**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, 2005





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 an accelerated filer (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
      2, 2005Common
      Stock, $.01 par value
    
    
    6,824,952














**MISONIX,
INC.**





**INDEX**





Part
      I - FINANCIAL INFORMATION
    **Page**Item
      1.
    Financial
      Statements:Consolidated
      Balance Sheets as of March 31, 2005 (Unaudited) and June 30,
      2004
    3Consolidated
      Statements of Income Nine months ended March 31, 2005 and 2004
      (Unaudited)
    4Consolidated
      Statements of Income Three months ended March 31, 2005 and 2004
      (Unaudited)
    5Consolidated
      Statements of Cash Flows Nine months ended March 31, 2005 and 2004
      (Unaudited)
    6Notes
      to Consolidated Financial Statements
    8Item
      2.
    Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
    13Item
      3.
    Quantitative
      and Qualitative Disclosures About Market Risk
    25Item
      4.
    Controls
      and Procedures
    25Part
      II - OTHER INFORMATIONItem
      4.
    Submission
      of Matters to a Vote of Security Holders
    26Item
      6.
    Exhibits
    26Signatures
    27








-2-





PART I -
FINANCIAL INFORMATION





Item 1.
Financial Statements.




**MISONIX,
INC.**


**CONSOLIDATED
BALANCE SHEETS**





**March
      31,**
    
    June
      30,**2005**
    
    ********2004**Assets**
    
    **(Unaudited)**Current
      assets:Cash
      and cash equivalents
    
    **$**
    **3,060,824**
    
    $
    4,839,866Accounts
      receivable, less allowance for doubtful accounts of $395,347 and$457,016,
      respectively
    
    
    **8,183,124**
    
    
    7,601,693Inventories
    
    
    **12,675,576**
    
    
    10,944,572Deferred
      income taxes
    
    
    **668,572**
    
    
    645,381Prepaid
      expenses and other current assets
    
    
    **1,534,624**
    
    
    1,114,546Total
      current assets
    
    
    **26,122,720**
    
    
    25,146,058Property,
      plant and equipment, net
    
    
    **4,216,125**
    
    
    3,892,920Deferred
      income taxes
    
    
    **379,136**
    
    
    412,201Goodwill
    
    
    **4,473,713**
    
    
    4,473,713Other
      assets
    
    
    **406,374**
    
    
    316,220Total
      assets
    
    **$**
    **35,598,068**
    
    $
    34,241,112**Liabilities
      and stockholders’ equity**Current
      liabilities:Revolving
      credit facilities
    
    **$**
    **1,470,615**
    
    $
    1,373,681Accounts
      payable
    
    
    **4,946,209**
    
    
    4,507,476Accrued
      expenses and other current liabilities
    
    
    **1,565,118**
    
    
    1,857,097Income
      taxes payable
    
    
    **72,166**
    
    
    107,282Current
      maturities of long-term debt and capital lease obligations
    
    
    **365,575**
    
    
    302,932Total
      current liabilities
    
    
    **8,419,683**
    
    
    8,148,468Long-term
      debt and capital lease obligations
    
    
    **1,366,585**
    
    
    1,264,480Deferred
      income
    
    
    **633,449**
    
    
    769,033Minority
      interest
    
    
    **372,284**
    
    
    315,955Stockholders’
      equity:Common
      stock, $.01 par value—shares authorized 10,000,000; 6,902,752 and6,816,253
      issued and 6,824,952 and 6,738,453 outstanding, respectively
    
    
    **69,028**
    
    
    68,163Additional
      paid-in capital
    
    
    **23,464,854**
    
    
    23,116,602Retained
      earnings
    
    
    **1,263,425**
    
    
    665,461Treasury
      stock, 77,800 shares
    
    
    **(412,424**
    **)**
    
    (412,424
    )Accumulated
      other comprehensive income
    
    
    **421,184**
    
    
    305,374Total
      stockholders’ equity
    
    
    **24,806,067**
    
    
    23,743,176Total
      liabilities and stockholders’ equity
    
    **$**
    **35,598,068**
    
    $
    34,241,112


**


*See
Accompanying Notes to Consolidated Financial Statements.*


-3-


****


**MISONIX,
INC.**


**CONSOLIDATED
STATEMENTS OF INCOME**


**(** **UNAUDITED)**








**For
      the nine months ended****March
      31****2005**
    
    2004Net
      sales
    
    **$******
    ******32,016,885**
    
    $
    28,262,256Cost
      of goods sold
    
    
    **18,610,337**
    
    
    16,164,154Gross
      profit
    
    
    **13,406,548**
    
    
    12,098,102Operating
      expenses:Selling
      expenses
    
    
    **4,407,551**
    
    
    3,282,312General
      and administrative expenses
    
    
    **6,026,911**
    
    
    5,703,640Research
      and development expenses
    
    
    **2,540,070**
    
    
    1,717,878Total
      operating expenses
    
    
    **12,974,532**
    
    
    10,703,830Income
      from operations
    
    
    **432,016**
    
    
    1,394,272Other
      income (expense):Interest
      income
    
    
    **45,194**
    
    
    39,278Interest
      expense
    
    
    **(165,457**
    **)**
    
    (119,972
    )Option/license
      fees
    
    
    **19,155**
    
    
    19,815Royalty
      income
    
    
    **669,856**
    
    
    1,036,485Foreign
      exchange loss
    
    
    **(19,744**
    **)**
    
    (16,562
    )Loss
      on impairment of Hearing Innovations, Inc.
    
    
    ******3⁄4**
    
    
    (198,800
    )Total
      other income
    
    
    **549,004**
    
    
    760,244Income
      before minority interest and income taxes
    
    
    **981,020**
    
    
    2,154,516Minority
      interest in net income of consolidatedsubsidiary
    
    
    **56,329**
    
    
    35,941Income
      before income taxes
    
    
    **924,691**
    
    
    2,118,575Income
      tax expense
    
    
    **326,727**
    
    
    947,498Net
      income
    
    **$**
    **597,964**
    
    $
    1,171,077Net
      income per share - Basic
    
    **$******
    ******.09**
    
    $
    .18Net
      income per share - Diluted
    
    **$******
    ******.09**
    
    $
    .17Weighted
      average common shares outstanding - Basic
    
    
    **6,776,137**
    
    
    6,655,865Weighted
      average common shares outstanding - Diluted
    
    
    **6,981,837**
    
    
    6,744,207





*See
Accompanying Notes to Consolidated Financial Statements* .





-4-





**MISONIX,
INC.**


**CONSOLIDATED
STATEMENTS OF INCOME**


**(UNAUDITED** **)**


****





**For
      the three months ended****March
      31,****2005**
    
    2004Net
      sales
    
    **$**
    **10,879,607**
    
    $
    10,346,249Cost
      of goods sold
    
    
    **6,330,457**
    
    
    5,892,060Gross
      profit
    
    
    **4,549,150**
    
    
    4,454,189Operating
      expenses:Selling
      expenses
    
    
    **1,476,236**
    
    
    1,203,820General
      and administrative expenses
    
    
    **2,284,786**
    
    
    1,813,594Research
      and development expenses
    
    
    **918,112**
    
    
    654,232Total
      operating expenses
    
    
    **4,679,134**
    
    
    3,671,646Income
      from operations
    
    
    **(129,984**
    **)**
    
    782,543Other
      income (expense):Interest
      income
    
    
    **15,462**
    
    
    11,432Interest
      expense
    
    
    **(52,735**
    **)**
    
    (42,969
    )Option/license
      fees
    
    
    **6,999**
    
    
    6,690Royalty
      income
    
    
    **234,716**
    
    
    197,897Foreign
      exchange loss
    
    
    **(9,331**
    **)**
    
    (7,621
    )Loss
      on impairment of Hearing Innovations, Inc.
    
    
    **3⁄4**
    
    
    (163,200
    )Total
      other income
    
    
    **195,111**
    
    
    2,229Income
      before minority interest and income taxes
    
    
    **65,127**
    
    
    784,772Minority
      interest in net income of consolidated subsidiary
    
    
    **29,083**
    
    
    7,790Income
      before income taxes
    
    
    **36,044**
    
    
    776,982Income
      tax expense
    
    
    **32,683**
    
    
    388,933Net
      income
    
    **$**
    **3,361**
    
    $
    388,049Net
      income per share - Basic
    
    **$**********
    ******3⁄4******
    
    $
    .06Net
      income per share - Diluted
    
    **$**********
    ******3⁄4******
    
    $
    .06Weighted
      average common shares outstanding - Basic
    
    
    **6,812,673**
    
    
    6,655,865Weighted
      average common shares outstanding - Diluted
    
    
    **7,037,501**
    
    
    6,774,501





*See
Accompanying Notes to Consolidated Financial Statements* .








-5-





**MISONIX,
INC.**


**CONSOLIDATED
STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**





**For
      the nine months ended****March
      31,******
    
    **2005**
    
    2004**Operating
      activities**Net
      income
    
    **$**
    **597,964**
    
    $
    1,171,077Adjustments
      to reconcile net income to net cash provided by operating
      activities:Bad
      debt (recovery) expense
    
    
    **(12,560**
    **)**
    
    (53,264
    )Deferred
      income tax benefit
    
    
    **9,874**
    
    
    290,362Depreciation
      and amortization
    
    
    **628,555**
    
    
    542,866Loss
      on disposal of equipment
    
    
    **153,552**
    
    
    45,843Foreign
      currency exchange loss
    
    
    **19,744**
    
    
    16,562Minority
      interest in net income of subsidiaries
    
    
    **56,329**
    
    
    35,941Loss
      on impairment of investments
    
    
    **3⁄4**
    
    
    198,800Changes
      in operating assets and liabilities:Accounts
      receivable
    
    
    **(374,014**
    **)**
    
    1,569,258Inventories
    
    
    **(1,561,418**
    **)**
    
    (1,619,688
    )Prepaid
      income taxes
    
    
    **3⁄4**
    
    
    25,314Prepaid
      expenses and other current assets
    
    
    **(405,585**
    **)**
    
    (194,731
    )Other
      assets
    
    
    **(115,010**
    **)**
    
    (47,198
    )Accounts
      payable and accrued expenses
    
    
    **(100,476**
    **)**
    
    444,557Deferred
      income
    
    
    **(135,585**
    **)**
    
    31,403Income
      taxes payable
    
    
    **(36,502**
    **)**
    
    320,010Net
      cash (used in) provided by operating activities
    
    
    **(1,275,132**
    **)**
    
    2,777,112**Investing
      activities**Acquisition
      of property, plant and equipment
    
    
    **(560,329**
    **)**
    
    (350,870
    )Loans
      to Hearing Innovations, Inc.
    
    
    **3⁄4**
    
    
    (198,800
    )Cash
      acquired from consolidation of variable interest entity
    
    
    **3⁄4**
    
    
    236Net
      cash used in investing activities
    
    
    **(560,329**
    **)**
    
    (549,434
    )











(Continued
on next page)





-6-





**MISONIX,
INC.**


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


**(UNAUDITED)**




**Financing
      activities**Proceeds
      from short-term borrowings
    
    
    **437,279**
    
    
    492,632Payments
      of short-term borrowings
    
    
    **(398,114**
    **)**
    
    (629,654
    )Principal
      payments on capital lease obligations
    
    
    **(255,090**
    **)**
    
    (241,806
    )Payments
      of long-term debt
    
    
    **(42,753**
    **)**
    
    (41,756
    )Proceeds
      from stock options
    
    
    **349,117**
    
    
    **3⁄4**Net
      cash provided by (used in) financing activities
    
    
    **90,439**
    
    
    (420,584
    )Effect
      of exchange rate changes on assets and liabilities
    
    
    **(34,020**
    **)**
    
    53,290Net
      (decrease) increase in cash and cash equivalents
    
    
    **(1,779,042**
    **)**
    
    1,860,384Cash
      and cash equivalents at beginning of period
    
    
    **4,839,866**
    
    
    2,279,869Cash
      and cash equivalents at end of period
    
    **$**
    **3,060,824**
    
    $
    4,140,253**Supplemental
      disclosure of cash flow information:**Cash
      paid forInterest
    
    **$**
    **165,457**
    
    $
    119,972Income
      taxes
    
    **$**
    **351,227**
    
    $
    118,917**Supplemental
      disclosure of noncash investing and financing
      activities:**Capital
      lease additions
    
    **$**
    **397,685**
    
    $
    236,199





*See
Accompanying Notes to Consolidated Financial Statements* .





-7-





**MISONIX,
INC.**


**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**


(Information
with respect to interim periods is unaudited)





1.
    Basis
      of Presentation





The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
March 31, 2005 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2005.





The
balance sheet at June 30, 2004 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, 2004.





2.
    Net
      Income Per Share





Basic
income per common share excludes any dilution. It is based upon the weighted
average number of common shares outstanding during the period. Dilutive earnings
per share reflects the potential dilution that would occur if options to
purchase common stock were exercised. The following table sets forth the
reconciliation of weighted average shares outstanding and diluted weighted
average shares outstanding:


****   ****


For
      the Nine Months
    
    For
      the Three MonthsEnded
      March 31,
    
    Ended
      March 31,**2005**
    
    2004
    
    **2005**
    
    2004Weighted
      average common sharesoutstanding
    
    
    **6,776,137**
    
    
    6,655,865
    
    
    **6,812,673**
    
    
    6,655,865Dilutive
      effect of stock options
    
    
    **205,700**
    
    
    88,342
    
    
    **224,828**
    
    
    118,636Diluted
      weighted average commonshares
      outstanding
    
    
    **6,981,837**
    
    
    6,744,207
    
    
    **7,037,501**
    
    
    6,774,501





3.
    Comprehensive
      Income





Total
comprehensive income (loss) was $713,774 and ($56,015) for the nine and three
months ended March 31, 2005, respectively, and $1,534,638 and $506,051 for the
nine and three months ended March 31, 2004, respectively. Accumulated other
comprehensive income is comprised of foreign currency translation adjustments.





-8-





**MISONIX,
INC.**


**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**


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





4.
    Stock-Based
      Compensation





The
Company accounts for stock-based employee and outside directors’ compensation
under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 123, "Accounting for Stock-Based Compensation" (“SFAS No.
123”) and SFAS No. 148, “Accounting for Stock-Based Compensation - Transition
and Disclosure”, which was released in December 2002 as an amendment of SFAS No.
123. The following table illustrates the effect on net income (loss) and net
income (loss) per share as if the Company had applied the fair value recognition
provisions of SFAS 123 to stock-based employee compensation:





For
      the Nine Months
    
    For
      the Three MonthsEnded
      March 31,
    
    Ended
      March 31,**2005**
    
    2004
    
    **2005**
    
    2004Net
      income - As reported:
    
    **$**
    **597,964**
    
    $
    1,171,077
    
    **$**
    **3,361**
    
    $
    388,049Stock
      based compensationdetermined
      under SFAS 123
    
    
    **(692,357**
    **)**
    
    (473,867
    )
    
    **(327,498**
    **)**
    
    (193,318
    )Net
      income (loss)- Pro forma:
    
    
    **($
      94,393**
    **)**
    $
    697,210
    
    
    **($
      324,137**
    **)**
    $
    194,731Net
      income (loss) per share -Basic:As
      reported
    
    **$**
    **.09**
    
    $
    .18
    
    **$******
    ******3⁄4**
    
    $
    .06Pro
      forma
    
    
    **($
      .01**
    **)**
    $
    .10
    
    
    **($
      .05**
    **)**
    $
    .03Net
      income (loss) per share -Diluted:As
      reported
    
    **$**
    **.09**
    
    $
    .17
    
    **$******
    ******3⁄4**
    
    $
    .06Pro
      forma
    
    
    **($
      .01**
    **)**
    $
    .10
    
    
    **($
      .05**
    **)**
    $
    .03





The
Financial Accounting Standards Board (“FASB”) issued FASB Statement 123R,
Share-Based ** Payment ** (“FAS
123R”) in December 2004. FAS 123R requires all companies to measure compensation
cost for all share-based payments (including employee stock options) at fair
value and recognize such costs in the statement of operations. FAS 123R is
effective for public companies for annual periods beginning after June 15, 2005.
Management is currently evaluating the impact of FAS 123R and has not determined
the impact of this statement on the consolidated financial statements.





5.
    Inventories








Inventories
are summarized as follows:





**March
      31, 2005**
    
    June
      30,
      2004Raw
      material
    
    **$**
    **5,003,942**
    
    $
    4,397,472Work-in-process
    
    
    **2,381,142**
    
    
    1,733,577Finished
      goods
    
    
    **5,290,492**
    
    
    4,813,523**$**
    **12,675,576**
    
    $
    10,944,572








-9-





**MISONIX,
INC.**


**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**


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








6.
    Accrued
      Expenses and Other Current Liabilities








The
following summarizes accrued expenses and other current
liabilities:




**March
      31, 2005**
    
    June
      30, 2004Accrued
      payroll and vacation
    
    **$**
    **309,318**
    
    $
    296,628Accrued
      VAT and sales tax
    
    
    **132,997**
    
    
    155,180Accrued
      commissions and bonuses
    
    
    **17,059**
    
    
    387,078Customer
      deposits and deferred contracts
    
    
    **868,273**
    
    
    808,414Accrued
      professional fees
    
    
    **198,261**
    
    
    176,426Other
    
    
    **39,210**
    
    
    33,371**$**
    **1,565,118**
    
    $
    1,857,097




7.
    Loans
      to Affiliate








Hearing
Innovations, Inc.


During
fiscal 2005, the Company entered into ten loan agreements whereby Hearing
Innovations, Inc. (“Hearing Innovations”) was required to pay the Company an
aggregate amount of $62,383 due December 31, 2004. The notes bear interest at 8%
per annum. The notes are secured by a lien on all of Hearing Innovations’ right,
title and interest in accounts receivable, inventory, property, plant and
equipment and processes of specified products whether now existing or arising
after the date of these agreements. The loan agreements contain warrants to
acquire an aggregate of 62,383 shares of Hearing Innovations common stock, at
the option of the Company, at a cost of $.20 per share. These
warrants, which are deemed nominal in value, expire in December
2005. The
Company recorded an allowance against the entire balance and accrued interest
due for the period ended March 31, 2005. Hearing Innovations suspended
operations in April 2004 and filed for bankruptcy in November 2004.





In
connection with the adoption of FASB Interpretation 46 “Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46”) the
Company consolidated Hearing Innovations in its March 31, 2004 balance sheet as
the entity was determined to be a Variable Interest Entity and the Company is
its primary beneficiary. **** The
Company elected to record the adoption of FIN 46 as a cumulative effect of an
accounting change. Consolidating Hearing Innovations did not have a material
impact on the Company’s consolidated results of operations or financial
condition. Since Hearing Innovations is now consolidated, loans of $62,383 for
the nine months ended March 31, 2005 are eliminated in consolidation.





On July
14, 2004, Hearing Innovations sent all shareholders and creditors a plan for
reorganization and disclosure statement. Hearing Innovations filed a petition
for relief under Chapter 11 of the U.S. Bankruptcy Code in November 2004 and a
plan was confirmed in January 2005. During February 2005, the Company funded
Hearing Innovations with $150,000 for the reorganization plan. Once the plan is
fully consummated, the Company will own 100% of the equity in Hearing
Innovations.





-10-





**MISONIX,
INC.**


**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**


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




8.
    Business
      Segments





The
Company operates in two business segments which are organized by product types:
laboratory and  scientific
products and medical device products. Laboratory and scientific products include
the Sonicator ultrasonic liquid processor, Aura ductless fume enclosure, the
Labcaire Autoscope and Guardian endoscope disinfectant systems and the Mystaire
wet scrubber. Medical device products include the Auto Sonix ultrasonic cutting
and coagulatory system, refurbishing revenues 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 Sonablate 500. 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, 2004. Certain
items are maintained at the corporate headquarters (corporate) and are not
allocated to the segments. They primarily include general and administrative
expenses. The Company does not allocate assets by segment. Summarized financial
information for each of the segments are as follows:





For the
nine months ended March 31, 2005:


****


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







**(a)**
    Amount
      represents general and administrative expenses.





For the
three months ended March 31, 2005:


****


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







(a)
    Amount
      represents general and administrative expenses.






-11-





**MISONIX,
INC.**


**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**


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





For the
nine months ended March 31, 2004:


****


**Laboratory
      and**
    
    ****(a)********Medical**Devices**
    
    **Scientific
      Products**
    
    ****Corporate
      and**Unallocated**
    
    **Total**Net
      sales
    
    $
    15,771,176
    
    $
    12,491,080
    
    $
    —
    
    $
    28,262,256Cost
      of goods sold
    
    
    8,700,327
    
    
    7,463,827
    
    
    —
    
    
    16,164,154Gross
      profit
    
    
    7,070,849
    
    
    5,027,253
    
    
    —
    
    
    12,098,102Selling
      expenses
    
    
    1,415,141
    
    
    1,867,171
    
    
    —
    
    
    3,282,312Research
      and development expenses
    
    
    1,119,595
    
    
    598,283
    
    
    —
    
    
    1,717,878Total
      operating expenses
    
    
    2,534,736
    
    
    2,465,454
    
    
    5,703,640
    
    
    10,703,830Income
      from operations
    
    $
    4,536,113
    
    $
    2,561,799
    
    $
    (5,703,640
    )
    $
    1,394,272







**(a)**
    Amount
      represents general and administrative expenses.





For the
three months ended March 31, 2004:





**Laboratory
      and**
    
    ****(a)********Medical**Devices**
    
    **Scientific
      Products**
    
    ****Corporate
      and**Unallocated**
    
    **Total**Net
      sales
    
    $
    6,040,544
    
    $
    4,305,705
    
    $
    —
    
    $
    10,346,249Cost
      of goods sold
    
    
    3,299,161
    
    
    2,592,899
    
    
    —
    
    
    5,892,060Gross
      profit
    
    
    2,741,383
    
    
    1,712,806
    
    
    —
    
    
    4,454,189Selling
      expenses
    
    
    551,549
    
    
    652,271
    
    
    —
    
    
    1,203,820Research
      and development expenses
    
    
    424,851
    
    
    229,381
    
    
    —
    
    
    654,232Total
      operating expenses
    
    
    976,400
    
    
    881,652
    
    
    1,813,594
    
    
    3,671,646Income
      from operations
    
    $
    1,764,983
    
    $
    831,154
    
    $
    (1,813,594
    )
    $
    782,543







(a)
    Amount
      represents general and administrative expenses.





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





For the
nine months ended March 31:





**2005**
    
    2004United
      States
    
    **$**
    **19,806,026**
    
    $
    18,746,761Canada
    
    
    **707,669**
    
    
    342,071Mexico
    
    
    **21,101**
    
    
    229,603United
      Kingdom
    
    
    **7,389,117**
    
    
    6,383,027Europe
    
    
    **2,419,255**
    
    
    1,133,740Asia
    
    
    **775,694**
    
    
    757,271Middle
      East
    
    
    **372,683**
    
    
    229,229Other
    
    
    **525,340**
    
    
    440,554**$**
    **32,016,885**
    
    $
    28,262,256











-12-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


**OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





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





Nine
months Ended March 31, 2005 and 2004.





**Net
sales:** Net
sales of the Company's medical device products and laboratory and scientific
products increased $3,754,629 to $32,016,885 for the nine months ended March 31,
2005 from $28,262,256 for the nine months ended March 31, 2004. This difference
in net sales is due to an increase in sales of medical device products of
$1,546,624 to $17,317,800 for the nine months ended March 31, 2005 from
$15,771,176 for the nine months ended March 31, 2004. This difference in net
sales is also due to an increase in sales of laboratory and scientific products
of $2,208,005 to $14,699,085 for the nine months ended March 31, 2005 from
$12,491,080 for the nine months ended March 31, 2004. The increase in sales of
medical device products was due to an increase in therapeutic medical device
products shipments of $282,134 and an increase in sales of diagnostic medical
device products of $1,264,490, both due to increased customer demand for several
diagnostic and therapeutic medical device products. The increase in sales of
diagnostic medical device products was not attributable to a single customer,
distributor or any other specific factors. The remaining increase in sales of
therapeutic medical device products is due to increased demand for several
products. The increase in sales of laboratory and scientific products is due to
an increase in Labcaire sales of $1,313,265, sales of wet scrubber products of
$564,126 and ductless fume enclosure products of $383,855 partially offset by a
decrease in laboratory ultrasonic products sales of $53,241. The increase in
Labcaire sales is primarily due to the strengthening of the English Pound and an
increase in demand for the Guardian (endoscopic cleaning) product. The increase
in sales of wet scrubber products is due to increased demand from semiconductor
and non-semiconductor manufacturers of process related products. The increase in
sales of ductless fume enclosure products is due to an increase in demand
relating to new clean air standards for the state of California for the
manufacturing process. The decrease in sales of laboratory ultrasonic products
is due to decreased demand for such products. Export sales from the United
States are remitted in U.S. Dollars and export sales for Labcaire are remitted
in English Pounds. During the nine months ended March 31, 2005 and 2004, the
Company had foreign net sales of $12,210,859 and $9,515,495, respectively,
representing 38% and 34% of net sales for such years, respectively. The increase
in foreign sales during the nine months ended March 31, 2005 as compared to the
nine months ended March 31, 2004 is substantially due to increased sales of
therapeutic medical device products in Europe and increased Labcaire product
sales. In March 2004, the Company signed an exclusive distribution agreement
with Focus Surgery, Inc. (“Focus Surgery”) for the sale of the Sonablate 500 for
the treatment of prostate cancer and other prostatic tumors in the geographic
areas of Western Europe, Eastern Europe and Russia. The agreement is for a term
of two years, with automatic renewals for successive one-year terms as long as
minimum quantities are purchased. Labcaire represented 70% and 75% of foreign
net sales during the nine months ended March 31, 2005 and 2004, respectively.
The remaining 30% and 25% represents net foreign sales remitted in U.S. Dollars
during the nine months ended March 31, 2005 and 2004, respectively.
Approximately 27% of the Company’s revenues for the nine months ended March 31,
2005 were received in English Pounds. 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 1.86 and
1.77 for the nine months ended March 31, 2005 and 2004, respectively. A
strengthening of the English Pound, in relation to the U.S. Dollar, will have
the effect of increasing reported revenues and profits, while a weakening of the
English Pound will have the opposite effect. Since the Company’s operations in
England generally set prices and bids for contracts in English Pounds, a
strengthening of the English Pound, while increasing the value of its UK assets,
might place the Company at a pricing disadvantage in bidding for work from
manufacturers based overseas. The Company collects its receivables in the
currency the subsidiary resides in. The Company has not engaged in foreign
currency hedging transactions, which include forward exchange
agreements.








-13-




**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





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





For the
nine months ended March 31:





**2005**
    
    2004United
      States
    
    **$**
    **19,806,026**
    
    $
    18,746,761Canada
    
    
    **707,669**
    
    
    342,071Mexico
    
    
    **21,101**
    
    
    229,603United
      Kingdom
    
    
    **7,389,117**
    
    
    6,383,027Europe
    
    
    **2,419,255**
    
    
    1,133,740Asia
    
    
    **775,694**
    
    
    757,271Middle
      East
    
    
    **372,683**
    
    
    229,229Other
    
    
    **525,340**
    
    
    440,554**$**
    **32,016,885**
    
    $
    28,262,256





Summarized
financial information for each of the segments for the nine months ended March
31, 2005 and 2004 are as follows:





For the
nine months ended March 31, 2005:





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







(a)
    Amount
      represents generalandadministrative expenses.








-14-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





For the
nine months ended March 31, 2004:


****


**Laboratory
      and**
    
    ****(a)********Medical**Device
      Products**
    
    **Scientific
      Products**
    
    ****Corporate
      and**Unallocated**
    
    **Total**Net
      sales
    
    $
    15,771,176
    
    $
    12,491,080
    
    $
    3⁄4
    
    $
    28,262,256Cost
      of goods sold
    
    
    8,700,327
    
    
    7,463,827
    
    
    3⁄4
    
    
    16,164,154Gross
      profit
    
    
    7,070,849
    
    
    5,027,253
    
    
    3⁄4
    
    
    12,098,102Selling
      expenses
    
    
    1,415,141
    
    
    1,867,171
    
    
    3⁄4
    
    
    3,282,312Research
      and development expenses
    
    
    1,119,595
    
    
    598,283
    
    
    3⁄4
    
    
    1,717,878Total
      operating expenses
    
    
    2,534,736
    
    
    2,465,454
    
    
    5,703,640
    
    
    10,703,830Income
      (loss) from operations
    
    $
    4,536,113
    
    $
    2,561,799
    
    $
    (5,703,640
    )
    $
    1,394,272







(a)
    Amount
      represents general and administrative expenses.





**Gross
profit:** Gross
profit decreased to 41.9% for the nine months ended March 31, 2005 from 42.8%
for the nine months ended March 31, 2004. Gross profit for medical device
products decreased to 44.4% of sales for the nine months ended March 31, 2005
from 44.8% of sales for the nine months ended March 31, 2004. The decrease in
gross profit for medical device products was impacted by an unfavorable mix of
sales of therapeutic medical device products and diagnostic medical device
products and lower volume. Gross profit for laboratory and scientific products
decreased to 38.9% for the nine months ended March 31, 2005 from 40.2% for the
nine months ended March 31, 2004. The decrease in gross profit for laboratory
and scientific products is predominantly due to a decrease in gross profit
margin for ductless fume enclosure products due to discounting offset by an
increase in gross profit margins for wet scrubber products due to increased
volume. The Company manufactures and sells both medical device products and
laboratory and scientific products with a wide range of product costs and gross
margin dollars as a percentage of revenues.





**Selling
expenses:** Selling
expenses increased $1,125,239 to $4,407,551 for the nine months ended March 31,
2005 from $3,282,312 for the nine months ended March 31, 2004. Medical device
products selling expenses increased $869,242, predominantly due to additional
sales personnel and marketing efforts for European distribution of the Sonablate
500 product used to treat prostate cancer and other prostatic afflictions.
Laboratory and scientific products selling expenses increased $255,997,
predominantly due to an increase in marketing expenses for Labcaire’s Guardian
endoscopic cleaning product and the strengthening of the English
Pound.





**General
and administrative expenses** : General
and administrative expenses increased $323,271 from $5,703,640 for the nine
months ended March 31, 2004 to $6,026,911 for the nine months ended March 31,
2005. The increase was primarily attributable to increased consulting expense
related to enhancing the Company’s quality control system to identify key
quality metrics which are designed to improve first pass yields and other
manufacturing efficiency measurements, increased stockholder relations expenses,
accounting fees and rent expense for a new location for Sonora Medical Systems.








-15-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





**Research
and development expenses:** Research
and development expenses increased $822,192 from $1,717,878 for the nine months
ended March 31, 2004 to $2,540,070 for the nine months ended March 31, 2005.
Medical device products research and development expenses increased $696,658
predominantly due to increased research and development efforts for a product to
treat liver and kidney  cancer
and the upgrade of our ultrasonic platform to a more modern digital format.
Laboratory and scientific products research and development expenses increased
$125,534, predominantly due to increased research and development efforts in
various product enhancements and new product designs.





**Other
income (expense):** Other
income for the nine months ended March 31, 2005 was $549,004 as compared to
$760,244 for the nine months ended March 31, 2004. The decrease was primarily
due to a decrease in royalty income. The Company received an additional royalty
payment for the quarter ended September 30, 2003 of approximately $403,000,
which was based upon a review of United States Surgical records that determined
that royalties were due for prior years. The review showed that United States
Surgical owed (and subsequently paid in the first quarter of fiscal 2004)
royalties due on a product that was not included in the original royalty
computation.





**Income
taxes:** The
effective tax rate is 35.3% for the nine months ended March 31, 2005, as
compared to an effective tax rate of 44.7% for the nine months ended March 31,
2004. The decrease in the consolidated effective tax rate was due to the
increase in both foreign sales and in anticipated research and development
credits.





-16-


****


**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





Three
Months Ended March 31, 2005 and 2004.





**Net
sales:** Net
sales of the Company's medical device products and laboratory and scientific
products increased $533,358 to $10,879,607 for the three months ended March 31,
2005 from $10,346,249 for the three months ended March 31, 2004. This difference
is due to an increase in sales of laboratory and scientific products of $907,481
to $5,213,186 for the three months ended March 31, 2005 from $4,305,705 for the
three months ended March 31, 2004. The increase in laboratory and scientific
products sales was partially offset by a 6.2% decrease in sales of medical
device products of $374,123 to $5,666,421 for the three months ended March 31,
2005 from $6,040,544 for the three months ended March 31, 2004. The decrease in
medical device products revenue was predominantly due to reduced shipments of
therapeutic medical device products from $3,665,874 in the third fiscal 2004
quarter to $2,609,936 in the third fiscal 2005 quarter. This decrease was
attributable to a reduction of shipments to Focus Surgery on production units
for Asia and Japan and a temporary reduction of shipments for the Company’s
AutoSonix products. The decrease in shipments of therapeutic medical device
products was partially offset by a $681,815 increase in diagnostic medical
device products revenues from $2,374,671 to $3,056,486. The increase in
laboratory and scientific products revenues was due to an increase in Labcaire
sales of $1,023,621 and an increase in sales of ultrasonic laboratory and
scientific products sales of $104,443. Wet scrubber products sales decreased
$183,356 in the 2005 quarter due to the timing of orders and delivery dates. In
addition, fume enclosure products sales also decreased $37,227 during the 2005
quarter. Export sales from the United States are remitted in U.S. Dollars and
export sales for Labcaire are remitted in English Pounds. During the three
months ended March 31, 2005 and 2004, the Company had foreign net sales of
$4,465,793 and $3,526,136, respectively, representing 41.0% and 34.0% of net
sales for such years, respectively. The increase in foreign sales during the
three months ended March 31, 2005 as compared to the three months ended March
31, 2004 is substantially due to increased Labcaire product sales. In March
2004, the Company signed an exclusive distribution agreement with Focus Surgery
for the sale of the Sonablate 500 for the treatment of prostate cancer and other
prostatic tumors in the geographic areas of Western Europe, Eastern Europe and
Russia. The agreement is for a term of two years with automatic renewals for
successive one-year terms as long as minimum quantities are purchased. Labcaire
represented 77% and 68% of foreign net sales during the three months ended March
31, 2005 and 2004, respectively. The remaining 23% and 32% represents net
foreign sales remitted in U.S. Dollars during the three months ended March 31,
2005 and 2004, respectively. Approximately 31% of the Company’s revenues for the
three months ended March 31, 2005 were received in English Pounds currency. To
the extent that the Company’s revenues are generated in English Pounds, its
operating results are translated for reporting purposes into U.S. Dollars using
weighted average rates of 1.89 and 1.84 for the three months ended March 31,
2005 and 2004, respectively. A strengthening of the English Pound, in relation
to the U.S. Dollar, will have the effect of increasing reported revenues and
profits, while a weakening of the English Pound will have the opposite effect.
Since the Company’s operations in England generally set prices and bids for
contracts in English Pounds, a strengthening of the English Pound, while
increasing the value of its UK assets, might place the Company at a pricing
disadvantage in bidding for work from manufacturers based overseas. The Company
collects its receivables in the currency the subsidiary resides in. The Company
has not engaged in foreign currency hedging transactions, which include forward
exchange agreements.





-17-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





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





For the
three months ended March 31:





**2005**
    
    2004United
      States
    
    **$**
    **6,413,814**
    
    $
    6,820,113Canada
    
    
    **252,266**
    
    
    193,001Mexico
    
    
    **2,000**
    
    
    63,170United
      Kingdom
    
    
    **2,966,475**
    
    
    2,163,826Europe
    
    
    **800,277**
    
    
    621,660Asia
    
    
    **109,352**
    
    
    339,507Middle
      East
    
    
    **181,538**
    
    
    78,193Other
    
    
    **153,885**
    
    
    66,779**$**
    **10,879,607**
    
    $
    10,346,249





Summarized
financial information for each of the segments for the three months ended
December 31, 2003 and 2004 are as follows:





For the
three months ended March 31, 2005:





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







(a)
    Amount
      represents general and administrative expenses**.**





For the
three months ended March 31, 2004:


****


**Laboratory
      and**
    
    ****(a)********Medical**Device
      Products**
    
    **Scientific
      Products**
    
    ****Corporate
      and**Unallocated**
    
    **Total**Net
      sales
    
    $
    6,040,544
    
    $
    4,305,705
    
    $
    3⁄4
    
    $
    10,346,249Cost
      of goods sold
    
    
    3,299,161
    
    
    2,592,899
    
    
    3⁄4
    
    
    5,892,060Gross
      profit
    
    
    2,741,383
    
    
    1,712,806
    
    
    3⁄4
    
    
    4,454,189Selling
      expenses
    
    
    551,549
    
    
    652,271
    
    
    3⁄4
    
    
    1,203,820Research
      anddevelopment
      expenses
    
    
    424,851
    
    
    229,381
    
    
    3⁄4
    
    
    654,232Total
      operating expenses
    
    
    976,400
    
    
    881,652
    
    
    1,813,594
    
    
    3,671,646Income
      (loss) from operations
    
    $
    1,764,983
    
    $
    831,154
    
    
    ($
      1,813,594
    )
    $
    782,543







(a)
    Amount
      represents general and administrative expenses.








-18-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





**Gross
profit:** Gross
profit decreased from 43.1% for the three months ended March 31, 2004 to 41.8%
for the three months ended March 31, 2005. Gross profit for medical device
products increased to 45.6% of sales for the three months ended March 31, 2005
from 45.4% of sales for the three months ended March 31, 2005. Gross profit for
laboratory and scientific products decreased to 37.7% for the three months ended
March 31, 2005 from 39.8% for the three months ended March 31, 2004. The
decrease in gross profit for laboratory and scientific products was negatively
impacted by the unfavorable order mix for sales of ductless fume enclosure
products due to discounting. The Company manufactures and sells both medical
device products and laboratory and scientific products with a wide range of
product costs and gross margin dollars as a percentage of revenues.





**Selling
expenses:** Selling
expenses increased $272,416 to $1,476,236 for the three months ended March 31,
2005 from $1,203,820 for the three months ended March 31, 2004. Medical device
products selling expenses increased $219,419, due both to additional sales and
marketing efforts for therapeutic medical device products in Europe and clinical
costs for the wound debrider product. Laboratory and scientific products selling
expenses increased $52,997, predominantly due to an increase in marketing
expenses for Labcaire’s Guardian endoscopic cleaning product and the
strengthening of the English Pound.





**General
and administrative expenses** : General
and administrative expenses increased $471,192 to $2,284,786 for the three
months ended March 31, 2005 from $1,813,594 for the three months ended March 31,
2004. The March 2004 quarter included a reduction of bad debt expense of
$198,000 and there was no similar benefit in the March 2005 quarter. The
increase was also due to increased general and administrative expenses related
to consultants, stockholder relations expenses, accounting fees related to
income tax matters and corporate insurance expenses.





**Research
and development expenses:** Research
and development expenses increased $263,880 to $918,112 for the three months
ended March 31, 2005 from $654,232 for the three months ended March 31, 2004.
Medical device products research and development expenses increased $215,647,
predominantly due to increased research and development efforts for a product to
treat liver and kidney cancer and upgrading our ultrasonic platform to a more
modern digitized format. Research and development expenses for laboratory and
scientific products increased $48,233, predominantly due to increased research
and development efforts for various product enhancements and new product
designs.





**Other
income (expense):** Other
income increased $192,882 for the three months ended March 31, 2005 to $195,111,
as compared to $2,229 for the three months ended March 31, 2004. The 2004 period
included an impairment loss of $163,200 related to loans to Hearing Innovations,
Inc. Royalty income increased by $36,819 during the March 2005 quarter, which
was partially offset by an increase in interest expense of $9,766. The increase
in interest expense is due to an increase in the average outstanding balance of
the Labcaire note payable and capital leases for the three months ended March
31, 2005 as compared to the three months ended March 31, 2004.





-19-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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




**Income
taxes:** The
effective tax rate was 91% and 50% for the three months ended March 31, 2005 and
the three months ended March 31, 2004, respectively. The increase was due to the
large percentage of minority interest income to total income.





**Critical
Accounting Policies:**





General: Financial Reporting Release No. 60, which was released by the Securities and
Exchange Commission in December 2001, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 of the Notes to Consolidated Financial Statements
included in the Company’s Annual Report on Form 10-K for the year ended June 30,
2004 includes a summary of the Company’s significant accounting policies and
methods used in the preparation of its financial statements. The Company’s
discussion and analysis of its financial condition and results of operations are
based upon the Company’s financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. On an on-going basis, management evaluates its estimates
and judgments, including those related to bad debts, inventories, property,
plant and equipment, goodwill and income taxes. Management bases its estimates
and judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The Company considers
certain accounting policies related to allowance for doubtful accounts,
inventories, property, plant and equipment, goodwill and income taxes to be
critical policies due to the estimation process involved in each.





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





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





Property,
Plant and Equipment: Property, plant and equipment are recorded at cost. Depreciation of property and
equipment is provided using the straight-line method over estimated useful lives
ranging from 1 to 5 years. Depreciation of the Labcaire building is provided
using the straight-line method over the estimated useful life of 50 years.
Leasehold improvements are amortized over the life of the lease or the useful
life of the related asset, whichever is shorter. The Company’s policy is to
periodically evaluate the appropriateness of the lives assigned to property,
plant and equipment and to make adjustments if necessary.







-20-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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




Goodwill: In July
2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 141 (“SFAS 141”) and SFAS 142 (“SFAS
142”), “Business Combinations” and “Goodwill and Other Intangible Assets”,
respectively. SFAS 141 replaced Accounting Principles Board (“APB”) Opinion 16
“Business Combinations” and requires the use of the purchase method for all
business combinations initiated after June 30, 2001. SFAS 142 requires goodwill
and intangible assets with indefinite useful lives to no longer be amortized,
but instead be tested for impairment at least annually and whenever events or
circumstances occur that indicate goodwill might be impaired. With the adoption
of SFAS 142, as of July 1, 2001, the Company reassessed the useful lives and
residual values of all acquired intangible assets to make any necessary
amortization period adjustments. Based on that assessment, only goodwill was
determined to have an indefinite useful life and no adjustments were made to the
amortization period or residual values of other intangible assets. SFAS 142
provided a six-month transitional period from the effective date of adoption for
the Company to perform an assessment of whether there is an indication that
goodwill is impaired. To the extent that an indication of impairment exists, the
Company must perform a second test to measure the amount of impairment. The
second test must be performed as soon as possible, but no later than the end of
the fiscal year. Any impairment measured as of the date of adoption will be
recognized as the cumulative effect of a change in accounting principle. The
Company performed the first test and determined that there was no indication
that the goodwill recorded was impaired and, therefore, the second test was not
required. The Company also completed its annual goodwill impairment tests for
fiscal 2004 in the fourth quarter with no impairment noted.





Income
Taxes: Income
taxes are accounted for in accordance with SFAS No. 109, “Accounting for Income
Taxes”. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases, operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.





Stock-Based
Compensation: The
Company accounts for its stock-based compensation plans in accordance with APB
Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25") and
related interpretations. Under APB 25, because the exercise price of the
Company’s employee stock options is generally set equal to the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.





-21-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





**Recent
Accounting Pronouncements**





In
December 2004, the FASB issued SFAS 123R, which is currently effective for
public companies for annual periods beginning after June 15, 2005. The Company
is required to implement the proposed standard no later than the quarter that
begins July 1, 2005. The cumulative effect of adoption, if any, applied on a
modified prospective basis, would be measured and recognized on July 1, 2005.
SFAS 123R would eliminate the ability to account for share-based compensation
transactions using APB 25, “Accounting for Stock Issued To Employees”, and would
instead require companies to recognize compensation expense, using a fair-value
based method, for costs related to share-based payments including stock options
and employee stock purchase plans. The Company is in the process of determining
the impact of this statement on its consolidated financial statements.





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. ****





**Liquidity
and Capital Resources** :





Working
capital at March 31, 2005 and June 30, 2004 was $17,703,037 and $16,997,590,
respectively. In the nine months ended March 31, 2005, cash used in operations
totaled $1,275,132. The decrease in the cash balance is predominately due to the
increase in inventory to support future shipments, prepaid insurance premiums
for policies with renewal dates in March, and payments of accounts payable and
accrued expenses. In the nine months ended March 31, 2005, cash used in
investing activities was $560,329, which primarily consisted of the purchase of
property, plant and equipment during the regular course of business. In the nine
months ended March 31, 2005, cash provided by financing activities was $90,439,
primarily consisting of increased short-term borrowings and receipts from the
exercise of employee stock options, partially offset by payments on capital
lease obligations, short-term borrowings and long-term debt.





-22-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





**Revolving
Credit Facilities**





Labcaire
has a debt purchase agreement with Lloyds TSB Commercial Finance. The amount of
this facility is approximately $1,800,000 (£950,000) and bears interest at the
bank’s base rate of 5.25% plus 1.75% and a service charge of .15% of sales
invoice value and fluctuates based upon the outstanding United Kingdom and
European receivables. The agreement was renewed effective February 28,
2005 through June 30, 2005 and covers all United Kingdom and European
sales.





The
Company secured a $5,000,000 revolving credit facility with Bank of America on
January 18, 2002, which expired on February 18, 2005. The Company is currently
negotiating a new credit facility with Bank of America, which agreement will be
retroactive to February 18, 2005.





**Hearing
Innovations, Inc.**





During
fiscal 2005, the Company entered into ten loan agreements whereby Hearing
Innovations was required to pay the Company an aggregate amount of $62,383 due
December 31, 2004. The notes bear interest at 8% per annum. The notes are
secured by a lien on all of Hearing Innovations’ right, title and interest in
accounts receivable, inventory, property, plant and equipment and processes of
specified products whether now existing or arising after the date of these
agreements. The loan agreements contain warrants to acquire an aggregate of
62,383 shares of Hearing Innovations common stock, at the option of the Company,
at a cost of $.20 per share. These
warrants, which are deemed nominal in value, expired in December
2004. The
Company recorded an allowance against the entire balance and accrued interest
due for the period ended March 31, 2005. Hearing Innovations suspended
operations in April 2004 and filed for bankruptcy in November 2004.





In
connection with the adoption of FASB Interpretation 46, “Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51” (“FIN 46”), the
Company consolidated Hearing Innovations in its March 31, 2004 balance sheet as
the entity was determined to be a variable interest entity and the Company is
its primary beneficiary. **** The
Company elected to record the adoption of FIN 46 as a cumulative effect of an
accounting change. Consolidating Hearing Innovations did not have a material
impact on the Company’s consolidated results of operations or financial
condition. Since Hearing Innovations is now consolidated, loans of $62,383 for
the nine months ended March 31, 2005 are eliminated in consolidation.








-23-





**MISONIX,
INC.**


**MANAGEMENT’S
DISCUSSION AND ANALYSIS**


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





On July
14, 2004, Hearing Innovations sent all shareholders and creditors a plan for
reorganization and disclosure statement. Hearing Innovations filed a petition
for relief under Chapter 11 of the U.S. Bankruptcy Code in November 2004 and a
plan was confirmed in January 2005. During February 2005 the Company funded
Hearing Innovations $150,000 for the reorganization plan. Once the plan is fully
consummated, the Company will own 100% of the equity in Hearing
Innovations.





**Off-Balance
Sheet Arrangements**





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





**Other**





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





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








-24-





**MISONIX,
INC.**




Item 3.
Quantitative and Qualitative Disclosures About Market Risk.





*Market
Risk:*





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





*Foreign
Exchange Rates:*





Approximately
27% of the Company’s revenues in the nine month period ended March 31, 2005 were
received in English Pounds currency. To the extent that the Company’s revenues
are generated in English Pounds, its operating results are translated for
reporting purposes into U.S. Dollars using rates of 1.86 and 1.77 for the nine
months ended March 31, 2005 and 2004, respectively. A strengthening of the
English Pound, in relation to the U.S. Dollar, will have the effect of
increasing its reported revenues and profits, while a weakening of the English
Pound will have the opposite effect. Since the Company’s operations in England
generally sets prices and bids for contracts in English Pounds, a strengthening
of the English Pound, while increasing the value of its UK assets, might place
the Company at a pricing disadvantage in bidding for work from manufacturers
based overseas. The Company collects its receivables in the currency the
subsidiary resides in. The Company has not engaged in foreign currency hedging
transactions, which include forward exchange agreements.





Item 4.
Controls and Procedures.




Our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) are designed to ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. The Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of March 31, 2005 and, based on
their evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.






There has
been no change in the Company's internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred
during the third quarter of fiscal 2005 that has materially affected, or is
reasonable likely to materially affect, the Company’s internal control over
financial reporting.





-25-





**MISONIX,
INC.**





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





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





At the
Company’s Annual Meeting of Shareholders, held on January 27, 2005, Messrs.
Howard Alliger, John W. Gildea, Michael A. McManus, Jr., T. Guy Minetti and
Thomas F. O’Neill were elected as Directors for a one-year term. The votes were
as follows: Mr. Alliger-votes for 5,785,354; votes withheld 943,014. Mr.
Gildea-votes for 6,272,749; votes withheld 455,619. Mr. McManus - votes for
5,783,704; votes withheld 944,664. Mr. Minetti - votes for 6,096,544; votes
withheld 631,824. Mr. O’Neill - votes for 6,147,077; votes withheld -
581,291.





The
shareholders ratified the selection of Ernst & Young LLP as the Company’s
auditors for its 2005 fiscal year by a vote of 6,694,879 shares for and 25,209
shares against, with 8,280 shares abstaining.





The
shareholders failed to approve the adoption of the Company’s 2004 Employee Stock
Option Plan by a vote of 1,353,111 shares for and 2,025,902 shares against, with
81,621 shares abstaining.





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








-26-





**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.





**MISONIX,
      INC.**
      (Registrant)Date: May 13, 2005
    By:
    /s/ Michael A. McManus,
      Jr.Michael A. McManus,
      Jr.
      President and Chief Executive
Officer
 By:
    /s/ Richard ZarembaRichard Zaremba
      Senior Vice President, Chief Financial
      Officer,
      Treasurer and
Secretary


-27-