from a customer to pay a past due balance
      reserved for in prior periods and lower insurance costs of $59,300. These
      decreases were partially offset by increased consulting fees of $131,191,
      related to the implementation of Section 404(a) of the Sarbanes-Oxley Act of
      2002, and increased directors’ fees of $10,418.





**Research
      and development expenses** **:**  Research
      and development expenses decreased $11,387 from $735,518 for the three months
      ended March 31, 2007 to $724,131 for the three months ended March 31, 2008.
      Laboratory and scientific products research and development expenses decreased
      approximately $6,978 due to reduced use of subcontractors and components
      relating to the Labcaire ISIS product which was introduced and launched in
      the
      fourth quarter of fiscal 2007. Research and development expenses for medical
      device products decreased $4,409. Medical device products research and
      development expenses for therapeutic medical device products increased
      approximately $1,960 primarily due to higher amortization costs of $36,933,
      partially offset by lower product development labor charges of $28,633, as
      well
      as lower salary related expenses of $5,336 and legal expenses of $2,751.
      Research and development expenses for diagnostic medical device products
      decreased approximately $6,369 due to lower consulting expenses of $32,629,
      partially offset by higher labor related expenses of $25,461.





**Other
      income:** Other
      income for the three months ended March 31, 2008 was $73,170 as compared to
      other income of $81,267 for the three months ended March 31, 2007. The decrease
      was primarily due to increased royalty expense of approximately $94,000 related
      to sales of licensed probe repair technology, sales of Acoustic Power tanks
      and
      sales of the Company’s ultrasonic assisted liposuction products. The March 2008
      period included litigation expense of $65,000 related to the settlement of
      a
      former employee lawsuit. In addition, royalty income and license fees from
      USS
      were approximately $7,000 less in the March 2008 period than the March 2007
      period. These decreases to other income were partially offset by a $95,000
      reduction in the litigation award against Sonora and a refund of value added
      taxes paid of approximately $32,000. Interest expense decreased approximately
      $29,000 principally due to decreased borrowing by Labcaire which was partially
      offset by interest related to the purchase of shares of Sonora from a
      shareholder.





**Income
      taxes:** The
      effective tax rate was 24.2% for the three months ended March 31, 2008, as
      compared to an effective tax rate of 31.6% for the three months ended March
      31,
      2007. The March 31, 2008 effective income tax rate differs from the statutory
      rate due to the impact of permanent differences related to SFAS 123R stock-based
      compensation and non-deductible entertainment expenses on taxable income.





**Critical
      Accounting Policies:**





The
      Company prepares its consolidated financial statements in accordance with
      accounting principles generally accepted in the United States of America.
      Certain of these accounting policies require the Company to make estimates
      and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses, and the related disclosure of contingent assets and liabilities,
      revenues and expenses. On an ongoing basis, the Company bases its estimates
      on
      historical data and experience, when available, and on various other assumptions
      that are believed to be reasonable under the circumstances, the combined 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.





20


Actual
      results may differ from these estimates. There have been no material changes
      in
      the Company’s critical accounting policies and estimates from those discussed in
      Item 7 of the Company’s Annual Report on Form 10-K for the year ended June 30,
      2007.





**Recent
      Accounting Standards**





In
      March
      2006, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 156, “Accounting for Servicing of
      Financial Assets” (“SFAS 156”), an amendment of SFAS 140, “Accounting for
      Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”.
      SFAS 156 requires all separately recognized servicing assets and servicing
      liabilities to be initially measured at fair value, if practicable, and permits
      an entity to subsequently measure those servicing assets and servicing
      liabilities at fair value. SFAS 156 is effective for fiscal years beginning
      after September 15, 2006. The Company adopted SFAS 156 effective July 1, 2007
      and the adoption of SFAS 156 did not have a material effect on the Company’s
      consolidated financial position or results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”). SFAS 157 provides a new single authoritative definition of fair value and
      provides enhanced guidance for measuring the fair value of assets and
      liabilities and requires additional disclosures related to the extent to which
      companies measure assets and liabilities at fair value, the information used
      to
      measure fair value, and the effect of fair value measurements on earnings.
      SFAS
      157 is effective as of the beginning of an entity’s first fiscal year beginning
      after November 15, 2007. The Company is currently evaluating the impact that
      the
      adoption of SFAS 157 may have on the Company’s consolidated financial position
      and results of operations.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”), which provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value in an attempt to reduce both complexity in accounting for financial
      instruments and the volatility in earnings caused by measuring related assets
      and liabilities differently. This Statement is effective as of the beginning
      of
      an entity’s first fiscal year beginning after November 15, 2007. The Company is
      currently evaluating the impact that the adoption of SFAS 159 may have on the
      Company’s consolidated financial position and results of
      operations.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 amends ARB No. 51 to establish accounting and reporting standards
      for
      the noncontrolling interest in a subsidiary and for the deconsolidation of
      a
      subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which
      is sometimes referred to as a minority interest, is an ownership interest in
      the
      consolidated entity that should be reported as equity in the consolidated
      financial statements. Among other requirements, this Statement requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and noncontrolling interest. It also requires
      disclosure, on the face of the consolidated statement of operations, of the
      amounts of consolidated net income (loss) attributable to the parent and to
      the
      noncontrolling interest. SFAS 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008.
      Earlier adoption is prohibited. The Company is currently evaluating the impact
      that the adoption of SFAS 160 may have on the Company’s consolidated financial
      position and 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 Securities
      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.





21





**Liquidity
      and Capital Resources**





Working
      capital at March 31, 2008 and June 30, 2007 was $9,852,096 and $11,165,090,
      respectively. For the nine months ended March 31, 2008, cash used in operations
      totaled $186,997. A major source of cash from operations was the receipt of
      $629,000 held by the Bank of America (“BOA”) to secure a standby letter of
      credit after the Company terminated its credit agreement with BOA. This amount
      was included in prepaid expenses and other current assets at June 30, 2007.
      The
      major use of cash from operations was related to increased accounts receivable
      and inventories of approximately $624,000 and $670,000, respectively, during
      the
      nine months ended March 31, 2008. The increases were attributable to the
      Company’s Labcaire subsidiary. For the nine months ended March 31, 2008, cash
      used in investing activities totaled $1,245,392, primarily consisting of the
      purchase of property, plant and equipment during the regular course of business
      and the purchase of shares of the common stock of Sonora increasing the
      Company’s ownership to 95%. For the nine months ended March 31, 2008, cash
      provided by financing activities was $138,048, primarily consisting of proceeds
      from short-term borrowings of $18,519,000, partially offset by principal
      payments on short-term borrowings and capital lease obligations of approximately
      $18,033,000 and $348,000, respectively.








**Revolving
      Credit Facilities**





On
      December 29, 2006, the Company and its subsidiaries, Sonora and Hearing
      Innovations, Inc. (“Hearing Innovations”) (the Company, Sonora and Hearing
      Innovations collectively referred to as the “Borrowers”) and Wells Fargo Bank
      entered into a (i) Credit and Security Agreement and a (ii) Credit and Security
      Agreement Export-Import Subfacility (collectively referred to as the “Credit
      Agreements”). The aggregate credit limit under the Credit Agreements is
      $8,000,000 consisting of a revolving facility in the amount of up to $8,000,000.
      Up to $1,000,000 of the revolving facility is available under the Export-Import
      Agreement as a subfacility for Export-Import working capital financing. All
      credit facilities under the Credit Agreements mature on December 29, 2009.
      Payment of amounts outstanding under the Credit Agreements may be accelerated
      upon the occurrence of an Event of Default (as defined in the Credit
      Agreements). All loans and advances under the Credit Agreements are secured
      by a
      first priority security interest in all of the Borrowers’ accounts receivable,
      letter-of-credit rights, and all other business assets. The Borrowers have
      the
      right to terminate or reduce the credit facility prior to December 29, 2009
      by
      paying a fee based on the aggregate credit limit (or reduction, as the case
      may
      be) as follows: (i) during year one of the Credit Agreements, 3%; (ii) during
      year two of the Credit Agreements, 2%; and (iii) during year three of the Credit
      Agreements, 1%.





The
      Credit Agreements, as amended, contain financial covenants requiring that the
      Borrowers (i) on a consolidated basis not have a Net Loss (as defined in the
      Credit Agreements) of more than (a) $40,000 for the fiscal quarter ended March
      31, 2008 and (b) $175,000 for the fiscal quarter ending June 30, 2008 and (ii)
      not incur or contract to incur Capital Expenditures (as defined in the Credit
      Agreements) of more than $1,000,000 in the aggregate in any fiscal year or
      more
      than $1,000,000 in any one transaction. At March 31, 2008, the Borrowers were
      in
      compliance with all financial covenants under the Credit
      Agreements.





The
      available amount under the Credit Agreements is the lesser of $8,000,000 or
      the
      amount calculated under the Borrowing Base (as defined in the Credit
      Agreements). The Borrowers must maintain a minimum outstanding amount of
      $1,250,000 under the Credit Agreements at all times and pay a fee equal to
      the
      interest rate set forth on any such shortfall. Interest on amounts borrowed
      under the Credit Agreements is payable at Wells Fargo’s prime rate of interest
      plus 1% per annum floating, payable monthly in arrears. The default rate of
      interest is 3% higher than the rate otherwise payable. A fee of 1⁄2 % per annum on
      the Unused Amount (as defined in the Credit Agreements) is payable monthly
      in
      arrears. At March 31, 2008, the balance outstanding under the Credit Agreement
      was $2,830,656 and an additional $833,496 was available under this line of
      credit.





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Labcaire
      has a debt purchase agreement with Lloyds TSB Commercial Finance. The amount
      of
      this facility bears interest at the bank’s base rate (5.5% at March 31, 2008)
      plus 2% and fluctuates based upon the outstanding United Kingdom and European
      receivables. The agreement expires September 28, 2008. The agreement covers
      all
      United Kingdom and European sales. At March 31, 2008, the balance outstanding
      under this credit facility was $1,619,949 and Labcaire was in compliance with
      all financial covenants.





**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**





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





**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,
      Misonix, Ltd. and UKHIFU.





*Foreign
      Exchange Rates:*


Approximately
      33.1% and 31.9% of the Company’s revenues in the nine-month and three-month
      period ended March 31, 2008, respectively, were received in English Pounds
      currency. To the extent that the Company’s revenues are generated in English
      Pounds, its operating results were translated for reporting purposes into U.S.
      Dollars using rates of 2.01 and 1.91 for the nine months ended March 31, 2008
      and 2007, respectively, and 1.98 and 1.95 for the three months ended March
      31,
      2008 and 2007, 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 will have the opposite effect. Since the Company’s
      operations in England generally set prices and bids for contracts in English
      Pounds, a strengthening of the English Pound, while increasing the value of
      its
      UK assets, might place the Company at a pricing disadvantage in bidding for
      work
      from manufacturers based overseas. The Company collects its receivables
      predominately in the currency of the country the subsidiary resides in. Misonix,
      Ltd. invoices certain customers in Euros and as a result there is an exchange
      rate exposure between the English Pound and the Euro. The Company has not
      engaged in foreign currency hedging transactions, which include forward exchange
      agreements.





*Interest
      Rate Risk:*


The
      Company earns interest on cash balances and pays interest on debt incurred.
      In
      light of the Company’s existing cash, results of operations, terms of its debt
      obligations and projected borrowing requirements, the Company does not believe
      a
      10% change in interest rates would have a significant impact on its consolidated
      financial position.





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**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, 2008 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 three months ended March 31, 2008 that has materially affected,
      or is
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.


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Part
      II-
      OTHER INFORMATION





Item
      1A.
      Risk Factors





Risks
      and
      uncertainties that, if they were to occur, could materially adversely affect
      our
      business or that could cause our actual results to differ materially from the
      results contemplated by the forward-looking statements contained in this Report
      and other public statements were set forth in the “Item 1A. Risk Factors”
section of our Annual Report on Form 10-K for the year ended June 30, 2007.
      There have been no material changes from the risk factors disclosed in that
      Form
      10-K.




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
      12,
      2008





MISONIX,
              INC.(Registrant)




By:
            /s/
                Michael A. McManus, Jr.Michael
                A. McManus, Jr.President
                and Chief Executive OfficerBy:
            /s/
                Richard ZarembaRichard
                ZarembaSenior
                Vice President, Chief Financial Officer,Treasurer
                and Secretary




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