This Management's Discussion and Analysis of Financial Condition and Results of Operations of Misonix and its subsidiaries, in which we refer to the Company as "Misonix", "we", "our", and "us", should be read in conjunction with the accompanying unaudited financial statements included in Item 1. "Financial Statements" of this Report and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on September 20, 2011, for the fiscal year ended June 30, 2011 ("2011 Form 10-K"). Item 7 of the 2011 Form 10-K describes the application of our critical accounting policies, for which there have been no significant changes as of March 31, 2012.

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 the 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.

Nine months ended March 31, 2012 and 2011.

Net sales: Net sales increased $1,769,885 to $10,377,480 for the nine months ended March 31, 2012 from $8,607,595 for the nine months ended March 31, 2011. The increase was primarily attributable to sales of the Company's Bone Scalpel™ products and SonaStar product revenues, partially offset by reduced revenue for the Autosonix product.

Set forth below are tables showing the Company's net sales by (i) product category and (ii) geographic region for the nine months ended March 31, 2012 and 2011:

                                      Nine months ended March 31,
                                 2012            2011           Variance
               BoneScalpel   $  3,110,474     $ 1,580,367     $  1,530,107
               SonicOne           777,885         831,425          (53,540 )
               SonaStar         4,147,578       2,664,080        1,483,498
               Other            2,341,543       3,531,723       (1,190,180 )
                             $ 10,377,480     $ 8,607,595     $  1,769,885




                                       Nine months ended March 31,
                                          2012               2011
                 United States       $     5,690,301      $ 6,040,175
                 Australia                   165,070           97,403
                 Europe                    1,919,508        1,057,683
                 Asia                      1,052,988          210,910
                 Canada and Mexico           346,316          190,236
                 South America               454,625          375,529
                 South Africa                253,250          299,312
                 Middle East                 495,422          260,832
                 Other                             -           75,515
                                     $    10,377,480      $ 8,607,595

The Company sells its products in the marketplace on the basis of full capital sales and reduced sales prices on leases which are accompanied with a commitment for adjusted disposable prices and terms.

Gross profit: Gross profit increased to 59.3% for the nine months ended March 31, 2012 from 57.5% for the nine months ended March 31, 2011, primarily due to lower sales of low margin AutoSonix products.

Selling expenses: Selling expenses increased $919,698 to $3,620,079 for the nine months ended March 31, 2012 from $2,700,381 for the nine months ended March 31, 2011. Selling expenses increased primarily due to higher commissions, higher employee-related expenses due to increased head count and higher advertising and depreciation expenses due to the rental/lease units in the field.

General and administrative expenses: General and administrative expenses decreased $60,104 from $3,334,338 in the nine months ended March 31, 2011 to $3,274,324 in the nine months ended March 31, 2012 mainly due to lower accounting expenses, lower legal and lower headcount related expenses.

Research and development expenses: Research and development expenses decreased $148,749 from $1,095,733 for the nine months ended March 31, 2011 to $964,984 in the nine months March 31, 2012 primarily due to lower product development and consulting expenses.

Other income (expense): Other income for the nine months ended March 31, 2012 was $549,421 as compared to $577,693 for the nine months ended March 31, 2011, a decrease of $28,272 due to lower royalty income from Covidien Ltd.

Income taxes: The effective tax rate was 25% for the nine months ended March 31, 2012, as compared to an effective tax rate of (3%) for the nine months ended March 31, 2011. The continuing operations effective rate of 25% is predicated on the application of the exception to the general intraperiod tax allocation guidance due to forecasted fiscal 2012 loss from continuing operations and income from discontinued operations. The tax benefit recognized in continuing operations is based on the application of the annual estimated effective tax rate while the tax in discontinued operations is recorded in the nine month period ended March 31, 2012. The Company expects the tax in discontinued operations will be principally offset with a tax benefit from continuing operations for the fiscal year ended June 30, 2012.

Three months ended March 31, 2012 and 2011.

Net sales: Net sales increased $456,975 to $3,609,746 for the three months ended March 31, 2012 from $3,152,971 for the three months ended March 31, 2011. The increase was primarily attributable to sales of the Company's BoneScalpel, Sonastar, products and service revenue, partially offset by lower Autosonix revenue.

Set forth below are tables showing the Company's net sales by (i) product category and (ii) geographic region for the three months ended March 31, 2012 and 2011:

                                      Three months ended March 31,
                                  2012            2011          Variance
                 BoneScalpel   $ 1,252,863     $   557,408     $  695,455
                 SonicOne          213,686         227,050        (13,364 )
                 SonaStar        1,520,246       1,162,165        358,081
                 Other             622,951       1,206,148       (583,197 )
                               $ 3,609,746     $ 3,152,771     $  456,975

                                      Three months ended March 31,
                                         2012                2011
                United States       $     1,940,250       $ 2,234,439
                Australia                    84,244            32,940
                Europe                      445,504           367,324
                Asia                        569,302            73,809
                Canada and Mexico            55,375            93,029
                South America               174,886            91,747
                South Africa                111,535           157,599
                Middle East                 228,650            81,950
                Other                             -            19,934
                                    $     3,609,746       $ 3,152,771

The Company sells its products in the marketplace on the basis of full capital sales and reduced sales prices on leases which are accompanied with a commitment for adjusted disposable prices and terms.

Gross profit: Gross profit increased to 58.7% for the three months ended March 31, 2012 from 55.7% for the three months ended March 31, 2011 due to lower sales of low margin Autosonix products.

Selling expenses: Selling expenses increased $273,608 to $1,245,782 for the three months ended March 31, 2012 from $972,174 for the three months ended March 31, 2011. Selling expenses increased primarily due to higher commissions, higher employee-related expenses, higher depreciation and higher travel expenses.

General and administrative expenses: General and administrative expenses increased $16,978 to $1,024,029 in the three months ended March 31, 2012 from $1,007,051 in the three months ended March 31, 2011.

Research and development expenses: Research and development expenses decreased $28,987 to $333,308 for the three months ended March 31, 2012 from $362,295 for the three months ended March 31, 2011. Research and development expenses decreased primarily due to reduced head count.

Other income (expense): Other income for the three months ended March 31, 2012 was $122,322 as compared to $231,421 for the three months ended March 31, 2011, a decrease of $109,099 due to the receipt of therapeutic research and development credit received in the third quarter of fiscal 2011.

Income taxes: The normal effective tax rate of approximately (1%) was increased to a rate of 24% for the three months ended March 31, 2012, based upon the tax expense being separated into continuing and discontinued operations for financial reporting purposes as compared to an effective tax rate of (1%) for the three months ended March 31, 2011. The continuing operations effective rate of 24% is predicated on the application of the exception to the general intraperiod tax allocation guidance due to a forecasted fiscal 2012 loss from continuing operations and income from discontinued operations. The tax benefit recognized in continuing operations is based on the application of the annual estimated effective tax rate while the tax in discontinued operations is recorded in the three month period ended March 31, 2012. The Company expects the tax in discontinued operations will be principally offset with a tax benefit from continuing operations for the fiscal year ended June 30, 2012.

Discontinued Operations



See Note 1 of the notes to consolidated financial statements included in Part 1,
Item 1 for a description of the discontinued operations. The following
summarizes the results of the discontinued operations:



                                          For the three months ended          For the nine months ended
                                                   March 31,                          March 31,
                                             2012               2011             2012             2011
Revenues                                $       28,588       $  440,383     $    1,455,791     $ 1,667,236
(Loss) from discontinued operations,
before tax                              $     (214,313 )     $ (173,950 )   $     (551,011 )   $  (439,022 )
Gain on sale of discontinued
operations                                     254,788                -          1,705,414               -
Income tax benefit/(expense)                    21,314                -           (380,437 )             -
Net income/(loss) from discontinued
operations net of tax                   $       61,789       $ (173,950 )   $      773,966     $  (439,022 )

Liquidity and Capital Resources

We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided by operations and possible future public or private debt and/or equity offerings. At times, we evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which may require the use of cash. We believe that our cash, other liquid assets and access to equity capital markets, taken together, provide adequate resources to fund ongoing operating expenditures. In the event that they do not, we may require additional funds in the future to support our working capital requirements or for other purposes and may primarily seek to raise such additional funds through the sale of public or private equity and/or debt financings. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on favorable terms when required.

Working capital at March 31, 2012 and June 30, 2011 was $10,884,000 and $10,233,000, respectively. For the nine months ended March 31, 2012, cash used in operations totaled $1,685,000 primarily due to an operating loss of $852,000 and increased inventory of $1,185,000, partially offset by lower prepaid expenses of $349,000. For the nine months ended March 31, 2012, cash used in investing activities totaled $657,000 due to the combination of the acquisition of fixed assets and the purchase of assets from Aesculap, Inc. For the nine months ended March 31, 2012, cash used in financing activities was $11,104.

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.

New Accounting Pronouncements

We are required to adopt certain new accounting pronouncements. See note 11 to our consolidated financial statements included herein.