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<SEC-DOCUMENT>0000950136-03-002730.txt : 20031110
<SEC-HEADER>0000950136-03-002730.hdr.sgml : 20031110
<ACCEPTANCE-DATETIME>20031110165029
ACCESSION NUMBER:		0000950136-03-002730
CONFORMED SUBMISSION TYPE:	S-2
PUBLIC DOCUMENT COUNT:		8
FILED AS OF DATE:		20031110

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MILESTONE SCIENTIFIC INC/NJ
		CENTRAL INDEX KEY:			0000855683
		STANDARD INDUSTRIAL CLASSIFICATION:	ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842]
		IRS NUMBER:				133545623
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		S-2
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-110376
		FILM NUMBER:		03988914

	BUSINESS ADDRESS:	
		STREET 1:		220 S ORANGE AVE
		STREET 2:		LIVINGSTON CORPORATE PARK
		CITY:			LIVINGSTON
		STATE:			NJ
		ZIP:			07039
		BUSINESS PHONE:		2013793171

	MAIL ADDRESS:	
		STREET 1:		44 KEAN ROAD
		STREET 2:		220 SOUTH ORANGE AVE
		CITY:			LIVINGSTON
		STATE:			NJ
		ZIP:			07039

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	U S OPPORTUNITY SEARCH INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-2
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>REGISTRATION STATEMENT
<TEXT>
<PAGE>

   As filed with the Securities and Exchange Commission on November 10, 2003
                                                           Registration No. 333-
================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                 ---------------
                                    FORM S-2
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                                 --------------
                            MILESTONE SCIENTIFIC INC.
             (Exact name of Registrant as specified in its charter)

               DELAWARE                                   13-3545623
    (State or Other Jurisdiction of                    (I.R.S. Employer
    Incorporation or Organization)                    Identification No.)

                             220 SOUTH ORANGE AVENUE
                            LIVINGSTON CORPORATE PARK
                              LIVINGSTON, NJ 07039
                                 (973) 535-2717
    (Address, including zip code, and telephone number, including area code,
                       of Registrant's executive offices)
                    -----------------------------------------
                                  LEONARD OSSER
                             CHIEF EXECUTIVE OFFICER
                            MILESTONE SCIENTIFIC INC.
                             220 SOUTH ORANGE AVENUE
                            LIVINGSTON CORPORATE PARK
                              LIVINGSTON, NJ 07039
                                 (973) 535-2717
 (Name, address, including zip code, and telephone number, including area code,
                              of agent for service)
                   -------------------------------------------

Copies to:

        STEPHEN A. ZELNICK, ESQ.             MARK A. VON BERGEN, ESQ.
   MORSE, ZELNICK, ROSE & LANDER, LLP          DAVID C. WANG, ESQ.
             405 PARK AVENUE                   HOLLAND & KNIGHT LLP
           NEW YORK, NY 10022                2300 U.S. BANCORP TOWER
             (212) 838-8040                   111 S.W. FIFTH AVENUE
        (212) 838-9190 FACSIMILE                PORTLAND, OR 97204
                                                  (503) 243-2300
                                             (503) 241-8014 FACSIMILE

                   -------------------------------------------

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [X]

    If the registrant elects to deliver its annual report to security holders,
or a complete and legible facsimile thereof, pursuant to item 11(a)(1) of this
form, check the following box. [ ]

    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=========================================================================================================
                              AMOUNT TO       PROPOSED        PROPOSED MAXIMUM
  TITLE OF EACH CLASS OF         BE           MAXIMUM        AGGREGATE OFFERING          AMOUNT OF
SECURITIES TO BE REGISTERED  REGISTERED    OFFERING PRICE       PRICE (1)(2)         REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------
<S>                           <C>              <C>               <C>                      <C>
Units, consisting of two
shares of common stock,
$.001 par value, and one
warrant to purchase one
share of common stock         1,150,000        $8.00             $9,200,000               $846.40
- ---------------------------------------------------------------------------------------------------------
Common stock included in
the units                     2,300,000                              --                     --
- ---------------------------------------------------------------------------------------------------------
Warrants to purchase common
stock included in the units   1,150,000                              --                     --
- ---------------------------------------------------------------------------------------------------------
Common stock underlying the
warrants included in the
units(3)                      1,150,000        $6.00             $6,900,000               $634.80
- ---------------------------------------------------------------------------------------------------------
Representative's
warrants(4)                    100,000
- ---------------------------------------------------------------------------------------------------------
Units issuable upon exercise
of the representative's
warrants                       100,000         $9.60              $960,000                $88.32
- ---------------------------------------------------------------------------------------------------------
Common stock included in the
units underlying the
representative's warrants(3)   200,000                               --                     --
- ---------------------------------------------------------------------------------------------------------
Warrants to purchase common
stock included in units
issuable upon exercise of
the representative's
warrants                       100,000                               --                     --
- ---------------------------------------------------------------------------------------------------------
Common stock underlying the
warrants to purchase common
stock included in units
issuable upon exercise of
the representative's
warrants (3)                   100,000         $6.00              $600,000                $55.20
- ---------------------------------------------------------------------------------------------------------
Total                                                            $17,660,000             $1,624.72
=========================================================================================================
</TABLE>

(1)  Estimated solely for purposes of calculating the amount of the registration
     fee paid pursuant to Rule 457(g) under the Securities Act.

(2)  Includes 150,000 units issuable upon exercise of underwriters'
     over-allotment option.

(3)  Pursuant to Rule 416 under the Securities Act, there are also being
     registered hereby such additional indeterminate number of shares as may
     become issuable pursuant to the antidilution provisions of the warrants.

(4)  In connection with the sale of the units, Milestone will issue to the
     representative of the underwriters warrants to purchase up to 100,000 units
     in the aggregate.

                             -----------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

================================================================================

<PAGE>

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (SUBJECT TO COMPLETION)
DATED November 10, 2003

                           [MILESTONE SCIENTIFIC LOGO]

                                      UNITS

EACH UNIT CONSISTING OF TWO SHARES OF COMMON STOCK AND ONE REDEEMABLE WARRANT TO
                       PURCHASE ONE SHARE OF COMMON STOCK

         This is a public offering on a firm commitment basis of [1,000,000]
units, each unit consisting of two shares of common stock and one warrant. Each
warrant entitles its holder to purchase one share of common stock at an exercise
price of $___[150% of the closing market price of our common stock on the
pricing date of this offering]. The warrants are exercisable at any time after
they become separately tradable until their expiration date, five years after
the effective date of this prospectus. Beginning six months from the effective
date of this offering, we may redeem some or all of the warrants at a price of
$.25 per warrant, by giving not less than 30 days' notice to the holders of the
warrants, which we may do at any time after the closing price for our stock on
the principal exchange on which the stock trades, equals or exceeds $___ [200%
of the price of our common stock on the effective date of this offering] for any
five consecutive trading days. The common stock and the warrants will trade only
as a unit for 30 days following this offering, unless the representative of the
underwriters determines that separate trading of the public warrants should
occur earlier. After that date, the common stock and the warrants will trade
separately and trading in the units will cease.

         We expect to offer units at an aggregate offering price of $8,000,000,
excluding units that may be sold on exercise of the representative's
over-allotment option. The price of the units that we will offer will be
negotiated after taking into account the price at which our stock will be
trading on the American Stock Exchange immediately prior to this offering after
giving effect to a reverse stock split, contemplated to take effect prior to
this offering, and designed to arrive at a market price for our stock of between
$4.00 and $5.00 per share.

         Our common stock is currently traded on American Stock Exchange under
the symbol "MS." On _____, 2003, the last reported sale price of our common
stock on the American Stock Exchange was $___ per share. We are applying to the
American Stock Exchange to also list the units and warrants under the symbols
"MSU" and "MSW," respectively.

         INVESTING IN THESE UNITS INVOLVES SIGNIFICANT RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE __ TO READ ABOUT RISKS YOU SHOULD CONSIDER BEFORE BUYING THESE
UNITS.

         NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

                                              PER UNIT              TOTAL
                                          -----------------    ----------------
Public offering price                     $                    $
Underwriting discount                     $                    $
Proceeds to us, before expenses           $                    $

         Paulson Investment Company, Inc. is the representative of the
underwriters of this offering. We have granted the representative a 45-day
option to purchase up to additional 150,000 units to cover over-allotments.

                        PAULSON INVESTMENT COMPANY, INC.

                 The date of this Prospectus is _________, 2003

<PAGE>

                               INSIDE FRONT COVER

CompuDent Unit with existing The Wand handpiece

[Picture of CompuDent Unit with existing The Wand handpiece)





























                          -----------------------------

        We have rights to the following trademarks: CompuDent(R), CompuMed(R),
The Wand(R), The WandPlus(R), CompuFlo(TM), SafetyWand(TM), CoolBlue Wand(TM)
and QuickBrite(TM). We have also used trademarks, tradenames and service marks
owned by others in this prospectus.

      All references in this prospectus to Milestone, "we," "us," or "our" refer
to Milestone Scientific Inc., its wholly owned subsidiary, Sagacity I, Inc. and
its 88.65% owned subsidiary, Spintech, Inc. ("Spintech"), unless the context
otherwise indicates.

        Our web address is www.milesci.com. Information contained on our website
is not part of this prospectus.


                                        2
<PAGE>

                               PROSPECTUS SUMMARY

         This summary highlights selected information from this prospectus and
may not contain all of the information that is important to you. For a more
complete understanding of this offering, we encourage you to read this entire
prospectus, including our financial statements and the notes to those
statements. Unless indicated to the contrary, all information in this
prospectus has been retroactively adjusted to reflect a 1-for-__ reverse stock
split effective on _________, 2003.

                            MILESTONE SCIENTIFIC INC.
OVERVIEW

         Milestone is a leader in advanced subcutaneous injection technology for
dental and medical applications. Its principal product, CompuDent, a computer
controlled, precision metered, local anesthetic injection system, together with
its ergonomically designed, single patient use, disposable handpiece, The Wand,
enables a dentist to consistently administer safe, effective and less painful
injections. Since January 1998, Milestone has sold more than 24,000 CompuDent
units and over 13 million single use handpieces in the United States and in over
25 other countries. CompuDent has been favorably evaluated in more than 44
clinical research reports. The system provides these specific benefits:

    o    CompuDent minimizes the pain associated with palatal and other
         injections, resulting in a more comfortable injection experience for
         the patient;
    o    the pencil grip used with CompuDent's handpieces provides enhanced
         tactile sense and more accurate control;
    o    new injections made possible with CompuDent eliminate collateral
         numbness of the tongue, lips and facial muscles;
    o    bidirectional rotation of The Wand handpiece results in greater
         precision and more rapid onset of anesthesia by eliminating needle
         deflection in mandibular block injections;
    o    the single patient use, disposable handpiece minimizes the risk of
         cross contamination;
    o    the ergonomic design of The Wand makes an injection easier and less
         stressful to administer and lowers the risk of carpal tunnel syndrome
         to the dentist or hygienist; and
    o    CompuDent can increase productivity in many dental procedures by
         eliminating the need for preliminary pain blocking injections, and
         reducing the waiting time required to see if the injection has taken
         effect.

SAFETYWAND

     In September 2003, Milestone received FDA approval for a newly developed
and patented disposable handpiece, the SafetyWand, that incorporates safety
engineered sharps protection features to aid in the prevention of inadvertent
needlesticks. Milestone believes that the SafetyWand is one of the first safety
engineered injection devices that is fully compliant with the regulations of the
Occupational Safety and Health Administration of the U.S. Department of Labor
("OSHA") promulgated under the federal Needlestick Safety and Prevention Act
("the Needlestick Safety Act"), while also meeting the clinical needs of
dentists. To date, these OSHA regulations have generally not been enforced
against dentists by OSHA and similar local and state authorities due to lack of
commercially available products that meet the special needs of dentistry.
Milestone believes that the commercial availability of the SafetyWand will
enable OSHA, and similar local and state authorities, to begin enforcement, or
stricter enforcement, of the Needlestick Safety Act against dentists. Since the
SafetyWand can only be used with the CompuDent system, enforcement by OSHA could
promote increased handpiece sales to current CompuDent users, while also
providing impetus for the purchase of these systems by new users. In

                                       3
<PAGE>

October 2003, we launched the SafetyWand at the American Dental Association
Annual Meeting in California. The SafetyWand will be commercially available
before the end of 2003.

NEW MARKETING APPROACH

         In early 2003, Milestone began building a national sales force of
highly trained independent representatives to provide sales coverage in urban
areas in 12 states. To increase its ability to retain this sales force and to
enhance its performance, Milestone:

     o   increased its base price of CompuDent to new customers to provide
         sufficient gross profit to recruit and adequately compensate its sales
         force;
     o   established a sales support staff to generate leads, set appointments,
         provide technical support and customer service and foster increased
         handpiece use; and
     o   began distributing a new product used in repairing and whitening teeth,
         the CoolBlue Wand, which also eases access to dental offices for sales
         of CompuDent.

     With a growing new sales force and the acquisition of rights to new
products to facilitate access to dental offices, Milestone intends to direct its
marketing efforts to capturing new customers, particularly from specialty
practitioners, including periodontists, pedodontists, endodontists and
cosmetic/restorative dentists.

OTHER PRODUCTS AND TECHNOLOGIES

         To broaden the use of its anesthetic injection technology, in 2001
Milestone launched CompuMed, a system similar to CompuDent, for the medical
market. To date, sales and marketing of CompuMed have been limited by financial
constraints. Milestone is currently seeking distribution partners in a variety
of discrete medical disciplines.

         Milestone has also developed CompuFlo, a prototype product embodying an
advanced pressure sensing technology for subcutaneous injection of liquid
medications and local anesthetics. CompuFlo enables health care practitioners to
monitor and precisely control pressure, rate and volume during subcutaneous
injections. Due to cash constraints, to date Milestone has conducted only
limited research as to potential medical applications for this technology and
has not yet begun development of commercial devices embodying this technology.
Recently, a major medical center proposed the initiation of clinical trials to
ascertain the efficacy, safety and suitability of CompuFlo in administering
epidural injections for adults and children. No assurances can be given that
these trials will be conducted or, if conducted, will be successful.

CORPORATE INFORMATION

         Milestone was organized in August 1989 as a Delaware corporation under
the name U.S. Opportunity Search, Inc. In 1996 we changed our name to Milestone
Scientific Inc. Our executive office is located at 220 South Orange Avenue,
Livingston Corporate Park, Livingston, New Jersey 07039. Our telephone number is
(973) 535-2717.

                                       4
<PAGE>

                                  THE OFFERING

<TABLE>
<CAPTION>
<S>                                                         <C>
Securities offered......................................   [1,000,000 - estimated] units, each unit consisting of
                                                           two shares of common stock and one redeemable warrant to
                                                           purchase one share of common stock. The common stock and
                                                           the warrants will not trade separately until the 31st day
                                                           following the effective date of this prospectus unless
                                                           the representative of the underwriters determines that
                                                           separate trading of the of the public warrants should
                                                           occur earlier.

Shares of common stock to be outstanding after this
     offering...........................................   _____________ (1)

Warrants:

     Number to be outstanding after this offering.......   [1,000,000]

     Exercise terms.....................................   The warrants are exercisable at any time after they
                                                           become separately tradable, which will be the 31st day
                                                           following the date of this prospectus, until the
                                                           expiration date.  Each warrant entitles its holder to
                                                           purchase one share of common stock at an exercise price
                                                           equal to 150% of the closing market price of the common
                                                           stock on the pricing date of this offering.

     Expiration date....................................   __________, 2008

                                                           Beginning six months from the effective date of this
     Redemption.........................................   offering, we may redeem some or all of the warrants, at a
                                                           price of $0.25 per warrant, on 30 days notice to the
                                                           holders.  However, we may only redeem the warrants if the
                                                           closing price for our stock, as reported on the principal
                                                           exchange on which our stock trades, for any five
                                                           consecutive trading days has equaled or exceeded 200% of
                                                           the closing price of the common stock on the effective
                                                           date of this offering.

AMEX symbols:
      Existing                                             Common Stock..................MS
      Proposed                                             Units.........................MSU
                                                           Warrants......................MSW
</TABLE>

- --------------
(1) Including an estimated 490,250 shares constituting part of the units to be
    issued at the price of the units offered hereby to satisfy $1,960,996 of
    indebtedness, accrued interest and accrued compensation on the later of the
    date of this Prospectus or January 2, 2004.

                                       5
<PAGE>


<TABLE>
<CAPTION>
<S>                                                        <C>
Risk factors............................................   Please refer to "Risk Factors" for a description of the
                                                           risk factors you should consider.

         Unless otherwise stated, the information contained in this prospectus
assumes no exercise of:

    o    the warrants;

    o    the over-allotment option to purchase up to 150,000 units;

    o    warrants to purchase 100,000 units granted to the representative in
         connection with this offering;

    o    outstanding compensatory options for 1,338,844 shares of common stock,
         exercisable at a weighted average price of $1.49 per share and
         outstanding investment options for 1,949,970 shares of common stock
         exercisable at a weighted average exercise price of $1.15 per share; or

    o    conversion rights relating to convertible notes in the aggregate
         principal amount of $100,000 convertible into 224,224 shares of common
         stock and into shares of series A convertible preferred stock
         convertible into 13,142 shares of common stock.

                                                       SUMMARY FINANCIAL INFORMATION

<CAPTION>
                                                      YEARS ENDED DECEMBER 31,          SIX MONTHS ENDED JUNE 30,
                                                   -------------------------------   ---------------------------------
                                                       2002             2001              2003              2002
                                                   -------------    --------------   ---------------    --------------
                                                                                               (UNAUDITED)
                                                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                   -------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
<S>                                                  <C>                <C>            <C>                <C>
Revenues...................................          $ 4,074            $ 4,094        $  2,135           $ 2,182
Gross profit...............................          $ 2,093            $ 2,120        $  1,086           $ 1,200
Operating expenses.........................          $ 3,763            $ 5,321        $  1,749           $ 1,880
Net loss...................................          $(2,440)           $(3,991)       $ (1,159)          $(1,022)
Net loss per share-basic and diluted(1)....         $  (0.20)           $ (0.36)       $   (.09)          $  (.08)

Weighted average number of shares
   outstanding-basic and diluted(1)........        12,469,673       11,142,590       12,633,370         12,171,450
</TABLE>

(1) The effect of options, warrants and convertible debt instruments has been
excluded, as their effect is anti-dilutive.

         The table below sets forth a summary of our balance sheet data as of
December 31, 2002 and as of June 30, 2003 on an actual basis, pro forma and pro
forma as adjusted for this offering.

         Pro forma balance sheet data takes into account the following events
occurring after June 30, 2003:

    o    The issuance of an aggregate of 4,939,256 shares of common stock and
         25,365 preferred shares in repayment of $5,014,014 of outstanding debt,
         including principal and interest amounts to various noteholders, out of
         which 400,454 common shares were issued to Leonard Osser, our Chairman
         and Chief Executive Officer;
    o    The issuance of additional 282,982 shares of common stock to the
         various noteholders mentioned above, as consideration for previously
         extending the maturity date on the notes;
    o    The issuance of 306,585 shares of common stock to vendors in payment of
         outstanding trade payables in the amount of approximately $503,000;
    o    The issuance of 7,000 shares of common stock upon the exercise of
         options for an aggregate exercise price of $7,750;
    o    The issuance of 101,829 shares of common stock for a consideration of
         $189,000 under an equity put agreement;
    o    The expected issuance, on the later of January 2, 2004 or the date this
         offering becomes effective, of an estimated 203,125 units, in payment
         of $1,624,996 of debt, including interest, to Leonard Osser, our
         Chairman and Chief Executive Officer and to a major

                                       6
<PAGE>

         stockholder; and
    o    The expected issuance, on the later of January 2, 2004 or the date this
         offering becomes effective, of an estimated 42,000 units, in payment of
         $336,000 of accrued compensation to Leonard Osser, our Chairman and
         Chief Executive Officer.

         Pro forma as adjusted for this offering takes into account the pro
forma data as well as the receipt of $6,500,000 of estimated net proceeds from
this offering, the deduction of underwriting discounts and commissions and other
estimated offering expenses to be paid by us.

<TABLE>
<CAPTION>
                                           DECEMBER 31,
                                               2002                                JUNE 30, 2003
                                          (IN THOUSANDS)                     (UNAUDITED, IN THOUSANDS)
                                          ----------------    --------------------------------------------------------
                                                                                                       PRO FORMA, AS
BALANCE SHEET DATA:                                                ACTUAL             PRO FORMA           ADJUSTED
                                                              ------------------    ---------------    ---------------
<S>                                              <C>               <C>                <C>                <C>
Current assets......................             $893              $1,111             $1,308             $7,808
Working capital (deficiency)........           (5,214)             (6,143)               165              6,665
Total assets........................            1,241               1,359              1,548              8,048
Total liabilities...................            7,347               8,609              1,329              1,329
Stockholders' equity (deficiency)...           (6,106)             (7,250)               227              6,727
</TABLE>

                                       7
<PAGE>

                                  RISK FACTORS

         This offering involves a high degree of risk. You should carefully
consider the risks described below and the other information in this prospectus,
including our financial statements and the notes to those statements, before you
purchase any units.

                          RISKS RELATED TO OUR BUSINESS

         WE HAVE NO HISTORY OF PROFITABLE OPERATIONS. CONTINUING LOSSES COULD
EXHAUST OUR CAPITAL RESOURCES AND FORCE US TO DISCONTINUE OPERATIONS. Although
our operations commenced in November 1995, until 1998 we had limited revenues.
For the years ended December 31, 1998, 1999, 2000, 2001 and 2002, our revenues
were approximately $8.8 million, $2.9 million, $5.7 million, $4.1 million and
$4.1 million, respectively. In addition, we have had losses for each year since
the commencement of operations, including net losses of approximately $2.5
million for 2002 and $1.1 million for the six-months ended June 30, 2003. At
June 30, 2003, we had an accumulated deficit of approximately $42.9 million.
Unless we can significantly increase sales of our CompuDent units, handpieces or
other injection devices, we expect to incur losses for the foreseeable future.

         WE HAVE A SIGNIFICANT WORKING CAPITAL DEFICIT. AS A RESULT, WE HAVE NOT
BEEN ABLE TO SUFFICIENTLY EXPAND OUR SALES AND MARKETING FORCE AND INCREASE OUR
REVENUES. Our working capital deficit at June 30, 2003, after adjustment to
reflect the subsequent repayment of approximately $5 million of debt and
$503,000 of trade payables through the issuance of common stock in October 2003,
was approximately $626,000. This has impaired our ability to expand marketing
and sales promotion and develop an adequate sales force, which in turn, had a
negative impact on revenue growth.

         WE HAVE LIMITED FINANCIAL RESOURCES AND WE MAY NEED ADDITIONAL CAPITAL
IN THE FUTURE. Our capital requirements have been and may continue to be
significant. In the future, we may need to borrow funds or sell equity
securities, or else curtail or reduce our activities. We have no current
arrangements for future additional financing, except as disclosed herein. We
cannot assure you that any sources of additional financing will be available on
acceptable terms, or at all. To the extent that any future financing involves
the sale of our equity securities, the ownership interest of our stockholders
could be substantially diluted.

         WE CANNOT BECOME SUCCESSFUL UNLESS WE GAIN GREATER MARKET ACCEPTANCE
FOR OUR PRODUCTS AND TECHNOLOGY. As with any new technology, there is
substantial risk that the marketplace will not accept the potential benefits of
this technology or be unwilling to pay for any cost differential with the
existing technologies. Market acceptance of CompuDent, the SafetyWand, CompuMed
and CompuFlo depends, in large part, upon our ability to educate potential
customers of their distinctive characteristics and benefits and will require
substantial marketing efforts and expense. More than 24,000 units of the
CompuDent or its predecessor have been sold worldwide since 1998. Sales of
disposable handpieces in 2002 reflect a moderate increase in usage of our dental
and medical systems. We cannot assure you that our current or proposed products
will be accepted by practitioners or that any of the current or proposed
products will be able to compete effectively against current and alternative
products.

         OUR LIMITED DISTRIBUTION CHANNELS MUST BE EXPANDED FOR US TO BECOME
SUCCESSFUL. Our future revenues depend on our ability to market and distribute
our anesthetic injection technology successfully. In the United States, we rely
on a limited number of independent

                                       8
<PAGE>

representatives and in-house sales people. Abroad, we lack distributors in many
markets. To be successful we will need to retain and hire additional sales
personnel, provide for their proper training and ensure adequate customer
support. We cannot assure you that we will be able to hire and retain an
adequate sales force or engage suitable distributors, or that our sales force or
distributors will be able to successfully market and sell our products.

         WE DEPEND ON TWO PRINCIPAL MANUFACTURERS. IF WE CANNOT MAINTAIN OUR
EXISTING RELATIONSHIPS OR DEVELOP NEW ONES, WE MAY HAVE TO CEASE OUR OPERATIONS.
We have informal arrangements with certain manufacturers with respect to the
manufacture of our products. Termination of the manufacturing relationship with
any of these manufacturers could significantly and adversely affect our ability
to produce and sell our products. Though we have established an alternate source
of supply for our handpieces in China and other alternate sources of supply
exist, we would need to recover our existing tools or have new tools produced to
establish relationships with new suppliers. Establishing new manufacturing
relationships could involve significant expense and delay. Any curtailment or
interruptions of the supply, whether or not as a result or termination of the
relationship, would adversely affect us.

         WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT ARE NOT FULLY
COVERED BY OUR INSURANCE AND THAT COULD PUT US UNDER A TREMENDOUS FINANCIAL
STRAIN. We could be subject to claims for personal injury from the alleged
malfunction or misuse of our dental and medical products. While we carry
liability insurance that we believe is adequate, we cannot assure you that the
insurance coverage will be sufficient to pay such claims should they be
successful. A partially or completely uninsured claim, if successful and of
significant magnitude, could have a material adverse effect on us.

         WE RELY ON THE CONTINUING SERVICES OF OUR CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, PRESIDENT AND DIRECTOR OF CLINICAL AFFAIRS. We depend on the personal
efforts and abilities of our Chairman and Chief Executive Officer, our President
and our Director of Clinical Affairs. We maintain a key man life insurance
policy in the amount of $1,000,000 on the life of our Chairman and Chief
Executive Officer. However, the loss of his services or the services of each of
our President or Director of Clinical Affairs, on whom we maintain no insurance,
could have a materially adverse effect on our business.

                         RISKS RELATED TO THIS OFFERING

         IF WE ARE UNABLE TO SATISFY THE AMERICAN STOCK EXCHANGE MAINTENANCE
REQUIREMENTS, OUR COMMON STOCK MAY BE DELISTED FROM THE AMERICAN STOCK EXCHANGE
AND, AS A RESULT, OUR LIQUIDITY AND THE VALUE OF OUR COMMON STOCK MAY BE
IMPAIRED. Shares of our common stock are currently listed on the American Stock
Exchange. Continued listing on the American Stock Exchange requires that we
maintain at least $6,000,000 in stockholders' equity since we have sustained
losses in our five most recent fiscal years. At December 31, 2002, Milestone had
a total stockholders' deficit of approximately $6.1 million. On May 2, 2002, we
received a letter from the American Stock Exchange advising us that we had
fallen below the stockholders' equity criterion and requesting that we submit a
recovery plan detailing any actions taken, or planned to be taken within the
next 18 months, to bring us into compliance. On June 10, 2002, we submitted a
detailed recovery plan to the American Stock Exchange, which, as supplemented on
August 14, 2002, showed how we expect to achieve stockholders' equity of
$6,000,000 by December 31, 2003. On August 23, 2002, the American Stock Exchange
advised us that they had determined that the plan makes a reasonable
demonstration of Milestone's

                                       9
<PAGE>

ability to regain compliance with the continued listing standards by the
conclusion of the plan period at the end of 2003. The continued listing of our
securities on the American Stock Exchange during this period is subject to
periodic reviews by the Exchange. Failure to show progress consistent with the
plan or to regain compliance by the end of the plan period could still result in
the Milestone being delisted. If our securities are delisted from the American
Stock Exchange, trading, if any, in the common stock and warrants would be
conducted in the over the counter market in the so-called "pink sheets" or on
the NASD's "OTC Bulletin Board." Consequently, the liquidity of our securities
could be impaired, not only in the number of securities that could be bought and
sold, but also through delays in the timing of transactions, reduction in
security analysts and new media coverage of Milestone, and lower prices for our
securities than might otherwise be obtained.

         IF OUR SHARES OF COMMON STOCK ARE REMOVED OR DELISTED FROM THE AMERICAN
STOCK EXCHANGE, THE ABILITY OF STOCKHOLDERS TO SELL OUR COMMON STOCK AND
WARRANTS IN THE SECONDARY MARKET COULD BE RESTRICTED. The Securities and
Exchange Commission has adopted regulations which generally define "penny stock"
to be an equity security that has a market price, as defined, of less than $5.00
per share or an exercise price of less than $5.00 per share, subject to certain
exceptions, including an exception of an equity security that is quoted on the
American Stock Exchange. If our shares of common stock are removed or delisted
from the American Stock Exchange, they may become subject to rules that impose
additional sales practice requirements on broker-dealers who sell these
securities. For transactions covered by these rules, the broker-dealer must make
a special suitability determination for the purchaser of such securities and
have received the purchaser's written consent to the transactions prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prepared by the Securities and Exchange Commission relating
to the penny stock market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered underwriter, and current
quotations for the securities, and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, among other requirements, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks. As
such, the "penny stock" rules, if our securities are delisted from the American
Stock Exchange, may restrict the ability to sell our common stock and warrants
in the secondary market.

         THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE AND MAY CONTINUE
TO FLUCTUATE SIGNIFICANTLY BECAUSE OF VARIOUS FACTORS, SOME OF WHICH ARE BEYOND
OUR CONTROL. Our stock price has been extremely volatile, fluctuating over the
last three years between closing prices of $.14 and $2.59. These fluctuations
have been unrelated to or disproportionately affected by our operating
performance. The market price of our common shares could continue to fluctuate
significantly after this offering in response to a variety of factors, some of
which may be beyond our control.

         THE EXISTENCE OF OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE
SECURITIES MAY PRECLUDE US FROM OBTAINING ADDITIONAL EQUITY FINANCING. We
currently have outstanding options, warrants,convertible debentures and series A
convertible preferred stock to purchase 3,301,956 shares of our common stock at
prices ranging from $.29 to $6.00 per share with a weighted average exercise or
conversion price of $1.29. Holders of these warrants and options are given the
opportunity to profit from a rise in the market price of our common stock and
are

                                       10
<PAGE>

likely to exercise their securities at a time when we would be able to
obtain additional equity capital on more favorable terms. Thus, the terms upon
which we will be able to obtain additional equity capital may be adversely
affected, since the holders of outstanding options and warrants can be expected
to exercise them at a time when we would, in all likelihood, be able to obtain
any needed capital on terms more favorable to us than the exercise terms
provided by such outstanding securities. We have granted registration rights
with respect to shares of our common stock covered by the warrants. The market
price of our common shares has been volatile and may continue to fluctuate
significantly because of various factors, some of which are beyond our control.

         OUR STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION AND THE PRICE OF
OUR COMMON STOCK MAY BE ADVERSELY AFFECTED BY THE ISSUANCE OF SHARES OF OUR
COMMON STOCK UNDER AN EQUITY PUT AGREEMENT. After taking into account 101,829
shares sold in October and November 2003, under an equity put agreement
expiring on May 10, 2004, we may sell up to an additional 1,998,171 shares of
our common stock under that agreement. The price of our common stock may
decrease as a result of the actual or potential sale of these shares into the
market. We may sell shares of our common stock under the equity put agreement at
a price that is below the market price of our stock at the time of the sale.
These sales will dilute the interests of our existing stockholders. In that
event, not only would you lose a portion of your investment, but we would
probably find it more difficult to obtain additional financing. The more shares
that are issued under the equity put, the more our shares will be diluted and
the more our stock price may decrease. This may encourage short sales, which
could place further downward pressure on the price of our common stock.

         WE ARE CONTROLLED BY A LIMITED NUMBER OF SHAREHOLDERS. Immediately
after this offering (including an estimated 490,250 shares forming part of units
to be issued to them in satisfaction of debt and accrued compensation), our
principal shareholders, Leonard Osser and K. Tucker Andersen, will own 40.6% of
the issued and outstanding shares of our common stock (40% if the over-allotment
option is exercised in full). As a result, they will have the ability to
exercise substantial control over our affairs and corporate actions requiring
shareholder approval, including electing directors, selling all or substantially
all of our assets, merging with another entity or amending our certificate of
incorporation. This de facto control could delay, deter or prevent a change in
control and could adversely affect the price that investors might be willing to
pay in the future for our securities.

         IF WE DO NOT MAINTAIN AN EFFECTIVE REGISTRATION STATEMENT COVERING THE
WARRANTS OR COMPLY WITH APPLICABLE STATE SECURITIES LAWS, YOU MAY NOT BE ABLE TO
EXERCISE THEM. In order for you to be able to exercise the warrants, they must
be covered by an effective registration statement and qualify for an exemption
under the securities laws of the state in which you live. We cannot assure you
that we will continue to maintain a current registration statement relating to
the offer and sale of the warrants and the common stock underlying these
warrants or that an exemption from registration or qualification will be
available throughout their term. This may have an adverse effect on the demand
for the warrants and the prices that can be obtained from reselling them.

         THE WARRANTS MAY BE REDEEMED ON SHORT NOTICE. THIS MAY HAVE AN ADVERSE
IMPACT ON THEIR PRICE. Beginning six months from the effective date of the
offering, we may redeem the warrants for $0.25 per warrant on 30 days notice at
any time after the closing price for our stock, as reported on its principal
trading market, has, for any five consecutive trading days, equaled or

                                       11
<PAGE>

exceeded 200% of the closing price of the common stock on the effective date of
this offering. If we give notice of redemption, you will be forced to sell or
exercise your warrants or accept the redemption price. The notice of redemption
could come at a time when, under your personal circumstances, it is not
advisable or possible for you to exercise the warrants or a current prospectus
or exemption does not exist.

         FUTURE SALES OR THE POTENTIAL FOR SALE OF A SUBSTANTIAL NUMBER OF
SHARES OF OUR COMMON STOCK COULD CAUSE THE TRADING PRICE OF OUR COMMON STOCK AND
WARRANTS TO DECLINE AND COULD IMPAIR OUR ABILITY TO RAISE CAPITAL THROUGH
SUBSEQUENT EQUITY OFFERINGS. Sales of a substantial number of shares of our
common stock in the public markets, or the perception that these sales may
occur, could cause the market price of our stock to decline and could materially
impair our ability to raise capital through the sale of additional equity
securities. Once this offering is completed, in addition to the 20,716,982
shares of common stock actually issued and outstanding, there will be another
7,601,007 shares of common stock reserved for future issuance as follows:

    o    up to [1,000,000] shares underlying the warrants;

    o    up to [450,000] shares underlying the over-allotment option, including
         the shares underlying the warrants included in that option;

    o    up to [300,000] shares underlying the representative's warrants,
         including the shares underlying the warrants included in the
         representative's warrants;

    o    up to 993,000 shares underlying stock options previously granted, or to
         be granted, under our Stock Option Plan;

    o    up to 2,622,470 shares underlying other stock options and warrants that
         were granted and remained outstanding as of October 31, 2003;

    o    up to 224,224 shares underlying 6% convertible notes in the aggregate
         principal amount of $100,000 and up to 13,142 shares of common stock
         underlying our series A convertible preferred stock; and

    o    up to 1,998,171 shares reserved for issuance, at our option, under an
         equity put agreement.

         The common stock included in the units as well as the common stock
underlying the warrants will be freely tradable without restriction. Before this
offering, we had 18,226,732 shares of common stock outstanding, of which
_________ are freely tradable. The remaining _________ shares are either held by
"affiliates", as defined by the rules and regulations promulgated under the
Securities Act of 1933, or are "restricted securities" as defined in Rule 144
promulgated under the Securities Act of 1933. Of this amount, ________
restricted shares not held by affiliates and __________restricted or non-
restricted shares held by "affiliates,"can only be sold in compliance with the
timing and volume limitations of Rule 144 promulgated under the Securities Act
of 1933. The other __________ restricted shares may be sold without limitation
under Rule 144(k). We have granted demand registration rights to holders of
466,841 shares of common stock including shares underlying warrants and
piggyback registration rights to holders of convertible notes covering an
aggregate of 224,224 shares of common stock. The holders of these shares can
require us to register the shares for resale. While we, our executive officers
and directors and

                                       12
<PAGE>

stockholders holding 5% or more of our outstanding shares have agreed not to
sell any shares of stock for a period of 90 days after this offering without the
consent of the representative of the underwriters, the representative may waive
that restriction at its sole discretion.

         MANAGEMENT HAS BROAD DISCRETION OVER THE USE OF PROCEEDS FROM THIS
OFFERING. WE MAY USE THE PROCEEDS OF THIS OFFERING IN WAYS THAT DO NOT IMPROVE
OUR OPERATING RESULTS OR THE MARKET VALUE OF OUR SECURITIES. While we have
general expectations as to the allocation of the net proceeds of this offering,
that allocation may change in response to a variety of unanticipated events,
such as differences between our expected and actual revenues from operations or
availability of commercial financing opportunities, unexpected expenses or
expense overruns or unanticipated opportunities requiring cash expenditures. We
have significant flexibility as to the timing and the use of the proceeds. You
will rely on our judgment with only limited information about our specific
intentions regarding the use of proceeds. We may spend most of the net proceeds
of this offering in ways with which you may not agree. If we fail to apply these
funds effectively, our business, results of operations and financial condition
may be materially and adversely affected.


                           FORWARD-LOOKING STATEMENTS

         Some of the statements made in this prospectus discuss future events
and developments, including our future business strategy and our ability to
generate revenue, income and cash flow and possible stricter enforcement of the
Needlestick Safety Act. In some cases, you can identify forward-looking
statements by words or phrases such as "may," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential,"
"continue," "our future success depends," "seek to continue," or the negative of
these words or phrases, or comparable words or phrases. These statements are
only predictions that are based, in part, on assumptions involving judgments
about future economic, competitive and market conditions, regulatory enforcement
and future business decisions, all of which are difficult or impossible to
predict accurately and many of which are beyond our control. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various facts, including the risks outlined in this "Risk
Factors" section. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date on which they are made. We do not undertake to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results.

                                       13
<PAGE>

                               RECENT DEVELOPMENTS

         Since July 1, 2003, we have entered into the following financing
transactions:

         On September 25, 2003 we received $50,000 in consideration for a 6%
Secured Convertible Note in the same amount and three-year warrants to purchase
15,000 shares of our common stock at an exercise price of $2.00. The entire
principal amount of the note and all accrued interest is due and payable on
March 24, 2005, or at an earlier date, at our option.

         On October 2, 2003 we issued 4,939,256 shares of common stock in
satisfaction of 6% / 12% Secured and Senior Secured Notes and other secured
notes in the aggregate amount of approximately $5 million. We also committed to
issue 25,365 shares of 8% convertible preferred stock in satisfaction of $25,365
of principal and accrued interest. The preferred stock will be convertible into
common stock at the average closing price of our common stock in October 2003.
Subsequently, we issued 282,982 additional shares of common stock to these
former noteholders as consideration for their previous consent to extend the
maturity date of these notes.

         On October 9, 2003 we reached an agreement to satisfy $1,176,640 of
debt and accrued interest due to a major investor, K. Tucker Andersen and
$448,356 of debt and accrued interest and $336,000 of deferred compensation due
to our Chief Executive Officer and Chairman, Leonard Osser, through the issuance
of units, similar to the units offered in this offering, on the later of January
2, 2004 or the effective date of this offering. The units will be issued at the
same price as offered in this offering.

         On October 21, 2003 we received $7,750 upon the exercise of options for
7,000 shares of common stock.

         On October 31, 2003 we issued 306,585 shares of our common stock to
principal vendors, in satisfaction of trade payables in the aggregate amount of
approximately $503,000.

         During October and November 2003 we issued an aggregate of 101,829
shares of common stock in consideration for a total of $189,000, after brokerage
commissions and closing costs, under an equity put agreement.


                                 USE OF PROCEEDS

         The principal purpose of this offering is to raise a sufficient amount
of capital that will allow us to:

    o    expand significantly our independent sales force and our sales support
         staff and provide for their proper training;
    o    implement marketing and advertising campaigns directed at the dental
         market;
    o    support the launch of the SafetyWand, including manufacturing and
         marketing costs;
    o    expand our international sales including the hiring of three sales
         managers for Asia, Europe and South America;
    o    develop and commercialize our Periodontal Ligament or PDL Injector
         project;
    o    to reestablish our dental and hygiene school program;

                                       14
<PAGE>

    o    respond quickly to new competitive and business developments in the
         industries and markets in which we operate and compete;
    o    qualify for continued listing on the American Stock Exchange;
    o    repay a portion of the outstanding debt to two of our major
         shareholders; and
    o    pay a portion of the accrued compensation to our Chief Executive
         Officer

         Based on gross proceeds of $8 million, and after deducting $800,000
reflecting the estimated underwriting discount, a non-accountable expense
allowance of $240,000, and other estimated offering expenses of $460,000 payable
by us, the net proceeds to us from this offering will be approximately $6.5
million, or $7.7 million if the representative exercises the over-allotment
option in full.

         The table below lists the specific uses of proceeds:

<TABLE>
<CAPTION>
                                                           APPROXIMATE                  APPROXIMATE
                   USE OF CAPITAL                            AMOUNT                     PERCENTAGE
      ------------------------------------------    --------------------------    ------------------------
<S>                                                        <C>                             <C>
      Sales and marketing                                  $2,770,000                      42.6%
      Product development..........                        $1,095,000                      16.8%
      Non-sales personnel expense                          $  235,000                       3.6%
      Repayment of debt and accrued
      compensation                                         $  525,000                       8.0%
      Miscellaneous working capital                        $1,875,000                      29.0%
                                                    --------------------------    ------------------------
               Total.........................              $6,500,000                     100.0%
                                                    ==========================    ========================
</TABLE>

         Sales and marketing expenses. This amount consists of the costs we
expect to incur to expand our independent and sales supportstaff, in the U.S.
and internationally. It includes expenses relating to hiring and training
additional sales and marketing personnel, consultant fees, and expenses relating
to attending trade shows and conventions and producing marketing materials.

         Product development. This amount is required for further development of
our PDL Injector Device and to develop additional clinical applications of the
CompuFlo technology including epidural injections.

         Non-sales personnel expense. Prior to this offering, we have been
operating with cash conservation as a dominant business objective. We expect
that additional personnel will be required, primarily in financial,
administrative and customer service areas, both to provide adequate support to
operations on an ongoing basis and to support growth.

         Repayment of debt and accrued compensation. This amount includes
repayment in cash of $301,854 out of $1,702,850 outstanding debt to two of our
major shareholders, Leonard Osser, our Chairman and Chief Executive Officer, and
K. Tucker Andersen, the beneficial owner of 21.67% of our outstanding shares of
common stock, and the payment of $224,000 out of $560,000 of accrued
compensation to our Chairman and Chief Executive Officer. The balance of the
debt and accrued compensation will be paid by issuance of units on the effective
date of this offering, valued at the same price as is offered to the public. The
cash amounts represent estimated tax amounts due by these individuals for
accrued interest on the debt and on payment of the accrued compensation.

                                       15
<PAGE>

         Miscellaneous working capital. These costs include general and
administrative costs, including the cost of increasing our inventory, acquiring
and enhancing our operating, support and management systems and capital
expenditures for computers and other equipment. We may use the portion of the
amount currently allocated to working capital and general corporate purposes to
reduce our current liabilities. We may also use a portion of the net proceeds to
license or acquire new products, technologies or intellectual property or to
acquire or invest in businesses complementary to ours. If the representative
exercises the over-allotment option, the additional net proceeds, approximately
$1.2 million, will be added to working capital.

         The above information represents our best estimate of our capital
requirements based upon the current status of our business. We will retain broad
discretion in the allocation of the net proceeds within the categories listed
above. The amounts actually expended for these purposes may vary significantly
and will depend on a number of factors, including our rate of revenue growth,
cash generated by operations, evolving business needs and the other factors
described in "Risk Factors."

         Pending their use, we intend to invest the net proceeds of this
offering in interest bearing, investment grade securities.

         We expect that the net proceeds from this offering, when combined with
the proceeds of other financing transactions and revenue from operations, will
be sufficient to fund our operations and capital requirements for at least 12
months following this offering. We may be required to raise additional capital
through the sale of equity or other securities sooner if our operating
assumptions change or prove to be inaccurate. We cannot assure you that any
financing of this type would be available. In the event of a capital inadequacy,
we would be required to limit our growth and the expenditures described above.

                                 DIVIDEND POLICY

         We have not declared or paid any dividends and do not intend to pay any
dividends in the foreseeable future. We intend to retain any future earnings for
use in the operation and expansion of our business. Any future decision to pay
dividends on common stock will be at the discretion of our board of directors
and will be dependent upon our fiscal condition, results of operations capital
requirements and other factors our board of directors may deem relevant.

                                       16
<PAGE>

                                 CAPITALIZATION

         The following table sets forth our capitalization as of June 30, 2003
on an actual basis, pro forma and pro forma as adjusted for this offering. Pro
forma data takes into account the following events occurring after June 30,
2003:

    o    The issuance of an aggregate of 4,939,256 shares of common stock in
         repayment of $4,988,649 of outstanding debt, including principal and
         interest amounts to various noteholders, out of which 400,454 were
         issued to Leonard Osser, our Chairman and Chief Executive Officer;
    o    The issuance of 282,982 additional shares of common stock to these
         debtholders as agreed remuneration for previously extending the
         maturity date of the notes;
    o    The issuance of 25,365 preferred shares in repayment of $25,365 of
         outstanding debt, including principal and interest amounts to a
         noteholder;
    o    The issuance of 306,585 shares of common stock as payment of
         approximately $503,000 due to principal vendors;
    o    The issuance of 101,829 shares of common stock for a consideration of
         $189,000, after commissions and closing costs, under an equity put
         agreement;
    o    The issuance of 7,000 shares of common stock upon the exercise of
         options for a total consideration of $7,750;
    o    The expected issuance, on the later of January 2, 2004 or the date this
         offering becomes effective, of 203,125 units, in payment of $1,624,996
         of debt, including interest, to Leonard Osser, our Chairman and Chief
         Executive Officer and to a major stockholder; and
    o    The expected issuance, on the later of January 2, 2004 or the date this
         offering becomes effective, of 42,000 units, in payment of $336,000 of
         accrued compensation to Leonard Osser, our Chairman and Chief Executive
         Officer.

         Pro forma as adjusted for this offering takes into account the pro
forma data as well as the receipt of $6.5 million of estimated net proceeds from
this offering, the deduction of underwriting discounts and commissions and other
estimated offering expenses to be paid by us.

<TABLE>
<CAPTION>
                                                                                           June 30, 2003
                                                                                --------------------------------------
                                                                                                           Pro forma
                                                                                 Actual       Pro forma   as adjusted
                                                                                 ------       ---------   -----------
                                                                                           (in thousands)

<S>                                                                              <C>           <C>          <C>
    Accounts payable and accrued expenses............................            $1,638        $1,135       $1,135
    Notes payable including interest.................................             6,491            50           50
    Accrued compensation                                                            480           144          144
                                                                                  -----         -----        -----
      Total debt.....................................................             8,609         1,329        1,329
Stockholders' equity (deficiency):
   Common stock, $0.001 par value,
   50,000,000 shares authorized, 12,733,370 shares issued and
   12,633,370 outstanding, actual; 20,331,988 shares issued and
   20,231,988 outstanding, pro forma; and 22,231,988 shares issued
   and outstanding, pro forma as adjusted............................                13            20           22
</TABLE>

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                                                           June 30, 2003
                                                                                --------------------------------------
                                                                                                           Pro forma
                                                                                 Actual       Pro forma   as adjusted
                                                                                 ------       ---------   -----------
                                                                                           (in thousands)

<S>                                                                              <C>           <C>          <C>
   Preferred Stock, $.001 par value 5,000,000 shares authorized, no
    shares issued and outstanding, actual; 25,365 shares issued and
    outstanding, pro forma; and 25,365 shares issued and outstanding,
    pro forma as adjusted............................................

    Additional paid-in capital.......................................            36,614        44,084       50,577
    Retained earnings (deficit)......................................          (42,945)      (42,945)     (42,945)
    Unearned compensation                                                          (20)          (20)         (20)
    Treasury stock, at cost, 100 shares                                           (912)         (912)        (912)
                                                                               =======       =======      =======
      Total stockholders' equity (deficiency)........................           (7,250)          227        6,727
                                                                               =======       =======      =======
      Total capitalization...........................................           (1,359)       (1,556)       8,056
                                                                               =======       =======      =======
</TABLE>

                                       18
<PAGE>

                        PRICE RANGES OF OUR COMMON STOCK

The principal market on which our common stock is traded is the American Stock
Exchange. The ticker symbol for our common stock is MS. The following table sets
forth the high and low closing sales prices of our common stock, as quoted by
the American Stock Exchange.

                                                        HIGH         LOW
                                                       -------     ------
        2001
        First Quarter                                  $2.00        $ .85
        Second Quarter                                 $1.00        $ .62
        Third Quarter                                  $1.75        $ .68
        Fourth Quarter                                 $ .73        $ .50

        2002
        First Quarter                                  $ .68        $ .52
        Second Quarter                                 $1.00        $ .58
        Third Quarter                                  $ .68        $ .29
        Fourth Quarter                                 $ .40        $ .21

        2003
        First Quarter                                  $ .34        $ .14
        Second Quarter                                 $ .40        $ .18
        Third Quarter                                  $1.66        $ .27
        Fourth Quarter (through October 31, 2003)      $2.59        $1.05

         According to the records of our transfer agent, there were
approximately 3,000 holders of record of our common stock as of October 1, 2003.

         We have applied to the American Stock Exchange to list the units
offered by this prospectus, as well as the warrants and common stock underlying
those units.

                                       19
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

         The selected consolidated financial data set forth below should be read
together with "Management's Discussion and Analysis or Plan of Operations"
included elsewhere in this prospectus. The statement of operations data for each
of the years in the two-year period ended December 31, 2002 and the balance
sheet data at December 31, 2002 are derived from our financial statements, which
have been audited by J.H. Cohn LLP, independent public accountants, and are
included elsewhere in this prospectus. The statement of operations data for the
six-month periods ended June 30, 2003 and 2002 and the balance sheet data for
June 30, 2003 are derived from our unaudited financial statements. The unaudited
financial statements have been prepared on substantially the same basis as the
audited financial statements and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of the results of operations for these periods. Historical
results are not necessarily indicative of the results to be expected in the
future, and the results of interim periods are not necessarily indicative of
results for the entire year.

STATEMENT OF OPERATIONS DATA:

- ------------------------------------------------

<TABLE>
<CAPTION>
                                           YEARS ENDED DECEMBER 31,        SIX MONTHS ENDED JUNE 30,
                                         ----------------------------    ----------------------------
                                            2001            2002            2002            2003
                                         ------------    ------------    ------------    ------------
                                                                                  (UNAUDITED)
                                               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                         ------------------------------------------------------------
<S>                                      <C>             <C>             <C>             <C>
Revenues .............................   $      4,094    $      4,074    $      2,182    $      2,135
Cost of sales ........................          1,973           1,980             983           1,049
                                         ------------    ------------    ------------    ------------
Gross profit .........................          2,121          2, 094           1,199    $      1,086
Selling, general and administrative ..          5,271           3,589           1,835           1,600
   expenses
Research and development .............             50             148              45              83
Closing of Deerfield, IL facility ....           --                26            --                66
                                         ------------    ------------    ------------    ------------
Loss from operations .................         (3,200)         (1,669)           (681)           (663)
Sale of prophy angle business and ....             64              80            --              --
   related consulting income
Other income .........................           --                                48
Interest expense net .................           (855)           (851)           (389)           (496)

Net loss .............................   $     (3,991)   $     (2,440)   $     (1,022)   $     (1,159)
                                         ============    ============    ============    ============
Net loss per share - basic and diluted   $       (.36)   $       (.20)   $       (.08)   $       (.09)
                                         ============    ============    ============    ============
Weighted average number of shares
   outstanding - basic and diluted ...     11,142,590      12,469,673      12,171,450      12,633,370
                                         ============    ============    ============    ============
</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
                                               DECEMBER 31,      JUNE 30,
                                                   2002            2003
                                               ------------      --------

<S>                                              <C>            <C>
         Current assets....................      $     893      $   1,111
         Working capital...................      $ (5,214)      $  (6,143)
         Total assets......................      $   1,241      $   1,359
         Total liabilities.................      $   7,347      $   8,609
         Stockholders' equity (deficit)....      $ (6,106)      $  (7,250)
</TABLE>

                                       20
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                              OR PLAN OF OPERATIONS

         You should read the following discussions of our financial condition
and results of operations in conjunction with the financial statements and the
notes to those statements included elsewhere in this prospectus. This discussion
may contain forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, such as those set
forth under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

         We have generated most of our revenues during our last two fiscal years
and the interim period this year through sale of our CompuDent system and The
Wand disposable handpiece used with that system. Revenues have been earned
domestically and internationally through sales in more than 25 countries. During
this period handpiece sales have provided a growing portion of our revenues,
reflecting a growing base of new customers for our systems internationally and
more intensive use of their systems by a relatively stagnant base of customers
domestically. Though we have continued to sell new systems domestically, a large
part of our domestic sales during this period represented the sale of upgraded
units or additional units to our existing customer base. Our limited domestic
sale of new systems reflects our limited sales and marketing efforts as a result
of cash constraints. We expect to use a portion of the proceeds of this offering
to increase sales and marketing expense and believe these increases should
generate additional revenue. The following table shows a breakdown of our
revenues, domestically and internationally, by product category, and the
percentage of total revenue by each product category.

                                       21
<PAGE>

<TABLE>
<CAPTION>
                                           SIX MONTHS ENDED JUNE 30,                        YEAR ENDED DECEMBER 31,
                               -----------------------------------------------   -----------------------------------------------
                                        2003                      2002                    2002                     2001
                               ----------------------    ---------------------   ----------------------   ----------------------
            DOMESTIC
<S>                            <C>              <C>     <C>              <C>     <C>              <C>     <C>              <C>
COMPU DENT .................   $  366,906       26.4%   $  569,901       34.6%   $  956,275       30.1%   $1,309,712       39.0%
HANDPIECES .................      916,861       66.0%      961,237       58.3%    1,999,050       63.0%    1,756,498       52.4%
OTHER ......................      104,952        7.6%      117,180        7.1%      219,605        6.9%      288,092        8.6%
                               ----------    -------    ----------    -------    ----------    -------    ----------    -------
TOTAL DOMESTIC .............   $1,388,719      100.0%   $1,648,318      100.0%   $3,174,930      100.0%   $3,354,302      100.0%
                               ==========    =======    ==========    =======    ==========    =======    ==========    =======

       International

COMPUDENT ..................   $  411,225       55.1%   $  312,588       58.6%   $  495,730       55.1%   $  519,089       70.2%
HANDPIECES .................      332,172       44.5%      218,731       41.0%      403,346       44.9%      192,271       26.0%
OTHER ......................        2,574        0.4%        2,080        0.4%            0        0.0%       28,048        3.8%
                               ----------    -------    ----------    -------    ----------    -------    ----------    -------
TOTAL INTERNATIONAL ........   $  745,971      100.0%   $  533,399      100.0%   $  899,076      100.0%   $  739,408      100.0%
                               ==========    =======    ==========    =======    ==========    =======    ==========    =======

   Domestic/International
                    Analysis

DOMESTIC ...................   $1,388,719       65.1%   $1,648,318       75.6%   $3,174,930       77.9%   $3,354,302       81.9%
INTERNATIONAL ..............      745,971       34.9%      533,399       24.4%      899,076       22.1%      739,408       18.1%
                               ----------    -------    ----------    -------    ----------    -------    ----------    -------
                               $2,134,690      100.0%   $2,181,717      100.0%   $4,074,006      100.0%   $4,093,710      100.0%
                               ==========    =======    ==========    =======    ==========    =======    ==========    =======
</TABLE>

                                       22
<PAGE>

         We have earned gross profits of 51.8% and 51.4% in the years ended
December 31, 2001 and 2002, respectively, and 55.0% and 50.9% in the six-month
periods ended June 30, 2002 and 2003, respectively. However, our revenues have
been too low to support our overhead, research and development expense and
interest on our debt. We have therefore reported substantial, though declining,
losses for each of those periods. We have taken steps to cut our overhead,
increase sales and reduce our interest expense.

         We took the following steps to reduce our operating overhead and
improve our utilization of cash:

    o    We reconfigured our sales force, commencing in 2001 and continuing
         through 2003, from a large internal force to independent sales
         representatives,distributors and a small sales support staff;

    o    We closed our Deerfield, Illinois facility on January 31, 2003,
         resulting in a reduction of ten employees. Customer support, technical
         service and other back-office functions previously conducted at this
         location were consolidated into our New Jersey location;

    o    We outsourced to an independent warehouse located in Pennsylvania
         receiving, shipping and storage functions previously conducted at
         Deerfield; and

    o    We cut marketing expense and limited our participation in trade shows,
         even though this had a further negative effect on sales.

         Next, we took steps to reduce our debt burden. We cut the interest rate
on our Senior Secured and Secured Notes (after negotiation with our noteholders)
from 20% per year to 12% per year (6% if we paid interest in cash) and extended
the previously extended maturity date until July and August 2003. Then, in
October 2003, we paid $5,014,014 of debt by issuing 4,939,256 shares of common
stock and 25,365 shares of convertible preferred stock and satisfied
approximately $503,000 of trade payable by issuing 306,585 shares of common
stock. In October we also reached an agreement to satisfy, on the later of
January 2, 2004 or the closing of this offering, an additional $1,960,996 of
debt, accrued interest and accrued compensation through issuance of 245,125
units.

         Finally, at the beginning of 2003, we took steps to increase our
revenues. In early 2003 we completed development of the SafetyWand, which
incorporates safety engineered sharps protection features to aid in the
prevention of inadvertent needlesticks. The SafetyWand is one of the first
safety engineered injection devices compliant with OSHA regulations under the
federal Needlestick Safety Act, while also meeting the clinical needs of
dentists. To date, these regulations have generally not been enforced against
dentists by OSHA and similar local and state authorities due to lack of
commercially available products that meet the special needs of dentistry.
Milestone believes that the commercial availability of the SafetyWand will
enable OSHA, and similar local and state authorities to begin enforcement, or
stricter enforcement, of the Needlestick Safety Act against dentists. Since the
SafetyWand can only be used with the CompuDent system, enforcement by OSHA could
promote increased handpiece sales to current CompuDent users, while also
providing impetus for the purchase of these systems by new users. In September
2003, we obtained FDA approval for SafetyWand. In October 2003, we launched the
SafetyWand at the American Dental Association Annual Meeting in California.
SafetyWand

                                       23
<PAGE>

will be commercially available before the end of 2003.

         In early 2003, we adopted a new marketing approach and began building a
national sales force of highly trained independent representatives to provide
sales coverage in urban areas in 12 states. To increase our ability to retain
this sales force and to enhance its performance, we:

    o    increased the base price of our CompuDent unit to new customers to
         provide sufficient gross profit to recruit and adequately compensate
         our sales force;

    o    established a sales support staff to generate leads, set appointments,
         provide technical support and customer service and foster increased
         handpiece use; and

    o    began distributing a new product used in repairing and whitening teeth,
         the CoolBlue Wand, which also helps gaining access to dental offices.

         With a growing new sales force and the acquisition of rights to new
products to facilitate access to dental offices, we intend to direct our
marketing efforts to capturing new customers, particularly from specialty
practitioners, including periodontists, pedodontists, endodontists and
cosmetic/restorative dentists

         The technology underlying our SafetyWand and the technology underlying
the CompuFlo were developed by our Director of Clinical Affairs and assigned to
us. Upon sale of products using either technology we will owe him a 5% royalty
on the total sales price, or, if technology covered by other patents is also
used by the product, on an allocated part of the sales price. In addition, he is
granted, pursuant to the agreement, an option to purchase, at fair market value
on the date of the grant, 25,000 of our common stock upon the issuance of each
additional patent relating to these technologies.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to accounts receivable, inventories, advances
to our contract manufacturer, stock based compensation and contingencies. We
base our estimates on historical experience and on various other assumptions
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 those estimates under different assumptions or conditions.

Inventory

         Inventories principally consist of finished goods and component parts
stated at the lower of cost (first-in, first-out method) or market.

                                       24
<PAGE>

Impairment of Long-Lived Assets

         We review long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts may
not be recovered.

Revenue Recognition

         Revenue is recognized when title passes at the time of shipment and
collectibility is deemed probable.

RESULTS OF OPERATIONS

         The results of operations for the year ended December 31, 2002, and six
months ended June 30, 2003, reflect our concentrated effort to reduce our
overhead while slowly growing our user base in the dental market domestically
and abroad. The loss for the year 2002, approximately $2.5 million, represents a
39% reduction from the same period in 2001. However, the net loss for the six
months ended June 30, 2003 was approximately $136,000 greater than the loss
reported for the six months ended June 30, 2002 as a result of a decline in
sales volume and gross profit, coupled with increases in research and
development expenses and interest expense.

         The following table sets forth for the periods presented, statement of
operations data as a percentage of revenues. The trends suggested by this table
may not be indicative of future operating results.

                                       25
<PAGE>

<TABLE>
<CAPTION>
                                         PERIOD ENDED JUNE 30,                            YEAR ENDED DECEMBER 31,
                           ------------------------------------------------ ------------------------------------------------
                                    2003                     2002                    2002                       2001
                           -----------------------  ----------------------- -------------------------  ---------------------
<S>                        <C>               <C>    <C>              <C>    <C>                 <C>    <C>             <C>
NET SALES ..............   $ 2,134,690       100.0% $ 2,181,717      100.0% $ 4,074,006         100.0% $ 4,093,710     100.0%
COST OF SALES ..........     1,048,421        49.1%     981,771       45.0%   1,980,949          48.6%   1,973,156      48.2%
GROSS PROFIT ...........     1,086,269        50.9%   1,199,946       55.0%   2,093,057          51.4%   2,120,554      51.8%
SELLING, GENERAL &
  ADMINISTRATIVE
  EXPENSE ..............     1,600,415        75.0%   1,835,208       84.1%   3,588,836          88.1%   5,271,032     128.8%
CLOSING OF DEERFIELD, IL
FACILITY ...............        65,873         3.1%                    0.0%      26,067           0.6%                   0.0%
RESEARCH AND DEVELOPMENT        83,092         3.9%      45,379        2.1%     147,709           3.6%      49,943       1.2%
LOSS FROM OPERATIONS ...      (663,111)      (31.1)%   (680,641)     (31.2)% (1,669,555)        (41.0)% (3,200,421)    (78.2)%
</TABLE>



                                       26
<PAGE>

Fiscal year ended December 31, 2002 compared to fiscal year ended December 31,
2001

         Net sales for the years ended December 31, 2002 and 2001 were
$4,074,006 and $4,093,710, respectively. The $23,988 decrease is attributable
primarily to a decrease in domestic sales of CompuDent, $71,592 generated from
prophy angle sales in 2001 before the sale of this product line in November
2001, and our decision to consolidate a $94,500 shipment to our South African
distributor with its January 2003 order to lower freight charges. The decrease
was partially offset by a 13% or $229,183 increase in domestic dental sales of
The Wand handpieces, $207,000 increase in The Wand handpiece sales to foreign
distributors, and CompuMed sales of approximately $163,000. The reduction in
CompuDent sales domestically are the direct result of the downsizing of our
sales and marketing effort in the U.S.

         Cost of sales for the years ended December 31, 2002 and 2001 were
$1,980,949 and $1,973,156 respectively. The $7,793 increase is attributable
primarily to product mix.

         For the year ended December 31, 2002, we generated a gross profit of
$2,093,057 or 51.4% as compared to a gross profit of $2,120,554 or 51.8% for the
year ended December 31, 2001. The decrease in gross profit is mainly
attributable to an increase in sales revenue generated from sales to foreign
distributors. The gross profit from these sales is lower than the aggregate
gross profit generated from domestic sales.

         Selling, general and administrative expenses for the years ended
December 31, 2002 and 2001 were $3,588,836 and $5,271,032, respectively. The
$1,682,196 decrease is attributable primarily to an approximate $858,000
decrease in expenses associated with the sale and marketing of CompuDent units
and The Wand handpieces due to the transitioning of its sales force to
independent representatives and an approximate $293,700 decrease in legal fees.
In addition, during 2001, we issued 242,308 shares as payment for services
rendered in the amount of $247,649. We had incurred higher legal expenses in
2001 related to advertising agreements and patent registrations.

         In 2002, we incurred costs totaling $26,067 associated with the closing
down of our Illinois facility.

         Research and development expenses for the years ended December 31, 2002
and 2001 were $147,709 and $49,943, respectively. The $97,766 increase is
attributed to the development of the SafetyWand.

         Other income for the years ended December 31, 2002 and 2001, $80,000
and $64,487, respectively reflect the sale of our prophy angle business in 2001
and consulting services we provided during 2002, in connection with this sale.

         The loss from operations for the years ended December 31, 2002 and 2001
were $1,669,555 and $3,200,421, respectively. The $1,530,866 decrease in loss
from operations is explained above.

         We incurred interest expense of $850,642 for the year ended December
31, 2002 as compared to $858,582 for the year ended December 31, 2001. The
decrease of $7,940 is attributable to a lower average interest rate, which was
partially offset by an increase in outstanding principal debt obligations.

         The net loss for the years ended December 31, 2002 was $2,440,197 as
compared to a net loss of $3,991,580 for 2001. The $1,551,383 decrease in
net loss is primarily attributable to a sharp decrease in selling and
administrative expenses, including reduction in personnel.

                                       27
<PAGE>

Six months ended June 30, 2003 compared to six months ended June 30, 2002

         Net sales for the six months ended June 30, 2003 and 2002 were
$2,134,690 and $2,181,717, respectively. The $47,027 or 2.2% decrease is
primarily related to an approximate $69,000 decrease in CompuMed sales, a
$35,000 decrease in CompuDent sales and a $44,000 decrease in domestic sales of
The Wand handpieces. These decreases were partially offset by an $113,000
increase in foreign sales of The Wand handpiece. The decrease in domestic sales
of The Wand handpiece is the result of changing the primary manufacturer of The
Wand handpiece, resulting in inconsistent inventory levels. Subsequently, the
transition issues have been resolved and are resulting in improved supply chain
management.

         Cost of sales for the six months ended June 30, 2003 and 2002 were
$1,048,421 and $981,771 respectively. The $66,650 increase is attributable
primarily to higher sales volume to foreign distributors. For the six months
ended June 30, 2003, we generated a gross profit of $1,086,269 or 50.9% as
compared to a gross profit of $1,199,946 or 55% for the six months ended June
30, 2002. The decrease in gross profit percentage is primarily attributable to
increased sales to foreign distributors, which are characterized by higher
volume but a reduced margin.

         Selling, general and administrative expenses for the six months ended
June 30, 2003 and 2002 were $1,600,415 and $1,835,208 respectively. The $234,793
decrease is attributable primarily to an approximate $227,000 decrease in
expenses associated with the sale and marketing of CompuDent.

         During the six months ended June 30, 2003, we incurred costs totaling
$65,873 in connection with the closure of our Deerfield, Illinois facility.

         Research and development expenses for the six months ended June 30,
2003 and 2002 were $83,092 and $45,379 respectively. The increase in 2003 for
these costs related to the development of the SafetyWand.

         The loss from operations for the six months ended June 30, 2003 and
2002 were $663,111 and $680,641 respectively. The $17,530 decrease in loss from
operations is explained above.

         We generated $48,000 in other income for the six months ended June 30,
2002 as a result of a consulting contract, which expired in October 2002.

         Interest expense of $495,691 was incurred for the six months ended June
30, 2003 as compared to $389,780 for the six months ended June 30, 2002. The
increase is attributable to higher average borrowings in 2003.

         The net loss for the six months ended June 30, 2003 was $1,158,802 as
compared to a net loss of $1,022,421 for the six months ended June 30, 2002. The
$136,381 increase in net loss is explained above.


LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2002, as shown in the accompanying consolidated
financial statements, we incurred net losses of approximately $2,440,000 and
$3,992,000 and negative cash flows from operating activities of approximately
$676,000 and $1,385,000 during 2002 and 2001, respectively. As a result, we had
a cash balance of approximately $10,000, a working capital deficiency of
approximately $5,214,000

                                       28
<PAGE>

and a stockholders' deficiency of approximately $6,106,000 as of December 31,
2002. These matters raise substantial doubt about our ability to continue as a
going concern.

         At June 30, 2002 the accompanying condensed consolidated financial
statements have been prepared assuming Milestone will continue as a going
concern. However, as shown in the accompanying condensed consolidated financial
statements, Milestone incurred net losses of approximately $1,159,000 and
$1,022,421 and negative cash flows from operating activities of $451,000 and
$216,000 during the six months ended June 30, 2003 and 2002, respectively. As a
result, Milestone had a cash balance of approximately $28,000, a working capital
deficiency of approximately $6,143,000 and a stockholders' deficiency of
approximately $7,250,000 as of June 30, 2003. These matters raised substantial
doubt about Milestone's ability to continue as a going concern. Management
believes that its initial concerns about our ability to continue as a going
concern were alleviated through the subsequent satisfaction of a substantial
portion of its outstanding obligations, the introduction of new products and
continuing efforts to reduce operating overhead. Nevertheless, management
believes that it is probable that Milestone will continue to incur losses and
negative cash flows from operating activities through at least June 30, 2004.

         During the year ended December 31, 2002, we reduced our average monthly
cash used in operations to less than $60,000, completed a $4.1 million debt
restructuring program, and obtained $785,000 in additional financing. This
program included debt to equity conversions, deferring payment on a portion of
our payables, restructuring our debt and outsourcing our sales force.

Satisfaction of certain liabilities

         Agreements reached by Milestone in October 2003 will effectively
eliminate the current stockholders' deficiency upon the later of completion of
this offering or January 2, 2004. During the month, Milestone satisfied
$5,014,000 of secured debt including interest, through the issuance of 4,939,256
shares of common stock and $25,365 face amount of 8% cumulative convertible
preferred stock. Also, approximately $503,000 of trade payables to principal
vendors was satisfied through issuance of 306,585 shares of common stock valued
at $1.64 per share, the approximate fair market value.

         Additionally, we reached agreements to satisfy, an aggregate amount of
$1,961,000 of debt, accrued interest, and accrued compensation through the
issuance of equity securities. Satisfaction of the secured debt for borrowed
money to a major investor and to our Chairman and CEO and accrued compensation
to our CEO will be on the later of January 2, 2004 or the effective date of the
next public offering of our securities through the issuance of common stock and
warrants at the same price as offered to the public. This settlement is
contingent upon there being a public offering. Payment of this debt, following
the conversion to equity in September 2003 of additional $5 million of debt will
eliminate most of Milestone's funded debt and will remove almost all liens on
its assets.

Reduction of operating overhead

         To date, we have taken certain steps in order to reduce our operating
overhead and use of cash. These steps includethe following:

    o    Commencing in 2001 and continuing through 2003, we reconfigured our
         sales force from a large internal sales force to independent sales
         representatives, distributors and a small sales support staff;

                                       29
<PAGE>

    o    On January 31, 2003, we completed the closing of the Deerfield,
         Illinois facility, resulting in the layoff of ten employees. The
         customer support, technical service and other back-office functions
         previously conducted, in whole or in part, at this location were
         consolidated into our New Jersey location. The receiving, shipping and
         storage functions, which were also previously done at this location,
         are now outsourced to an independent warehouse located in Pennsylvania.

         On June 4, 2003, we borrowed $50,000 pursuant to a 6% secured
convertible promissory note due November 27, 2004. At the option of the
noteholder, the principal and interest are payable on the maturity date in
common stock at a rate of one share of common stock for every $.312 of
indebtedness. Additionally, we granted the investor warrants to purchase 160,256
of our common stock at a per share price of $.52 with an estimated fair value of
$14,423 at any time or from time to time during the period commencing June 4,
2003 and ending June 3, 2005. This resulted in an initial increase to debt
discount and to additional paid-in capital.

Cash flow results

         For the six months ended June 30, 2003, our net cash used in operating
activities was $451,760. This was attributable primarily to a net loss of
$1,158,802 adjusted for noncash items of $242,962 (of which $213,640 was for
amortization of debt discount and deferred financing costs); a $369,518 increase
in accounts receivable; an $38,092 increase in inventories; a $103,883 decrease
in advances to contract manufacturer; a $43,555 decrease in prepaid expenses; an
increase in accounts payable of $270,807; a $282,051 increase in accrued
interest; a $11,396 increase in accrued expenses; and an $160,000 increase in
deferred compensation.

         For the six months ended June 30, 2003, we used $14,950 in investing
activities for capital expenditures.

         For the six months ended June 30, 2003, we generated $485,494 from
financing activities as it issued promissory notes to existing investors
totaling $450,000, incurred $58,215 of net borrowings from its Chief Executive
Officer, and recorded $22,721 in deferred financing expenses.

         At June 30, 2003, we had one foreign customer that accounted for
approximately 22% of sales for the six months ended June 30, 2003 and
approximately 17% for the six months ended June 30, 2002. At June 30, 2003,
receivables from this customer were approximately 68% of total accounts
receivables.

RECENT ACCOUNTING PRONOUNCEMENT

         In December 2002, SFAS No.148, "Accounting for Stock-Based
Compensation-Transition and Disclosure, an Amendment of SFAS No. 123" was
issued. SFAS No. 148 amends SFAS No. 123, to provide alternative methods of
transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effects of the method used on
reporting results. Milestone adopted SFAS No. 148, effective January 1, 2003 and
it did not have any material impact on its consolidated financial statements.

         In May 2003, SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" was issued. The
statement requires that an issuer classify financial

                                       30
<PAGE>

instruments that are within its scope as a liability. Many of those instruments
were classified as equity under previous guidance. Most of the guidance in SFAS
No. 150 is effective for all financial instruments entered into or modified
after May 31, 2003, and otherwise effective at the beginning of the first
interim period beginning after June 15, 2003. We are currently evaluating the
provisions of this statement, and do not believe that it will have an impact on
our consolidated financial statements.

                                    BUSINESS

BACKGROUND

         Milestone is a leader in advanced subcutaneous injection technology for
dental and medical applications. Its products improve the quality of patient
care and comfort, while also addressing the health and safety needs of the
practitioner. Milestone's principal product, CompuDent, was developed to replace
the hypodermic syringe in dentistry. The hypodermic syringe has been little
changed since its invention more than 150 years ago. A dentist using a syringe
can generally administer an adequate volume of anesthetic to the intended target
area to achieve the desired level of anesthesia. However, use of a syringe for
this purpose, may result in a number of unintended consequences or collateral
problems including:

    o    high levels of patient pain in some procedures;
    o    post-operative pain as a result of tissue tearing or distension;
    o    necrosis as a consequence of tissue tearing and other damage;
    o    failure to hit the intended nerve target because of needle deflection
         and the awkward manner in which the syringe must be held;
    o    temporary paralysis of adjacent tissue such as the tongue, lips, and
         facial muscles;
    o    fear reactions by the patient to the syringe;
    o    carpal tunnel syndrome to the dentist or hygienist;
    o    inability to inject sufficient anesthetic into dense tissue or tight
         spaces; and
    o    use of unnecessarily high levels of anesthetic.

DENTAL PRODUCTS

         COMPUDENT AND THE WAND

         Milestone's principal product, CompuDent, is a computer controlled,
precision metered, local anesthetic injection system. The system, including its
ergonomically designed, single patient use, disposable handpiece, The Wand,
enables a dentist to consistently administer safe, effective and less painful
injections. Since January 1998, Milestone has sold more than 24,000 CompuDent
units and over 13 million single use handpieces in the United States and in over
25 other countries. CompuDent has been favorably evaluated in more than 44
clinical research reports. The system provides these benefits:

    o    minimizes the pain associated with palatal and other injections,
         resulting in a more comfortable injection experience for the patient;
    o    the pencil grip used with The Wand handpiece provides enhanced tactile
         sense and more accurate control;
    o    new injections made possible with CompuDent minimize collateral
         numbness of the tongue, lips and facial muscles;
    o    bidirectional rotation of The Wand handpiece results in greater
         precission and more rapid onset of anesthesia by eliminating needle
         deflection in mandibular block injections;
    o    the single patient use disposable handpiece minimizes the risk of cross
         contamination;

                                       31
<PAGE>

    o    the ergonomic design of The Wand makes an injection easier, less
         stressful to administer and reduces the risk of carpal tunnel syndrome
         to the dentist or hygienist; and
    o    CompuDent can increase productivity in many dental procedures by
         eliminating the need for preliminary pain blocking injections, and
         reducing the waiting time required to see if the injection has taken
         effect.

         The system design allows a drop of anesthetic to always precede the
needle tip, thus creating a pathway of already anesthetized tissue for the
needle to penetrate. The system also eliminates the "bee-sting" effect, that is,
the painful effect associated with a surge of fluid into a confined tissue area.
Syringes do not allow sufficient control of the flow rate to achieve these
benefits. With a syringe, the needle often enters tissue that has not yet been
anesthetized. Further, dentists using a syringe do not have a solid resting
point against which they may guide their hand while administering the injection,
often resulting in uncontrolled and movement of the needle that causes pain for
the patient.

         The slim, pencil-like, shape of The Wand handpiece is also more
  functional for the user and less ominous in appearance to the patient. The
  pencil grip provides enhanced tactile sense, more accurate control, and a
  greater level of stability for the user by preventing antagonistic movements.
  As a single patient use device, the handpiece also offers protection against
  patient cross-contamination.

         The design of The Wand handpiece allows the practitioner to use a new
needle insertion technique called bidirectional rotational insertion that
minimizes needle deflection. Contemporary dental anesthesia textbooks indicate
that needle deflection is a source of anesthetic failures in mandibular blocks,
the most common dental injection. Anesthetic blocks are missed 30% to 35% of the
time because of needle deflection associated with hypodermic syringes. The
bi-directional rotational insertion technique associated with The Wand handpiece
addresses these failures. Further, the new technique also requires two to three
times less force to penetrate tissue, which may lead to a less painful injection
experience for the patient.

         We sell CompuDent units, together with an initial supply of 50
handpieces, in the U.S. for $1,995. However, discounts are offered for purchases
of multiple units and on sales of additional units to existing customers. We
sell The Wand and The Wand with bonded needle handpieces for $62.50 for a box of
50 handpieces, but offer discounts for participants in the Milestone Savings
Plan and other periodic buying programs.

         Our international master distributors and direct distributors to whom
we sell in a number of countries purchase units at a range of generally lower
prices, depending upon the extent of the marketing, promotional, training and
repair obligations which they assume.



         THE SAFETYWAND

         In September 2003, we received FDA approval for the SafetyWand, an
injection handpiece device that incorporates safety engineered sharps protection
features. The SafetyWand was developed to address requirements of the
Needlestick Safety Act, mandating the use of a safety engineered sharps device
to eliminate inadvertent needle sticks. The Act was adopted in 2000 after it was
found that U.S. healthcare workers suffer from an estimated 590,000 needle-stick
injuries each year, some of which resulted in cases of HIV, Hepatitis B,
Hepatitis C and other illnesses, costing taxpayers in excess of $2 billion
annually, in testing and treatment.

                                       32
<PAGE>

         OSHA promulgates regulations under the Needlestick Safety Act. OSHA and
corresponding authorities in some states are responsible for enforcing the Act
and its regulations. OSHA and similar state and local authorities conduct
enforcement actions on a state-by-state basis. While OSHA and these state and
local authorities are empowered to levy substantial fines for failure to use
these devices, we believe that they have largely been unable to enforce the law
against dentists because of the inadequacy of existing devices to meet both the
requirements of the law and the unique clinical needs of dentists. The
SafetyWand is one of the first safety engineered injection devices that is fully
compliant with more than 30 parameters published by OSHA to be met by safety
engineered products while also meeting the clinical needs of dental
practitioners. It provides the practitioner with a safer retractable needle
device, with single hand activation, which is reusable multiple times during a
single patient visit, yet small and sleek enough not to obscure the dentist's
often limited field of view.

         We believe that the commercial availability of the SafetyWand will
enable OSHA and similar state and local authorities to begin enforcement, or
stricter enforcement, of the Needlestick Safety Act against dentists. Since the
SafetyWand can only be used with CompuDent, enforcement by OSHA could promote
increased handpiece sales to current CompuDent users, while also providing
significant impetus for the purchase of these systems by new users. However,
there are no assurances that the Act or related regulations will be strictly or
consistently enforced or that this enforcement will result in increased sales of
our products. We launched the SafetyWand at the American Dental Association
Annual Meeting in California in October 2003. We expect to begin initial
shipments of the SafetyWand before the end of 2003.


         THE WAND HANDPIECE WITH NEEDLE


           This handpiece was designed to eliminate the re-use of handpieces on
multiple patients, a problem occurring primarily outside the United States. This
product is The Wand handpiece with a needle permanently attached. The benefits
of this product are three-fold: for the patient, the risk of contamination from
a previously used needle is eliminated, for the practitioner, there is less
preparation time needed, and for Milestone, it should increase overall handpiece
sales as customers will now stock handpieces with different sized needles. In
June 2003 we received our CE mark to sell The Wand handpiece with needle in
Europe and have since generated $________ in Wand handpiece with needle sales.


         COOLBLUE WAND DENTAL ENHANCEMENT SYSTEM

         In August 2003, we entered into an agreement with DaVinci Systems,
granting us non-exclusive distribution rights for the CoolBlue Wand,
manufactured by DaVinci. The CoolBlue Wand is a dental enhancement system that
uses advanced blue light emitting diodes for faster curing of dental repair
amalgams, trans-illumination of teeth and activation of whitening gels and
pastes. The agreement also granted us exclusive worldwide distribution rights
for a whitening head. We began selling the CoolBlue Wand at a dental trade show
in late October 2003. Sales to date have been inconsequential although we
received $15,055 of orders at, and since, the show.

         Curing. Technological advances have allowed the introduction of a
composite material that is soft and malleable and generally matches the color of
teeth. Once applied, this composite is hardened through the use of a curing
light. The first generation of curing lights used halogen lamps, which require
several minutes of curing time and emitted a great deal of heat in the mouth.
Newer curing lights use light emitting diodes ("LEDs") that reduce curing time
and emit less heat. DaVinci's curing light uses shorter wavelength blue LEDs
that cure faster, deeper and cooler than products using halogen lamps. Further,
the design is versatile and allows optional attachments for trans-illumination
to identify cracks in a tooth and for activating whitening gels and pastes.

                                       33
<PAGE>

         Whitening. The curing light may also be used as the base device for a
whitening system employing a proprietary whitening head developed by DaVinci for
Milestone, a dental office treatment kit, a take home kit provided by the
dentist for follow-up, and a unique whitening rinse for long term maintenance.
DaVinci will supply all components of the system to Milestone. Milestone is the
exclusive worldwide distributor of the whitening head. All gels, pastes and
rinse to be used with the whitening head will be supplied to Milestone by
DaVinci at the lowest price provided to its customers.

         We are currently working with a manufacturer to complete development of
packaging for the system. Concurrently, Milestone has engaged a creative firm to
assist in the development of the launch materials, including naming, logo
creation and promotional materials. We expect to launch the QuickBrite whitening
system at the Greater New York Dental Meeting in late November 2003 and to begin
shipments of the product in the first quarter of 2004. We believe this product
has an array of practitioner and patient benefits including lower cost and
safety and which will allow the dentist to market take home consumables.

         For its assistance in arranging our distribution agreement with
DaVinci, we agreed to pay Strider_______, a commission of 5% of our gross
revenues on all products purchased from DaVinci and resold to the professional
dental market, and a commission of 2% of our gross revenues on all products
purchased from DaVinci and resold to markets other than the professional dental
market.

         THE PROPOSED PDL INJECTOR DEVICE

         The Periodontal Ligament, or PDL, Injection is a site specific
injection which is highly effective for single tooth anesthesia. During a PDL
procedure, a dentist anesthetizes a single tooth without causing collateral
anesthesia to the tongue, lip and cheek. However, due to the pain elicited from
the high volume of drug required and the associated pressure, a PDL can only be
used as a secondary injection once the patient has already been anesthetized.

         The traditional PDL injection is typically administered using a spring
loaded, high pressure, trigger-activated injector, known as a PDL Injector.
Using this device, anesthetic must be delivered into the PDL under extremely
high pressure and force over a short period of time, resulting in rapid flow
rates and high interstitial pressures in the PDL. A successful injection is only
possible if the needle placement allows the proper flow of anesthetic into the
PDL. If the needle is obstructed in any way, proper flow of the drug cannot
occur and excessive pressure will result, possibly leading to persistent post
operative pain and potential tissue necrosis.

         An independent clinical study conducted by the NYU College of Dentistry
in 2000, demonstrated that when lower pressures are used over a longer period of
time, larger volumes of anesthetic can be effectively delivered into the PDL
space. These lower pressures are very difficult to produce with any handheld
syringe and impossible to consistently produce with a PDL Injector. Our modified
PDL injection, administered with the CompuDent, can be used on any tooth and
differs significantly from the traditional PDL injection as administered with
the PDL Injector or syringe. Using these devices requires the delivery of a
relatively small volume of anesthetic solution under tremendous pressure while
the CompuDent allows the operator to deliver a larger volume, under controlled
pressure using a slow, controlled flow rate. The modified PDL injection
can be used for primary anesthesia as well as the traditional supplementary
injection to a mandibular block. Successful administration of the PDL also
reduced the number of visits and time required for many procedures.

                                       34
<PAGE>

         While CompuDent has enhanced the practitioners' ability to perform a
successful PDL injection, there is still one component missing - the ability to
know for certain that the needle is in the PDL. By using pressure/force feedback
to control the flow rate, one could predictably produce successful PDL
injections.

         We have reduced to practice the use of pressure/force feedback and
control in our CompuFlo device discussed below. The proposed PDL Injector
combines our computer controlled injection system from CompuDent with our
patented pressure sensing technology to scientifically ensure a successful PDL
injection. . This pressure sensing technology provides real-time measurement
during an injection that we believe will allow the practitioner to properly
position the needle and inject a sufficient volume of anesthetic. We have begun
discussions with a major international manufacturer of dental equipment for
their distribution, on an exclusive worldwide basis of our proposed PDL
Injector. Marketing of the proposed PDL Injector Device can begin once we obtain
a 510(k) clearance the FDA, which we expect to apply for during the first half
of 2004.

MEDICAL PRODUCTS

         COMPUMED

         In 2001 Milestone introduced CompuMed, an anesthetic injection system
designed to meet the needs of the medical market. CompuMed provides benefits
similar to CompuDent. CompuMed allows a number of medical procedures, now
requiring IV sedation, to be performed with only local anesthesia because of the
significantly reduced pain. Also, dosages of local anesthetic can often be
significantly reduced, thus reducing side effects, accelerating recovery times,
lowering costs and minimizing complications. CompuMed is now gaining acceptance
in a variety of discrete medical applications including colorectal surgery,
podiatry, dermatology, including Moh's surgery for the removal of basal cell
carcinomas and other oncological dermatologic procedures, nasal and sinus
surgery, including rhinoplasty, hair transplantation and plastic surgery.

         An independent clinical study conducted by researchers at the
University of Southern California and published in May 2001, in colorectal
surgery, confirmed that patients experienced significantly less pain when the
CompuMed system was used. The study was terminated before accruing its initial
target number of patients because the researchers considered it unethical not to
use CompuMed exclusively. In another clinical study conducted in 2001 by
researchers at Scholl College of Podiatric Medicine in Chicago Illinois, which
was presented as an abstract in the field of podiatry, CompuMed was compared
with the traditional hypodermic syringe for obtaining regional anesthetics in
the hallux. The results stated that the moderate pain associated with the
traditional syringe decreased to nearly non-existent when using the CompuMed.

         Also, in 2002, we sold 21 units of CompuMed to a national hair
restoration provider.


PROPOSED PRODUCTS

         COMPUFLO

         Milestone has developed CompuFlo, a prototype injection, perfusion and
aspiration device, that embodies a new technology that Milestone believes, will
provide it with entry into new markets, specifically the large hospital sector.
CompuFlo provides a real time readout of pressures, fluid densities and flow
rates in the delivery and removal of a wide array of liquid drugs and other
fluids, including

                                       35
<PAGE>

bodily fluids. Due to cash constraints, Milestone has not yet developed devices
embodying this technology for specific applications. A major medical center has
proposed the initiation of clinical trials, at the beginning of 2004, to
ascertain the efficacy, safety and suitability of CompuFlo in administering
epidural injections for adults and children. We can give no assurances that
these trials will be conducted or, if conducted, will be successful.

         SAFETYINFUSE WAND

         Milestone has also developed SafetyInfuse Wand, a safety engineered IV
catheter introducer. This product is designed to allow a practitioner to
introduce an IV catheter into a vein using a single-handed, automatic safety
engineered device. Protraction and retraction can be accomplished with a single
hand, further enhancing the safety feature. It is a fail-safe device; that is,
if the safety components break or fail to operate, then the needle moves into
its protected state thus ensuring optimal safety to the end user. A major
advantage of the SafetyInfuse Wand is that it can be used multiple times on a
single patient, following a failure to introduce the catheter into the vein. We
expect to apply for 510(k) FDA marketing clearance for the SafetyInfuse Wand in
2004. Due to cash constraints, Milestone has not commercially introduced
SafetyInfuse Wand.


MANUFACTURING

         CompuDent and CompuMed units are manufactured for us by Tricor Systems,
Inc. ("Tricor") pursuant to specific purchase orders. In order to fund certain
expenses of Tricor, we have advanced funds to Tricor. These advances are reduced
as Tricor makes shipments to us. Net advances to Tricor as of December 31, 2001
and 2002 and October 31, 2003 were approximately $690,000, $398,000, and
$300,000, respectively. The Wand disposable handpiece is manufactured for us in
Mexico by Nypro Precision Assemblies, a subsidiary of Nypro. ("NPA") pursuant to
scheduled production requirements. NPA utilizes molds, semi-automated assembly
equipment and packaging equipment purchased by us. These products are sterilized
in California and shipped to our fulfillment center in Pennsylvania. The Wand
Handpiece with Needle is manufactured for us in China by United Systems. We may
expand our relationship with this manufacturer to include production of other
types of handpieces. All of our suppliers are ISO compliant.

MARKETING

         MARKETING BACKGROUND

         When we launched CompuDent in 1997, we relied on four major dental
dealers to distribute our products. While this achieved broad access to dental
offices, the nature of a typical sales visit by these dealers' representatives
proved to be counterproductive to the training requirements of CompuDent. Though
more than 15,000 units were sold in the first quarter following launch, this
distribution method distanced us from our customers and made it impossible to
provide customer support and adequate clinical training. These factors, coupled
with introduction problems typically associated with new technology and early
product design problems, now resolved, led to disgruntled customers and limited
handpiece use. Therefore, in 2000 we began selling directly to customers. We
hired a sales manager and eleven direct sales representatives to cover major
metropolitan areas. However, the then sales price for CompuDent was inadequate
to cover our direct expenses, including compensation to our representatives. We
also experienced difficulty gaining access to dental offices because the
representatives had a single product and the technology was still new to the
market.

                                       36
<PAGE>

         NEW MARKETING PLAN - DENTISTRY - DOMESTIC

         In January 2003, we developed a new sales and marketing plan, which
reflected five years of lessons learned in the marketplace. We increased the
base price of CompuDent from $1,495 to $1,995 that allowed us to recruit and
adequately compensate our sales force and support staff. We developed a
comprehensive training plan to enable our reps to provide orientation and
training to new customers, and to foster increased usage of disposable
handpieces. By September 30, 2003, we had a force of 12 sales representatives
providing sales coverage in urban areas in 12 states. The typical independent
rep manages a territory of approximately 3,500 to 5,000 dentists within a large
metropolitan area. We support these independent sales reps in several important
ways:

    o    our sales support staff set appointments to help the reps gain access
         to dental offices;
    o    we generate sales leads for them through our attendance at an average
         of 20 trade shows a year and through limited advertising and direct
         mail campaigns;
    o    we provide technical and service support;
    o    we provide them with access to our existing customer base for the
         purpose of increasing utilization of handpieces as well as converting
         customers to a subscription program, the Milestone Saving Plan, under
         which they commit to the monthly purchase of handpieces at a discount
         from our regular prices; and
    o    in September 2003, we began distributing the CoolBlue Wand which helps
         us gain access to dental offices for sales of CompuDent.

         Also, in 2002 we entered into a non-exclusive distribution agreement
with Benco Dental, granting them rights to distribute CompuDent and its
handpieces in designated portions of the eastern U.S. Benco failed to achieve
specified minimum purchase requirements and we now have the right to terminate
the agreement upon notice to Benco. However, we continue to sell limited amounts
of units and handpieces to Benco at a discount to our direct customers.

         With a growing new sales force and the acquisition of rights to new
products to facilitate access to dental offices, we intend to direct our
marketing efforts to capturing new customers from specialty practitioners,
including periodontists, pedodontists, endodontists and cosmetic/restorative
dentists.


         DENTISTRY - INTERNATIONAL MARKETING

         We manage the sales and marketing support for Canada, Mexico, Brazil
and Japan. Throughout the rest of the world, we distribute our products through
two master distributors who manage an extensive network of independent dealers.
The role of these principal distributors, Milestone Medical Technologies ("MMT")
and United Systems, Inc ("United"), includes identification of suitable local
distributors, establishment of distribution arrangements, supporting local
marketing efforts and acting as liaison with the parent company. International
sales represented 18%, 22% and 35% of sales in 2001 and 2002, and the first six
months of 2003, respectively.

         MMT is our principal distributor for Europe, Africa and the Middle
East. MMT is our largest customer, representing 55%, 63% and 77% of our
international revenues in 2001, 2002 and the first six months of 2003,
respectively, and 10%, 14% and 27% of total sales in those periods,
respectively.

         United Systems is our principal distributor in China, Taiwan, and South
Korea. Handpiece use

                                       37
<PAGE>

for these territories is less than in Europe and the US. In 2001, 2002 and the
first six months of 2003, respectively, sales to these territories represented
fewer than 1% of our total revenues, for all those periods.

         In addition, sales to Yoshida Dental Manufacturing Company of Japan,
Synca (our distributor in Canada) and Moyco (our distributor in Mexico) in 2001,
2002 and the first six months of 2003, represented collectively, 7%, 8% and 7%,
respectively.

         After this offering, we plan to hire a dedicated sales manager for each
of the three major regions - Europe, Asia and Latin America, to oversee the
implementation of this sales and marketing strategy and to ensure that the
distributors are provided with adequate training and technical support. We also
plan to assist our master distributors to engage new distributors in major
markets, to train existing and new distributors and to replace poor performing
distributors.

         PROPOSED EXPANDED MARKETING PROGRAM FOR DENTAL AND HYGIENE SCHOOLS

         More than 5,000 students graduate annually from dental school in the
US. We believe this presents a key opportunity for us to cultivate use of
CompuDent early in the dentists' training. We expect to use a portion of the
proceeds of this offering to offer special educational assistance programs to
dental and hygiene schools in the U.S. and Canada. Our hope is that training in
the use of CompuDent will be incorporated into the curriculum of the schools and
that students will use the products throughout their training.

         As of September 30, 2003, CompuDent has been added to the curriculum of
8 U.S. and Canadian dental schools and 13 schools providing degrees in dental
hygiene. Through our international distribution partners, training in the use of
CompuDent systems has also become part of the curriculum in several
international dental programs. To properly implement a program of this magnitude
and potential importance, we may need to hire a dedicated Academic Director.
This Academic Director, ideally either a retired dentist or hygienist, would be
responsible for working with the staffs of the chosen institutions on
incorporating the product into their curricula.

COMPETITION

         Our anesthetic delivery systems compete with disposable and reusable
syringes that generally sell at lower prices and that use established and
well-understood methodologies and other local anesthetic delivery systems, in
both the dental and medical marketplaces.

         Our systems compete on the basis of their performance characteristics
and the benefits provided to both the practitioner and the patient. Clinical
studies have shown that our systems reduce fear, pain and anxiety for some
patients, and we believe that they can also reduce practitioner stress levels.
CompuDent can be used for all local anesthesia techniques that can be performed
with a syringe. CompuDent can also be used for new and modified techniques that
cannot be performed with traditional syringes. These new techniques allow faster
procedures, shorten chair time, while minimizing numbing of the lips and facial
muscles, enhance productivity, reduce stress and virtually eliminate pain and
anxiety.

         The Luer Lock needle, sold by Milestone, competes with dental needles
produced and distributed by a number of major manufacturers and distributors and
other producers or distributors of dental products, many of whom have
significant competitive advantages because of their size, strength in the
marketplace, financial and other resources and broad product lines. Milestone
competes on the basis of convenience since it can package the product with an
order for disposable handpieces.


                                       38
<PAGE>

         We face intense competition from many companies in the medical and
dental device industry, including well-established academic institutions,
possessing substantially greater financial, marketing, personnel, and other
resources. Most of our competitors have established reputations, stemming from
their success in the development, sale, and service of competing dental
products. Further, rapid technological change and research may affect our
products. Current or new competitors could, at any time, introduce new or
enhanced products with features that render our products less marketable or even
obsolete. Therefore, we must devote substantial efforts and financial resources
to improve our existing products, bring our products to market quickly, and
develop new products for related markets. In addition, our ability to compete
successfully requires that we establish an effective distribution network. New
products must be approved by regulatory authorities before they may be marketed.
We cannot assure you that we can compete successfully, that our competitors will
not develop technologies or products that render our products less marketable or
obsolete, or that we will succeed in improving our existing products,
effectively develop new products, or obtain required regulatory approval for
those products.

PATENTS AND INTELLECTUAL PROPERTY

         We hold the following U.S. utility and design patents:

<TABLE>
<CAPTION>
                                                                                        U.S. PATENT      DATE OF
                                     DESCRIPTION                                           NUMBER         ISSUE
                                      ---------                                           --------       ------
<S>                                                                                        <C>            <C>  <C>
CompuDent
Hypodermic Anesthetic Injection Method                                                     4,747,824      5/31/88
Hypodermic Anesthetic Injection Apparatus & Method                                         5,180,371      1/19/93
    (CompuFlo, CompuMed, and CompuDent)
Dental Anesthetic and Delivery Injection Unit                                              6,022,337       2/8/00
Dental Anesthetic Delivery Injection Unit (continuation of No. 6,022,337)                  6,152,734     11/28/00
Dental Anesthetic Delivery Injection Unit (continuation of No. 6,022,337)                  6,132,414     10/17/00
Pressure/Force Computer Controlled Drug Delivery System                                    6,200,289      3/13/01
Design for a Dental Anesthetic Delivery System Handle                                       D427,314      6/27/00
Design for a Dental Anesthetic Delivery System Holder                                       D422,361       4/4/00
Design for a Dental Anesthetic Delivery System Housing                                      D423,665      4/25/00
Handpiece for Injection Device with a Retractable and Rotating Needle                      6,428,517       8/6/02

Other
Hypodermic Syringe and Method                                                              4,877,934     12/19/88
Apparatus and Method for Sterilizing, Destroying and
    Encapsulating Medical Implement Wastes                                                 4,992,217      2/12/91
Apparatus and Method for Verifiably Sterilizing
    Destroying and Encapsulating Regulated Medical Wastes                                  5,078,924       1/7/92
Apparatus and Method for Verifiably Sterilizing,
    Destroying and Encapsulating Regulated Medical Wastes                                  5,401,444      3/28/95
Self-Sterilizing Hypodermic Syringe and Method                                             5,512,730      4/30/96
Self-Sterilizing Hypodermic Syringe and Method                                             5,693,026      12/2/97
</TABLE>

                              ---------------------

                                       39

<PAGE>

         We also have several patent applications pending before the U.S. Patent
and Trademark Office, and hold a number of corresponding patents in Europe and
other major markets.

         During the 2002 and 2001 fiscal years, we expensed $147,709 and
$49,943, respectively, on research and development activities. The higher costs
incurred during 2002 were primarily associated with the development of the
SafetyWand.

         We rely on a combination of patent, copyright, trade secret, and
trademark laws and employee and third party nondisclosure agreements to protect
our intellectual property rights. Despite the precautions taken by us to protect
our products, unauthorized parties may attempt to reverse engineer, copy, or
obtain and use products and information that we regard as proprietary, or may
design products serving similar purposes that do not infringe on our patents.
Litigation may be necessary to protect our intellectual property rights and
could result in substantial cost to us and diversion of our efforts by with no
guarantee of success. Our failure to protect our proprietary information and the
expenses of doing so could have a material adverse effect on our operating
results and financial condition.

         While there are no current claims that our products infringe on the
proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against us in the future with
respect to current or future products or that any such assertion may not require
us to cease selling such products, or to enter into arrangements that require us
to pay royalties, or to engage in costly litigation. Although we have received
no claims of infringement, it is possible that infringement of existing or
future patents or proprietary rights of others may occur. In the event that our
products infringe upon patent or proprietary rights of others, we may be
required to modify our processes or to obtain a license. There can be no
assurance that we would be able to do so in a timely manner, upon acceptable
terms and conditions, or at all. The failure to do so would have a material
adverse effect on us.

GOVERNMENT REGULATION

         The FDA cleared CompuDent system and its disposable handpiece for
marketing in the U.S., for dental applications in July 1996, the CompuMed system
for marketing in the U.S. for medical applications in May 2001 and the
SafetyWand for marketing in the U.S. for dental applications in September 2003.
For us to commercialize our other products in the United States, we will have to
submit additional 510(k) applications with the FDA.

         The manufacture and sale of medical devices and other medical products
are subject to extensive regulation by the FDA pursuant to the FDC Act, and by
other federal, state and foreign authorities. Under the FDC Act, medical devices
must receive FDA clearance before they can be marketed commercially in the
United States. Some medical products must undergo rigorous pre-clinical and
clinical testing and an extensive FDA approval process before they can be
marketed. These processes can take a number of years and require the expenditure
of substantial resources. The time required for completing such testing and
obtaining such approvals is uncertain, and FDA clearance may never be obtained.
Delays or rejections may be encountered based upon changes in FDA policy during
the period of product development and FDA regulatory review of each product
submitted. Similar delays also may be encountered in other countries. Following
the enactment of the Medical Device Amendments to the FDC Act in May 1976, the
FDA classified medical devices in commercial distribution into one of three
classes. This classification is based on the controls necessary to reasonably
ensure the safety and effectiveness of the medical device. Class I devices are
those devices whose safety and effectiveness can reasonably be ensured through
general controls, such as adequate labeling, premarket notification, and
adherence to the FDA's Quality System Regulation ("QSR"), also referred to as
"Good Manufacturing

                                       40
<PAGE>

Practices" ("GMP") regulations. Some Class I devices are further exempted from
some of the general controls. Class II devices are those devices whose safety
and effectiveness reasonably can be ensured through the use of special controls,
such as performance standards, post-market surveillance, patient registries, and
FDA guidelines. Class III devices are those which must receive premarket
approval by the FDA to ensure their safety and effectiveness. Generally, Class
III devices are limited to life-sustaining, life-supporting or implantable
devices.

         If a manufacturer or distributor can establish that a proposed device
is "substantially equivalent" to a legally marketed Class I or Class II medical
device or to a Class III medical device for which the FDA has not required
premarket approval, the manufacturer or distributor may seek FDA marketing
clearance for the device by filing a 510(k) Premarket Notification. The 510(k)
Premarket Notification and the claim of substantial equivalence may have to be
supported by various types of data and materials, including test results
indicating that the device is as safe and effective for its intended use as a
legally marketed predicate device. Following submission of the 510(k) Premarket
Notification, the manufacturer or distributor may not place the device into
commercial distribution until an order is issued by the FDA. By regulation, the
FDA has no specific time limit by which it must respond to a 510(k) Premarket
Notification. At this time, the FDA typically responds to the submission of a
510(k) Premarket Notification within 90 days. The FDA response may declare that
the device is substantially equivalent to another legally marketed device and
allow the proposed device to be marketed in the United States. However, the FDA
may determine that the proposed device is not substantially equivalent or may
require further information, such as additional test data, before the FDA is
able to make a determination regarding substantial equivalence. Such
determination or request for additional information could delay market
introduction of our products and could have a material adverse effect on us. If
a device that has obtained 510(k) Premarket Notification clearance is changed or
modified in design, components, method of manufacture, or intended use, such
that the safety or effectiveness of the device could be significantly affected,
separate 510(k) Premarket Notification clearance must be obtained before the
modified device can be marketed in the United States. If a manufacturer or
distributor cannot establish that a proposed device is substantially equivalent
to a legally marketed device, the manufacturer or distributor will have to seek
premarket approval of the proposed device a more difficult procedure requiring
extensive data, including pre-clinical and human clinical trial data, as well as
extensive literature, to prove the safety and efficacy of the device.

         Though CompuDent, the SafetyWand and CompuMed have received FDA
marketing clearance, there can be no assurance that any of our other products
under development will obtain the required regulatory clearance on a timely
basis, or at all. If regulatory clearance of a product is granted, such
clearance may entail limitations on the indicated uses for which the product may
be marketed. In addition, modifications may be made to our products to
incorporate and enhance their functionality and performance based upon new data
and design review. There can be no assurance that the FDA will not request
additional information relating to product improvements, that any such
improvements would not require further regulatory review thereby delaying the
testing, approval and commercialization of our development products or that
ultimately any such improvements will receive FDA clearance.

         Compliance with applicable regulatory requirements is subject to
continual review and will be monitored through periodic inspections by the FDA.
Later discovery of previously unknown problems with a product, manufacturer, or
facility may result in restrictions on such product or manufacturer, including
fines, delays or suspensions of regulatory clearances, seizures or recalls of
products, operating restrictions and criminal prosecution and could have a
material adverse effect on us.

         We are subject to pervasive and continuing regulation by the FDA, whose
regulations require manufacturers of medical devices to adhere to certain QSR
requirements as defined by the FDC Act.

                                       41
<PAGE>

QSR compliance requires testing, quality control and documentation procedures.
Failure to comply with QSR requirements can result in the suspension or
termination of production, product recall or fines and penalties. Products also
must be manufactured in registered establishments. In addition, labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission. The export of devices is also
subject to regulation in certain instances.

         The Medical Device Reporting ("MDR") regulation obligates us to provide
information to the FDA on product malfunctions or injuries alleged to have been
associated with the use of the product or in connection with certain product
failures that could cause serious injury. If, as a result of FDA inspections,
MDR reports or other information, the FDA believes that we are not in compliance
with the law, the FDA can institute proceedings to detain or seize products,
enjoin future violations, or assess civil and/or criminal penalties against us,
its officers or employees. Any action by the FDA could result in disruption of
our operations for an undetermined time.

         In June 2003 we received CE mark in the European Common Market for
marketing in Europe of the SafetyWand and the Wand Handpiece with Needle. In
July 2003, we obtained regulatory approval to sell CompuDent and its handpieces
in Australia and New Zealand.

PRODUCT LIABILITY

         Failure to use any of our products in accordance with recommended
operating procedures potentially could result in subjecting users to health
hazards or injury. Failures of our products to function properly could subject
us to claims of liability. We maintain liability insurance in an amount that we
believe is adequate. However, there can be no assurance that our insurance
coverage will be sufficient to pay product liability claims brought against us.
A partially or completely uninsured claim, if successful and of significant
magnitude, could have a material adverse effect on us.

EMPLOYEES

         On September 30, 2003 Milestone had 11 full-time employees, including
three executive officers, two customer service people, a national sales manager,
four sales support staff and an administrative assistant and one part time
employee. In addition, our Director of Clinical Affairs and 11 independent sales
representatives provide us with their services on an independent basis.


                                       42
<PAGE>

FACILITIES

         Our offices are located in Livingston Corporate Park in Livingston, New
Jersey. We lease approximately 2,693 square feet of office space under a lease
through March 2007, at a cost that we believe to be competitive. We may have to
increase our office space in the future, and we believe that we will be able to
find adequate premises at reasonable terms. A third party distribution and
logistics center in Pennsylvania handles shipping and order fulfillment.

                                       43
<PAGE>

                                   MANAGEMENT

         The current executive officers, directors and key personnel of
Milestone and their respective ages as of September 30, 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                                 DIRECTOR
             NAME                      AGE                   POSITION                             SINCE
             ----                      ---                   --------                             -----
     <S>                                <C>       <C>                                              <C>
     Leonard A. Osser                   56        Chairman and Chief Executive Officer             1991
     Stuart J. Wildhorn                 46        President
     Thomas M. Stuckey                  49        Vice President and Chief Financial Officer
     Mark Hochman, D.D.S.               45        Director of Clinical Affairs
     Eugene Casagrande, D.D.S.,         60        Director of Professional Relations
     Paul Gregory (2)                   68        Director                                         1997
     Leonard M. Schiller(1)(2)          62        Director                                         1997
     Jeffrey Fuller(1)                  57        Director                                         2003
     Leslie Bernhard(1)                 59        Director                                         2003
</TABLE>

- ----------
(1)      Member of the Audit Committee
(2)      Member of the Compensation Committee

         Leonard A. Osser has been our Chairman and Chief Executive Officer
since July 1991. From 1980 until the consummation of Milestone's public offering
in November 1995, he was engaged primarily as the principal owner and Chief
Executive of U.S. Asian Consulting Group, Inc., a New Jersey based provider of
consulting services in "work-out" and "turnaround" situations for publicly and
privately owned companies in financial difficulty.

         Stuart J. Wildhorn has been our President since September 2003 and
prior to that he had been our Senior Vice President since April 2001. From 1990
until April 2001, Mr. Wildhorn held progressive senior management positions with
Datex-Ohmeda, a leading manufacturer of anesthesia and patient monitoring
products.

         Thomas M. Stuckey has been our Vice President and Chief Financial
Officer since May 1998. Mr. Stuckey is a CPA, and CMA and holds a MS degree in
Accounting from Syracuse University.

         Dr. Mark Hochman has been a clinical consultant to Milestone since 1997
and has served as the Director of Clinical Affairs and Director of Research and
Development since 1999. He has a doctorate of dental surgery with advanced
training in the specialties of periodontics and orthodontics from New York
University College of Dentistry and has been practicing dentistry since 1984. He
holds a faculty appointment as a clinical associate professor at NYU School of
Dental Surgery. Dr. Hochman is a recognized world authority on advanced
subcutaneous drug delivery systems, has published numerous articles in this area
and is personally responsible for inventing much of the technology currently
available from Milestone.

         Dr. Eugene Casagrande has been the Director of Professional Relations
for Milestone since September 1998. In his capacity, Dr. Casagrande represents
Milestone in a variety of clinical and industry related opportunities. Dr.
Casagrande is the President and founder of Casagrande Consulting Services, an
entity devoted to quality management to the dental industry.

         Paul Gregory has been a director of Milestone since April 1997. Mr.
Gregory has been a business and insurance consultant at Innovative Programs
Associates Inc. and Paul Gregory Associates Inc. since

                                       44
<PAGE>

January 1995 and January 1986, respectively, where he services, among other
entities, foreign and domestic insurance groups, law and accounting firms and
international corporations.

         Leonard M. Schiller has been a director of Milestone since April 1997.
Mr. Schiller has been a partner in the Chicago law firm of Schiller, Klein &
McElroy, P.C. since 1977. He has also been President of The Dearborn Group, a
residential property management and real estate acquisition company since 1980.

         Jeffrey Fuller has been a director of Milestone since January 2003. Mr.
Fuller has been president and owner of two municipal water supply systems,
Hudson Valley Water Co. and Lake Lenape Water Co. since 1983 and in addition has
been an executive recruiter since 1995.

         Leslie Bernhard has been a director of Milestone since May 2003. Ms.
Bernhard co-founded AdStar, Inc., and since 1986 has been its president, chief
executive officer and a director. AdStar is an application service provider for
the newspaper classified advertising industry.

         All directors hold office until the next annual meeting of stockholders
and until their successors are duly elected and qualified. Officers are elected
to serve, subject to the discretion of the Board of Directors, until their
successors are appointed.

         Milestone's Board of Directors has established compensation and audit
committees. The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all the officers of Milestone,
reviews general policy matters relating to compensation and benefits of
employees of Milestone, and administers the issuance of stock options to
Milestone's officers, employees, directors and consultants. All compensation
arrangements between Milestone and its directors, officers and affiliates are
reviewed by the compensation committee, the majority of which is made up of
independent directors. The Audit Committee meets with management and Milestone's
independent auditors to determine the adequacy of internal controls and other
financial reporting matters.


                                       45
<PAGE>

LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION

         Our certificate of incorporation provides that a director will not be
personally liable to us or to our stockholders for monetary damages for breach
of the fiduciary duty of care as a director, including breaches which constitute
gross negligence. This provision does not eliminate or limit the liability of a
director:

    o    for breach of his or her duty of loyalty to us or to our stockholders;
    o    for acts or omissions not in good faith or which involve intentional
         misconduct or a knowing violation of law;
    o    under Section 174 of the Delaware General Corporation Law (relating to
         unlawful payments or dividends or unlawful stock repurchases or
         redemptions);
    o    for any improper benefit; or
    o    for breaches of a director's responsibilities under the Federal
         securities laws.

         Our certificate of incorporation also provides that we indemnify and
hold harmless each of our directors and officers to the fullest extent
authorized by the Delaware General Corporation Law, against all expense,
liability and loss (including attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons pursuant to
our certificate of incorporation, Bylaws and the Delaware General Corporation
Law, we have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy and is, therefore,
unenforceable.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons under our
certificate of incorporation, we have been informed that, in the opinion of the
SEC, indemnification is against public policy as expressed in the Securities Act
and is unenforceable.

                             EXECUTIVE COMPENSATION

         The following Summary Compensation Table sets forth all compensation
earned, in all capacities, during the fiscal years ended December 31, 2002,
2001, and 2000 by (i) Milestone's Chief Executive Officer and (ii) the most
highly compensated executive officers, other than the CEO, who were serving as
executive officers at the end of the 2002 fiscal year and whose salary as
determined by Regulation S-B, Item 402, exceeded $100,000 (the individuals
falling within categories (i) and (ii) are collectively referred to as the
"Named Executives").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                               AWARDS
                                                              ANNUAL         COMMON STOCK
                                                           COMPENSATION       UNDERLYING
               NAME AND                                       SALARY           OPTIONS
          PRINCIPAL POSITION                  YEAR             ($)               (#)
        ---------------------------------------------------------------------------------
        <S>                                   <C>           <C>                 <C>
        Leonard A. Osser                      2002          351,800(1)          50,000
              Chief Executive                 2001          350,967(2)          50,000
              Officer and                     2000          265,407(3)          50,000
              Chairman

                                       46
<PAGE>

        Stuart J. Wildhorn                    2002          155,400              7,000
              President                       2001           93,750             50,000


        Thomas A. Stuckey                     2002          136,267(4)           7,000
              Chief Financial                 2001          116,905             10,000
              Officer and Vice President      2000          114,051             25,000
</TABLE>

- ----------
(1)  Includes $320,000 in deferred compensation. It excludes $19,049 paid by
     Milestone to Marilyn Elson, a certified public account, who was employed by
     Milestone to render professional tax services. Ms. Elson is the wife of Mr.
     Osser.

(2)  Includes $350,000 in deferred compensation. The deferred compensation was
     paid subsequent to year end through the issuance of 625,000 units, each
     consisting of one share and one six-year warrant to purchase one share at
     prices ranging from $.80-$2.00. It excludes $20,850 paid by Milestone to
     Marilyn Elson.

(3)  Includes $141,346 in deferred compensation. The deferred compensation was
     paid subsequent to year end through the issuance of 176,683 units, each
     consisting of one share and one six-year warrant to purchase one share at
     prices ranging from $.80-$2.00.Reflects voluntary reduction of base salary,
     which commenced in July.

(4)  Includes a $20,000 bonus paid in 2002.

                                   ----------

                                       47
<PAGE>

STOCK OPTIONS

         The following tables show certain information with respect to incentive
and non-qualified stock options granted in 2002 to Named Executives under
Milestone's 1997 Stock Option Plan and the aggregate value at December 31, 2003
of such options. In general, the per share exercise price of all options is
equal to the fair market value of a share of Common Stock on the date of grant.
No options granted to Named Executives have been exercised.

                              OPTION GRANTS IN 2002

INDIVIDUAL GRANTS OF OPTIONS

<TABLE>
<CAPTION>
                          NUMBER OF             PERCENT OF TOTAL
                       SHARES OF COMMON         OPTIONS GRANTED
                       STOCK UNDERLYING           TO EMPLOYEES           EXERCISE PRICE
         NAME              OPTIONS                  IN 2002                  ($/SH)           EXPIRATION DATE
- -------------------------------------------------------------------------------------------------------------
<S>                        <C>                        <C>                 <C>                    <C>
Leonard A. Osser           50,000  (1)                28.9%               $    .55               01-01-07
Stuart J. Wildhorn          7,000  (2)                4.0%                $    .75               07-27-07
Thomas M. Stuckey           7,000  (2)                4.0%                $    .75               07-27-07
</TABLE>

- ----------
(1)  Options vested 01-01-03

(2)  Two thirds have vested and one third will vest on 07-27-04.


                     AGGREGATED 2002 YEAR END OPTIONS VALUES
                  FOR OPTIONS GRANTED PRIOR TO AND DURING 2002

<TABLE>
<CAPTION>
                                    NUMBER OF SHARES OF COMMON             VALUE OF UNEXERCISED
                                   STOCK UNDERLYING UNEXERCISED            IN-THE-MONEY OPTIONS
                                      OPTIONS AT 12-31-2002                  AT 12-31-2002(1)
                                           EXERCISABLE/                        EXERCISABLE/
                   NAME                   UNEXERCISABLE                        UNEXERCISABLE
         --------------------------------------------------------------------------------------
         <S>                               <C>                                  <C>
         Leonard A. Osser                  0 / 200,000                           $0 / $0
         Stuart J. Wildhorn              19,000 / 38,000                         $0 / $0
         Thomas M. Stuckey               71,667 / 16,333                         $0 / $0
</TABLE>

- ----------
(1) Based on the closing price on December 31, 2003 of $.30 as quoted on the
American Stock Exchange.

EMPLOYMENT CONTRACTS

         As of January 1, 1998 Milestone entered into an Employment Agreement
with Mr. Osser, which provides for an initial term expiring on December 31,
2002, with a two-year non-competition period at the end of the term. The term is
automatically extended for successive one-year periods, unless prior to December
1 of any year either party notifies the other of its election not to extend the
term. Neither party has given notice to the other. Under the Agreement Mr. Osser
serves as our full-time Chief Executive Officer and receives annual base pay of
$350,000, increasing to reflect cost of living adjustments commencing on January
1, 2001. In addition, during January 1998 and each of the next four Januarys
Milestone shall grant Mr. Osser an option to purchase 50,000 shares of Common
Stock exercisable only during the last 30 days of the five-year option term
unless Milestone achieves certain financial goals to

                                       48
<PAGE>

be specified annually by the Compensation Committee. Additionally, as soon as
financial statements for each year commencing with 1998 are completed, Milestone
shall grant the executive an additional option to purchase up to 50,000 shares
depending upon the achievement of specified performance goals. Further, Mr.
Osser shall receive the opportunity to earn cash bonuses of up to $200,000 per
year depending upon the achievement of performance targets to be specified by
the Option Committee.

         On July 7, 1998, at his sole discretion, Mr. Osser implemented a
voluntary reduction of his annual base salary, reducing his annual base pay from
$350,000 to $188,462. The voluntary reduction has been described by Mr. Osser as
being both temporary and having no effect upon his rights under his employment
agreement with Milestone. Such reduction remained in effect until August 5,
2000. At that time, Mr. Osser began to defer his salary at the $350,000 annual
base. At December 31, 2000, his deferred compensation was $141,346. In December
2001, Milestone reached an agreement with Mr. Osser to satisfy the $491,346 of
unpaid salary. The agreement calls for the issuance of 614,183 units. Each unit
consists of one share of Milestone common stock and one warrant to purchase an
additional share of such common stock. The warrants will be exercisable at $.80
per share through January 31, 2003, thereafter at $1.00 per share through
January 31, 2004, and thereafter at $2.00 per share through January 31, 2007, at
which time they will expire. On March 31, 2003, Mr. Osser signed an agreement
deferring $640,000 of his annual salary until April 1, 2004. On October 9, 2003
Mr. Osser signed an agreement according to which he will receive, on the later
of January 2, 2004 or the date this offering becomes effective, an estimated
42,000 units, in payment of $336,000 of accrued compensation.

COMPENSATION OF DIRECTORS

         In 2003, each non-employee director was granted a five-year option to
purchase 20,000 shares of our Common Stock at an exercise price of $.50, a price
above the fair market value of a share of our Common Stock on the date of grant.
Directors receive no cash compensation.

                            EQUITY COMPENSATION PLANS


<TABLE>
<CAPTION>
                                         NUMBER OF                                      NUMBER OF
                                      SECURITIES TO BE                                  SECURITIES
                                        ISSUED UPON          WEIGHTED AVERAGE      REMAINING AVAILABLE
                                        EXERCISE OF         EXERCISE PRICE OF      FOR FUTURE ISSUANCE
                                        OUTSTANDING            OUTSTANDING             UNDER EQUITY
                                        OPTIONS AND            OPTIONS AND          COMPENSATION PLANS
                                         WARRANTS                WARRANTS
                                     ------------------     -------------------    ---------------------
<S>                                      <C>                       <C>                   <C>
Equity compensation plans
approved by stockholders (1):
Grants under our 1997 Stock
Option Plan                              656,344                   $.93                  336,656

Equity compensation plans not
approved by stockholders(2)
    Aggregate Individual                  687,500                 $2.00               Not Applicable
Option Grants

     Total                               1,350,844                $1.47
</TABLE>

                                       49
<PAGE>

(1)      Consisting of our 1997 stock option plan covering a total of 1,000,000
         common shares underlying options issuable to officers and other key
         employees and excluding 7,000 options which were exercised in October
         2003. The plan has a term of 10 years and is administered by a
         committee appointed by the board of directors. The committee, in its
         sole discretion, determines who is eligible to receive these incentive
         stock options, how many options they will receive, the term of the
         options, the exercise price and other conditions relating to the
         exercise of the options. Stock options granted under the plan must be
         exercised within a maximum of 10 years from the date of grant at an
         exercise price that is not less than the fair market value of the
         common shares on the date of the grant. Options granted to shareholders
         owning more than 10% of our outstanding common shares must be exercised
         within five years from the date of grant and the exercise price must be
         at least 110% of the fair market value of the common shares on the date
         of the grant.

(2)      The aggregate individual option grants outside the Stock Option Plan
         referred to in the table above include options issued as payment for
         services rendered to us by outside consultants and providers of certain
         services. The aggregate individual warrant grants referred to in the
         table above include warrants granted to investors in Milestone as part
         of private placements and credit line arrangements.


                                       50
<PAGE>

              CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

         In December 2001, we reached an agreement with Mr. Osser to satisfy
$491,346 of his deferred compensation through the issuance of 614,183 units,
each unit consisted of one share of Milestone common stock and one warrant to
purchase an additional share of common stock. These units were issued to
Mr. Osser in January 2002.

         On October 2, 2003, Milestone issued 400,454 shares of common stock to
Mr. Osser, his share of approximately $5 million of indebtedness satisfied on
the same basis in repayment of 6%/12% notes in the aggregate principal and
interest amount of $404,638.

         In April 2000, Mr. Osser provided Milestone with a $200,000 line of
credit which was payable on January 2, 2003. On October 9, 2003 we reached an
agreement with him to satisfy this $200,000 and $248,356 of other debt and
accrued interest and $336,000 of deferred compensation through the issuance of
units, similar to the units offered in this offering, on the later of January 2,
2004 or the effective date of this offering. The units will be issued at the
same price as offered in this offering.

         We have adopted a policy that, in the future, the audit committee must
review all transactions with any officer, director or 5% shareholder.

                                       51
<PAGE>

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information regarding the beneficial
ownership of our common shares as of the date of this prospectus by:

    o    each person, or group of affiliated persons, known by us to be the
         beneficial owner of more than 5% of our outstanding common shares;
    o    each of our directors;
    o    each Named Executive above;
         and
    o    all of our directors and executive officers as a group.

         The following table does not take into account any common shares sold
as a result of the exercise of the over-allotment option granted to the
representative. Except as otherwise indicated, the persons listed below have
sole voting and investment power with respect to all of the common shares owned
by them. The individual shareholders have furnished all information concerning
their respective beneficial ownership to us.


<TABLE>
<CAPTION>
                                                                            SHARES OF
                                                                          COMMON STOCK
                                                                          BENEFICIALLY           PERCENTAGE OF
         NAME OF BENEFICIAL OWNER (1)                                      OWNED (2)              OWNERSHIP
         ------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                      <C>
         EXECUTIVE OFFICERS AND DIRECTORS
         ------------------------------------------------
         Leonard Osser........................................             3,970,174(3)             20.98%
         Stuart J. Wildhorn...................................                40,333(4)                *
         Thomas M. Stuckey....................................                62,967(5)                *
         Paul Gregory.........................................                32,422(6)                *
         Leonard M. Schiller..................................                32,572(7)                *
         Jeffrey Fuller.......................................                20,000(8)                *
         Leslie Bernhard......................................                20,000(9)                *
         All directors & executive officers as a group
            (7 persons).......................................             4,178,468(10)            21.84%

         5% AND GREATER STOCKHOLDERS
         ------------------------------------------------
         K. Tucker Andersen ..................................             3,950,152 (11)         21.67%
         Cumberland Associates, LLC ..........................             1,980,775 (12)         10.87%
         Gintel Asset Management, Inc. .......................             1,347,000(13)           7.39%
</TABLE>
- ----------
*    Less than 1%

(1)  The addresses of the persons named in this table are as follows: Leonard A.
     Osser, Stuart Wildhorn and Thomas M. Stuckey are all at 220 South Orange
     Avenue, Livingston Corporate Park, Livingston, NJ 07039., Paul

                                       52
<PAGE>

     Gregory, Innovative Programs Associates Inc., 370 E. 76th Street, New York,
     New York 10021; Leonard M. Schiller, Schiller, Klein & McElroy, P.C., 33
     North Dearborn Street, Suite 1030, Chicago, Illinois 60602, Jeffrey Fuller,
     Eagle Chase, Woodbury, NY 11797; Leslie Bernhard, AdStar, Inc., 4553
     Glencoe Avenue, Suite 325, Marina del Rey, California 90292; K. Tucker
     Anderson, c/o Cumberland Associates LLC, 1114 Avenue of the Americas, New
     York, New York 10036; Cumberland Associates, LLC, 1114 Avenue of the
     Americas, New York, New York 10036 and Gintel Asset Management, Inc. 6
     Greenwich Office Park, Greenwich, CT 06831.

(2)  A person is deemed to be a beneficial owner of securities that can be
     acquired by such person within 60 days from the filing of this proxy
     statement upon the exercise of options and warrants or conversion of
     convertible securities. Each beneficial owner's percentage ownership is
     determined by assuming that options, warrants and convertible securities
     that are held by such person (but not held by any other person) and that
     are exercisable or convertible within 60 days from the filing of this
     report have been exercise or converted. Except as otherwise indicated, and
     subject to applicable community property and similar laws, each of the
     persons named has sole voting and investment power with respect to the
     shares shown as beneficially owned. All percentages are determined based on
     the number of all shares, including those underlying options exercisable
     within 60 days from the filing of this proxy statement held by the named
     individual, divided by 18,226,732 outstanding shares on October 31, 2003
     and those shares underlying options exercisable within 60 days from the
     filing of this proxy statement, held by the named individual.

(3)  Includes (i) 614,183 shares issuable upon exercise of stock options within
     60 days of the date hereof, which until January 31 are exercisable at
     $1.00,and beginning February 1, 2004 will be exercisable at $2.00, (ii)
     warrants immediately exercisable to purchase 35,714 shares at $1.75 per
     share and (iii) option for 50,000 shares exercisable at $1.00 per share
     within 60 days .

(4)  Includes 33,333 shares subject to stock options, exercisable within 60 days
     of the date hereof at $2.50 per share and 7,000 shares subject to stock
     options, exercisable within 60 days of the date hereof at $.75 per share.

(5)  Includes 21,000 shares subject to stock options, exercisable within 60 days
     of the date hereof at $3.00 per share and 25,000 shares subject to stock
     options, exercisable within 60 days of the date hereof at $2.1875 per
     share, 6,667 shares subject to stock options exercisable within 60 days of
     the date hereof at $2.50 per share and 7,000 shares subject to stock
     options exercisable within 60 days of the date hereof at $.75 per share.
     Mr. Stuckey disclaims beneficial ownership of (i) 10,000 shares, which are
     held by his wife as custodian for their children, and (ii) 1,700 shares
     which are owned by his wife in her IRA.

(6)  Includes 150 shares held by Mr. Gregory's wife, 12,422 shares subject to
     stock options, exercisable within 60 days of the date hereof at $2.1875 per
     share and 20,000 subject to stock options, exercisable within 60 days of
     the date hereof at $.50 per share.

(7)  Includes 12,422 shares subject to stock options, exercisable within 60 days
     of the date hereof at $2.1875 per share and 20,000 subject to stock
     options, exercisable within 60 days of the date hereof at $.50 per share.

(8)  Includes 20,000 shares subject to stock options, exercisable within 60 days
     of the date hereof at $.50 per share.

(9)  Includes 20,000 shares subject to stock options, exercisable within 60 days
     of the date hereof at $.50 per share

(10) Includes 734,361 shares subject to stock options, 35,714 shares subject to
     warrants all of which are exercisable within sixty (60) days of the date
     hereof and 92,000 shares to which he has shared voting and dispositive
     power.

(11) Based solely upon an amendment to Schedule 13G filed by K. Tucker Andersen
     with the Securities and Exchange Commission on___________, 2003.

(12) Based solely upon Form 4 filed by Cumberland Associates, LLC with the
     Securities and Exchange Commission on November 5, 2003.

(13) Includes 555,000 shares held by Gintel Asset Management and 792,000 shares
     held by Robert Gintel Florida Intangible Tax Trust. Excludes 110,000 shares
     owned by Barbara Gintel (Robert Gintel's spouse) and 150,000 shares owned
     by Gintel Partners Fund.

         All of the common shares set forth in the above table are covered by
lock-up agreements prohibiting their sale, assignment or transfer for 90 days
following the date of this prospectus without the prior written consent of the
representative.

                                       53
<PAGE>

                            DESCRIPTION OF SECURITIES

         As of the date of this prospectus, our authorized capital stock
consists of 55,000,000 shares consisting of 50,000,000 of common stock, par
value $.001 per share and 5,000,000 shares of preferred stock par value $.001
per share. After this offering, we will have 20,716,982 shares of common stock
issued and outstanding, 21,016,982 if the over-allotment option is exercised in
full. As of the date of this prospectus, we have 18,226,732 shares of common
stock outstanding.

UNITS

         Each unit consists of two shares of common stock and one warrant to
purchase one share of common stock. The shares and the warrants included in the
units will not trade separately until the 31st day following the effective date
of this offering, unless the representative of the underwriters determines that
separate trading of the public warrants shall occur earlier. At closing, we will
deliver only unit certificates. An investor can request physical delivery of the
certificate and can immediately request that the unit certificate can be
exchanged for stock and unit certificates. If the investor does so before the
stock and warrants trade separately, trades based on the stock and warrant
certificates will mot clear until trading in those securities commences.

COMMON STOCK

         The holders of outstanding shares of common stock are entitled to
receive dividends out of legally available assets when and to the extent
determined by our board of directors from time to time. Each stockholder is
entitled to one vote for each share held by him on each matter submitted to a
vote of stockholders. At an election of directors, each director is elected by a
plurality of the voting shares of common stock. The shares of common stock are
not entitled to preemptive rights and are not convertible or redeemable. In the
case of a liquidation, dissolution or other termination of our business, the
holders of common stock are entitled to share ratably in the distribution of all
of our assets remaining available for distribution after all of our liabilities
have been satisfied. Each outstanding share of common stock is, and all shares
of common stock to be outstanding after this offering is completed will be,
fully paid and nonassessable.

WARRANTS

         General. The warrants issued in this offering may be exercised at any
time beginning 30 days after this offering and ending on _____________ ___,
2008. Each warrant entitles the holder to purchase one share of common stock at
an exercise price of $_______ per share [150%] of the closing market price of
our common stock on the pricing date of this offering]. This exercise price will
be adjusted if specific events, summarized below, occur. A holder of warrants
will not be deemed a holder of the underlying stock for any purpose until the
warrant is exercised.

         Redemption. Beginning six months after the effective date of this
offering, we will have the right to redeem the warrants at a price of $0.25 per
warrant, after providing 30 days' prior written notice to the warrantholders, at
any time after the closing price for our common stock, as reported on the
principal exchange on which our stock trades, was at or above [200% of the price
of our common stock on the effective date of this offering.] for any five
consecutive trading days. We will send a written notice of redemption by first
class mail to holders of the warrants at their last known addresses appearing on
the registration records maintained by the transfer agent. No other form of
notice or publication or otherwise will be required. If we call the warrants for
redemption, the holders of the warrants will then

                                       54
<PAGE>

have to decide whether to sell the warrants, exercise them before the close of
business on the business day preceding the specified redemption date or hold
them for redemption. If the warrants are not covered by a current registration
statement or are not qualified for sale under the laws of the state in which you
reside, you may not be able to exercise them.

         Exercise. The holders of the warrants may exercise them only if an
appropriate registration statement is then in effect and if the common stock
issuable upon their exercise are qualified for sale under the securities laws of
the state in which the holder resides. To exercise a unit warrant, the holder
must deliver to our transfer agent the unit warrant certificate on or before the
expiration date or the redemption date, as applicable, with the form on the
reverse side of the certificate executed as indicated, accompanied by payment of
the full exercise price for the number of warrants being exercised. Fractional
shares of common stock will not be issued upon exercise of the warrants.

         Adjustments of exercise price. The exercise price of the warrants will
be adjusted if we declare any stock dividend to stockholders or effect any split
or share combination with regard to our common stock. If we effect any stock
split or stock combination with regard to our common stock, the exercise price
in effect immediately before the stock split or combination will be
proportionately reduced or increased, as the case may be. Any adjustment of the
exercise price will also result in an adjustment of the number of shares
underlying a unit warrant or, if we elect, an adjustment of the number of
warrants outstanding.

OPTIONS AND WARRANTS

         As of the date of this prospectus, we had outstanding 656,344
compensatory stock options granted to employees and directors. These options
have exercise prices ranging from $.29 to $6.00 per share and expire between
February 2005 and January 2008. Of these options, 483,011 are currently
exercisable.

         As of the date of this prospectus, we had outstanding 687,500
compensatory stock options granted to non-employees. These options have exercise
prices ranging from $.52 to $4.50 per share and expire between July 2005 and May
2008. Of these options, 528,333 are currently exercisable.

         As of the date of this prospectus, we had outstanding 1,934,970
investment options. These options have exercise prices ranging from $.52 to
$3.00 per share and expire between February 2005 and January 2007. All of these
options are currently exercisable.

REGISTRATION RIGHTS

         As of the date of this prospectus, 691,065 shares of common stock,
including shares underlying warrants and convertible debentures are covered by
registration rights agreements with the holders of these securities. Regarding
306,585 shares of common stock, there is an informal understanding that we will
file a registration statement in connection with these shares. Regarding 160,256
shares, we have agreed to use our reasonable best efforts to file a registration
statement covering these shares. The remain 224,224 are covered by agreements
according to which we will include them in the next Registration Statement on
Form S-3 that we file with the SEC, provided they have not yet become eligible
to sell their shares under Rule 144.

AUTHORIZED BUT UNISSUED SHARES

         The authorized but unissued shares of common and preferred stock are
available for future

                                       55
<PAGE>

issuance without stockholder approval. These additional shares may be utilized
for a variety of corporate purposes, including future public offerings to raise
additional capital, corporate acquisitions and employee benefit plans. The
existence of authorized but unissued shares could render more difficult or
discourage an attempt to obtain control of us by means of a proxy contest,
tender offer, merger or otherwise.

         The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
the corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage. Our certificate of incorporation does not impose
any supermajority vote requirements.

TRANSFER AGENT, WARRANT AGENT AND REGISTRAR

         The transfer agent and registrar for our common stock and the warrant
agent for the warrants is Continental Stock Transfer & Trust Company, located in
New York, New York.

                                       56
<PAGE>

                                  UNDERWRITING

         The underwriters named below have severally agreed, subject to the
terms and conditions contained in an underwriting agreement with us, to purchase
[1,000,000] units, each unit consisting of two shares of common stock and one
public warrant to purchase one share of common stock from us at the price set
forth on the cover page of this prospectus, in accordance with the following
table:


                                          Number of
Underwriter                               Shares
- --------------------------------------    ---------------
Paulson Investment Company, Inc.

                                          ---------------
Total
                                          ===============


         Nature of Underwriting Commitment. The underwriting agreement provides
that the underwriters are committed to purchase all the units offered by this
prospectus if any units are purchased. This commitment does not apply to 150,000
units subject to the over-allotment option granted by us to the representative
to purchase additional units in this offering.

         Conduct of the Offering. We have been advised by Paulson Investment
Company, Inc., that the underwriters propose to offer the units to be sold in
this offering directly to the public at the public offering price set forth on
the cover page of this prospectus, and to certain securities dealers at that
price less a concession of not more than $0.__ per share. The underwriters may
allow, and those dealers may reallow, a concession not in excess of $0.__ per
share to certain other dealers. After the shares are released for sale to the
public, the underwriters may change the offering price and other selling terms
from time to time. No change in those terms will change the amount of proceeds
to be received by us as set forth on the cover page of this prospectus.

         The underwriters have informed us that they do not expect to confirm
sales of units offered by this prospectus to accounts over which they exercise
discretionary authority without obtaining the specific approval of the account
holder.

         Over-allotment Option. We have granted the underwriters an option,
expiring 45 days after the date of this prospectus, to purchase up to 150,000
additional units from us on the same terms as set forth in this prospectus with
respect to the [1,000,000] units. The underwriters may exercise this option, in
whole or in part, only to cover over-allotments, if any, in the sale of the
units offered by this prospectus.

         Offering Discounts. The following table shows the per unit and total
underwriting discounts to be paid by us to the underwriters. These amounts are
shown assuming no exercise and full exercise, respectively, of the underwriters'
over-allotment option described above:

                                       57
<PAGE>


<TABLE>
<CAPTION>
                                                                           TOTAL WITHOUT         TOTAL WITH
                                                           PER             OVER-ALLOTMENT        OVER-ALLOTMENT
                                                           UNIT            OPTION                OPTION
                                                           ------------    ------------------    ----------------
<S>                                                        <C>             <C>                   <C>
Total underwriting discount to be paid by us               $               $                     $
</TABLE>

         Expense Allowance. We have agreed to pay to Paulson Investment Company,
Inc., a non-accountable expense allowance equal to three percent of the
aggregate public offering price of the units sold by us in this offering
(including units sold on exercise of the underwriters' over-allotment option).

         Underwriters' Warrants. On completion of this offering, we will issue
to certain of the underwriters warrants to purchase from us up to 100,000 units,
for a price of $_____ per unit (120%). These warrants are exercisable during the
four-year period beginning one year from the date of this prospectus. These
warrants are not transferable for one year following the date of this
prospectus, except to an individual who is an officer or partner of an
underwriter, by will or by the laws of descent and distribution, and are not
redeemable.

         The holder of these warrants will have, in that capacity, no voting,
dividend or other shareholder rights. Any profit realized on the sale of the
units issuable upon exercise of these warrants may be deemed to be additional
underwriting compensation. The securities underlying these warrants are being
registered pursuant to the registration statement of which this prospectus is a
part. During the term of these warrants, the holder thereof is given the
opportunity to profit from a rise in the market price of our common stock. We
may find it more difficult to raise additional equity capital while these
warrants are outstanding. At any time at which these warrants are likely to be
exercised, we may be able to obtain additional equity capital on more favorable
terms.

         Indemnification. We have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the underwriters may be required to make in respect
thereof.

         Lock-up Agreements. Our officers and directors have agreed not to sell
or transfer any shares of our common stock or equity securities for ninety days
after the date of this public offering, without first obtaining the written
consent of Paulson Investment Company, Inc. Specifically, these officers and
directors have agreed not to, directly or indirectly:

    o    sell or offer to sell any shares of our common stock or equity
         securities;
    o    grant any option to sell any shares of our common stock or equity
         securities;
    o    engage in any short sale of our common stock or equity securities;
    o    pledge or otherwise transfer or dispose of any shares of our common
         stock or equity securities; or
    o    publicly announce an intention to do any of the foregoing.

         These lock-up agreements apply to shares of our common stock and also
to any options or warrants to acquire shares of our common stock. These lock-up
agreements apply to all such securities that are currently owned or later
acquired either of record or beneficially by the persons executing the
agreements. However, Paulson Investment Company, Inc. may, in its sole
discretion and without notice, release some or all of the securities subject to
these agreements at any time during the ninety-day period.

                                       58
<PAGE>

Currently, there are no agreements by Paulson Investment Company, Inc. to
release any of the securities from the lock-up agreements.

         Our officers and directors have agreed that, for a period of one year
from the date of this prospectus, they will notify Paulson Investment Company,
Inc. before they sell our common stock under Rule 144.

         Online Activities. A prospectus in electronic format is available at
www.paulsoninvestment.com and at ____________ and may be made available on
Internet sites or through other online services maintained by one or more of the
underwriters of this offering, members of the selling group or by persons with
whom they may contract for such services. In those cases, prospective investors
may view offering terms online and, depending upon the particular underwriter,
prospective investors may be allowed to place orders online. The underwriters
may agree with us to allocate a specific number of shares for sale to online
brokerage account holders. The representatives will make allocations for online
distributions on the same basis as other allocations.

         Stabilization and Other Transactions. The rules of the SEC generally
prohibit the underwriters from trading in our securities on the open market
during this offering. However, the underwriters are allowed to engage in some
open market transactions and other activities during this offering that may
cause the market price of our securities to be above or below that which would
otherwise prevail in the open market. These activities may include
stabilization, short sales and over-allotments, syndicate covering transactions
and penalty bids.

    o    Stabilizing transactions consist of bids or purchases made by the
         managing underwriter for the purpose of preventing or slowing a decline
         in the market price of our securities while this offering is in
         progress.
    o    Short sales and over-allotments occur when the managing underwriter, on
         behalf of the underwriting syndicate, sells more of our shares than
         they purchase from us in this offering. In order to cover the resulting
         short position, the managing underwriter may exercise the
         over-allotment option described above and/or may engage in syndicate
         covering transactions. There is no contractual limit on the size of any
         syndicate covering transaction. The underwriters will deliver a
         prospectus in connection with any such short sales. Purchasers of
         shares sold short by the underwriters are entitled to the same remedies
         under the federal securities laws as any other purchaser of units
         covered by the registration statement.
    o    Syndicate covering transactions are bids for or purchases of our
         securities on the open market by the managing underwriter on behalf of
         the underwriters in order to reduce a short position incurred by the
         managing underwriter on behalf of the underwriters.
    o    A penalty bid is an arrangement permitting the managing underwriter to
         reclaim the selling concession that would otherwise accrue to an
         underwriter if the common stock originally sold by the underwriter was
         later repurchased by the managing underwriter and therefore was not
         effectively sold to the public by such underwriter.

         If the underwriters commence these activities, they may discontinue
them at any time without notice. The underwriters may carry out these
transactions on the American Stock Exchange, in the over-the-counter market or
otherwise.

                                       59
<PAGE>


                                  LEGAL MATTERS

         The validity of the common shares offered by this prospectus will be
passed upon for us by Morse, Zelnick, Rose & Lander LLP, New York, New York.
Holland & Knight LLP will pass upon certain matters for the underwriters named
in this prospectus in connection with this offering. Morse, Zelnick, Rose and
Lander, LLP, legal counsel to Milestone and its affiliates are the holders of
[350,596] shares of common stock and options to purchase 301,333 shares of
Common Stock.

                                     EXPERTS

         The Consolidated Financial Statements as of December 31, 2002 and for
the years ended December 31, 2001 and 2002, have been audited by J. H. Cohn LLP
independent public accountants as set forth in their report. We have included
these financial statements in the prospectus and elsewhere in the registration
statement in reliance on J. H. Cohn LLP's report, given on their authority as
experts in accounting and auditing.

                       WHERE YOU CAN FIND MORE INFORMATION

         In connection with the units offered by this prospectus, we have filed
a registration statement on Form S-2 under the Securities Act with the SEC. This
prospectus, filed as part of the registration statement, does not contain all of
the information included in the registration statement and the accompanying
exhibits and schedules. For further information with respect to our units,
shares and warrants, and us you should refer to the registration statement and
the accompanying exhibits and schedules. Statements contained in this prospectus
regarding the contents of any contract or any other document are not necessarily
complete, and you should refer to the copy of the contract or other document
filed as an exhibit to the registration statement, each statement being
qualified in all respects by the actual contents of the contract or other
document referred to. You may inspect a copy of the registration statement and
the accompanying exhibits and schedules without charge at the Securities and
Exchange Commission's public reference facilities, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its regional offices located at 233
Broadway, 16th Flr., New York, NY 10279, and you may obtain copies of all or any
part of the registration statement from those offices for a fee. You may obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The SEC maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically. The address of the
site is http://www.sec.gov.

         We are registered under the Securities and Exchange Act of 1934 and we
file with the SEC annual reports on Form 10-KSB and quarterly reports on Form
10-QSB.

         We intend to furnish our shareholders with annual reports containing
financial statements audited by our independent public accountants.

                                       60
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES


                                    I N D E X


                                                                            PAGE

Interim Financial Statements for the Six Months Ended June 30,2003

        Unaudited Condensed Consolidated Balance Sheets
        June 30, 2003 (Unaudited) and December 31, 2002                      F-2

        Unaudited Condensed Consolidated Statements of Operations
        Six Months Ended June 30, 2003 and 2002 (Unaudited)                  F-3

        Unaudited Condensed Consolidated Statements of Cash Flows
        Six Months Ended June 30, 2003 and 2002 (Unaudited)                  F-4

        Notes to Unaudited Condensed Consolidated Financial Statements       F-6

Financial Statements for the Year Ended December 31, 2002

   Independent Auditors' Report                                             F-13

   Consolidated Balance Sheet, at December 31, 2002                         F-14

   Consolidated Statements of Operations, for the years ended
   December 31, 2002 and 2001                                               F-15


   Consolidated Statements of Stockholders' equity (Deficit), for
   the years ended December 31, 2002 and 2001                               F-16


   Consolidated Statements of Cash Flows for the years ended
   December 31, 2002 and 2001                                               F-17

   Notes to Consolidated Financial Statements



                                       F-1

<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       June 30, 2003 and December 31, 2002

<TABLE>
<CAPTION>
                                                                                           June 30, 2003
                                                                                            (Unaudited)         December 31, 2002
<S>                                                                                            <C>                     <C>
ASSETS
CURRENT ASSETS:                                                                                $ 28,467                $  9,683
      Cash                                                                                      608,953                 239,435
      Accounts receivable, net of allowance for doubtful accounts at June 30,
         2003 and December 31, 2002 of $40,220 and $46,152,  respectively                       157,383                 119,291
       Inventories                                                                              284,052                 300,000
       Advances to contract manufacturer                                                         11,275                 159,877
       Deferred debt financing costs, net                                                        21,397                  64,952
                                                                                             ----------              ----------
       Prepaid expenses                                                                       1,111,527                 893,238
                                                                                                212,835                 227,207
                      Total current assets                                                           --                  87,935
EQUIPMENT, net                                                                                    2,385                      --
ADVANCES TO CONTRACT MANUFACTURER-- Long term                                                    32,333                  32,333
                                                                                             ----------              ----------
DEFERRED DEBT FINANCING-Long term                                                            $1,359,080              $1,240,713
                                                                                             ==========              ==========
OTHER ASSETS
                      Totals
                                                                                             $1,540,330              $1,269,523
LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                                         97,888                  86,492
CURRENT LIABILITIES:                                                                            313,543                 169,519
       Account payable, including $11,594 and $32,000 to related parties                      4,976,666               4,581,708
            at June 30, 2003 and December 31, 2002, respectively                                326,215                    --
                                                                                             ----------              ----------
       Accrued expenses                                                                       7,254,642               6,107,242
       Accrued interest                                                                         117,139                 139,323
       Note payable                                                                             480,000                 320,000
       Notes payable-officer/stockholder                                                        725,622                 480,091
                                                                                                 32,000                 300,000
                                                                                             ----------              ----------
                 Total current liabilities                                                    8,609,403               7,346,656
                                                                                             ----------              ----------
Accrued interest
Deferred compensation payable to officer/stockholder
Notes payable
Notes payable -- officer/stockholder

                 Total liabilities

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY:
       Common stock, par value $.001; authorized,
             25,000,000 shares; 12,733,370 shares issued                                         12,733                  12,733
       Additional paid-in capital                                                            36,614,029              36,599,607
       Accumulated deficit                                                                  (42,945,569)            (41,786,767)
       Unearned compensation                                                                    (20,000)                (20,000)
       Treasury stock, at cost, 100,000 shares                                                 (911,516)               (911,516)
                                                                                            -----------             -----------
               Total stockholders' deficiency                                               (7,250,323)              (6,105,943)
                                                                                            -----------             ===========
                 Totals                                                                     $ 1,359,080             $ 1,240,713
                                                                                            ===========             ===========


</TABLE>



                                      F-2
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     SIXMONTHS ENDED JUNE 30, 2003 AND 2002
                                   (Unaudited)

                                                      Six Months Ended
                                                      June 30, June 30,
                                                   2003            2002
                                               ------------    ------------

Net sales ..................................   $  2,134,690    $  2,181,717
Cost of sales ..............................      1,048,421         981,771
                                               ------------    ------------

Gross Profit ...............................      1,086,269       1,199,946
                                               ------------    ------------

Selling, general and administrative expenses      1,600,415       1,835,208
Charge in connection with the closing of the
    Deerfield, IL facility .................         65,873            --
Research and development expenses ..........         83,092          45,379
                                               ------------    ------------

                               Totals ......      1,749,380       1,880,587
                                               ------------    ------------

Loss from operations .......................       (663,111)       (680,641)

Other income ...............................           --            48,000
Interest, net ..............................       (495,691)       (389,780)
                                               ------------    ------------
Net loss ...................................   $ (1,158,802)   $ (1,022,421)
                                               ============    ============
Loss per share - basic and diluted .........   $       (.09)   $       (.08)
                                               ============    ============
Weighted average shares outstanding -basic
     and diluted ...........................     12,633,370      12,171,450
                                               ============    ============

                                      F-3
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 2003 AND 2002
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                       2003           2002
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>
Cash flows from operating activities:
     Net loss ..................................................................   $(1,158,802)   $(1,022,421)
     Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation ..........................................................        18,074         28,419
         Amortization of debt discount and deferred financing costs ............       213,640        129,999
         Loss on disposal of fixed assets ......................................        11,248           --
         Amortization of advertising cost ......................................          --           17,616
         Changes in operating assets and liabilities:
              Increase in accounts receivable ..................................      (369,518)       (38,735)
              (Increase) decrease in inventories ...............................       (38,092)        46,652
              Decrease in advances to contract manufacturer ....................       103,883        113,490
              (Increase) decrease in prepaid expenses ..........................        43,555         (9,987)
              Increase in other assets .........................................          --          (19,971)
              Increase in accounts payable .....................................       270,807        126,978
              Increase in accrued interest .....................................       282,049        259,781
              Increase (decrease) in accrued expenses ..........................        11,396         (8,033)
              Increase in deferred compensation ................................       160,000        160,000
                                                                                   -----------    -----------
                  Net cash used in operating activities ........................      (451,760)      (216,212)
                                                                                   -----------    -----------

Cash flows from investing activities-payment for capital expenditures ..........       (14,950)       (21,440)
                                                                                   -----------    -----------

Cash flows from financing activities:
     Proceeds from note payable - officer/stockholder ..........................       130,537       (114,960)
     Payments to note payable - officer/stockholder ............................       (72,322)          --
     Proceeds from issuance of notes payable ...................................       450,000        400,000
     Payments for deferred financing costs .....................................       (22,721)       (40,538)
                                                                                   -----------    -----------

                  Net cash provided by financing activities ....................       485,494        244,502
                                                                                   -----------    -----------


NET INCREASE IN CASH ...........................................................        18,784          6,850
Cash, beginning of period ......................................................         9,683         15,742
                                                                                   -----------    -----------
Cash, end of period ............................................................   $    28,467    $    22,592
                                                                                   ===========    ===========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                      F-4
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                     SIX MONTHS ENDED JUNE 30, 2003 AND 2002
                                   (Unaudited)

Supplemental schedule of noncash financing activities:

In June 2003, we granted warrants to purchase 160,256 shares of common stock
(with an estimated fair value of $14,423) in connection with a $50,000 credit
facility provided by a major existing investor. This resulted in an initial
increase to debt discount and to additional paid-in capital.

During the six months ended June 30, 2003, pursuant to the 6%/12% promissory
note agreements, we converted $160,211 of accrued interest into additional
principal.

In January 2002, we issued 33,840 units consisting of one share of common stock
and one warrant to purchase an additional share of common stock in exchange for
payment of accrued interest totaling $27,072.

In January 2002, in consideration for payment of $491,346 in deferred
compensation, we issued 614,183 units (consisting of one share of common stock
and one warrant to purchase an additional share of common stock).The warrants
are exercisable at $.80 per share through January 31, 2003; at $1.00 per share
through January 31, 2004 and thereafter at $2.00 per share through January 31,
2007.

In January 2002, pursuant to the 20% promissory note agreements, we converted
$63,377 of accrued interest into additional principal.

In April 2002, pursuant to the 20% promissory note agreements, we converted
$65,168 of accrued interest into additional principal.

In April 2002, pursuant to the debt restructuring, we recorded a deferred
financing charge of $329,572. This resulted in an increase to notes payable of
$140,203 and accrued interest of $189,369.

                                       F-5
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1 - Summary of accounting policies:

         The unaudited condensed consolidated financial statements of Milestone
         Scientific Inc. and Subsidiaries (the "Company" or "Milestone") have
         been prepared in accordance with accounting principles generally
         accepted in the United States of America for interim financial
         information. Accordingly, they do not include all of the information
         and footnotes required by accounting principles generally accepted in
         the United States of America for complete financial statements.

         These unaudited condensed consolidated financial statements should be
         read in conjunction with the consolidated financial statements and
         notes thereto for the year ended December 31, 2002 included in
         our Annual Report on Form 10-KSB. The accounting policies used in
         preparing these unaudited condensed consolidated financial statements
         are the same as those described in the December 31, 2002 consolidated
         financial statements.

         In the opinion of Milestone, the accompanying unaudited condensed
         consolidated financial statements contain all adjustments (consisting
         of normal recurring entries) necessary to present fairly the financial
         position as of June 30, 2003 and the results of operations for the six
         months ended June 30, 2003 and 2002.

         The results reported for the six months ended June 30, 2003 and 2002
         are not necessarily indicative of the results of operations which may
         be expected for a full year.

Note 2 - Basis of presentation:

         The accompanying condensed consolidated financial statements have been
         prepared assuming Milestone will continue as a going concern. However,
         as shown in the accompanying condensed consolidated financial
         statements, Milestone incurred net losses of approximately $1,159,000
         and $1,022,000 and negative cash flows from operating activities of
         approximately $452,000 and $216,000 during the six months ended June
         30, 2003 and 2002, respectively. As a result, Milestone had a cash
         balance of only approximately $28,000, a working capital deficiency of
         approximately $6,143,000 and a stockholders' deficiency of
         approximately $7,250,000 as of June 30, 2003. These matters raise
         substantial doubt about Milestone's ability to continue as a going
         concern. Management believes that its initial concerns about
         Milestone's ability to continue as a going concern have been alleviated
         by recent actions taken by Milestone as well as management's plans
         which are discussed below.

         Further, management believes that, in the absence of substantial
         increase in revenue, it is probable that Milestone will continue to
         incur losses and negative cash flows from operating activities through
         at least June 30, 2004 and that Milestone will need to obtain
         additional equity or debt financing, as well as to continue its ability
         to defer its obligations, to sustain its operations until it can expand
         its customer base and achieve profitability, if ever.

                                       F-6
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         We have taken certain steps in order to reduce its operating expenses
         and utilization of cash. These steps include, amongst others, the
         following:

         o    Commencing in 2001 and continuing through 2003, we reconfigured
              our sales force from maintaining a large internal sales force to
              utilizing independent sales representatives and distributors.

         o    We reduced administrative personnel and telemarketers by
              approximately ten people.

         o    On January 31, 2003, we completed the closing of the Deerfield,
              Illinois facility. The customer support, service and other
              back-office functions previously conducted, in whole or in part,
              at this location were consolidated into our New Jersey location.
              The receiving, shipping and storage functions, which were also
              previously done at this location, are now outsourced to an
              independent warehouse located in Pennsylvania.

         o    Obtained an agreement from its Chief Executive Officer/Stockholder
              to defer 2002 and 2003 compensation, aggregating $640,000 until
              January 2005.

         o    Restructured and extended the maturity dates of its debt
              obligations. Further, as part of the debt restructuring, we
              obtained agreements from certain of its noteholders enabling it to
              convert debt and related interest aggregating approximately
              $5,239,000 at June 30, 2003 into shares of common stock. On July
              1, 2003, we received the necessary approval from convertible debt
              holders to extend the maturity date of certain obligations until
              September 20, 2003. It is our intention to have this conversion
              completed sometime during the third quarter of 2003.

         o    Obtained an agreement from one of its attorneys to convert an
              additional $160,000 of the amount owed into shares of common
              stock.

         o    During February 2003, we received a $200,000 note payable from an
              existing investor which was scheduled to mature on August 1, 2003.
              The note is convertible into shares of common stock, at ouroption,
              which we plan to do during the third quarter of 2003. On July 1,
              2003, the noteholder agreed to extend the note payable to
              September 20, 2003.

         o    In April 2003, we received an additional $900,000 8% line of
              credit from the same investor, which is scheduled to mature on
              January 1, 2005, unless extended. $200,000 was drawn down from the
              line during April 2003. Subsequent drawn down were $25,000 and
              $75,000 in July and August, respectively.

         o    On June 2, 2003, we received an additional $50,000 6% note payable
              with warrants attached from a stockholder. The note is scheduled
              to mature in November 2004 and is convertible to stock at our
              option.

         The accompanying condensed consolidated financial statements do not
         include any adjustments relating to the recoverability and
         classification of recorded asset amounts or the amounts and
         classifications of liabilities that might be necessary should we be
         unable to continue as a going concern.

                                       F-7
<PAGE>

MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 - Loss per share:

         Basic loss per common share is computed using the weighted average
         number of common shares outstanding.

         Options and warrants to purchase 3,265,814 and 4,415,855 shares of
         common stock were outstanding as of June 30, 2003 and 2002,
         respectively, but were not included in the computation of diluted loss
         per share because the effect would have been anti-dilutive.

Note 4 - Significant Customer:

         We had one foreign customer who accounted for approximately 22% of our
         net sales for the six months ended June 30, 2003 and approximately 17%
         for the six months ended June 30, 2002. At June 30, 2003, receivables
         from this customer were approximately 68% of our total accounts
         receivable.

Note 5 - Notes payable to officer/stockholder:

         Notes payable to officer/stockholder represent six obligations payable
         to our Chief Executive Officer ("CEO"), consisting of (i) $200,000 note
         payable, with interest payable at 9% per annum and having an original
         due date of January 2, 2003, (ii) a $100,000 line of credit with
         interest payable at 6% per annum having an original due date of April
         2, 2003, and (iii) a $33,215 note payable on demand with interest
         payable at 6% per annum. On April 1, 2003, the $200,000 and $100,000
         notes were extended to April 1, 2004. On April 15, 2003, $32,000 of the
         $33,215 notes payable was extended to January 2, 2005.

         On January 17, 2003, our CEO provided us with a $57,322 short term loan
         for the express purpose of purchasing Wand handpieces from our
         supplier. We repaid the loan in full by February 7, 2003. On February
         12, 2003, the CEO provided us with a $38,215 loan for the same purposes
         as above and $23,215 remains outstanding as of August 15, 2003.

Note 6- Notes payable:

    6%/12% Promissory Notes

    (A) THE 6%/12% PROMISSORY NOTES CONSIST OF THE FOLLOWING ISSUANCES:

         (i)  On June 16, 2001, we restructured our obligations to the holders
              of its 10% Senior Secured Promissory Notes. Under the terms of the
              agreement, each of the noteholders agreed to exchange their 10%
              Notes for a new, zero coupon note (the "Zero Coupon Note").

                                       F-8
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

              As a result of us initially restructuring our obligations, the
              unamortized portion of the debt discount and deferred financing
              costs were amortized through June 30, 2002. The significant terms
              of the Restructuring Debt were (i) modification of the interest
              rate (ii) granting us the option to pay the debt with shares of
              common stock and (iii) repricing the warrants which were
              previously issued to the shareholders back to the initial exercise
              price of $1.75 per share.

              Subsequently, on April 15, 2002, the holders additionally agreed
              to extend the promissory notes to July 1, 2003 and to lower the
              interest rate to 6% if paid in cash or to 12% if paid in common
              stock. In connection with the extension, we recorded $16,215 in
              deferred financing charges relating to professional fees and
              $140,203 of deferred financing costs relating to consideration to
              the noteholders valued at $120 per share of our common stock for
              each $1,000 face amount outstanding at maturity which increased
              the aggregate carry value of the notes by $140,203. We areaccruing
              interest expense at 12%. These deferred financing costs are being
              amortized through July 1, 2003.

              Further, on July 1, 2003, the holders additionally agreed to
              extend the promissory notes to September 20, 2003.

      (ii)    In August 2000, we borrowed $1,000,000 which consists of two loans
              from two funds managed by Cumberland Associates LLC, and bear
              interest at 20% per year and payable in cash or through the
              issuance of additional 20% notes on which both interest and
              principal are payable. The loans are secured by substantially all
              of our assetsand are subordinated to the 6%/12% senior secured
              promissory notes that were amended April 15, 2002. We can prepay
              the loans in cash at any time. We can prepay the notes and accrued
              interest with common stock at its option. Stock issued in lieu of
              payment of the debt will be valued at 85% of the then market
              price.

              For the six months June 30, 2003 and 2002, we converted into
              principal, accrued interest of $160,211 and $128,545,
              respectively.

              On April 12, 2002, Cumberland Associates LLC agreed to extend the
              maturity date of these loans through July 1, 2003 and to lower the
              interest rate from 20% to 6%, if paid in cash, or 12% if paid in
              common stock. We recorded $16,215 of deferred financing charges
              relating to professional fees and $189,369 relating to
              consideration issued to the noteholders valued at $120 per share
              of our common stock for each $1,000 face amount outstanding at
              maturity. We arecurrently accruing interest expense at 12%.
              Accordingly, the deferred financing costs and the unamortized
              financing charges are being amortized through July 1, 2003.

              It is currently ourintention to satisfy these obligations with
              shares of common stock upon their maturity.

                                      F-9
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     (B) 8% PROMISSORY NOTES

     The 8% promissory notes consist of the following:

              On July 31, 2000, we established a $1,000,000 credit facility with
              a major existing investor. Initially, $500,000 was borrowed under
              the line, which was due on June 30, 2003. In December 2000, and
              January 2001, we borrowed under the credit facility an additional
              $400,000 and $100,000, respectively, due on December 31, 2003. In
              connection with the initial $500,000, the investor received
              five-year warrants to purchase 70,000 shares of our common stock,
              exercisable at $3.00 per share. In connection with the $400,000,
              the investor received five-year warrants to purchase 80,000 shares
              of ourcommon stock exercisable at $1.25 per share. In connection
              with the $100,000, the investor received five-year warrants to
              purchase 20,000 shares of our common stock at $1.25 per share. On
              April 12, 2002, the investor agreed to extend the maturity date of
              the $500,000 to August 1, 2003. At our option , this $500,000 can
              be convertible into common stock. Accordingly, in connection with
              the extension, the unamortized debt discount is being amortized to
              August 1, 2003. On April 15, 2003, the investor agreed to extend
              the maturity date of the $500,000 and interest originally due
              December 31, 2003 to January 2, 2005. Accordingly, only $500,000
              of loans have been recorded as long term debt in the accompanying
              consolidated financial statements. On July 1, 2003, the investor
              agreed to extend the maturity date of notes due August 1, 2003
              until September 20, 2003.

              During 2002, we issued a total of $1,185,000 promissory notes to
              an existing investor. The notes bear interest at 8% if paid in
              cash and 10% if paid in stock and mature on September 30, 2003. At
              our option , the principal and interest are payable on the
              maturity date in common stock. Additionally, the note will
              automatically convert into shares of our common stock if we issue
              1,000,000 shares or raise at least $1,000,000 from the sale of
              equities prior to August 1, 2003, at the market price in that
              transaction but not less than $.50 per common share, or more than
              $2.00 per share. We are accruing interest at 10%.


     (C) 6% CONVERTIBLE PROMISSORY NOTES

              During June 2003, we issued a $50,000 promissory note to an
              existing investor. The note bears interest at 6% and matures on
              November 27, 2004. At our option, the principal and interest are
              payable on the maturity date in common stock at a rate of one
              share of our common stock for every $.312 of indebtedness.
              Additionally, Milestone granted the investor warrants to purchase
              160,256 shares of our common stock at a per share price of $.52
              with an estimate fair value of $14,423 at any time or from time to
              time during the period commencing of June 4, 2003 and ending June
              3, 2005. This resulted in an initial increase to debt discount and
              to additional paid-in capital.

Note 7- Legal proceedings

              On June 10, 2002, a former distributor, Henry Schein, Inc., sued
              Milestone in the Supreme Court of the State of New York for
              $110,851 claimed to be due them for returned merchandise.
              Milestone denies any liability. The parties are currently engaged
              in discovery. Milestone believes it has meritorious defense to
              this complaint based, in part, on its position that the plaintiff
              had no right to return the goods.

                                      F-10
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

              On May 9, 2003, Milestone was served with a Breach of Contract
              Complaint. In the complaint, the plaintiff, Korman/Lender
              Management (landlord of the facility in Deerfield, IL) seeks
              damages of $17,755 plus costs, including attorney's fees, interest
              and continuing rental obligation. We are in the process of
              preparing a response.

Note 8 - Employee Stock Option Plan

              As of June 30, 2003, there were 663,344 outstanding options
              granted under the Milestone 1997 Stock Option Plan. We account for
              these plans under the recognition and measurement principles of
              APB Opinion No. 25, Accounting for Stock Issued to Employees, and
              related Interpretations. No stock-based employee compensation cost
              is reflected in net loss, as all options granted under those plans
              had an exercise price equal to the market value of the underlying
              common stock on the date of grant. The following table illustrates
              the effect on net loss and loss per share if we had applied the
              fair value recognition provisions of FASB Statement No. 123,
              Accounting for Stock-Based Compensation, to stock-based employee
              compensation.

<TABLE>
<CAPTION>
                                                             SIX MONTHS ENDED JUNE 30

                                                              2003              2002
                                                              ----              ----
<S>                                                         <C>               <C>
              Net loss, as reported                         $1,158,802        $1,022,421
              Deduct:  Total stock-based employee
              compensation expenses determined under
              fair value based method for all awards
                                                               112,108           257,688
                                                            ----------        ----------
              Net loss, pro forma
                                                            $1,270,910        $1,280,109
                                                            ==========        ==========
              Loss per share: Basic and diluted
                   As reported
                   Basic-pro forma                              $(.09)            $(.08)
                                                                ======            ======
                                                                $(.10)            $(.08)
                                                                ======            ======
</TABLE>

Note 9 - Closing of Deerfield, IL Facility

              In December 2002, Milestone initiated the transition of its
              customer service office to its corporate headquarters in
              Livingston, New Jersey and its distribution and logistics center
              to a third party, Design Centre of York, Pennsylvania. The
              resulting closing of the Deerfield location was completed during
              January 2003. The net book value of the facility's fixed assets
              transferred or disposed during January 2003 was $41,425 and
              $11,248, respectively.



                                      F-11

<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 10 - Subsequent Events

              Annual Meeting Results

              On July 2, 2003, the Stockholders of Company adopted the Amendment
              to Milestone's Certificate of Incorporation, increasing the
              authorized shares of Common Stock from 25,000,000 to 50,000,000.

              An additional amendment to our Certificate of Incorporation was
              approved by our stockholders on July 18, 2003. It adds a new class
              of the 5,000,000 shares of "blank check" Preferred Stock. Such
              rights, preferences and privileges are to be determined by the
              Board of Directors when designating each issue.

              These amendments will serve to facilitate the conversion of the
              debt instruments whose maturity had been extended to September 20,
              3003.

                                      F-12
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
Milestone Scientific, Inc.

We have audited the accompanying consolidated balance sheet of MILESTONE
SCIENTIFIC, INC. AND SUBSIDIARIES as of December 31, 2002, and the related
consolidated statements of operations, changes in stockholders' deficiency and
cash flows for the years ended December 31, 2002 and 2001. These consolidated
financial statements are the responsibility of our management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Milestone
Scientific, Inc. and Subsidiaries as of December 31, 2002, and their results of
operations and cash flows for the years ended December 31, 2002 and 2001, in
conformity with accounting principles generally accepted in the United States of
America.

                                                          J.H. Cohn LLP

Roseland, New Jersey
April 1, 2003, except for Notes B and H
    which are as of April 15, 2003

                                      F-13

<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                              AT DECEMBER 31, 2002

<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S>                                                                                         <C>
                  Cash                                                                      $      9,683
                  Accounts receivable, net of allowance for doubtful accounts of $46,152         239,435
                  Inventories                                                                    119,291
                  Advances to contract manufacturer                                              300,000
                  Deferred debt financing, net                                                   159,877
                  Prepaid expenses                                                                64,952
                                                                                              ----------
                                Total current assets                                             893,238
EQUIPMENT, net                                                                                   227,207
ADVANCES TO CONTRACT MANUFACTURER-- Long term                                                     87,935
OTHER ASSETS                                                                                      32,333
                                                                                              ----------
                                Total                                                       $  1,240,713
                                                                                              ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
                  Account payable, including $32,000 to related parties                     $  1,269,523
                  Accrued expenses                                                                86,492
                  Accrued interest                                                               169,519
                  Notes payable                                                                4,581,708
                                                                                              ----------
                                Total current liabilities                                      6,107,242
Accrued interest                                                                                 139,323
Deferred compensation payable to officer/stockholder                                             320,000
Notes payable                                                                                    480,091
Notes payable-- officer/stockholder                                                              300,000
                                                                                              ----------
                                Total liabilities                                              7,346,656
                                                                                              ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY:
                  Common stock, par value $.001; authorized,
                                  25,000,000 shares; 12,733,370 shares issued                     12,733
                  Additional paid-in capital                                                  36,599,607
                  Accumulated deficit                                                        (41,786,767)
                  Unearned compensation                                                          (20,000)
                  Treasury stock, at cost, 100,000 shares                                       (911,516)
                                                                                              ----------
                                Total stockholders' deficiency                                (6,105,943)
                                                                                              ----------
                                Total                                                       $  1,240,713
                                                                                              ==========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-14
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             YEAR ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                                            2002                2001
                                                                         ------------       ------------
<S>                                                                      <C>                <C>
Revenues                                                                 $  4,074,006       $  4,093,710
Cost of Sales                                                               1,980,949          1,973,156
                                                                         ------------       ------------
Gross profit                                                                2,093,057          2,120,554
                                                                         ------------       ------------
Selling, general and administrative expenses                                3,588,836          5,271,032
Research and development expenses                                             147,709             49,943
Closing of Deerfield, IL facility                                              26,067                 --
                                                                         ------------       ------------
TOTALS                                                                      3,762,612          5,320,975
                                                                         ------------       ------------
Loss from operations                                                       (1,669,555)        (3,200,421)
Interest income                                                                    --              2,936
Interest expense                                                             (850,642)          (858,582)
Sale of prophy angle business and related consulting income                    80,000             64,487
                                                                         ------------       ------------
NET LOSS                                                                 $ (2,440,197)      $ (3,991,580)
                                                                         ============       ============
Loss per common share-- basic and diluted                                $       (.20)      $       (.36)
                                                                         ============       ============
Weighted-average shares outstanding-- basic and diluted                    12,469,673         11,142,590
                                                                         ============       ============
</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-15
<PAGE>


                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                       COMMON STOCK          ADDITIONAL
                                                              PAID IN     ACCUMULATED     UNEARNED
                                   SHARES        AMOUNT       CAPITAL       DEFICIT      ADVERTISING
                                  --------      --------      --------      --------     -----------
<S>                               <C>         <C>           <C>           <C>              <C>
Balance, January 1, 2001          10,752,898  $     10,753  $ 34,584,473  $(35,354,990)    $      --
Warrants issued with draw-
down on credit facility                                           23,400
Common stock issued for
consideration for payment
of accrued interest                   27,641            28        36,251
Warrants issued pursuant to
a $500,000 line of credit                                         40,000
Common stock issued for
services rendered                     92,308            92       149,908
Warrants issued for
unearned advertising fees                                        324,218                    (324,218)
Proceeds from sale of
common stock, net of
expenses                             500,000           500       491,500
Warrants issued to
consultants                                                      100,000
Stock options issued for
services rendered                                                 97,649
Amortization of unearned
advertising expense                                                                           21,398
Amortization of deferred
compensation
Proceeds from sale of
common stock yet to be issued,
net of expenses                                                  243,167
Net loss                                                                    (3,991,580)
- ------------------------------------------------------------------------------------------------------

Balance, December 31, 2001        11,372,847        11,373    36,090,566   (39,346,570)     (302,820)
- ------------------------------------------------------------------------------------------------------

Common stock issued from the
sale of common stock in 2001         325,000           325          (325)
Common stock issued for accrued
interest                              33,840            34        27,038
Common stock issued for deferred
compensation                         614,183           614       490,732
Common stock issued for payment of
accounts payable                     187,500           187       149,813
Amortization of unearned
advertising expense                                                                           24,803
Expired warrants for
unearned advertising                                            (278,017)                    278,017
Stock options issued for
future services                                                   30,000
Common stock issued for payment of
accounts payable                     200,000           200        89,800
Net loss                                                                    (2,440,197)
- ------------------------------------------------------------------------------------------------------

Balance, December 31, 2002        12,733,370  $     12,733  $ 36,599,607  $(41,786,767)    $      --
- ------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                     DEFERRED       UNEARNED      TREASURY
                                   COMPENSATION   COMPENSATION      STOCK         TOTAL
                                   ------------   ------------    --------      --------
<S>                                <C>              <C>        <C>           <C>
Balance, January 1, 2001           $    (31,055)    $      --  $   (911,516) $ (1,702,335)
Warrants issued with draw-
down on credit facility                                                            23,400
Common stock issued for
consideration for payment
of accrued interest                                                                36,279
Warrants issued pursuant to
a $500,000 line of credit                                                          40,000
Common stock issued for
services rendered                                                                 150,000
Warrants issued for
unearned advertising fees                                                               0
Proceeds from sale of
common stock, net of
expenses                                                                          492,000
Warrants issued to
consultants                                                                       100,000
Stock options issued for
services rendered                                                                  97,649
Amortization of unearned
advertising expense                                                                21,398
Amortization of deferred
compensation                             31,055                                    31,055
Proceeds from sale of
common stock yet to be issued,
net of expenses                                                                   243,167
Net loss                                                                       (3,991,580)
- ------------------------------------------------------------------------------------------

Balance, December 31, 2001                   --            --      (911,516)   (4,458,967)
- ------------------------------------------------------------------------------------------

Common stock issued from the
sale of common stock in 2001
Common stock issued for accrued
interest                                                                           27,072
Common stock issued for deferred
compensation                                                                      491,346
Common stock issued for payment of
accounts payable                                                                  150,000
Amortization of unearned
advertising expense                                                                24,803
Expired warrants for
unearned advertising                                                                    0
Stock options issued for
future services                                       (20,000)                     10,000
Common stock issued for payment of
accounts payable                                                                   90,000
Net loss                                                                       (2,440,197)
- ------------------------------------------------------------------------------------------

Balance, December 31, 2002            $      --  $    (20,000) $   (911,516) $ (6,105,943)
- ------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-16
<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             YEAR ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                                                2002             2001
                                                                             ----------        ----------
<S>                                                                         <C>              <C>
Cash flows from operating activities:
Net loss                                                                    $(2,440,197)     $(3,991,580)
Adjustments to reconcile net loss to net cash used in
operating activities:
              Depreciation                                                       53,052           75,990
              Amortization of unearned advertising cost                          24,803           21,398
              Amortization of debt discount and deferred financing costs        340,133          306,734
              Common stock issued for services                                       --          150,000
              Amortization of deferred compensation                                  --           31,055
              Stock options and warrants issued to consultants                   10,000          197,649
              Loss on disposal of fixed asset                                     1,909               --
              Changes in operating assets and liabilities:
                      Decrease in accounts receivable                           124,308          165,801
                      Decrease in inventories                                    43,349           13,533
                      Decrease in advances to contract manufacturer             301,594          315,000
                      (Increase) decrease in prepaid expenses                   (33,967)         121,727
                      Decrease in other assets                                  (19,971)          (2,044)
                      Increase in accounts payable                              107,220          253,776
                      Increase in accrued interest                              510,508          551,847
                      Increase (decrease) in accrued expenses                   (18,918)          54,178
                      Increase in deferred compensation                         320,000          350,000
                                                                              ---------        ---------
              Net cash used in operating activities:                           (676,177)      (1,384,936)
                                                                              ---------        ---------
Cash flows from investing activities-payment for capital expenditures           (74,344)         (10,672)
                                                                              ---------        ---------
Cash flows from financing activities:
              Proceeds from sale of common stock, net of expenses                    --          492,000
              Proceeds from note payable-- officer/stockholder                  100,000               --
              Proceeds from line of credit                                           --          500,000
              Proceeds from issuance of notes payable                           685,000          100,000
              Proceeds from the sale of common stock yet to be issued                --          243,167
              Payments for deferred financing costs                             (40,538)         (96,684)
                                                                              ---------        ---------
              Net cash provided by financing activities                         744,462        1,238,483
                                                                              ---------        ---------
              NET DECREASE IN CASH                                               (6,059)        (157,125)
Cash at beginning of year                                                        15,742          172,867
                                                                              ---------        ---------
Cash at end of year                                                           $   9,683        $  15,742
                                                                              =========        =========
Supplemental disclosures of cash flow information:
              Cash paid during the year for interest                          $       0        $       0
                                                                              =========        =========
              Cash paid during the year for taxes                             $       0        $       0
                                                                              =========        =========
</TABLE>

- ----------

                                      F-17

<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Supplemental schedule of noncash financing activities:

In January 2002, we issued 33,840 units consisting of one share of common stock
and one warrant to purchase an additional share of common stock in exchange for
payment of accrued interest totaling $27,072.

In January 2002, we issued 614,183 units (consisting of one share of common
stock and one warrant to purchase an additional share of common stock) for
payment of $491,346 in deferred compensation. The warrants are exercisable at
$.80 per share through January 31, 2003; at $1.00 per share through January 31,
2004 and thereafter at $2.00 per share through January 31, 2007.

In January 2002, pursuant to the 20% promissory note agreements, we converted
$63,377 of accrued interest into additional principal.

In April 2002, pursuant to the 6%/12% promissory note agreements, we converted
$65,168 of accrued interest into additional principal.

In April 2002, pursuant to the debt restructuring, we recorded a deferred
financing charge of $329,572. This resulted in an increase to notes payable of
$140,203 and accrued interest of $189,369.

In July 2002, we issued 187,500 units consisting of one share of common stock
and one warrant to purchase an additional share of common stock to a vendor in
accordance with the agreement valued at $150,000 for payment of accounts
payable.

In August 2002, we issued 200,000 shares of common stock in exchange for payment
of $90,000 of accounts payable.

In September 2002, pursuant to the 6%/12% promissory note agreements, we
converted $41,512 of accrued interest into additional principal.

In January 2001, pursuant to the 20% promissory note agreements, we converted
$51,111 of accrued interest into additional principal.

In January 2001, we granted warrants to purchase 20,000 shares of common stock
(with an estimated fair value of $23,400) in connection with $100,000 drawn from
a $1,000,000 credit facility provided by a major existing investor. This
resulted in an initial increase to debt discount and to additional paid-in
capital.

In February 2001, we issued 27,641 shares of common stock in exchange for
payment of accrued interest totaling $36,279.

In February 2001, we issued 92,308 shares of common stock with a value of
$150,000 for services rendered.

In March 2001, pursuant to a $500,000 line of credit agreement, we granted
warrants to purchase 100,000 shares of common stock (with an estimated fair
value of $80,000). This resulted in an initial increase to debt discount and in
additional paid-in capital.

                                      F-18

<PAGE>

                   MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)

In March 2001, we granted warrants to purchase 390,625 shares of common stock
with an estimated fair value of $324,418 for advertising services. This amount
was recorded in stockholders' deficiency as an increase to unearned advertising
and to additional paid-in capital.

In April 2001, pursuant to the 20% promissory note agreements, we converted
$53,472 of accrued interest into additional principal.

                                      F-19

<PAGE>

                 MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- ORGANIZATION

     Milestone Scientific Inc. (the "Company" or "Milestone") was incorporated
     in the State of Delaware in August 1989. Milestone has developed a
     proprietary, computer-controlled anesthetic delivery system, through the
     use of the Wand(R), a single use disposable handpiece. The system is
     marketed in dentistry under the trademark CompuDent(TM) and Wand Plus(R)
     and in medicine under the trademark CompuMed(TM). CompuDent(TM) is suitable
     for all dental procedures that requires local anesthetic. CompuMed(TM) and
     Wand Plus(R) are suitable for many medical procedures regularly performed
     in Plastic Surgery, Hair Restoration Surgery, Podiatry, Colorectal Surgery,
     Dermatology, Orthopedics and a number of other disciplines. The systems are
     sold in the United States and in over 25 countries abroad. Ourproducts are
     manufactured by third-party contract manufacturers.

NOTE B -- BASIS OF PRESENTATION:

     The accompanying consolidated financial statements have been prepared
     assuming that the Company will continue as a going concern. However, as
     shown in the accompanying consolidated financial statements, the Company
     incurred net losses of approximately $2,440,000 and $3,992,000 and negative
     cash flows from operating activities of approximately $676,000 and
     $1,385,000 during 2002 and 2001, respectively. As a result, the Company had
     a cash balance of approximately $10,000, a working capital deficiency of
     approximately $5,214,000 and a stockholders' deficiency of approximately
     $6,106,000 as of December 31, 2002. These matters raise substantial doubt
     about the Company's ability to continue as a going concern.

     Management believes that, in the absence of a substantial increase in
     revenue, it is probable that the Company will continue to incur losses and
     negative cash flows from operating activities through at least December 31,
     2003 and that the Company will need to obtain additional equity or debt
     financing, as well as to continue its ability to defer its obligations, to
     sustain its operations until it can expand its customer base and achieve
     profitability.

     To date, the Company has taken certain steps in order to reduce its
     operating expenses and utilization of cash. These steps include, amongst
     others, the following:

     o   Commencing in 2001 and continuing through 2002, the Company
         reconfigured its sales force. The Company went from maintaining a large
         internal sales force to utilizing independent sales representatives and
         distributors.

     o   The Company reduced administrative personnel and telemarketers by
         approximately ten people.

     o   On January 31, 2003, the Company completed the closing of the
         Deerfield, IL facility. The customer support, service and other
         back-office functions previously conducted, in whole or in part, at
         this location were consolidated into the Company's New Jersey location.
         The receiving, shipping and storage functions, which were also
         previously done at this location, will be outsourced at an independent
         warehouse located in Pennsylvania. The closure of the Illinois facility
         will result in reductions in overhead and other costs, while improving
         operational efficiencies.

     o   Obtained an agreement from its Chief Executive Officer/Stockholder to
         defer 2002 and 2003 compensation, aggregating $640,000 until April
         2004.

         o    Restructured and extended the maturity dates of its debt
              obligations ( see Note H). Further, as part of the debt
              restructuring, the Company obtained agreements from certain of its
              note holders enabling it to convert debt and related interest
              aggregating approximately $4,751,000 into shares of common stock.
              It is the Company's intention to have this conversion completed
              sometime during the third quarter 2003.

                                      F-20
<PAGE>

MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B (CONTINUED)

         o    Obtained an agreement from one of its attorneys to convert an
              additional $160,000 of the amount owed into shares of common
              stock.

     In addition, during February 2003, the Company received a $200,000 note
     payable from an existing investor. The note is convertible into shares of
     common stock, at the Company's option, which it plans to do during the
     third quarter of 2003. During April 2003, the Company received an
     additional $900,000 line of credit from the same investor, which is
     scheduled to mature on January 1, 2005, unless extended.

     The accompanying consolidated financial statements do not include any
     adjustments relating to the recoverability and classification of recorded
     asset amounts or the amounts and classifications of liabilities that might
     be necessary should the Company be unable to continue as a going concern.

NOTE C -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.   Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
     and of its wholly-owned subsidiaries and its majority-owned subsidiary,
     Spintech. All significant intercompany balances and transactions have been
     eliminated in consolidation.

2.   Cash and Cash Equivalents

     For purposes of the statements of cash flows, the Company considers all
     highly liquid investments purchased with a maturity of three months or less
     to be cash equivalents. At December 31, 2002 and 2001, the Company did not
     have any cash equivalents.

3.   Inventories

     Inventories principally consist of finished goods and component parts
     stated at the lower of cost (first-in, first-out method) or market.

4.   Equipment

     Equipment is recorded at cost, less accumulated depreciation. Depreciation
     expense is computed using the straight-line method over the estimated
     useful lives of the assets, which range from 3 to 7 years. The costs of
     maintenance and repairs are charged to operations as incurred.

5.   Debt Issue Cost and Debt Discount

     Debt issue costs are deferred and amortized to interest expense over the
     term of the related loan on a straight-line method, which approximates the
     interest method. Debt discounts are offset against the principal balance
     and amortized using the straight-line method over the term of the related
     loan.

6.   Impairment of Long-Lived Assets

     The Company reviews long-lived assets for impairment whenever circumstances
     and situations change such that there is an indication that the carrying
     amounts may not be recovered.

7.   Revenue Recognition

     Revenue is recognized when title passes at the time of shipment and
     collectibility is reasonably assured.

                                      F-21
<PAGE>

MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C (CONTINUED)

8.   Research and Development

     Research and development costs are expensed as incurred.

9.   Income Taxes

     The Company uses the liability method of accounting for income taxes, as
     set forth in SFAS No. 109, "Accounting for Income Taxes." Under this
     method, deferred income taxes, when required, are provided on the basis of
     the difference between the financial reporting and income tax bases of
     assets and liabilities at the statutory rates enacted for future periods.

10.  Basic and diluted net loss per common share

     Basic and diluted net loss per share are computed using the
     weighted-average number of shares of common stock outstanding during the
     period. Potentially dilutive securities have been excluded from the
     computation of diluted earnings per share, as their effect is antidilutive.
     If the Company had reported net income, diluted earnings per share would
     have included the shares used in the computation of net loss per share plus
     common equivalent shares related to 4,844,355 and 3,325,832 outstanding
     options and warrants for the years ended December 31, 2002 and 2001,
     respectively and the payment of the notes payable with shares of comon
     stock.

11.  Use of Estimates

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make estimates and assumptions in determining the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and reported amounts of
     revenues and expenses during the reporting period. The most significant
     estimates relate to the allowance for doubtful accounts, advances to
     contract manufacturer, inventory valuation allowances, and valuation
     allowances on deferred tax assets. Actual results could differ from those
     estimates.

12.  Fair Value of Financial Instruments

     The carrying amounts reported in the consolidated balance sheet for cash,
     accounts receivable, accounts payable and accrued expenses approximate fair
     value based on the short-term maturity of these instruments. Notes payable
     to officer/stockholder and long-term notes payable approximate fair value
     due to the fact that the effective interest rates are comparable among the
     various noteholders.

13.  Accounting for Stock-Based Compensation

     The Company has adopted the disclosure provisions of Statements of
     Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
     Stock Based Compensation," and therefore applies the intrinsic value method
     of accounting for employee stock options as prescribed under Accounting
     Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
     Issued to Employees." Under APB No. 25, when the exercise price of an
     employee stock option granted by the Company is equal to or greater than
     the market price of the underlying stock on the date of grant, no
     compensation expense is recognized.

14.  Concentration of Credit Risk

     The Company's financial instruments that are exposed to concentrations of
     credit risk consist primarily of cash and trade accounts receivable. The
     Company places its cash with high quality credit

                                      F-22
<PAGE>



MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C (CONTINUED)

     institutions. At times, such investments may be in excess of the Federal
     Deposit Insurance Corporation insurance limit. The Company has not
     experienced any losses in such accounts and believes it is not exposed to
     any significant credit risks. Financial instruments which potentially
     subject the Company to concentrations of credit risk consist principally of
     trade accounts receivable, as the Company does not require collateral or
     other securities to support customer receivables.

NOTE D -- INVENTORIES

Inventories consist of the following:

The Wand(R)units and handpieces                       $125,214
Component parts and other materials                    104,558
                                                      --------
                                                       229,772
Reserve                                                110,481
                                                      --------
                                                      $119,291
                                                      ========

NOTE E -- ADVANCES TO CONTRACT MANFACTURER

     Advances to contract manufacturer represents deposits to the Company's
     contract manufacturer to fund future inventory commitments. The aggregate
     amount of the advances amounted to $387,935 of which approximately $300,000
     is estimated to be used in 2003.

NOTE F --EQUIPMENT

     Equipment consists of the following:

Furniture and fixtures                                        $ 194,656
Office equipment                                                148,797
Tooling equipment                                                64,079
Trade show displays                                              81,800
Computer servers and software                                   125,341
                                                               --------
                                                                614,673
Less accumulated depreciation                                  (387,466)
                                                               --------
                                                              $ 227,207
                                                               ========

NOTE G -- NOTES PAYABLE TO OFFICER/STOCKHOLDER

     Notes payable to officer/stockholder represent two obligations payable to
     the Company's Chief Executive Officer ("CEO"), consisting of (i) $200,000
     note payable, with interest payable at 9% per annum having an original due
     date of January 2, 2003 and (ii) a $100,000 line of credit with interest
     payable at 6% per annum having an original due date of April 2, 2003. On
     April 1, 2003, the notes were extended to April 1, 2004. Interest expense
     for the years ended December 31, 2002 and 2001 amounted to $19,701 and
     $18,250, respectively.

                                      F-23
<PAGE>

                 MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H -- NOTES PAYABLE

     Notes payable consist of the following:

     Short term

<TABLE>
<CAPTION>
          <S>                                                              <C>
          6%/12% Promissory notes, due on August 1, 2003 (A)               $2,945,542
          8% Line of credit for $500,000,  originally due on August 31,
          2002, extended to August 1, 2003, net of debt discount
          of $7,024 (B)                                                       492,976
          8% Promissory notes payable, $500,000 originally due
          June 30, 2003, extended to August 1, 2003 and $685,000 due
          August 1, 2003, net of debt discount of $41,810 (C)               1,143,190
                                                                            ---------
                Total                                                      $4,581,708
                                                                            =========
</TABLE>

     Long Term (B)
        8% Promissory note payable for $500,000 originally due December 31,
        2003, extended to January 2, 2005, net of a debt discount of $19,909
        totaling $480,091.

      (A) 6%/12% PROMISSORY NOTES

     The 6%/12% Promissory Notes consist of the following issuances:

        (i)    On March 16, 2001, the Company restructured its obligations to
               the holders of its 10% Senior Secured Promissory Notes. Under the
               terms of the agreement, each of the noteholders agreed to
               exchange their 10% Notes for a new, zero coupon note (the "Zero
               Coupon Note").

               As a result of the Company initially restructuring its
               obligations, the unamortized portion of the debt discount and
               deferred financing costs were amortized through March 31, 2002.
               The significant terms of the Restructuring Debt were (i)
               modification of the interest rate (ii) granting the company the
               option to pay the debt with shares of common stock and (iii)
               repricing the warrants which were previously issued to the
               shareholders back to the initial exercise price of $1.75 per
               share.

               Subsequently, on April 15, 2002, the holders additionally agreed
               to extend the promissory notes to July 1, 2003 and to lower the
               interest rate to 6% if paid in cash or to 12% if paid in common
               stock. In connection with the extension, the Company recorded
               $16,215 in deferred financing charges relating to professional
               fees and $140,203 of deferred financing costs relating to
               consideration to the noteholders valued at $120 per share of the
               Company's common stock for each $1,000 face amount outstanding at
               maturity which increased the aggregate carry value of the notes
               by $140,203. The Company is accruing interest expense at 12%.
               These deferred financing costs are being amortized through July
               1, 2003.

        (iii)  In August 2000, the Company borrowed $1,000,000 which consists of
               two loans from two funds managed by Cumberland Associates LLC,
               and bear interest at 20% per year and payable in cash or through
               the issuance of additional 20% notes on which both interest and
               principal are payable. The loans are secured by substantially all
               assets of the Company and are subordinated to the 6%/12% senior
               secured promissory notes that were amended April 15, 2002. The
               Company can prepay the loans in cash at any time. The Company can
               prepay the notes and accrued interest with common stock at its
               option after

                                      F-24

<PAGE>

MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H (CONTINUED)

                  March 31, 2001. Stock issued in lieu of payment of the debt
                  will be valued at 85% of the then market price. For the year
                  ended December 31, 2002, the Company converted $257,865 of
                  accrued interest into principal. During 2001, the Company had
                  previously converted $222,417 of accrued interest into
                  principal. On April 12, 2002, Cumberland Associates LLC agreed
                  to extend the maturity date of these loans through July 1,
                  2003 and to lower the interest rate from 20% to 6%, if paid in
                  cash, or 12% if paid in common stock. The Company recorded
                  $16,215 of deferred financing charges relating to professional
                  fees and $189,369 relating to consideration issued to the
                  noteholders valued at $120 per share of the Company's common
                  stock for each $1,000 face amount outstanding at maturity. The
                  Company is currently accruing interest expense at 12%.
                  Accordingly, the deferred financing costs and the unamortized
                  financing charges are being amortized through July 1, 2003.

                  It is currently the Company's intention to satisfy these
                  obligations with shares of common stock upon their maturity.

      (B) 8% PROMISSORY NOTES

     The 8% promissory notes consist of the following:

         On July 31, 2000, the Company established a $1,000,000 credit facility
         with a major existing investor. Initially, $500,000 was borrowed under
         the line, which was due on June 30, 2003. In December 2000, and January
         2001, the Company borrowed under the credit facility an additional
         $400,000 and $100,000, respectively, due on December 31, 2003. In
         connection with the initial $500,000, the investor received five-year
         warrants to purchase 70,000 shares of the Company's common stock,
         exercisable at $3.00 per share. In connection with the $400,000, the
         investor received five-year warrants to purchase 80,000 shares of the
         Company's common stock exercisable at $1.25 per share. In connection
         with the $100,000, the investor received five-year warrants to purchase
         20,000 shares of the Company's common stock at $1.25 per share. On
         April 12, 2002, the investor agreed to extend the maturity date of the
         $500,000 to August 1, 2003. At the option of the Company, this $500,000
         can be convertible into common stock. Accordingly, in connection with
         the extension, the unamortized debt discount is being amortized to
         August 1, 2003. On April 15, 2003, the investor agreed to extend the
         maturity date of the $500,000 and interest originally due December 31,
         2003 to January 2, 2005. Accordingly, only $500,000 of loans have been
         recorded as long term debt in the accompanying consolidated financial
         statements.

         (c)  During 2002, the Company issued a total of $1,185,000 promissory
              notes to an existing investor. The notes bear interest at 8% if
              paid in cash and 10% if paid in stock and mature on August 1,
              2003. At the option of the Company, the principal and interest are
              payable on the maturity date in common stock. Additionally, the
              note will automatically convert into the Company's common stock if
              the Company issues 1,000,000 shares or raises at least $1,000,000
              from the sale of equities prior to August 1, 2003, at the market
              price in that transaction but not less than $.50 per common share,
              or more than $2.00 per share. The Company is accruing interest at
              10%.

NOTE I -- STOCK OPTION PLAN

     In 1997, the Board of Directors approved the adoption of the 1997 Stock
     Option Plan. The 1997 Stock Option Plan provides for the grant of options
     to purchase up to 500,000 shares of the Company's common stock. In 1999,
     the Plan was amended, providing for the grant of options to purchase up to
     1,000,000 shares of the Company's common stock. Options may be granted to
     employees, officers, directors and consultants of the Company for the
     purchase of common stock of the Company at a price.

                                      F-25
<PAGE>

MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I (CONTINUED)

     not less than the fair market value of the common stock on the date of the
     grant. In general, options become exercisable over a three-year period from
     the grant date and expire five years after the date of grant.

     The Company has adopted the disclosure provisions of Statement of Financial
     Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
     Compensation." SFAS No. 123 establishes financial accounting and reporting
     standards for stock-based employee compensation plans. The Company applies
     the intrinsic value method prescribed under Accounting Principles Board
     Opinion No. 25 and related interpretations in accounting for its
     stock-based compensation plans.

     If the Company had elected to recognize compensation expense based upon the
     fair value at the grant date, consistent with the methodology prescribed by
     SFAS No. 123, pro forma net loss and net loss per share to common
     stockholders for the years ended December 31, 2002 and 2001 would have
     increased to the following pro forma amounts:

                                                       DECEMBER 31,
                                                     -----------------
                                                 2002               2001
                                              ----------         ----------
Net loss as reported                        $  (2,440,197)     $  (3,991,580)
                                               ==========         ==========
Pro forma net loss                          $  (2,664,814)     $  (4,484,067)
                                               ==========         ==========
Loss per share as reported                  $        (.20)     $        (.36)
                                               ==========         ==========
Pro forma loss per share                    $        (.21)     $        (.40)
                                               ==========         ==========

     The weighted-average fair value of the individual options granted during
     2002 and 2001 was estimated as .22 and $1.79, respectively, on the date of
     grant. The fair value for 2002 and 2001 was determined using a
     Black-Scholes option-pricing model with the following assumptions:

                                                              DECEMBER 31,
                                                             -------------
                                                          2002             2001
                                                        -------          -------
Volatility                                                  71%            92.0%
Risk-free interest rate                                    4.5%            5.7%
Expected life                                            5 years         5 years

     Stock option activity during 2002 and 2001 is summarized below:

                                               SHARES OF          WEIGHTED
                                              COMMON STOCK         AVERAGE
                                              ATTRIBUTABLE        EXERCISE
                                               TO OPTIONS      PRICE OF OPTIONS
                                               ----------       ------------
Options outstanding at January 1, 2001            929,110          $5.11
Granted                                           140,000           2.32
Forfeited                                        (139,844)          3.02
                                                 --------
Options outstanding at December 31, 2001          929,266           5.16
Granted                                           173,000            .79
Forfeited                                        (360,422)          4.99
                                                 --------
Options outstanding at December 31, 2002          741,844          $4.08
                                                 ========          =====

                                      F-26
<PAGE>

                 MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I (CONTINUED)

     The following table summarizes information concerning outstanding and
exercisable options at December 31, 2002.

                                               REMAINING
                               NUMBER         CONTRACTUAL         NUMBER
    EXERCISES PRICES        OUTSTANDING      LIFE (YEARS)     EXERCISABLE
       -----------           ---------         ---------        --------
      $   .5500               50,000             4.0                   0
          .7500               61,000             4.0              20,333
          .8750               50,000             2.0                   0
         1.0000               50,000             1.0                   0
         1.2000               25,000             4.5                   0
         1.2500                5,000             1.7               5,000
         1.2500               10,000             4.8                   0
         1.5625                5,000             0.7               5,000
         1.6100               24,844             2.5              16,563
         1.8125                7,000             2.1               4,666
         2.0000               50,000             3.0                   0
         2.1875               81,000             2.5              54,000
         2.5000              100,000             1.8             100,000
         2.5000               80,000             3.6              26,667
         3.0000               29,000             1.0              29,000
         3.0000                4,500             1.5               4,500
         4.0000                1,500             1.5               1,500
         5.0000                1,500             1.5               1,500
         6.0000                1,500             1.5               1,500
        16.0000               50,000             0.0                   0
        16.5000               25,000             0.3              25,000
        23.0000               30,000             0.2              30,000
                            --------                             -------
                             741,844                             325,229
                            ========                             =======


     The weighted-average exercise price of options exercisable at December 31,
     2002 is $5.30.

     The Company charged $10,000 to operations during the year ended December
     31, 2002, representing the fair market value of 150,000 stock options
     issued to a customer. Furthermore, the Company charged $197,649 to
     operations during the year ended December 31, 2001, representing the fair
     market value of 330,000 common stock purchase warrants issued to
     consultants.

                                      F-27

<PAGE>

                 MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J -- EMPLOYMENT CONTRACT AND DEFERRED COMPENSATION

     In January 1998, the Company entered into a five-year employment contract
     with its CEO providing for an annual base compensation of up to $350,000,
     plus stock options and cash bonuses based upon attaining certain earnings
     levels, which the Company has not yet achieved.

     In July 1998, the CEO agreed to a voluntary reduction of his annual base
     salary from $350,000 to approximately $188,000 that remained in effect
     through August 2000. At that time, the CEO agreed to defer his annual
     salary on a discretionary basis. Accordingly, the Company has recorded
     deferred compensation payable to the CEO in the amount of $491,346 at
     December 31, 2001.

     In January 2002, in consideration for payment of the deferred compensation,
     the Company issued 625,000 units. Each unit consisted of one share of the
     Company's common stock and one warrant to purchase an additional share of
     common stock. The warrants are exercisable at $.80 per share through
     January 31, 2003 and then at $1.00 per share through January 31, 2004 and
     thereafter at $2.00 per share through January 31, 2007. Furthermore, on
     April 1, 2003, the CEO has agreed to defer payment on $640,000 of
     additional compensation relating to his salary for 2002 and 2003 until
     January 2, 2005.

NOTE K -- SALES OF PROPHY ANGLES AND RELATED CONSULTING INCOME

     In November 2001, the Company sold certain tangible and intangible assets,
     rights and properties (which were fully amortized) relating to the
     SplatrFree(TM) prophy angle to Smart Health, Inc. for $55,000. In addition,
     the Company entered into a 12 month consulting agreement with Smart Health
     for $96,000. The Company recorded consulting income of $80,000 for the year
     ended December 31, 2002.

NOTE L -- INCOME TAXES

     Deferred tax attributes resulting from differences between financial
     accounting amounts and tax bases of assets and liabilities at December 31,
     2002 and 2001 are as follows:

Current assets and liabilities                          2002            2001
                                                   ------------    ------------
      Allowance for doubtful accounts ..........   $     18,000    $     22,000
      Inventory allowance ......................         44,000          60,000
      Warrants issued to consultants ...........           --              --
      Other ....................................           --              --
Valuation allowance ............................        (62,000)        (82,000)
                                                   ------------    ------------
Current deferred tax asset .....................   $       --      $       --
                                                   ============    ============
Non-current assets and liabilities
      Depreciation .............................   $    (60,000)   $   (540,000)
      Asset impairment charge ..................           --              --
      Net operating loss carryforward ..........     14,000,000      13,600,000
      Warrants and options issued to consultants        598,000         423,000
      Accrued interest .........................        347,000         177,000
      Deferred compensation ....................        128,000            --
                                                   ------------    ------------
                                                     15,013,000      13,660,000
Valuation allowance ............................    (15,013,000)    (13,660,000)
                                                   ------------    ------------
Non-current deferred tax asset (liability) .....   $       --      $       --
                                                   ============    ============

                                      F-28
<PAGE>

                 MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE L (CONTINUED)

     For the years ended December 31, 2002 and 2001 the valuation allowance
     increased by $1,353,000 and $2,038,000 respectively.

     As of December 31, 2002, the Company has Federal and State net operating
     loss carryforwards of approximately $36,000,000 that will be available to
     offset future taxable income, if any through December 2022. The utilization
     of the Company's net operating losses may be subject to a substantial
     limitation due to the "change of ownership provisions" under Section 382 of
     the Internal Revenue Code and similar state provisions. Such limitation may
     result in the expiration of the net operating loss carryforwards before
     their utilization. The Company has established a 100% valuation allowance
     to reserve for all of its net deferred tax assets due to the significant
     uncertainty that their benefit will be realized in the future.

NOTE M -- PRODUCT SALES AND SIGNIFICANT CUSTOMERS

     The Company's sales by product and by geographical region are as follows:

                                 DECEMBER 31,
                          -----------------------
                              2002         2001
                          ----------   ----------
The Wand(R)system kits    $1,452,005   $1,828,801
The Wand(R)handpieces .    2,402,396    1,948,769
Prophy angles .........         --         71,592
Dental needles ........      181,236      168,169
Other .................       38,369       76,379
                          ----------   ----------
                          $4,074,006   $4,093,710
                          ==========   ==========
Dental division .......   $3,892,069   $4,093,710
Medical division ......      181,937         --
                          ----------   ----------
                          $4,074,006   $4,093,710
                          ==========   ==========
United States .........   $3,174,930   $3,354,302
Canada ................      215,722      173,729
Other foreign countries      683,354      565,679
                          ----------   ----------
                          $4,074,006   $4,093,710
                          ==========   ==========

     During the years ended December 31, 2002 and 2001, the Company had sales to
     one customer (a worldwide distributor of the Company's products based in
     South Africa) of approximately $566,000 and $410,000, respectively. This
     represented 14% and 10% the total net sales for 2002 and 2001,
     respectively. Accounts receivable from this customer amounted to
     approximately $157,000, representing 65% of net accounts receivable at
     December 31, 2002.

                                      F-29
<PAGE>

                 MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N -- COMMITMENTS AND CONTINGENCIES

     Lease Commitments

     The Company leases office space and warehouse facilities under
     noncancelable operating leases. These leases also provide for escalations
     of the Company's share of utilities and operating expenses, which expire
     through 2007.

     Aggregate minimum rental commitments under noncancelable operating leases
     are as follows:

     YEAR ENDING DECEMBER 31,
     ------------------------
             2003                              $123,000
             2004                               104,000
             2005                                72,000
             2006                                66,000
             2007                                21,000
                                               --------
                                               $386,000
                                               ========

     For the years ended December 31, 2002 and 2001, rent expense amounted to
     approximately $108,000 and $103,000 respectively.

     Contract Manufacturing Agreement

     The Company has informal arrangements for the manufacture of The Wand(R)
     unit and system kit with Tricor Systems, Inc. ("Tricor") and for the
     manufacture of The Wand(R) disposable handpiece by Nypro Inc.

     The termination of the manufacturing relationship with any of the above
     manufacturers could have a material adverse effect on the Company's ability
     to produce and sell its products. Although alternate sources of supply
     exist and new manufacturing relationships could be established, the Company
     would need to recover its existing tools or have new tools produced.
     Establishment of new manufacturing relationships could involve significant
     expense and delay. Any curtailment or interruption of the supply, whether
     or not as a result of termination of such a relationship, would adversely
     affect the Company.

     Contingencies

     In March 2001, the Company entered into an advertising agreement with News
     USA, Inc. and Vested Media Partners, Inc. (the "Agreement") to increase the
     awareness of healthcare professionals and the public to the benefits of The
     Wand(R)and the CompuFlo(TM) technologies.

     Under the Agreement, News USA is required to prepare articles and
     advertisements for the Company's products and technologies and place them
     in newspapers and on radio stations.

     News USA had guaranteed 72,000 media placements during the 18-month term of
     the Agreement. In exchange for these services, the Company granted warrants
     to purchase 1,171,875 shares of common stock exercisable on the following
     dates and prices over the life of the Agreement: (1) $1.28 during the first
     18 months, (2) $2.25 during the next year and (3) $3.00 during the next
     year.

                                      F-30

<PAGE>



                 MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N (CONTINUED)

     The Agreement provided for a termination clause in the fourth month if the
     Company's average closing stock price does not exceed $2.25 during the
     first ten days of the fourth month provided that the Company has received
     24,000 publications. Accordingly, the remaining two-thirds of the warrants
     to purchase the Company's common stock would not become exercisable.
     However, the vendor can recommence producing the publications whenever the
     Company's average closing stock price for a ten day period exceeds $2.25.
     At the end of the ninth month, the vendors have the option to terminate the
     Agreement if the Company's stock price has not averaged $2.25 for a ten day
     period.

     Upon termination, two-thirds of the warrants remaining to purchase the
     Company's common stock will be forfeited unless the vendors resume
     fulfilling one-half of their obligation in three months and the remaining
     obligation in the next six months.

     In March 2001, the Company initially recorded unearned advertising cost of
     $324,218 which represents the estimated fair value of the 390,625 of the
     warrants for one-third of the total warrants granted based on the 24,000
     minimum placements. The unearned advertising cost is being amortized as
     publications are received by the Company over the minimum placements. As of
     December 31, 2002, unearned advertising cost was $278,017 and during the
     year ended December 31, 2002, the Company recorded $24,803 in advertising
     expenses relating to placements during the year. The estimated fair value
     of the remaining warrants to purchase 781,250 of the Company's common stock
     have not been recorded in the Company's consolidated financial statements
     due to the likelihood that the Agreement will not be fulfilled.

     As of December 31, 2002, News USA did not meet the guaranteed media
     placements and accordingly the unearned advertising cost of $278,017 was
     reversed.

NOTE O -- RELATED PARTY TRANSACTIONS

     The Company paid $137,500 and $72,500 during the years ended December 31,
     2002 and December 31, 2001, respectively, to a law firm where one of the
     partners was previously on the Company's Board of Directors. At December
     31, 2002 and 2001, the Company had accounts payable to the law firm of
     $389,181 and $302,866, respectively. On March 29, 2002, the Company entered
     into an agreement with the law firm deferring $272,866 of the accounts
     payable to January 2, 2003. The law firm and the former Director also
     participated in the February 2001 private placement, each purchasing
     $50,000 of 10% Senior Secured Promissory Notes and warrants to purchase
     7,143 shares of the Company's Common Stock. The notes were extended to July
     1, 2003.

     For the years ended December 31, 2002 and 2001, the Company paid $19,049
     and $20,850 to the wife of Milestone's CEO. She was employed by Milestone
     to render professional services. At December 31, 2002, the Company had
     accounts payable totaling $32,000 to the Company's CEO and his wife.

                                      F-31

<PAGE>

MILESTONE SCIENTIFIC INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P -- STOCKHOLDERS' DEFICIENCY

     In January 2001, Milestone entered into a three-year private equity line
     agreement with Hillgreen Investments Limited ("Hillgreen"), a British
     Virgin Islands corporation, pursuant to which Hillgreen is obligated to
     purchase, subject to the fulfillment of specified conditions, up to
     2,100,000 shares of Milestone common stock over the next 36 months.
     Hillgreen has allocated $20,000,000 to fund its purchase obligations. The
     transaction was arranged by Jesup & Lamont Securities Corporation, a New
     York based investment banking firm. Milestone's right to draw upon this
     facility is subject to a number of limitations and conditions, including a
     limitation on the amounts sold to Hillgreen within specified periods.
     Subject to these and other conditions and limitations, Milestone will have
     full control over the timing of any financing under the equity line and is
     under no obligation to sell any shares to Hillgreen. Any shares that are
     sold will be priced at 87.5% of the volume weighted average market price of
     Milestone common stock during a fixed period prior to the sale. Milestone
     has discretion to establish a floor price below which shares will not be
     sold by Milestone to Hillgreen. At April 11, 2003, without any restrictions
     and based on the closing stock price, the maximum proceeds that the Company
     could receive would be approximately $478,000.

     In August 2002, the Company issued 200,000 shares of common stock in
     exchange for payment of $90,000 of outstanding legal fees.

NOTE Q -- SUBSEQUENT EVENTS

     On January 17, 2003, the Company's CEO provided the Company with a $57,322
     short term loan for the express purpose of purchasing Wand(R) handpieces
     from the Company's supplier. The Company repaid the loan in full by
     February 7, 2003. On February 12, 2003, the CEO provided the Company with a
     $38,215 loan for the same purposes as above. The loan is payable on demand
     and $33,215 remains outstanding as of March 31, 2003.

     On February 13, 2003, the Company received $200,000 from an existing
     investor that matures on August 1, 2003. At the option of the Company, the
     note and interest can be paid in common stock.

     On April 7, 2003, the CEO provided the Company with an additional $35,000
     to use for the express purpose of contributing towards the Company's
     increased insurance premium.


                                      F-32
<PAGE>


                                INSIDE BACK COVER


                        SAFETYWAND WITH NEEDLE PROTRACTED
                 [PICTURE OF SAFETYWAND WITH NEEDLE PROTRACTED]



















                        SAFETYWAND WITH NEEDLE RETRACTED
                  [PICTURE OF SAFETYWAND WITH NEEDLE RETRACTED]


<PAGE>



         YOU MAY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON
SHARES MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY OUR COMMON SHARES IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER
OR SOLICITATION IS UNLAWFUL.
                           ---------------------------
                                TABLE OF CONTENTS
                                                Page
Prospectus Summary...........................     3
Risk Factors.................................
Forward Looking Statements...................
Use of Proceeds..............................
Dividend Policy..............................
Capitalization...............................
Price Ranges of Our Common Stock.............
Selected Consolidated Financial Data.........
Management's Discussion and Analysis or
  Plan of Operations ........................
Business ....................................
Management...................................
Certain Relationships and Related Party
  Transactions ..............................
Security Ownership of Certain Beneficial
  Owners and Management .....................
Description of Securities....................
Underwriting.................................
Legal Matters................................
Experts......................................
Where You Can Find More Information..........
Index to Financial Statements................   F-1

                           ---------------------------

         Until __________, 2003 (the 25th day after the date of this prospectus)
all dealers effecting transactions in our units, whether or not participating in
this distribution, may be required to deliver a prospectus. This is in addition
to the obligation of dealers to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.



                                  _______ UNITS



                            MILESTONE SCIENTIFIC INC.

                                     [LOGO]


                                  ------------

                                   PROSPECTUS
                                  ------------


                        PAULSON INVESTMENT COMPANY, INC.












                               _________ ___, 2003

================================================================================

                                      II-2
<PAGE>

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

LIMITATION OF DIRECTOR LIABILITY; INDEMNIFICATION

         Our Certificate of Incorporation provides that a director will not be
personally liable to us or to our stockholders for monetary damages for breach
of the fiduciary duty of care as a director, including breaches which constitute
gross negligence. This provision does not eliminate or limit the liability of a
director:

         o    for breach of his or her duty of loyalty to us or to our
              stockholders;

         o    for acts or omissions not in good faith or which involve
              intentional misconduct or a knowing violation of law;

         o    under Section 174 of the Delaware General Corporation Law
              (relating to unlawful payments or dividends or unlawful stock
              repurchases or redemptions),

         o    for any improper benefit, or

         o    for breaches of a director's responsibilities under the Federal
              securities laws.

         Our Certificate of Incorporation also provides that we indemnify and
hold harmless each of our directors and officers to the fullest extent
authorized by the Delaware General Corporation Law, against all expense,
liability and loss (including attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons pursuant to
our Certificate of Incorporation, Bylaws and the Delaware General Corporation
Law, we have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy and is, therefore,
unenforceable.

         The Underwriting Agreement provides for reciprocal indemnification
between us and our controlling persons, on the one hand, and the underwriters
and their respective controlling persons, on the other hand, against certain
liabilities in connection with this offering, including liabilities under the
Securities Act of 1933, as amended.

         OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

         The following are the expenses of the issuance and distribution of the
securities being registered, other than underwriting commissions and expenses,
all of which will be paid by the Company. Other than the SEC registration fee
and the NASD filing fees all of such expenses are estimated.

Registration fee...........................................$         1,625
NASD fee...................................................$
American Stock Exchange listing fee........................$         3,000
Printing expenses..........................................$        75,000
Accounting fees and expenses...............................$       100,000
Legal fees and expenses....................................$       250,000
Transfer agent and registrar fees and expenses.............$        10,000
Miscellaneous..............................................$        20,000
                                                           ---------------
      Total................................................$        460,00
                                                           ===============

                                      II-1
<PAGE>

         RECENT SALES OF UNREGISTERED SECURITIES.

         On January 31, 2000, Milestone issued five-year warrants to purchase an
aggregate of 142,857 shares of Common Stock to holders of Milestone's 10%
Secured Promissory Notes, including Cumberland Associates LLC, Strategic
Restructuring Partnership L.P., a former principal of Cumberland Associates, two
officers of the Corporation, an affiliate of one of its directors and six other
individuals. The warrants were issued as consideration for the loans made by
these investors to Milestone at the time of issuance. Each of the warrants, as
originally issued, contained a provision gradually escalating its exercise price
from $1.75 in 2000 to a maximum of $7.00 in 2004. However, in March 2001, the
exercise price of these warrants was amended by agreement between Milestone and
the warrant holders to provide for an exercise price of $1.75 per share up to
the date of maturity. The warrants were issued pursuant to the exemption from
registration under the Securities Act of 1933, as amended (the "Act"), provided
by Sections 4(2) and 4(6) of the Act.

         Morse, Zelnick, Rose and Lander, LLP, legal counsel to Milestone, and
its affiliates, are the holders of warrants to purchase 301,333 shares of Common
Stock. On February 3, 2000, Milestone reduced the exercise price of all these
warrants to $1.25 and extended their exercise period to February 2, 2005.
Consideration for the amendments were legal services rendered to Milestone by
Morse, Zelnick, Rose & Lander, LLP. The warrants originally were issued pursuant
to the exemption from registration under the Act provided by Sections 4(2) and
4(6) of the Act.

         On December 7, 2000, and January 26, 2001, Milestone issued to K.
Tucker Andersen, a major existing investor, warrants to purchase 80,000 and
20,000 shares of Common Stock, respectively, at an exercise price of $1.25 and
$1.875 per share, respectively. Each of the aforementioned warrants are
exercisable for five years from the date of issuance and were issued as
consideration for loans of a total of $1,000,000 that the investor made to
Milestone. The loans, which are evidenced by a senior secured promissory note,
bear an 8% interest that is payable quarterly in arrears. Principal payments, in
the amount of $500,000 each, are due on June 30, 2003, and December 31, 2003,
respectively. The warrants were issued pursuant to the exemptions from
registration under the Act provided by Sections 4(2) and 4(6) of the Act.

         On January 22, 2001, Milestone entered into an agreement to grant to
Hillgreen Investments Limited ("Hillgreen") warrants to purchase 100,000 shares
of Common Stock as consideration for opening an equity put agreement with
Milestone. In addition, as consideration for the services rendered by Jesup &
Lamont Securities Corporation ("Jesup & Lamont") as placement agent in
connection with the equity put, Milestone granted to Jesup & Lamont warrants to
purchase 75,000 shares of Common Stock. The warrants issued to Hillgreen and
Jesup & Lamont are exercisable at any time prior to January 22, 2004 at a price
of $1.86 per share, and were issued pursuant to the exemptions from registration
under the Act provided by Sections 4(2) and 4(6) of the Act.

         On January 30, 2001, Milestone issued to Shaul Koren 92,308 shares of
Common Stock, as payment for consulting services performed by Mr. Koren,
pursuant to exemptions from registration under the Act provided by Sections 4(2)
and 4(6) of the Act.

         On February 8, 2001, Milestone issued to Cumberland Associates LLC,
Strategic Restructuring Partnership L.P., a former principal of Cumberland
Associates, two officers of the Corporation, an affiliate of one of its
directors and six other individuals, an aggregate of 27,641 shares of Common
Stock in payment of interest on the 10% Secured Promissory Notes issued to these
investors on January 31, 2000. The stock was issued pursuant to the exemption
from registration under the Act provided by

                                      II-2
<PAGE>

Sections 4(2) and 4(6) of the Act.

         On March 9, 2001, Milestone issued to K. Tucker Andersen, a major
existing investor a warrant to purchase 100,000 shares of Common Stock,
exercisable at any time for five years from the date of issuance at $1.10 per
share, as consideration for opening a $500,000 line of credit. Milestone pays a
2% facility fee on the line of credit and interest at a rate of 10% per annum on
monies borrowed. On December 28, 2001, Milestone signed an agreement to issue
33,840 units, consisting of one share and one warrant to purchase one share in
payment of the $27,072 accrued interest through December 31, 2001. The warrants
are exercisable at $.80 per share through January 31, 2003, thereafter at $1.00
per share through January 31, 2004, and thereafter at $2.00 per share through
January 31, 2007, at which time they will expire. All of these units and
warrants were issued in February 2002 pursuant to the exemptions from
registration under the Act provided by Sections 4(2) and 4(6) of the Act.

         In March 2001, Milestone signed an agreement with News USA, Inc. and
Vested Media Partners, Inc. to increase the awareness of healthcare
professionals and the public to the benefits of CompuDent(TM), CompuMed(TM), The
Wand(R) and CompuFlo(TM) technologies. Under the agreement, News USA, Inc. is
required to prepare, write and seek to place in newspapers and other media,
articles about Milestone's products and technologies. As consideration for their
services, Milestone granted to News USA, Inc. and Vested Media Partners, Inc.
warrants to purchase an aggregate of approximately 1,172,000 shares of
Milestone's Common Stock at prices increasing from $1.28 to $3.00 per share
during the 3-year warrant term. The warrants were issued pursuant to the
exemptions from registration under the Act provided by Sections 4(2) and 4(6) of
the Act.

         On December 28, 2001, Milestone entered into an agreement with its CEO,
Leonard Osser, to issue to him 614,183 units in payment of $491,346 in
compensation, specifically, his salary as Chief Executive Officer of Milestone,
which he voluntarily has deferred since August 5, 2000. In January 2002, the
units were issued and each unit consists of one share of Milestone's common
stock and one warrant to purchase an additional share of such common stock. The
warrants are exercisable at $.80 per share through January 31, 2003, thereafter
at $1.00 per share through January 31, 2004, and thereafter at $2.00 per share
through January 31, 2007, at which time they will expire. The warrants were
issued pursuant to the exemptions from registration under the Act provided by
Sections 4(2) and 4(6) of the Act.

         In December 2001, Milestone entered into an agreement with K. Tucker
Andersen, an existing investor, to issue 325,000 units. The units, which were
issued in January 2002, consist of one share of Milestone common stock and one
warrant to purchase an additional share of such common stock. The warrants are
exercisable at $.80 per share through January 31, 2003, thereafter at $1.00 per
share through January 31, 2004, and thereafter at $2.00 per share through
January 31, 2007, at which time they will expire. The units were issued in
exchange for $185,000 and the cancellation of a 10% convertible promissory note
issued in October 2001, under which an amount of $75,000 was due at that time.

         On January 14, 2002, we issued 33,840 units, consisting of one share of
common stock and one warrant to purchase an additional share of common stock to
K. Tucker Andersen in exchange for payment of accrued interest totaling $27,072.

         In July 2002, we issued 187,500 units consisting of one share of common
stock and one warrant to purchase an additional share of common stock to a
vendor in accordance with the agreement valued at $150,000.

         In August 2002, we issued 200,000 shares of common stock in exchange
for payment of $90,000 of outstanding legal fees.

                                      II-3
<PAGE>

         In June 2003 we issued a 6% convertible note in the amount of $50,000
and an 18 months warrant to purchase 160,256 shares of our common stock at $.52
per share, in consideration for a $50,000 loan from an accredited investor.

         In September 2003 we issued a 6% convertible note in the amount of
$50,000 and an 18 months warrant to purchase 15,000 shares of our common stock
at $2.00 per share, in consideration for a $50,000 loan from an accredited
investor.

         In October 2003 we issued 4,939,256 shares of common stock in
satisfaction of 6% / 12% Secured and Senior Secured Notes in the aggregate
amount of approximately $5 million. We also committed to issue 25,365 shares of
8% convertible preferred stock in satisfaction of $25,365 of principal and
accrued interest. The preferred stock will be convertible into 13,142 common
stock at $1.93. Subsequently, we issued 282,982 additional shares of common
stock to these former noteholders as consideration for their previous consent to
extend the maturity date of these notes.

         On October 31, 2003 we issued 306,585 shares of our common stock to
principal vendors, in satisfaction of trade payables in the aggregate amount of
approximately $503,000.

         The foregoing securities were issued in reliance upon the exemption
from the registration requirements of the Securities Act of 1933, as amended,
provided in Section 4(2) thereof, as a transaction by an issuer not involving a
public offering. The registrant reasonably believed that each purchaser had such
knowledge and experience in financial and business matters to be capable of
valuating the merits and risks of the investment, each purchaser represented an
intention to acquire the securities for investment only and not with a view to
distribution thereof and appropriate legends were affixed to the stock
certificates or warrants. No commissions were paid in connection with such
issuances.

         EXHIBITS

     EXHIBIT
       NO.                         DESCRIPTION
      ------                      ------------
        1        Form of Underwriting Agreement
        3.1      Certificate of Incorporation of Milestone(1)
        3.2      Certificate of Amendment filed July 13, 1995(2)
        3.3      Certificate of Amendment filed December 6, 1996(3)
        3.4      Certificate of Amendment filed December 17, 1997(6)
        3.5      Certificate of Amendment filed July 23, 2003
        3.6      By-laws of Milestone(1)
        4.1      Specimen Stock Certificate(2)
        4.2      Form of unit certificate
        4.3      Form of warrant agreement, including form of warrant
        4.4      Form of representative's warrant
        10.1     Lease dated November 25, 1996 between Livingston Corporate Park
                 Associates, L.L.C. and Milestone.  (3)
        10.2     Intentionally Left Blank
        10.5     Intentionally Left Blank
        10.8     Agreement for The Wand(R)Product dated December 1, 1996,
                 between Spintech and Princeton PMC. (3)
        10.10    Agreement between Milestone and Spintech dated December 21,
                 1994, and Amendment No. 1 thereto.  (2)

                                      II-4
<PAGE>

        10.11    Employment Agreement between Milestone and Leonard Osser dated
                 January 1, 1998.  (6)
        10.12    Intentionally Left Blank
        10.13    Intentionally Left Blank
        10.14    Intentionally Left Blank
        10.15    Private Equity Line of Credit Agreement between Milestone and
                 Hillgreen Investments Limited dated January 22, 2001. (5)
        10.16    Registration Rights Agreement, dated January 22, 2001, between
                 Registrant and Hillgreen Investments Limited. (5)
        10.17    Intentionally Left Blank
        10.18    Intentionally Left Blank
        10.19    Intentionally Left Blank
        10.20    Intentionally Left Blank
        10.21    Intentionally Left Blank
        10.22    Intentionally Left Blank
        10.23    Letter from Leonard Osser and Morse, Zelnick, Rose & Lander,
                 LLP, dated April 9, 2000.(7)
        10.24    Letter from Leonard Osser, dated March 29, 2002 deferring
                 compensation payment.
        10.25    Letter from Morse, Zelnick, Rose & Lander LLP, dated March 29,
                 2002, re deferral of payment.
        10.26    Letter from Leonard Osser, dated April 15, 2003 deferring
                 payment.
        10.27    Letter from Morse, Zelnick, Rose & Lander LLP, dated __________
                 deferring payment.
        10.28    Line of Credit for 900,000 and extension of 500,000 line of
                 credit, dated April 15, 2003.
        10.29    Agreement with DaVinci Systems dated _____.
        10.30    Agreement with Mark Hochman and amendments thereto dated April
                 9, 1998, December 16, 1999, November 28, 2001 and October __,
                 2002
        10.31    Agreement with Strider ____dated _______.
        21.1     Subsidiaries of the Registrant.  (3)
        23.1     Consent of J. H. Cohn, LLP

(2)  Incorporated by reference to Milestone's Registration Statement on Form
     SB-2 No. 333-92324.
(3)  Incorporated by reference to Amendment No. 1 to Milestone's Registration
     Statement on Form SB-2 No. 333-92324.
(4)  Incorporated by reference to Milestone's Form 10-KSB for the year ended
     December 31, 1996.
(5)  Incorporated by reference to Milestone's Registration Statement on Form S-3
     No. 333-39784.
(6)  Incorporated by reference to Milestone's Registration Statement on Form S-2
     No. 333-54732.
(6)  Incorporated by reference to Milestone's Form 10-KSB for the year ended
     December 31, 1999.
(7)  Incorporated by reference to Milestone's Form 10-KSB for the year ended
     December 31, 2000.
(8)  Incorporated by reference to Milestone's Form 10-KSB for the year ended
     December 31, 2001.

                                      II-5

<PAGE>

         UNDERTAKINGS

         A. The undersigned Registrant hereby undertakes:

              (1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

                   (i) to include any prospectus required by Section 10(a)(3) of
the Securities Act;

                   (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and

                   (iii) to include any additional or changed material
information with respect to the plan of distribution disclosed in the
Registration Statement.

              (2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

              (3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

              (4) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.

              (6) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

         B. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

                                      II-6
<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York on November 7, 2003.

                                      MILESTONE SCIENTIFIC INC.


                                      By: /s/ Leonard Osser
                                          --------------------------------------
                                          Leonard Osser, Chief Executive Officer

         ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Leonard Osser his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all pre- or post-effective amendments to this Registration Statement, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any one of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.

         In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities indicated on November 7, 2003.

         SIGNATURE                        TITLE
         ---------                        -----

                             Chief Executive Officer and Chairman
     /s/ Leonard Osser       of the Board of Directors
- --------------------------
       Leonard Osser

   /s/ Thomas M. Stuckey     Chief Financial Officer
- --------------------------
     Thomas M. Stuckey

   /s/ Leonard Schiller      Director
- --------------------------
     Leonard Schiller

     /s/ Paul Gregory        Director
- --------------------------
       Paul Gregory

    /s/ Jeffrey Fuller       Director
- --------------------------
      Jeffrey Fuller

    /s/ Leslie Bernhard      Director
- --------------------------
      Leslie Bernhard

                                      II-7
<PAGE>

                                  EXHIBIT INDEX

     EXHIBIT
       NO.                         DESCRIPTION
      ------                      ------------
        1        Form of Underwriting Agreement
        3.1      Certificate of Incorporation of Milestone(1)
        3.2      Certificate of Amendment filed July 13, 1995(2)
        3.3      Certificate of Amendment filed December 6, 1996(3)
        3.4      Certificate of Amendment filed December 17, 1997(6)
        3.5      Certificate of Amendment filed July 23, 2003
        3.6      By-laws of Milestone(1)
        4.1      Specimen Stock Certificate(2)
        4.2      Form of unit certificate*
        4.3      Form of warrant agreement, including form of warrant
        4.4      Form of representative's warrant
        10.1     Lease dated November 25, 1996 between Livingston Corporate Park
                 Associates, L.L.C. and Milestone.  (3)
        10.2     Intentionally Left Blank
        10.5     Intentionally Left Blank
        10.8     Agreement for The Wand(R)Product dated December 1, 1996,
                 between Spintech and Princeton PMC. (3)
        10.10    Agreement between Milestone and Spintech dated December 21,
                 1994, and Amendment No. 1 thereto.  (2)
        10.11    Employment Agreement between Milestone and Leonard Osser dated
                 January 1, 1998.  (6)
        10.12    Intentionally Left Blank
        10.13    Intentionally Left Blank
        10.14    Intentionally Left Blank
        10.15    Private Equity Line of Credit Agreement between Milestone and
                 Hillgreen Investments Limited dated January 22, 2001. (5)
        10.17    Intentionally Left Blank
        10.18    Intentionally Left Blank
        10.19    Intentionally Left Blank
        10.20    Intentionally Left Blank
        10.21    Intentionally Left Blank
        10.22    Intentionally Left Blank
        10.23    Letter from Leonard Osser and Morse, Zelnick, Rose & Lander,
                 LLP, dated April 9, 2000.(7)
        10.24    Letter from Leonard Osser, dated March 29, 2002 deferring
                 compensation payment.(9)
        10.25    Letter from Morse, Zelnick, Rose & Lander LLP, dated March 29,
                 2002, re deferral of payment.(9)
        10.26    Letter from Leonard Osser, dated April 15, 2003 deferring
                 payment.(9)
        10.27    Letter from Morse, Zelnick, Rose & Lander LLP deferring
                 payment.(9)
        10.28    Line of Credit for 900,000 and extension of 500,000 line of
                 credit, dated April 15, 2003.(9)
        10.29    Agreement with DaVinci Systems dated _____.*
        10.30    Agreement with Mark Hochman and amendments thereto dated April
                 9, 1998, December 16, 1999, November 28, 2001 and October __,
                 2002
        10.31    Agreement with Strider Incorporated dated September 3, 2003.*
        21.1     Subsidiaries of the Registrant.  (3)
        23.1     Consent of J. H. Cohn, LLP

(1) Incorporated by reference to Milestone's Registration Statement on Form SB-2
    No. 333-92324.

(2) Incorporated by reference to Amendment No. 1 to Milestone's Registration
    Statement on Form SB-2 No. 333-92324.

(3) Incorporated by reference to Milestone's Form 10-KSB for the year ended
    December 31, 1996.

(4) Incorporated by reference to Milestone's Registration Statement on Form S-3
    No. 333-39784.

(5) Incorporated by reference to Milestone's Registration Statement on Form S-2
    No. 333-54732.

(6) Incorporated by reference to Milestone's Form 10-KSB for the year ended
    December 31, 1999.

(7) Incorporated by reference to Milestone's Form 10-KSB for the year ended
    December 31, 2000.

(8) Incorporated by reference to Milestone's Form 10-KSB for the year ended
    December 31, 2001.

(9) Incorporated by reference to Milestone's Form 10-KSB for the year ended
    December 31, 2002.

*  To be provided



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1
<SEQUENCE>3
<FILENAME>file002.txt
<DESCRIPTION>UNDERWRITING AGREEMENT
<TEXT>
<PAGE>


                                 1,150,000 Units


                            Milestone Scientific Inc.


                             UNDERWRITING AGREEMENT


                                                               ___________, 2003



Paulson Investment Company, Inc.
As Representative of the
   Several Underwriters
811 SW Naito Parkway, Suite 200
Portland, Oregon 97204

Gentlemen:

     Milestone Scientific Inc., a Delaware corporation (the "Company"), proposes
to sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as Representative (the "Representative") an
aggregate of 1,000,000 Units (the "Firm Units"). Each Unit will consist of two
shares ("Share") of the common stock, par value $0.001 of the Company ("Common
Stock") and one warrant (individually, a "Warrant" and, collectively, the
"Warrants") each to purchase one share of Common Stock. The Warrants are to be
issued under the terms of a Warrant Agreement (the "Warrant Agreement") by and
between the Company and [______________], as warrant agent (the "Warrant
Agent"), in each case substantially in the form most recently filed as an
exhibit to the Registration Statement (hereinafter defined). The respective
number of the Firm Units to be so purchased by the several Underwriters are set
forth opposite their names in Schedule I hereto. The Company also proposes to
grant to the Representative an option to purchase in aggregate up to 150,000
additional Units, identical to the Firm Units (the "Option Units"), as set forth
below.

     As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in Schedule I. The Firm Units and the
Option Units (to the extent the aforementioned option is exercised) are herein
collectively called the "Units."

     In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:


                                       1
<PAGE>

     1. Representations and Warranties of the Company. The Company represents
and warrants to each of the Underwriters as follows:

          (a) A registration statement on Form S-2 (File No. __________) with
respect to the Units has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (i) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (ii) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Units, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."

          (b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Except as described in the
Registration Statement, the Company does not own a controlling interest in any
other corporation or other business entity that has any material assets,
liabilities or operations. Each entity that the Registration Statement discloses
as being controlled by the Company (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing under the laws
of its jurisdiction of organization and has the necessary legal power and
authority to own or lease its properties and to conduct its business as
described in the Registration Statement. The Company and each Subsidiary is duly
qualified to transact business in all jurisdictions in which the conduct of its
business requires such qualification.

          (c) The outstanding shares of each class or series of capital stock or
other equity interests of the Company and each Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable and, except
as disclosed in the Registration Statement, have been issued and sold by the
Company or the Subsidiary in compliance in all material respects with applicable
securities laws; the issuance and sale of the Units have been duly authorized by
all necessary corporate action and, when issued and paid for as contemplated
herein, the Units will be validly issued, fully paid and non-assessable; and no
preemptive rights of shareholders exist with respect to any security of the
Company or the issue and sale thereof. Except as set forth in the Registration
Statement, neither the filing of the Registration Statement nor the offering or
sale of the Units as contemplated by this Agreement gives rise to any rights,



                                       2
<PAGE>

other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock or other securities of the Company.
The Company has duly and validly reserved, out of its authorized and unissued
Common Stock, for issuance upon exercise of Warrants a number of shares
sufficient for such purposes, including Warrants included in the Option Units
and Units obtainable on exercise of the Representative's Warrants issuable as
described in Section 2(d) (the "Representative's Warrants").

          (d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. The Common Stock conforms and the Warrants
and the Representative's Warrants will conform to the description thereof
contained in the Registration Statement. The forms of certificates for the
Common Stock, the Warrants and the Representative's Warrants conform to the
requirements of the corporate law of Delaware.

          (e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Units nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements that are required to be stated therein by the Company and will
conform to the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representative, specifically for use in
the preparation thereof.

          (f) The consolidated financial statements of the Company, together
with related notes and schedules as set forth in the Registration Statement,
present fairly the consolidated financial position and the results of operations
and cash flows of the Company and its consolidated subsidiaries at the indicated
dates and for the indicated periods. The impact of each material accounting
judgment made in the preparation of the financial statements included in the
Registration Statement has been fairly and adequately disclosed in the notes
thereto or elsewhere in the Registration Statement. Such financial statements
and related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed herein and in the Registration Statement, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary financial and statistical data of the Company included in
the Registration Statement presents fairly the information shown therein and
such data has been compiled on a basis consistent with the financial statements
presented therein and the books and records of the Company.

          (g) J.H. Cohn LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants


                                       3
<PAGE>

as required by the Act and the Rules and Regulations. There are no facts or
circumstances that would cause the selection and/or engagement of J.H. Cohn LLP
as auditors of the Company's financial statements included in the Registration
Statement or the Prospectus to constitute a violation of Title II of the
Sarbanes-Oxley Act of 2002 or any rules adopted or proposed to be adopted
pursuant thereto.

          (h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
before any court or administrative agency or otherwise which if determined
adversely to the Company or such Subsidiary might result in any material adverse
change in the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company or
prevent the consummation of the transactions contemplated hereby, except as set
forth in the Registration Statement.

          (i) The Company and each Subsidiary either has, or has disposed of in
the ordinary course of business since December 31, 2002, good and marketable
title to all of its properties and assets, tangible and intangible, reflected in
the consolidated balance sheet of the Company and its consolidated Subsidiaries
as of that date that is a part of the financial statements included in the
Registration Statement, and has good and marketable title to all other property
described in the Registration Statement as owned by the Company or a Subsidiary,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
those reflected in such financial statements (or as described in the
Registration Statement) or which are not material. All of the leases and
subleases under which the Company or any Subsidiary holds properties are in full
force and effect (with only such exceptions as are commonly accepted by prudent
companies engaged in the business of the Company or such Subsidiary) and neither
the Company nor any Subsidiary has received notice of any claim that is
materially adverse to the rights of the Company or any Subsidiary under any of
such leases or subleases.

          (j) The Company, for itself and its Subsidiaries that have been
consolidated for tax purposes, has filed all federal, state, local and foreign
income tax returns which have been required to be filed and has paid all taxes
indicated by said returns and all assessments received by it to the extent that
such taxes have become due and are not being contested in good faith. All tax
liabilities have been adequately provided for in the financial statements of the
Company. Except as described in the Registration Statement, all of the
Subsidiaries are consolidated with the Company for tax purposes.

          (k) Since the respective dates as of which information is given in the
Registration Statement, as it may have been amended or supplemented, there has
not been any material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise), or
prospects of the Company or any Subsidiary, whether or not occurring in the
ordinary course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company or any Subsidiary, other than transactions in the ordinary course
of business and changes and transactions described in the Registration
Statement, as it may be amended or supplemented. Neither the Company nor any
Subsidiary has any material contingent obligations which are not


                                       4
<PAGE>

disclosed in the Company's financial statements included in the Registration
Statement or elsewhere in the Prospectus.

          (l) Neither the Company nor any Subsidiary is, nor, with the giving of
notice or lapse of time or both, will any such entity be, in violation of or in
default under its Certificate of Incorporation or Bylaws or other charter
documents or under any agreement, lease, contract, indenture or other instrument
or obligation to which it is a party or by which it, or any of its properties,
is bound and which default is of material significance in respect of the
condition, financial or otherwise of the Company or such Subsidiary or the
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company or such Subsidiary. The
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which any member of the Company is a party, or of the
Certificate of Incorporation or Bylaws of the Company or any order, rule or
regulation applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.

          (m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Units for public offering by
the Underwriters under state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.

          (n) The Company or a Subsidiary holds all patents, patent rights,
trademarks, trade names, copyrights, trade secrets and licenses of any of the
foregoing (collectively, "Intellectual Property Rights") that are necessary to
the conduct of its businesses; there is no claim pending or, to the best
knowledge of the Company, threatened against the Company or any Subsidiary or
any of their respective officers, directors or employees alleging any
infringement of Intellectual Property Rights, or any violation of the terms of
any license relating to Intellectual Property Rights, nor does the Company know
of any basis for any such claim. The Company knows of no infringement by others
of Intellectual Property Rights owned by or licensed to the Company or a
Subsidiary. The Company or a Subsidiary has obtained, is in compliance in all
material respect with and maintains in full force and effect all material
licenses, certificates, permits, orders or other, similar authorizations granted
or issued by any governmental agency (collectively "Government Permits")
required to conduct its business as it is presently conducted. No proceeding to
revoke, limit or otherwise materially change any Government Permit has been
commenced or, to the Company's best knowledge, is threatened against the Company
or any Subsidiary, and the Company has no reason to anticipate that any such
proceeding will be commenced against the Company or any Subsidiary. Except as
disclosed or contemplated in the Prospectus, the Company has no reason to
believe that any pending application for a Government Permit will be denied or
limited in a manner inconsistent with the Company's business plan as described
in the Prospectus.

                                       5
<PAGE>

          (o) The Company and each Subsidiary is in all material respects in
compliance with all applicable Environmental Laws. The Company has no knowledge
of any past, present or, as anticipated by the Company, future events,
conditions, activities, investigation, studies, plans or proposals that (i)
would interfere with or prevent compliance with any Environmental Law by the
Company or any Subsidiary or (ii) could reasonably be expected to give rise to
any common law or other liability, or otherwise form the basis of a claim,
action, suit, proceeding, hearing or investigation, involving the Company or any
Subsidiary and related to Hazardous Substances or Environmental Laws. Except for
the prudent and safe use and management of Hazardous Substances in the ordinary
course of the Company's business, (i) no Hazardous Substance is or has been
used, treated, stored, generated, manufactured or otherwise handled on or at any
Facility and (ii) to the Company's best knowledge, no Hazardous Substance has
otherwise come to be located in, on or under any Facility. No Hazardous
Substances are stored at any Facility except in quantities necessary to satisfy
the reasonably anticipated use or consumption by the Company. No litigation,
claim, proceeding or governmental investigation is pending regarding any
environmental matter for which the Company or any Subsidiary has been served or
otherwise notified or, to the knowledge of the Company, threatened or asserted
against the Company or any Subsidiary, or the officers or directors of the
Company or any Subsidiary in their capacities as such, or any Facility or the
Company's business. There are no orders, judgments or decrees of any court or of
any governmental agency or instrumentality under any Environmental Law which
specifically apply to the Company or any Subsidiary, any Facility or any of the
Company's or any Subsidiary's operations. Neither the Company nor any Subsidiary
has received from a governmental authority or other person (i) any notice that
it is a potentially responsible person for any Contaminated site or (ii) any
request for information about a site alleged to be Contaminated or regarding the
disposal of Hazardous Substances. There is no litigation or proceeding against
any other person by the Company or any Subsidiary regarding any environmental
matter. The Company has disclosed in the Prospectus or made available to the
Underwriters and their counsel true, complete and correct copies of any reports,
studies, investigations, audits, analyses, tests or monitoring in the possession
of or initiated by the Company or any Subsidiary pertaining to any environmental
matter relating to the Company, any Subsidiary, their past or present operations
or any Facility.

     For the purposes of the foregoing paragraph, "Environmental Laws" means any
applicable federal, state or local statute, regulation, code, rule, ordinance,
order, judgment, decree, injunction or common law pertaining in any way to the
protection of human health or the environment, including without limitation, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Toxic Substances Control Act, the
Clean Air Act, the Federal Water Pollution Control Act and any similar or
comparable state or local law; "Hazardous Substance" means any hazardous, toxic,
radioactive or infectious substance, material or waste as defined, listed or
regulated under any Environmental Law; "Contaminated" means the actual existence
on or under any real property of Hazardous Substances, if the existence of such
Hazardous Substances triggers a requirement to perform any investigatory,
remedial, removal or other response action under any Environmental Laws or if
such response action legally could be required by any governmental authority;
"Facility" means any property currently owned, leased or occupied by the
Company.

          (p) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or intends to take, directly or indirectly, any action
which is designed to


                                       6
<PAGE>

cause or result in, or which constitutes or might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock or the Warrants to facilitate the sale or resale of the Units.

          (q) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the rules and regulations
of the Commission thereunder.

          (r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has adopted Disclosure Controls and Procedures, as
defined in Section 13a-14(c) of the rules and regulations adopted under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and has
implemented such procedures as adopted and has evaluated the effectiveness of
such Disclosure Controls and Procedures.

          (s) The Company and each Subsidiary carries, or is covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.

          (t) The Company and each Subsidiary is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company or any Subsidiary would have any liability; neither the
Company nor any Subsidiary has incurred and the Company does not expect that it
or any Subsidiary will incur liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company or any Subsidiary would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such qualification.

          (u) The Company and each Subsidiary is in material compliance with all
laws, rules, regulations, orders of any court or administrative agency,
operating licenses or other requirements imposed by any governmental body
applicable to it, including, without limitation, all applicable laws, rules,
regulations, licenses or other governmental standards applicable to the its
business; and the conduct of the business of the Company and each Subsidiary, as
described in the Prospectus, will not cause the Company or such Subsidiary to be
in violation of any such requirements.

                                       7
<PAGE>

          (v) Each of the Warrants and the Representative's Warrants have been
authorized for issuance to the purchasers thereof or to the Representative or
its designees, as the case may be, and will, when issued, possess rights,
privileges, and characteristics as represented in the most recent form of
Warrant Agreement or Representative's Warrants, as the case may be, filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Warrants and the Representative's Warrants, when issued and delivered
against payment therefor in accordance with the terms thereof, will be duly and
validly issued, fully paid, nonassessable and free of preemptive rights, and all
corporate action required to be taken for the authorization and issuance of the
Warrants and the Representative's Warrants, and the securities to be issued upon
their exercise, have been validly and sufficiently taken. The execution by the
Company of the Warrant Agreement and the Representative's Warrants has been duly
authorized by all required action of the Company and, when so executed and
delivered (and assuming due and valid execution by the Warrant Agent, in the
case of the Warrant Agreement) will constitute the valid an binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.

          (w) Except as disclosed in the Prospectus, neither the Company nor any
of its officers, directors or affiliates have caused any person, other than the
Underwriters, to be entitled to reimbursement of any kind, including, without
limitation, any compensation that would be includable as underwriter
compensation under the NASD's Corporate Financing Rule with respect to the
offering of the Units, as a result of the consummation of such offering based on
any activity of such person as a finder, agent, broker, investment adviser or
other financial service provider.

          (x) Except as described in the Prospectus, the Company does not
directly or indirectly control or have a material interest in any other business
entity.

          (y) The Units, the Common Stock and the Warrants have been approved
for listing on the American Stock Exchange ("AMEX") upon the effectiveness of
the Registration Statement and the Company has satisfied all of the requirements
of AMEX for such listing and for the trading of its Common Stock, Units and
Warrants on AMEX.

          (z) The Company has adopted organizational structures and policies
sufficient to comply with the requirements of the AMEX corporate governance
rules in effect as of the date hereof and as proposed to be amended in
accordance with any proposed rules of AMEX published for comment as of the date
hereof (collectively, the "AMEX Corporate Governance Rules"). Without limiting
the generality of the foregoing, the Company's Board of Directors has validly
appointed an Audit Committee and a Compensation Committee whose composition
satisfies the requirements of the AMEX Corporate Governance Rules. The Board of
Directors and/or the Audit Committee or Compensation Committee, as the case may
be, has adopted a charter governing the respective activities of the Audit and
Compensation Committees that satisfies the requirements of the AMEX Corporate
Governance Rules. The Audit Committee and the Compensation Committee have each
acted in accordance with the provisions of their respective charters, as amended
from time to time.

                                       8
<PAGE>

          (aa) Neither the Board of Directors nor the Audit Committee has been
informed, nor is any director of the Company aware, of (i) any significant
deficiencies in the design or operation of the Company's internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weakness in the Company's internal
controls; or (ii) any fraud, whether or not material, that involves management
or other employees of the Company who have a significant role in the Company's
internal controls.

          (bb) Each of the certifications made by the principal executive and
principal financial officers of the Company pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and the rules and regulations adopted thereunder was
correct in all material respects when made.

          (cc) The Company and each Subsidiary has complied with all provisions
of Section 517.075 Florida Statutes, relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.

     2. Purchase, Sale and Delivery of the Units.

          (a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of [$____] per Unit, the number of Firm
Units set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.

          (b) Payment for the Firm Units to be sold hereunder is to be made in
New York Clearing House funds and, at the option of the Representative, by bank
wire to an account specified by the Company, certified or bank cashier's checks
drawn to the order of the Company, against either uncertificated delivery of
Firm Units or of certificates therefor (which delivery, if certificated, shall
take place in such location in New York, New York as may be specified by the
Representative) to the Representative for the several accounts of the
Underwriters. Such payment is to be made at the offices of the Representative at
the address set forth on the first page of this agreement, at 7:00 a.m., Pacific
time, on the third business day after the date of this Agreement or at such
other time and date not later than five business days thereafter as you and the
Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.) Except
to the extent uncertificated Firm Units are delivered at closing, the
certificates for the Firm Units will be delivered in such denominations and in
such registrations as the Representative requests in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representative at least one business day prior to the
Closing Date.

          (c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriters to purchase the Option Units
at the price per Unit as set forth in Section 2(a). The option granted hereby
may be exercised in whole or in part by giving written notice (i) at any time
before the Closing Date and (ii) only once thereafter within 45 days after


                                       9
<PAGE>

the date of this Agreement, by the Representative to the Company setting forth
the number of Option Units as to which the Underwriters are exercising the
option, the names and denominations in which the Option Units are to be
registered and the time and date at which certificates representing such Units
are to be delivered. The time and date at which certificates for Option Units
are to be delivered shall be determined by the Representative but shall not be
earlier than three nor later than 10 full business days after the exercise of
such option, nor in any event prior to the Closing Date (such time and date
being herein referred to as the "Option Closing Date"). If the date of exercise
of the option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The option with
respect to the Option Units granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Units by the Underwriters. The
Representative may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Units shall be made on
the Option Closing Date in New York Clearing House funds and, at the option of
the Representative, by bank wire to an account specified by the Company, or
certified or bank cashier's check drawn to the order of the Company for the
Option Units to be sold by the Company in consideration either of uncertificated
delivery of Option Units or delivery of certificates therefor (which delivery,
if certificated, shall take place in such location in New York, New York as may
be specified by the Representative) to the Representative for the several
accounts of the Underwriters. Except to the extent uncertificated Option Units
are delivered at closing, the certificates for the Option Units will be
delivered in such denominations and in such registrations as the Representative
requests in writing not later than the second full business day prior to the
Option Closing Date, and will be made available for inspection by the
Representative at least one business day prior to the Option Closing Date.

          (d) In addition to the sums payable to the Representative as provided
elsewhere herein, the Representative shall be entitled to receive at the
Closing, for itself alone and not as Representative of the Underwriters, as
additional compensation for its services, Representative's Warrants for the
purchase of up to 100,000 Units at a price of [$____] per Unit, upon the terms
and subject to adjustment and conversion as described in the form of
Representative's Warrants filed as an exhibit to the Registration Statement.

     3. Offering by the Underwriters.

          (a) It is understood that the several Underwriters are to make a
public offering of the Firm Units as soon as the Representative deems it
advisable to do so. The Firm Units are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms. To the extent, if at all, that any Option Units are
purchased pursuant to Section 2 hereof, the Representative will offer them to
the public on the foregoing terms.

     It is further understood that you will act as the Representative for the
Underwriters in the offering and sale of the Units in accordance with an
Agreement Among Underwriters entered into by you and the several other
Underwriters.

     4. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:

                                       10
<PAGE>

          (a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representative containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, and (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy or to which the
Representative shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.

          (b) The Company will advise the Representative promptly (i) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (ii) of receipt of any comments from the Commission, (iii) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.

          (c) The Company will cooperate with the Representative in endeavoring
to qualify the Units for sale under the securities laws of such jurisdictions as
the Representative may reasonably have designated in writing and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Representative may
reasonably request for distribution of the Units.

          (d) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representative may
reasonably request. The Company will deliver to the Representative at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representative such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representative
may reasonably request.

          (e) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Units as contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the

                                       11
<PAGE>

Company or in the reasonable opinion of the Underwriters, it becomes necessary
to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading, or, if it is necessary at any time to
amend or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances existing
at the time the Prospectus is so delivered, be misleading, or so that the
Prospectus will comply with the law.

          (f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.

          (g) The Company will, for a period of five years from the Closing
Date, deliver to the Representative copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representative similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.

          (h) The Company will make no offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivatives of Common Stock (or agreement therefor), directly or indirectly, for
a period of ninety days after the date of this Agreement otherwise than
hereunder, or pursuant to contractual obligations existing on the date hereof or
pursuant to employee benefit plans in effect on the date hereof, or with the
prior written consent of the Representative, which consent will not be
unreasonably withheld.

          (i) The Company will use its best efforts to list, subject to notice
of issuance of the Units, the Common Stock and the Warrants on the AMEX and to
cause such listing to remain in effect with respect to each such security unless
and until (i) such security expires; (ii) such security is listed on another
exchange of at least comparable reputation; or (iii) the Company is no longer
required to file reports under Section 12 of the Exchange Act.

          (j) The Company has caused each officer and director and each person
who owns, beneficially or of record, shares of the Common Stock constituting 5%
or more of the Common Stock outstanding immediately prior to the date hereof to
furnish to you, on or prior to the date of this agreement, a letter or letters,
in form and substance satisfactory to the Underwriters ("Lock-up Agreements"),
pursuant to which each such person has agreed not to offer, sell, sell short or
otherwise dispose of any shares of Common Stock or other capital stock of the
Company, or any other securities convertible, exchangeable or exercisable for
Common Stock or derivatives of Common Stock owned by such person or request the
registration for the


                                       12
<PAGE>

offer or sale of any of the foregoing (or as to which such person has the right
to direct the disposition) for a period of 90 days after the date of this
Agreement, directly or indirectly, except with the prior written consent of the
Representative.

          (k) The Company shall apply the net proceeds of its sale of the Units
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Units and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.

          (l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company to register as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act").

          (m) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock, and shall comply with the provisions of the Warrant Agreement with
respect to the appointment and maintenance of a Warrant Agent for the Warrants.

          (n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.

     5. Costs and Expenses.

          (a) The Representative shall be entitled to reimbursement from the
Company, for itself alone and not as Representative of the Underwriters, to a
non-accountable expense allowance equal to 3.0% of the aggregate initial public
offering price of the Firm Units and any Option Units purchased by the
Underwriters. The Representative shall be entitled to withhold this allowance on
the Closing Date related to the purchase of the Firm Units or the Option Units,
as the case may be.

          (b) In addition to the payment described in Paragraph (a) of this
Section 5, the Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of printing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the AMEX listing application, the costs of due diligence
investigation of the principals of the Company, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fees and expenses (including any fees and disbursements of counsel for the
Underwriters) incident to securing the required review by the NASD Regulation,
Inc. of the underwriting terms and arrangements; the AMEX listing fee; and the
expenses, including the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Units under state
securities or Blue Sky laws. Any transfer taxes imposed on the sale of the Units
to the several Underwriters will be paid by the Company. The Company agrees to
pay all costs and expenses of the Underwriters, including the fees and
disbursements of


                                       13
<PAGE>

counsel for the Underwriters, incident to the offer and sale of directed Units
by the Underwriters to employees and persons having business relationships with
the Company. The Company shall not, however, be required to pay for any of the
Underwriters' expenses (other than those related to qualification under NASD
regulation and state securities or Blue Sky laws) except that, if this Agreement
shall not be consummated, then the Company shall reimburse the several
Underwriters for accountable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Units or in contemplation of performing
their obligations hereunder; but the Company shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Units.

     6. Conditions of Obligations of the Underwriters. The several obligations
of the Underwriters to purchase the Firm Units on the Closing Date and the
Option Units, if any, on the Option Closing Date are subject to the accuracy, as
of the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company contained herein, and to the
performance by the Company of their covenants and obligations hereunder and to
the following additional conditions:

          (a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representative and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Units.

The Representative shall have received on the Closing Date or the Option Closing
Date, as the case may be, the opinion of Morse, Zelnick, Rose & Lander LLP,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:

               (i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement.

               (ii) Each Subsidiary has been duly organized and is validly
existing as a business entity in good standing under the laws of its
jurisdiction of formation with all requisite power and authority under the laws
governing such entities to own or lease its properties and conduct its business
as described in the Registration Statement.

               (iii) The Company and each Subsidiary is duly qualified to
transact business in all jurisdictions in which the conduct of its business
requires such qualification, or in


                                       14
<PAGE>

which the failure to qualify would have a material adverse effect upon the
business of the Company.

               (iv) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable; all of the securities of the Company conform to
the description thereof contained in the Prospectus; the certificates for the
Common Stock and the Warrants are in due and proper form; no preemptive rights
of shareholders exist with respect to any of the Common Stock or the issuance or
sale thereof pursuant to any applicable statute or the provisions of the
Company's Articles of Incorporation or Bylaws or, to such counsel's best
knowledge, pursuant to any contractual obligation. The Company's ownership
interest in each Subsidiary is, in all material respects, as described in the
Registration Statement.

               (v) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Units or the right to have any Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.

               (vi) The Warrant Agreement and the Warrants have been duly
authorized by the Company. When duly executed, authenticated, issued and
delivered as contemplated in the Registration Statement and the Warrant
Agreement, the Warrant Agreement and the Warrants will constitute legally
binding obligations of the Company, enforceable against it in accordance with
their terms and, in the case of the Warrants, entitled to the benefits of the
Warrant Agreement subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.

               (vii) The Warrants are exercisable to purchase Common Stock in
accordance with the terms of the Warrant Agreement; the shares of Common Stock
initially issuable upon exercise of the Warrants (including Warrants comprising
the Option Units and Warrants issuable on exercise of the Representative's
Warrants) have been duly authorized and reserved for issuance upon such
conversion or exercise, as the case may be, and, when issued upon such
conversion or exercise in accordance with the terms of the Warrant Agreement
will be validly issued, fully paid and nonassessable.

               (viii) The Representative's Warrants have been duly authorized by
the Company. When duly executed, issued and delivered as contemplated in the
Registration


                                       15
<PAGE>

Statement, the Representative's Warrants will constitute the legally binding
obligation of the Company, enforceable against it in accordance with its terms
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.

               (ix) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.

               (x) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein).

               (xi) The statements under the captions "Business-Patents and
Intellectual Property," "Business-Government Regulation," "Shares Eligible for
Future Sale," "Description of Securities" and _______________________ in the
Prospectus and in Items __ and __ of the Registration Statement, insofar as such
statements constitute a summary of documents referred to therein or matters of
law, fairly summarize in all material respects the information called for with
respect to such documents and matters.

               (xii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.

               (xiii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any Subsidiary.

               (xiv) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of the
Company, as amended, or any agreement or instrument known to such counsel to
which the Company is a party or by which the Company may be bound.

               (xv) Each of this Agreement and the Warrant Agreement has been
duly authorized, executed and delivered by the Company.

               (xvi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD, as to which such counsel need
express no opinion) except such as have been obtained or made, specifying the
same.

               (xvii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net


                                       16
<PAGE>

proceeds therefrom as described in the Prospectus, required to register as an
investment company under the 1940 Act.

In rendering such opinion, such counsel may rely as to matters governed by the
laws of states other than Oregon, or federal laws on local counsel in such
jurisdictions, provided that in each case such counsel shall state that they
believe that they and the Underwriters are justified in relying on such other
counsel. In addition to the matters set forth above, the opinion of Morse,
Zelnick, Rose & Lander LLP shall also include a statement to the effect that
nothing has come to the attention of such counsel that has caused them to
believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A under the Act) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein).

          (b) The Representative shall have received from Holland & Knight LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (ix) and (x) of Paragraph (b) of this Section 6. In rendering such
opinion Holland & Knight LLP may rely as to all matters governed other than by
the laws of the State of Oregon or Federal laws on the opinion of counsel
referred to in Paragraph (b) of this Section 6. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel that has caused them to
believe that (i) the Registration Statement, or any amendment thereto, as of the
time it became effective under the Act (but after giving effect to any
modifications incorporated therein pursuant to Rule 430A under the Act) and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to such
statement, Holland & Knight LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.

          (c) The Representative shall have received at or prior to the Closing
Date from Holland & Knight LLP a memorandum or summary, in form and substance
satisfactory to the Representative, with respect to the qualification for
offering and sale by the Underwriters of the Units under the state securities or
Blue Sky laws of such jurisdictions as the Representative may reasonably have
designated to the Company.



                                       17
<PAGE>

          (d) The Representative, on behalf of the several Underwriters, shall
have received, on each of the dates hereof, the Closing Date and the Option
Closing Date, as the case may be, a letter dated the date hereof, the Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representative, of J.H. Cohn LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.

          (e) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:

               (i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for such purpose have been taken or are, to his
or her knowledge, contemplated by the Commission;

               (ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;

               (iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;

               (iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and

               (v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the Company or
the earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company, whether or not
arising in the ordinary course of business.



                                       18
<PAGE>

               (f) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representative may reasonably have requested.

               (g) The Common Stock and the Warrants have been approved for
listing upon notice of issuance of the Units on AMEX.

               (h) The Lock-up Agreements described in Section 4(j) are in full
force and effect.

     The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representative and to Holland & Knight LLP, counsel
for the Underwriters.

     If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.

     In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).

     7. Conditions of the Obligations of the Company. The obligations of the
Company to sell and deliver the portion of the Units required to be delivered as
and when specified in this Agreement are subject to the conditions that at the
Closing Date or the Option Closing Date, as the case may be, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.

     8. Indemnification.

          (a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Units, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue


                                       19
<PAGE>

statement, or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representative specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.

          (b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.

          (c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of presentation) the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding
(including any


                                       20
<PAGE>

impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.

          (d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

     The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation


                                       21
<PAGE>

which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Units purchased by such Underwriter, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.

          (e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.

          (f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Units and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.

     9. Default by Underwriters. If on the Closing Date or the Option Closing
Date, as the case may be, any Underwriter shall fail to purchase and pay for the
portion of the Units which such Underwriter has agreed to purchase and pay for
on such date (otherwise than by reason of any default on the part of the
Company), you, as Representative of the Underwriters, shall use reasonable
efforts to procure within 36 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Units or Option Units,
as the case may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representative, shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option Units, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion


                                       22
<PAGE>

to the respective numbers of Firm Units or Option Units, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Units or
Option Units, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of Firm Units or
Option Units, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Units or Option Units, as the case may be, covered
hereby, the Company or you as the Representative of the Underwriters will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company except to the extent provided
in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representative, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.

     10. Notices.

     All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows:

          if to the Underwriters, to

                 Paulson Investment Company, Inc.
                 811 SW Naito Parkway, Suite 200
                 Portland, Oregon 97204
                 Attention: Chester L.F. Paulson

                 with a copy, which shall not constitute notice, to

                 Holland & Knight LLP
                 111 SW Fifth Avenue, Suite 2300
                 Portland, Oregon 97204
                 Attention: Mark A. von Bergen

          if to the Company, to

                 Milestone Scientific Inc.
                 220 South Orange Avenue
                 Livingston, New Jersey 07039
                 Attention: Leonard Osser

                 with copy, which shall not constitute notice, to

                 Morse, Zelnick, Rose & Lander LLP
                 405 Park Avenue
                 New York, New York  10022
                 Attention: Stephen A. Zelnick

                                       23
<PAGE>

     11. Termination. This Agreement may be terminated by you by notice to the
Company as follows:

          (a) at any time prior to the earlier of (i) the time the Units are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;

          (b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company, the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company, whether or not arising in the ordinary
course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Units or to enforce contracts for
the sale of the Units, (iii) the Dow Jones Industrial Average shall have fallen
by 15 percent or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission, (iv) suspension of trading in securities generally on the New York
Stock Exchange or AMEX or limitation on prices (other than limitations on hours
or numbers of days of trading) for securities on either such Exchange, (v) the
enactment, publication, decree or other promulgation of any statute, regulation,
rule or order of any court or other governmental authority which in your opinion
materially and adversely affects or may materially and adversely affect the
business or operations of the Company, (vi) declaration of a banking moratorium
by United States or New York State authorities, (vii) any downgrading in the
rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act); (viii) the suspension of trading of the Common Stock or the
Warrants by the Commission or AMEX, or (ix) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States; or

          (c) as provided in Sections 6 and 9 of this Agreement.

     12. Successors. This Agreement has been and is made solely for the benefit
of the Underwriters, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.

     13. Information Provided by Underwriters. The Company and the Underwriters
acknowledge and agree that the only information furnished or to be furnished by
any


                                       24
<PAGE>

Underwriter to the Company for inclusion in the Prospectus or the Registration
Statement consists of the information set forth in the last paragraph on the
front cover page (insofar as such information relates to the Underwriters),
legends required by Item 502(b) of Regulation S-B under the Act and the
information under the caption "Underwriting" in the Prospectus.

     14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Units under this Agreement.

     This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.


     This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Oregon. All disputes relating to this Underwriting
Agreement shall be adjudicated before a court located in Multnomah County,
Oregon to the exclusion of all other courts that might have jurisdiction.



      (Remainder of page intentionally left blank; signature page follows)



                                       25
<PAGE>


     If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.

                                    Very truly yours,

                                    MILESTONE SCIENTIFIC INC.


                                    By: ______________________________________
                                         Name:
                                         Title:


     The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.

                                    PAULSON INVESTMENT COMPANY, INC.
                                    As Representative of the several
                                    Underwriters listed on Schedule I


                                    By: ______________________________________
                                         Name:
                                         Title:




                                       26
<PAGE>


                                   SCHEDULE I

                            Schedule of Underwriters

                                                   Number of Firm Units
              Underwriter                            to Be Purchased
- ------------------------------------------   -------------------------------
   Paulson Investment Company, Inc.


              Total





# 1331484_v1


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.5
<SEQUENCE>4
<FILENAME>file003.txt
<DESCRIPTION>CHARTER AMENDMENT
<TEXT>
<PAGE>



                           CERTIFICATE OF AMENDMENT OF

                        THE CERTIFICATE OF INCORPORATION

                                       OF

                           MILESTONE SCIENTIFIC, INC.

         (PURSUANT TO SECTION 242 OF THE DELAWARE GENERAL CORPORATION LAW)

                          ----------------------------


         It is hereby certified that:

         1.     The name of the corporation is Milestone Scientific Inc (the
                "Corporation").

         2.     The Certificate of Incorporation of the Corporation was
                filed by the Department of State on August 17, 1989 (under
                the name "U.S. Opportunity Search, Inc.") and subsequent
                amendments thereto were filed on July 13, 1995, December 6,
                1996 and, December 17, 1997.

         3.     The Certificate of Incorporation of the Corporation is
                hereby amended to increase the total number of shares of
                common stock and to add a new class of preferred stock,
                which the Corporation shall have authority to issue.

         4.     To accomplish the foregoing amendments, a Article FOURTH of
                the Certificate of Incorporation is amended to read in its
                entirety as follows:


                           "FOURTH: The total number of shares which this
                           corporation shall have authority to issue is
                           55,000,000 shares, consisting of (i) 50,000,000
                           shares of common stock, $.001 par value per share
                           (the "Common Stock") and (ii) 5,000,000 shares of
                           preferred stock, $.001 par value per share (the
                           "Preferred Stock"). The Board of Directors, in the
                           exercise of its discretion, is authorized to issue
                           the undesignated Preferred Stock in one or more
                           series, to determine the powers, preferences and
                           rights, and qualifications, limitations or
                           restrictions, granted to or imposed upon any wholly
                           unissued series of undesignated Preferred Stock, and
                           to fix the number of shares constituting any series
                           and the designation of such series, without any
                           further vote or action by the stockholders."


<PAGE>



         5.     The Amendments herein certified have been duly adopted in
                accordance with the provisions of Section 242 of the
                Delaware General Corporation Law.

         6.     This Certificate of Amendment shall become effective upon
                the filing hereof in the Office of the Secretary of State of
                the State of Delaware.


Executed on this 24th day of July 2003




                                         /s/ Leonard Osser
                                         -----------------
                                         Leonard Osser
                                         President and Chief Executive Officer















                                       2


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>5
<FILENAME>file004.txt
<DESCRIPTION>WARRANT AGREEMENT
<TEXT>
<PAGE>



                                WARRANT AGREEMENT



                                     BETWEEN



                            MILESTONE SCIENTIFIC INC.

                                       AND


                              ____________________



                        DATED AS OF ___________ __, 2003



<PAGE>


                                WARRANT AGREEMENT

     This Agreement, dated as of ____________ __, 2003, is between Milestone
Scientific Inc., a Delaware corporation (the "Company") and _____________, a
______________, (the "Warrant Agent").

     The Company, at or about the time that it is entering into this Agreement,
proposes to issue and sell to public investors up to 1,150,000 Units (together
with the additional units issuable as provided herein, the "Units"). Each Unit
consists of one share of common stock, $0.001 par value, of the Company and one
warrant (collectively, the "Warrants"). Each Warrant is exercisable to purchase
one share of Common Stock upon the terms and conditions and subject to
adjustment in certain circumstances, all as set forth in this Agreement.

     The Company proposes to issue to the Representative of the Underwriters in
the public offering of Units referred to above warrants to purchase up to
100,000 additional Units.

     The Company wishes to retain the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, transfer, exchange and replacement of the certificates evidencing the
Warrants to be issued under this Agreement (the "Warrant Certificates") and the
exercise of the Warrants;

     The Company and the Warrant Agent wish to enter into this Agreement to set
forth the terms and conditions of the Warrants and the rights of the holders
thereof ("Warrantholders") and to set forth the respective rights and
obligations of the Company and the Warrant Agent. Each Warrantholder is an
intended beneficiary of this Agreement with respect to the rights of
Warrantholders herein.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:

     1. Appointment of Warrant Agent. The Company appoints the Warrant Agent to
act as agent for the Company in accordance with the instructions in this
Agreement and the Warrant Agent accepts such appointment.

     2. Date, Denomination and Execution of Warrant Certificates.

          (a) The Warrant Certificates (and the Form of Election to Purchase and
the Form of Assignment to be printed on the reverse thereof) shall be in
registered form only and shall be substantially of the tenor and purport recited
in Exhibit A hereto, and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law, or with any rule or regulation made pursuant
thereto, or with any rule or regulation of any stock exchange on which the
Common Stock or the Warrants may be listed or any automated quotation system, or
to conform to usage. Each Warrant Certificate shall entitle the registered
holder thereof, subject to the provisions of this Agreement and of the Warrant
Certificate, to purchase, on or after ____________, 2003 and on or before the
close of business on _________, 2008 (the "Expiration Date"), one fully paid and
non-assessable share of


                                       1
<PAGE>

Common Stock for each Warrant evidenced by such Warrant Certificate for $_____.
The exercise price of the Warrants (the "Exercise Price") is subject to
adjustments as provided in Section 6 hereof. Each Warrant Certificate issued as
a part of a Unit offered to the public as described in the recitals, above,
shall be dated _____________, 2003; each other Warrant Certificate shall be
dated the date on which the Warrant Agent receives valid issuance instructions
from the Company or a transferring holder of a Warrant Certificate or, if such
instructions specify another date, such other date.

          (b) For purposes of this Agreement, the term "close of business" on
any given date shall mean 5:00 p.m., Eastern time, on such date; provided,
however, that if such date is not a business day, it shall mean 5:00 p.m.,
Eastern time, on the next succeeding business day. For purposes of this
Agreement, the term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in New York, New York or in the
State in which the Warrant Agent maintains the principal office in which it
conducts business related to the Warrants are authorized or obligated by law to
be closed.

          (c) Each Warrant Certificate shall be executed on behalf of the
Company by the Chairman of the Board or its President or a Vice President,
either manually or by facsimile signature printed thereon, and have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. Each Warrant Certificate shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
Warrant Certificate shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issue and delivery thereof by the
Company, such Warrant Certificate, nevertheless, may be countersigned by the
Warrant Agent, issued and delivered with the same force and effect as though the
person who signed such Warrant Certificate had not ceased to be such officer of
the Company.

     3. Subsequent Issue of Warrant Certificates. Subsequent to their original
issuance, no Warrant Certificates shall be reissued except (i) Warrant
Certificates issued upon transfer thereof in accordance with Section 4 hereof,
(ii) Warrant Certificates issued upon any combination, split-up or exchange of
Warrant Certificates pursuant to Section 4 hereof, (iii) Warrant Certificates
issued in replacement of mutilated, destroyed, lost or stolen Warrant
Certificates pursuant to Section 5 hereof, (iv) Warrant Certificates issued upon
the partial exercise of Warrant Certificates pursuant to Section 7 hereof, and
(v) Warrant Certificates issued to reflect any adjustment or change in the
Exercise Price or the number or kind of shares purchasable thereunder pursuant
to Section 22 hereof. The Warrant Agent is hereby irrevocably authorized to
countersign and deliver, in accordance with the provisions of said Sections 4,
5, 7 and 22, the new Warrant Certificates required for purposes thereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purposes.

     4. Transfers and Exchanges of Warrant Certificates.

          (a) The Warrant Agent will keep or cause to be kept books for
registration of ownership and transfer of the Warrant Certificates issued
hereunder. Such registers shall show


                                       2
<PAGE>

the names and addresses of the respective holders of the Warrant Certificates
and the kind and number of Warrants evidenced by each such Warrant Certificate.

          (b) The Warrant Agent shall, from time to time, register the transfer
of any outstanding Warrants upon the books to be maintained by the Warrant Agent
for that purpose, upon surrender of the Warrant Certificate evidencing such
Warrants, with the Form of Assignment duly filled in and executed with such
signature guaranteed by a banking institution or NASD member and such supporting
documentation as the Warrant Agent or the Company may reasonably require, to the
Warrant Agent at its stock transfer office in __________ at any time on or
before the Expiration Date of such Warrant, and upon payment to the Warrant
Agent for the account of the Company of an amount equal to any applicable
transfer tax. Payment of the amount of such tax may be made in cash, or by
certified or official bank check, payable in lawful money of the United States
of America to the order of the Company.

          (c) Upon receipt of a Warrant Certificate, with the Form of Assignment
duly filled in and executed, accompanied by payment of an amount equal to any
applicable transfer tax, the Warrant Agent shall promptly cancel the surrendered
Warrant Certificate and countersign and deliver to the transferee a new Warrant
Certificate for the number of full Warrants transferred to such transferee;
provided, however, that in case the registered holder of any Warrant Certificate
shall elect to transfer fewer than all of the Warrants evidenced by such Warrant
Certificate, the Warrant Agent in addition shall promptly countersign and
deliver to such registered holder a new Warrant Certificate or Certificates for
the number of full Warrants not so transferred.

          (d) Any Warrant Certificate or Certificates may be exchanged at the
option of the holder thereof for another Warrant Certificate or Certificates of
different denominations, of like tenor and representing in the aggregate the
same kind and number of Warrants, upon surrender of such Warrant Certificate or
Certificates, with the Form of Assignment duly filled in and executed, to the
Warrant Agent, at any time or from time to time after the close of business on
the date hereof and prior to the close of business on the Expiration Date
relating to such Warrant. The Warrant Agent shall promptly cancel the
surrendered Warrant Certificate and deliver the new Warrant Certificate pursuant
to the provisions of this Section.

     5. Mutilated, Destroyed, Lost or Stolen Warrant Certificates. Upon receipt
by the Company and the Warrant Agent of evidence reasonably satisfactory to them
of the loss, theft, destruction or mutilation of any Warrant Certificate, and in
the case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and reimbursement to them of all reasonable expenses
incidental thereto, and, in the case of mutilation, upon surrender and
cancellation of the Warrant Certificate, the Warrant Agent shall countersign and
deliver a new Warrant Certificate of like tenor for the same kind and number of
Warrants.

     6. Adjustments of Number and Kind of Shares Purchasable and Exercise Price.
The number and kind of securities or other property purchasable upon exercise of
a Warrant shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of any of the following events:



                                       3
<PAGE>

          (a) In case the Company shall (1) pay a dividend in, or make a
distribution of, shares of capital stock on its outstanding Common Stock, (2)
subdivide its outstanding shares of Common Stock into a greater number of such
shares or (3) combine its outstanding shares of Common Stock into a smaller
number of such shares, the total number of shares of Common Stock purchasable
upon the exercise of each Warrant outstanding immediately prior thereto shall be
adjusted so that the holder of any Warrant Certificate thereafter surrendered
for exercise shall be entitled to receive at the same aggregate Exercise Price
the number of shares of capital stock (of one or more classes) which such holder
would have owned or have been entitled to receive immediately following the
happening of any of the events described above had such Warrant been exercised
in full immediately prior to the record date with respect to such event. Any
adjustment made pursuant to this Subsection shall, in the case of a stock
dividend or distribution, become effective as of the record date therefor and,
in the case of a subdivision or combination, be made as of the effective date
thereof. If, as a result of an adjustment made pursuant to this Subsection, the
holder of any Warrant Certificate thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive and shall be evidenced by a Board resolution filed with the Warrant
Agent) shall determine the allocation of the adjusted Exercise Price between or
among shares of such classes of capital stock.

          (b) In the event of a capital reorganization or a reclassification of
the Common Stock (except as provided in Subsection (a) above or Subsection (e)
below), any Warrantholder, upon exercise of Warrants, shall be entitled to
receive, in substitution for the Common Stock to which he would have become
entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of the Company (or cash) that he would have been entitled to receive at
the same aggregate Exercise Price upon such reorganization or reclassification
if such Warrants had been exercised immediately prior to the record date with
respect to such event; and in any such case, appropriate provision (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and shall be evidenced by a certified Board resolution filed with
the Warrant Agent) shall be made for the application of this Section 6 with
respect to the rights and interests thereafter of the Warrantholders (including
but not limited to the allocation of the Exercise Price between or among shares
of classes of capital stock), to the end that this Section 6 (including the
adjustments of the number of shares of Common Stock or other securities
purchasable and the Exercise Price thereof) shall thereafter be reflected, as
nearly as reasonably practicable, in all subsequent exercises of the Warrants
for any shares or securities or other property (or cash) thereafter deliverable
upon the exercise of the Warrants.

          (c) Whenever the number of shares of Common Stock or other securities
purchasable upon exercise of a Warrant is adjusted as provided in this Section
6, the Company will promptly file with the Warrant Agent a certificate signed by
a Chairman or co-Chairman of the Board or the President or a Vice President of
the Company and by the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Company setting forth the number and kind of
securities or other property purchasable upon exercise of a Warrant, as so
adjusted, stating that such adjustments in the number or kind of shares or other
securities or property conform to the requirements of this Section 6, and
setting forth a brief statement of the facts accounting for such adjustments.
Promptly after receipt of such certificate, the Company, or the Warrant Agent at
the Company's request, will deliver, by first-class, postage prepaid mail,


                                       4
<PAGE>

a brief summary thereof (to be supplied by the Company) to the registered
holders of the outstanding Warrant Certificates; provided, however, that failure
to file or to give any notice required under this Subsection, or any defect
therein, shall not affect the legality or validity of any such adjustments under
this Section 6; and provided, further, that, where appropriate, such notice may
be given in advance and included as part of the notice required to be given
pursuant to Section 12 hereof.

          (d) In case of any consolidation of the Company with, or merger of the
Company into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
corporation formed by such consolidation or merger or the corporation which
shall have acquired such assets, as the case may be, shall execute and deliver
to the Warrant Agent a supplemental warrant agreement providing that the holder
of each Warrant then outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such Warrant, solely
the kind and amount of shares of stock and other securities and property (or
cash) receivable upon such consolidation, merger, sale or transfer by a holder
of the number of shares of Common Stock of the Company for which such Warrant
might have been exercised immediately prior to such consolidation, merger, sale
or transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided in this Section. The above provision of this Subsection shall similarly
apply to successive consolidations, mergers, sales or transfers.

     The Warrant Agent shall not be under any responsibility to determine the
correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Warrant Certificates upon the
exercise of their Warrants after any such consolidation, merger, sale or
transfer or of any adjustment to be made with respect thereto, but subject to
the provisions of Section 20 hereof, may accept as conclusive evidence of the
correctness of any such provisions, and shall be protected in relying upon, a
certificate of a firm of independent certified public accountants (who may be
the accountants regularly employed by the Company) with respect thereto.

          (e) Irrespective of any adjustments in the number or kind of shares
issuable upon exercise of Warrants, Warrant Certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the similar Warrant Certificates initially issuable
pursuant to this Warrant Agreement.

          (f) The Company may retain a firm of independent public accountants of
recognized standing, which may be the firm regularly retained by the Company,
selected by the Board of Directors of the Company or the Executive Committee of
said Board, and not disapproved by the Warrant Agent, to make any computation
required under this Section, and a certificate signed by such firm shall, in the
absence of fraud or gross negligence, be conclusive evidence of the correctness
of any computation made under this Section.

          (g) For the purpose of this Section, the term "Common Stock" shall
mean (i) the Common Stock or (ii) any other class of stock resulting from
successive changes or


                                       5
<PAGE>

reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that at any time as a result of an adjustment made pursuant to this
Section, the holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of capital stock of the Company other than
shares of Common Stock, thereafter the number of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in this Section, and all other provisions
of this Agreement, with respect to the Common Stock, shall apply on like terms
to any such other shares.

          (h) The Company may, from time to time and to the extent permitted by
law, reduce the Exercise Price of the Warrants by any amount for a period of not
less than 20 days. If the Company so reduces the Exercise Price of such
Warrants, it will give not less than 15 days' notice of such decrease, which
notice may be in the form of a press release, and shall take such other steps as
may be required under applicable law in connection with any offers or sales of
securities at the reduced price.

     7. Exercise and Redemption of Warrants. Unless the Warrants have been
redeemed as provided in this Section 7, the registered holder of any Warrant
Certificate may exercise the Warrants evidenced thereby, in whole at any time or
in part from time to time at or prior to the close of business, on the
Expiration Date relating to such Warrant, subject to the provisions of Section
9, at which time the Warrant Certificates shall be and become wholly void and of
no value. Warrants may be exercised by their holders or redeemed by the Company
as follows:

          (a) Exercise of Warrants shall be accomplished upon surrender of the
Warrant Certificate evidencing such Warrants, with the Form of Election to
Purchase on the reverse side thereof duly filled in and executed, to the Warrant
Agent at its stock transfer office in ______________, together with payment to
the Company of the Exercise Price (as of the date of such surrender) of the
Warrants then being exercised and an amount equal to any applicable transfer tax
and, if requested by the Company, any other taxes or governmental charges which
the Company may be required by law to collect in respect of such exercise.
Payment of the Exercise Price and other amounts may be made by wire transfer of
good funds, or by certified or bank cashier's check, payable in lawful money of
the United States of America to the order of the Company. No adjustment shall be
made for any cash dividends, whether paid or declared, on any securities
issuable upon exercise of a Warrant.

          (b) Upon receipt of a Warrant Certificate, with the Form of Election
to Purchase duly filled in and executed, accompanied by payment of the Exercise
Price of the Warrants being exercised (and of an amount equal to any applicable
taxes or government charges as aforesaid), the Warrant Agent shall promptly
request from the Transfer Agent with respect to the securities to be issued and
deliver to or upon the order of the registered holder of such Warrant
Certificate, in such name or names as such registered holder may designate, a
certificate or certificates for the number of full shares of the securities to
be purchased, together with cash made available by the Company pursuant to
Section 8 hereof in respect of any fraction of a share of such securities
otherwise issuable upon such exercise. If the Warrant is then exercisable to
purchase property other than securities, the Warrant Agent shall take
appropriate steps to cause such property to be delivered to or upon the order of
the registered holder of such Warrant


                                       6
<PAGE>

Certificate. In addition, if it is required by law and upon instruction by the
Company, the Warrant Agent will deliver to each Warrantholder a prospectus which
complies with the provisions of Section 9 of the Securities Act of 1933, as
amended, and the Company agrees to supply Warrant Agent with sufficient number
of prospectuses to effectuate that purpose.

          (c) In case the registered holder of any Warrant Certificate shall
exercise fewer than all of the Warrants evidenced by such Warrant Certificate,
the Warrant Agent shall promptly countersign and deliver to the registered
holder of such Warrant Certificate, or to his duly authorized assigns, a new
Warrant Certificate or Certificates evidencing the number of Warrants that were
not so exercised.

          (d) Each person in whose name any certificate for securities is issued
upon the exercise of Warrants shall for all purposes be deemed to have become
the holder of record of the securities represented thereby as of, and such
certificate shall be dated, the date upon which the Warrant Certificate was duly
surrendered in proper form and payment of the Exercise Price (and of any
applicable taxes or other governmental charges) was made; provided, however,
that if the date of such surrender and payment is a date on which the stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares as of, and the certificate for such
shares shall be dated, the next succeeding business day on which the stock
transfer books of the Company are open (whether before, on or after the
Expiration Date relating to such Warrant) and the Warrant Agent shall be under
no duty to deliver the certificate for such shares until such date. The Company
covenants and agrees that it shall not cause its stock transfer books to be
closed for a period of more than 20 consecutive business days except upon
consolidation, merger, sale of all or substantially all of its assets,
dissolution or liquidation or as otherwise provided by law.

          (e) Beginning on ____________, 2004, the Warrants outstanding at the
time of a redemption may be redeemed at the option of the Company, in whole or
in part on a pro-rata basis, by giving not less than 30 days prior notice as
provided in Section 7(f) below, which notice may not be give before, but may be
given at any time after, the closing price of the Common Stock on the principal
exchange on which it is then traded has equaled or exceeded $______ per share on
each of five consecutive trading days that occur subsequent to the date of this
Warrant Agreement. The price at which Warrants may be redeemed (the "Redemption
Price") is $0.01 per Warrant. On and after the redemption date the holders of
record of redeemed Warrants shall be entitled to payment of the Redemption Price
upon surrender of such redeemed Warrants to the Company at the office of the
Warrant Agent designated for that purpose.

          (f) Notice of redemption of Warrants shall be given at least 30 days
prior to the redemption date by mailing, by registered or certified mail, return
receipt requested, a copy of such notice to the Warrant Agent and to all of the
holders of record of Warrants at their respective addresses appearing on the
books or transfer records of the Company or such other address designated in
writing by the holder of record to the Warrant Agent not less than 40 days prior
to the redemption date.

          (g) From and after the redemption date, all rights of the
Warrantholders (except the right to receive the Redemption Price) shall
terminate, but only if (i) no later than one


                                       7
<PAGE>

day prior to the redemption date the Company shall have irrevocably deposited
with the Warrant Agent as paying agent a sufficient amount to pay on the
redemption date the Redemption Price for all Warrants called for redemption and
(ii) the notice of redemption shall have stated the name and address of the
Warrant Agent and the intention of the Company to deposit such amount with the
Warrant Agent no later than one day prior to the redemption date.

          (h) On the Redemption Date, the Warrant Agent shall pay to the holders
of record of redeemed Warrants all monies received by the Warrant Agent for the
redemption of Warrants to which the holders of record of such redeemed Warrants
who shall have surrendered their Warrants are entitled. The Warrant Agent shall
have no obligation to pay for the redemption of the warrants except to the
extent that funds for such payment have been provided to it by the Company.

          (i) Any amounts deposited with the Warrant Agent that are not required
for redemption of Warrants may be withdrawn by the Company. Any amounts
deposited with the Warrant Agent that shall be unclaimed after six months after
the redemption date shall be redelivered back to the Company, and thereafter the
holders of the Warrants called for redemption for which such funds were
deposited shall look solely to the Company for payment. The Company shall be
entitled to the interest, if any, on funds deposited with the Warrant Agent and
the holders of redeemed Warrants shall have no right to any such interest. At
the instruction of the Company, the Warrant agent shall deposit or invest any
and all funds deposited with it by the Company in connection with any redemption
in federally insured, interest bearing accounts with a financial institution or
institutions designated by the Company but shall have no liability with respect
to the performance of any such investments other than, in the case of funds
deposited in accounts maintained by the Warrant Agent, the liability of the
Warrant Agent to its depositors in such accounts, generally.

          (j) If the Company fails to make a sufficient deposit with the Warrant
Agent as provided above, the holder of any Warrants called for redemption may at
the option of the holder (i) by notice to the Company declare the notice of
redemption a nullity as to such holder, or (ii) maintain an action against the
Company for the Redemption Price. If the holder brings such an action, the
Company will pay reasonable attorneys' fees of the holder. If the holder fails
to bring an action against the Company for the Redemption Price within 60 days
after the redemption date, the holder shall be deemed to have elected to declare
the notice of redemption to be a nullity as to such holder and such notice shall
be without any force or effect as to such holder. Except as otherwise
specifically provided in this Paragraph 7(j), a notice of redemption, once
mailed by the Company as provided in Paragraph F shall be irrevocable.

     8. Fractional Interests. The Company shall not be required to issue any
Warrant Certificate evidencing a fraction of a Warrant or to issue fractions of
shares of securities on the exercise of the Warrants. If any fraction
(calculated to the nearest one-hundredth) of a Warrant or a share of securities
would, except for the provisions of this Section, be issuable on the exercise of
any Warrant, the Company shall, at its option, either purchase such fraction for
an amount in cash equal to the current value of such fraction computed on the
basis of the closing market price (as quoted on the American Stock Exchange) on
the trading day immediately preceding the day upon which such Warrant
Certificate was surrendered for exercise in accordance with Section 7 hereof or
issue the required fractional Warrant or share. By accepting


                                       8
<PAGE>

a Warrant Certificate, the holder thereof expressly waives any right to receive
a Warrant Certificate evidencing any fraction of a Warrant or to receive any
fractional share of securities upon exercise of a Warrant, except as expressly
provided in this Section 8.

     9. Reservation of Equity Securities. The Company covenants that it will at
all times reserve and keep available, free from any pre-emptive rights, out of
its authorized and unissued equity securities, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of equity securities of the
Company as shall then be issuable upon the exercise of all outstanding Warrants
("Equity Securities"). The Company covenants that all Equity Securities which
shall be so issuable shall, upon such issue, be duly authorized, validly issued,
fully paid and non-assessable.

     The Company covenants that if any equity securities, required to be
reserved for the purpose of issue upon exercise of the Warrants hereunder,
require registration with or approval of any governmental authority under any
federal or state law before such shares may be issued upon exercise of Warrants,
the Company will use all commercially reasonable efforts to cause such
securities to be duly registered, or approved, as the case may be, and, to the
extent practicable, take all such action in anticipation of and prior to the
exercise of the Warrants, including, without limitation, filing any and all
post-effective amendments to the Company's Registration Statement on Form S-2
(Registration No. 333-_____) necessary to permit a public offering of the
securities underlying the Warrants at any and all times during the term of this
Agreement, provided, however, that in no event shall such securities be issued,
and the Company is authorized to refuse to honor the exercise of any Warrant, if
such exercise would result in the opinion of the Company's Board of Directors,
upon advice of counsel, in the violation of any law; and provided further that,
in the case of a Warrant exercisable solely for securities listed on a
securities exchange or for which there are at least three independent market
makers, in lieu of obtaining such registration or approval, the Company may
elect to redeem Warrants submitted to the Warrant Agent for exercise for a price
equal to the difference between the aggregate low asked price, or closing price,
as the case may be, of the securities for which such Warrant is exercisable on
the date of such submission and the Exercise Price of such Warrants; in the
event of such redemption, the Company will pay to the holder of such Warrants
the above-described redemption price in cash within 10 business days after
receipt of notice from the Warrant Agent that such Warrants have been submitted
for exercise.

     10. Reduction of Conversion Price Below Par Value. Before taking any action
that would cause an adjustment pursuant to Section 6 hereof reducing the portion
of the Exercise Price required to purchase one share of capital stock below the
then par value (if any) of a share of such capital stock, the Company will use
its best efforts to take any corporate action which, in the opinion of its
counsel, may be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of such capital stock.

     11. Payment of Taxes. The Company covenants and agrees that it will pay
when due and payable any and all federal and state documentary stamp and other
original issue taxes which may be payable in respect of the original issuance of
the Warrant Certificates, or any shares of Common Stock or other securities upon
the exercise of Warrants. The Company shall not, however, be required (a) to pay
any tax which may be payable in respect of any transfer involved in the transfer
and delivery of Warrant Certificates or the issuance or delivery of certificates
for


                                       9
<PAGE>

Common Stock or other securities in a name other than that of the registered
holder of the Warrant Certificate surrendered for purchase or (b) to issue or
deliver any certificate for shares of Common Stock or other securities upon the
exercise of any Warrant Certificate until any such tax shall have been paid, all
such tax being payable by the holder of such Warrant Certificate at the time of
surrender.

     12. Notice of Certain Corporate Action. In case the Company after the date
hereof shall propose (a) to offer to the holders of Common Stock, generally,
rights to subscribe to or purchase any additional shares of any class of its
capital stock, any evidences of its indebtedness or assets, or any other rights
or options or (b) to effect any reclassification of Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization, or any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale, transfer or other
disposition of its property and assets substantially as an entirety, or the
liquidation, voluntary or involuntary dissolution or winding-up of the Company,
then, in each such case, the Company shall file with the Warrant Agent and the
Company, or the Warrant Agent on its behalf, shall mail (by first-class, postage
prepaid mail) to all registered holders of the Warrant Certificates notice of
such proposed action, which notice shall specify the date on which the books of
the Company shall close or a record be taken for such offer of rights or
options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up shall take place or commence, as the
case may be, and which shall also specify any record date for determination of
holders of Common Stock entitled to vote thereon or participate therein and
shall set forth such facts with respect thereto as shall be reasonably necessary
to indicate any adjustments in the Exercise Price and the number or kind of
shares or other securities purchasable upon exercise of Warrants which will be
required as a result of such action. Such notice shall be filed and mailed in
the case of any action covered by clause (a) above, at least ten days prior to
the record date for determining holders of the Common Stock for purposes of such
action or, if a record is not to be taken, the date as of which the holders of
shares of Common Stock of record are to be entitled to such offering; and, in
the case of any action covered by clause (b) above, at least 20 days prior to
the earlier of the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up is expected to become effective and the
date on which it is expected that holders of shares of Common Stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up.

     Failure to give any such notice or any defect therein shall not affect the
legality or validity of any transaction listed in this Section 12.

     13. Disposition of Proceeds on Exercise of Warrant Certificates, etc. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all moneys received by the Warrant
Agent for the purchase of securities or other property through the exercise of
such Warrants.

     The Warrant Agent shall keep copies of this Agreement available for
inspection by


                                       10
<PAGE>

Warrantholders during normal business hours at its stock transfer office. Copies
of this Agreement may be obtained upon written request addressed to the Warrant
Agent at its stock transfer office in ______________.

     14. Warrantholder Not Deemed a Stockholder. No Warrantholder, as such,
shall be entitled to vote, receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise of the Warrants represented thereby for any purpose whatever,
nor shall anything contained herein or in any Warrant Certificate be construed
to confer upon any Warrantholder, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger, conveyance or otherwise), or to receive notice
of meetings or other actions affecting stockholders (except as provided in
Section 12 hereof), or to receive dividend or subscription rights, or otherwise,
until such Warrant Certificate shall have been exercised in accordance with the
provisions hereof and the receipt of the Exercise Price and any other amounts
payable upon such exercise by the Warrant Agent.

     15. Right of Action. All rights of action in respect to this Agreement are
vested in the respective registered holders of the Warrant Certificates; and any
registered holder of any Warrant Certificate, without the consent of the Warrant
Agent or of any other holder of a Warrant Certificate, may, in his own behalf
for his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, or otherwise in respect of,
his right to exercise the Warrants evidenced by such Warrant Certificate, for
the purchase of shares of the Common Stock in the manner provided in the Warrant
Certificate and in this Agreement.

     16. Agreement of Holders of Warrant Certificates. Every holder of a Warrant
Certificate by accepting the same consents and agrees with the Company, the
Warrant Agent and with every other holder of a Warrant Certificate that:

          (a) the Warrant Certificates are transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in this
Agreement; and

          (b) the Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner of the
Warrant (notwithstanding any notation of ownership or other writing thereon made
by anyone other than the Company or the Warrant Agent) for all purposes whatever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.

     17. Cancellation of Warrant Certificates. In the event that the Company
shall purchase or otherwise acquire any Warrant Certificate or Certificates
after the issuance thereof, such Warrant Certificate or Certificates shall
thereupon be delivered to the Warrant Agent and be canceled by it and retired.
The Warrant Agent shall also cancel any Warrant Certificate delivered to it for
exercise, in whole or in part, or delivered to it for transfer, split-up,
combination or exchange. Warrant Certificates so canceled shall be delivered by
the Warrant


                                       11
<PAGE>

Agent to the Company from time to time, or disposed of in accordance with the
instructions of the Company.

     18. Concerning the Warrant Agent. The Company agrees to pay to the Warrant
Agent from time to time, on demand of the Warrant Agent, reasonable compensation
for all services rendered by it hereunder and also its reasonable expenses,
including counsel fees, and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Warrant Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the Warrant Agent,
arising out of or in connection with the acceptance and administration of this
Agreement.

     19. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 21 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrant Certificates shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Agreement.

     In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrant Certificates so countersigned; and in case at that time any
of the Warrant Certificates shall not have been countersigned, the Warrant Agent
may countersign such Warrant Certificates either in its prior name or in its
changed name; and in all such cases such Warrant Certificates shall have the
full force provided in the Warrant Certificates and in this Agreement.

     20. Duties of Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrant Certificates, by their
acceptance thereof, shall be bound:

          (a) The Warrant Agent may consult with counsel satisfactory to it (who
may be counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Warrant Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
opinion; provided, however, that the Warrant Agent shall have exercised
reasonable care in the selection of such counsel. Fees and expenses of such
counsel, to the extent reasonable, shall be paid by the Company.



                                       12
<PAGE>

          (b) Whenever in the performance of its duties under this Agreement,
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by a Chairman or co-Chairman of the Board or
the President or a Vice President or the Secretary of the Company and delivered
to the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.

          (c) The Warrant Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.

          (d) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature on the Warrant Certificates and such
statements or recitals as describe the Warrant Agent or action taken or to be
taken by it) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.

          (e) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Warrant Certificate; nor shall
it be responsible for the making of any change in the number of shares of Common
Stock for which a Warrant is exercisable required under the provisions of
Section 6 or responsible for the manner, method or amount of any such change or
the ascertaining of the existence of facts that would require any such
adjustment or change (except with respect to the exercise of Warrant
Certificates after actual notice of any adjustment of the Exercise Price); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock to be
issued pursuant to this Agreement or any Warrant Certificate or as to whether
any shares of Common Stock will, when issued, be validly issued, fully paid and
non-assessable.

          (f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or take any other action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrant Certificates, as their respective rights
or interests may appear.

          (g) The Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the


                                       13
<PAGE>

Company or become pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to or otherwise act as fully
and freely as though it were not Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.

          (h) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from a
Chairman or co-Chairman of the Board or President or a Vice President or the
Secretary or the Controller of the Company, and to apply to such officers for
advice or instructions in connection with the Warrant Agent's duties, and it
shall not be liable for any action taken or suffered or omitted by it in good
faith in accordance with instructions of any such officer.

          (i) The Warrant Agent will not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.

          (j) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, however, that reasonable care shall
have been exercised in the selection and continued employment of such attorneys,
agents and employees.

          (k) The Warrant Agent will not incur any liability or responsibility
to the Company or to any holder of any Warrant Certificate for any action taken,
or any failure to take action, in reliance on any notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument reasonably
believed by the Warrant Agent to be genuine and to have been signed, sent or
presented by the proper party or parties.

          (l) The Warrant Agent will act hereunder solely as agent of the
Company in a ministerial capacity, and its duties will be determined solely by
the provisions hereof. The Warrant Agent will not be liable for anything which
it may do or refrain from doing in connection with this Agreement except for its
own gross negligence, bad faith or willful conduct.

     21. Change of Warrant Agent. The Warrant Agent may resign and be discharged
from its duties under this Agreement upon 30 days' prior notice in writing
mailed, by registered or certified mail, to the Company. The Company may remove
the Warrant Agent or any successor warrant agent upon 30 days' prior notice in
writing, mailed to the Warrant Agent or successor warrant agent, as the case may
be, by registered or certified mail. If the Warrant Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Warrant Agent and shall, within 15 days following such
appointment, give notice thereof in writing to each registered holder of the
Warrant Certificates. If the Company shall fail to make such appointment within
a period of 15 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, then the Company agrees to perform the duties of
the Warrant Agent hereunder until a successor Warrant Agent is appointed. After
appointment and


                                       14
<PAGE>

execution of a copy of this Agreement in effect at that time, the successor
Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer to
the successor Warrant Agent, within a reasonable time, any property at the time
held by it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Failure to give any notice provided for
in this Section, however, or any defect therein shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or the appointment
of the successor warrant agent, as the case may be.

     22. Issuance of New Warrant Certificates. Notwithstanding any of the
provisions of this Agreement or the several Warrant Certificates to the
contrary, the Company may, at its option, issue new Warrant Certificates in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price or the number or kind of shares purchasable under
the several Warrant Certificates made in accordance with the provisions of this
Agreement.

     23. Notices. Notice or demand pursuant to this Agreement to be given or
made on the Company by the Warrant Agent or by the registered holder of any
Warrant Certificate shall be sufficiently given or made if sent by first-class
or registered mail, postage prepaid, addressed (until another address is filed
in writing by the Company with the Warrant Agent) as follows:

     Milestone Scientific Inc.
     220 South Orange Ave.
     Livingston, New Jersey 07039
     Attention:  President

     Subject to the provisions of Section 21, any notice pursuant to this
Agreement to be given or made by the Company or by the holder of any Warrant
Certificate to or on the Warrant Agent shall be sufficiently given or made if
sent by first-class or registered mail, postage prepaid, addressed (until
another address is filed in writing by the Warrant Agent with the Company) as
follows:

    __________________________

    __________________________

    __________________________

     Any notice or demand authorized to be given or made to the registered
holder of any Warrant Certificate under this Agreement shall be sufficiently
given or made if sent by first-class or registered mail, postage prepaid, to the
last address of such holder as it shall appear on the registers maintained by
the Warrant Agent.

     24. Modification of Agreement. The Warrant Agent may, without the consent
or concurrence of the Warrantholders, by supplemental agreement or otherwise,
concur with the Company in making any changes or corrections in this Agreement
that the Warrant Agent shall have been advised by counsel (who may be counsel
for the Company) are necessary or desirable to cure any ambiguity or to correct
any defective or inconsistent provision or clerical omission or mistake or
manifest error herein contained, or to make any other provisions in regard to
matters


                                       15
<PAGE>

or questions arising hereunder and which shall not be inconsistent with the
provisions of the Warrant Certificates and which shall not adversely affect the
interests of the Warrantholders. As of the date hereof, this Agreement contains
the entire and only agreement, understanding, representation, condition,
warranty or covenant between the parties hereto with respect to the matters
herein, supersedes any and all other agreements between the parties hereto
relating to such matters, and may be modified or amended only by a written
agreement signed by both parties hereto pursuant to the authority granted by the
first sentence of this Section.

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

     26. Governing Law. This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
_________ , and for all purposes shall be construed in accordance with the laws
of said State. All disputes relating to this Agreement and each Warrant
Certificate issued hereunder shall be adjudicated in a court located in
________________, __________ to the exclusion of all other courts that might
have jurisdiction.

     27. Termination. This Agreement shall terminate as of the close of business
on the Expiration Date, or such earlier date upon which all Warrants shall have
been exercised or redeemed, except that the Warrant Agent shall account to the
Company as to all Warrants outstanding and all cash held by it as of the close
of business on the Expiration Date.

     28. Benefits of this Agreement. Nothing in this Agreement or in the Warrant
Certificates shall be construed to give to any person or corporation other than
the Company, the Warrant Agent, and their respective successors and assigns
hereunder and the registered holders of the Warrant Certificates any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant Agent, their
respective successors and assigns hereunder and the registered holders of the
Warrant Certificates.

     29. Descriptive Headings. The descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.

     30. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.



      (Remainder of page intentionally left blank; signature page follows)




                                       16
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.


                                   MILESTONE SCIENTIFIC INC.


                                   By: ______________________________________
                                        Name:
                                        Title:


                                   [WARRANT AGENT]


                                   By: ______________________________________
                                        Name:
                                        Title:




                                       17
<PAGE>


                                    EXHIBIT A


            VOID AFTER 5 P.M. PACIFIC TIME ON _________________, 2008

                        WARRANTS TO PURCHASE COMMON STOCK


W_____                                                       _________ Warrants


                            Milestone Scientific Inc.

                                CUSIP ___________


THIS CERTIFIES THAT




or registered assigns, is the registered holder of the number of Warrants
("Warrants") set forth above. Each Warrant, unless and until redeemed by the
Company as provided in the Warrant Agreement, hereinafter more fully described
(the "Warrant Agreement") entitles the holder thereof to purchase from Milestone
Scientific Inc., a corporation incorporated under the laws of the State of
Delaware (the "Company"), subject to the terms and conditions set forth
hereinafter and in the Warrant Agreement, at any time on or after ___________,
2003 and before the close of business on ________, 2008 ("Expiration Date"), one
fully paid and non-assessable share of Common Stock of the Company ("Common
Stock") upon presentation and surrender of this Warrant Certificate, with the
instructions for the registration and delivery of Common Stock filled in, at the
stock transfer office in ______________, of ______________, Warrant Agent of the
Company ("Warrant Agent") or of its successor warrant agent or, if there be no
successor warrant agent, at the corporate offices of the Company, and upon
payment of the Exercise Price (as defined in the Warrant Agreement) and any
applicable taxes paid either in cash, or by certified or official bank check,
payable in lawful money of the United States of America to the order of the
Company. Each Warrant initially entitles the holder to purchase one share of
Common Stock for $____. The number and kind of securities or other property for
which the Warrants are exercisable are subject to adjustment in certain events,
such as mergers, splits, stock dividends, splits and the like, to prevent
dilution. Beginning on _____________, 2004, the Company may redeem any or all
outstanding and unexercised warrants by giving not less than 30 days prior
notice at any time after the closing price of the Common Stock on the principal
exchange on which it is traded has equaled or exceeded $______ per share on each
of five consecutive trading days subsequent to _________, 2003. The Redemption
Price is $0.01 per Warrant. All Warrants not theretofore exercised will expire
on the Expiration Date.

                                       1
<PAGE>

     This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, dated as of ________________, 2003, between
the Company and the Warrant Agent, to all of which terms, provisions and
conditions the registered holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is incorporated herein by reference and
made a part hereof and reference is made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities of the Warrant Agent, the Company and the holders of the Warrant
Certificates. Copies of the Warrant Agreement are available for inspection at
the stock transfer office of the Warrant Agent or may be obtained upon written
request addressed to the Company at Milestone Scientific Inc., 220 South Orange
Ave., Livingston, New Jersey 07039, Attention: President.

     The Company shall not be required upon the exercise of the Warrants
evidenced by this Warrant Certificate to issue fractions of Warrants, Common
Stock or other securities, but shall make adjustment therefor in cash on the
basis of the current market value of any fractional interest as provided in the
Warrant Agreement.

     In certain cases, the sale of securities by the Company upon exercise of
Warrants would violate the securities laws of the United States, certain states
thereof or other jurisdictions. The Company has agreed to use all commercially
reasonable efforts to cause a registration statement to continue to be effective
during the term of the Warrants with respect to such sales under the Securities
Act of 1933, and to take such action under the laws of various states as may be
required to cause the sale of securities upon exercise to be lawful. However,
the Company will not be required to honor the exercise of Warrants if, in the
opinion of the Board of Directors, upon advice of counsel, the sale of
securities upon such exercise would be unlawful. In certain cases, the Company
may, but is not required to, purchase Warrants submitted for exercise for a cash
price equal to the difference between the market price of the securities
obtainable upon such exercise and the exercise price of such Warrants.

     This Warrant Certificate, with or without other Certificates, upon
surrender to the Warrant Agent, any successor warrant agent or, in the absence
of any successor warrant agent, at the corporate offices of the Company, may be
exchanged for another Warrant Certificate or Certificates evidencing in the
aggregate the same number of Warrants as the Warrant Certificate or Certificates
so surrendered. If the Warrants evidenced by this Warrant Certificate shall be
exercised in part, the holder hereof shall be entitled to receive upon surrender
hereof another Warrant Certificate or Certificates evidencing the number of
Warrants not so exercised.

     No holder of this Warrant Certificate, as such, shall be entitled to vote,
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose whatever, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder of this Warrant
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof or give or withhold consent to any corporate
action (whether upon any matter submitted to stockholders at any meeting
thereof, or give or withhold consent to any merger, recapitalization, issuance
of stock, reclassification of stock, change of par value or change of stock to
no par value, consolidation, conveyance or otherwise) or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Warrant Agreement) or to receive


                                       2
<PAGE>

dividends or subscription rights or otherwise until the Warrants evidenced by
this Warrant Certificate shall have been exercised and the Common Stock
purchasable upon the exercise thereof shall have become deliverable as provided
in the Warrant Agreement.

     If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Company's Common Stock or other
class of stock purchasable upon the exercise of the Warrants evidenced by this
Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.

     Every holder of this Warrant Certificate by accepting the same consents and
agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:

     (a) this Warrant Certificate is transferable on the registry books of the
Warrant Agent only upon the terms and conditions set forth in the Warrant
Agreement, and

     (b) the Company and the Warrant Agent may deem and treat the person in
whose name this Warrant Certificate is registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes whatever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary. The Company shall not be required to issue or deliver any
certificate for shares of Common Stock or other securities upon the exercise of
Warrants evidenced by this Warrant Certificate until any tax which may be
payable in respect thereof by the holder of this Warrant Certificate pursuant to
the Warrant Agreement shall have been paid, such tax being payable by the holder
of this Warrant Certificate at the time of surrender.

     This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.



      (Remainder of page intentionally left blank; signature page follows)




                                       3
<PAGE>


     WITNESS the facsimile signatures of the proper officers of the Company and
its corporate seal.

Dated: _______________

                                         MILESTONE SCIENTIFIC INC.


                                         By: ___________________________________
                                              Name:
                                              Title:



                                         Attest:  ______________________________
                                                   Secretary

Countersigned:


By: ______________________________________
     Authorized Officer




# 1337391_v1


                                       4



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>6
<FILENAME>file005.txt
<DESCRIPTION>PURCHASE WARRANT
<TEXT>
<PAGE>





                      THIS WARRANT HAS NOT BEEN REGISTERED
                        UNDER THE SECURITIES ACT OF 1933
                             AND IS NOT TRANSFERABLE
                            EXCEPT AS PROVIDED HEREIN

                            MILESTONE SCIENTIFIC INC.

                                PURCHASE WARRANT

                                   Issued to:

                        PAULSON INVESTMENT COMPANY, INC.

                             Exercisable to Purchase

                                  100,000 Units


                                       of


                            MILESTONE SCIENTIFIC INC.












                          Void after ____________, 2008

<PAGE>




     This is to certify that, for value received and subject to the terms and
conditions set forth below, the Warrantholder (hereinafter defined) is entitled
to purchase, and the Company promises and agrees to sell and issue to the
Warrantholder, at any time on or after _____________, 2004 and on or before
____________, 2008, up to 100,000 Units (hereinafter defined) at the Exercise
Price (hereinafter defined).

     This Warrant Certificate is issued subject to the following terms and
conditions:

     1. Definitions of Certain Terms. Except as may be otherwise clearly
required by the context, the following terms have the following meanings:

          (a) "Act" means the Securities Act of 1933, as amended.

          (b) "Cashless Exercise" means an exercise of Warrants in which, in
lieu of payment of the Exercise Price, the Holder elects to receive a lesser
number of Securities such that the value of the Securities that such Holder
would otherwise have been entitled to receive but has agreed not to receive, as
determined by the closing price of such Securities on the date of exercise or,
if such date is not a trading day, on the next prior trading day, is equal to
the Exercise Price with respect to such exercise. A Holder may only elect a
Cashless Exercise if Securities issuable by the Company on such exercise are
publicly traded securities.

          (c) "Closing Date" means the date on which the Offering is closed.

          (d) "Commission" means the Securities and Exchange Commission.

          (e) "Common Stock" means the common stock, par value $0.001, of the
Company.

          (f) "Company" means Milestone Scientific Inc., a Delaware corporation.

          (g) "Company's Expenses" means any and all expenses payable by the
Company or the Warrantholder in connection with an offering described in Section
6 hereof, except Warrantholder's Expenses.

          (h) "Effective Date" means the date on which the Registration
Statement is declared effective by the Commission.

          (i) "Exercise Price" means the price at which the Warrantholder may
purchase one Unit upon exercise of Warrants as determined from time to time
pursuant to the provisions hereof. The initial Exercise Price is $________ per
Unit.

          (j) "Offering" means the public offering of Units made pursuant to the
Registration Statement.

          (k) "Participating Underwriter" means any underwriter participating in
the sale of the Securities pursuant to a registration under Section 6 of this
Warrant Certificate.



<PAGE>

          (l) "Registration Statement" means the Company's registration
statement (File No. 333 -___________) as amended on the Closing Date.

          (m) "Rules and Regulations" means the rules and regulations of the
Commission adopted under the Act.

          (n) "Securities" means the securities obtained or obtainable upon
exercise of the Warrant or securities obtained or obtainable upon exercise,
exchange, or conversion of such securities.

          (o) "Unit" means one share of Common Stock and one Unit Warrant.

          (p) "Unit Warrant" means a warrant to purchase one share of Common
Stock issued pursuant to the Warrant Agreement.

          (q) "Warrant Agreement" means that certain Warrant Agreement, dated as
of ______________, 2003, by and between the Company and __________________
relating to the issuance of Unit Warrants.

          (r) "Warrant Certificate" means a certificate evidencing the Warrant.

          (s) "Warrantholder" means a record holder of the Warrant or
Securities. The initial Warrantholder is Paulson Investment Company, Inc.

          (t) "Warrantholder's Expenses" means the sum of (i) the aggregate
amount of cash payments made to an underwriter, underwriting syndicate, or agent
in connection with an offering described in Section 6 hereof multiplied by a
fraction the numerator of which is the aggregate sales price of the Securities
sold by such underwriter, underwriting syndicate, or agent in such offering and
the denominator of which is the aggregate sales price of all of the securities
sold by such underwriter, underwriting syndicate, or agent in such offering and
(ii) all out-of-pocket expenses of the Warrantholder, except for the fees and
disbursements of one firm retained as legal counsel for the Warrantholder that
will be paid by the Company.

          (u) "Warrant" means the warrant evidenced by this certificate, any
similar certificate issued in connection with the Offering, or any certificate
obtained upon transfer or partial exercise of the Warrant evidenced by any such
certificate.

     2. Exercise of Warrant. All or any part of the Warrant represented by this
Warrant Certificate may be exercised commencing on the first anniversary of the
Effective Date and ending at 5 p.m. Pacific Time on the fifth anniversary of the
Effective Date by surrendering this Warrant Certificate, together with
appropriate instructions, duly executed by the Warrantholder or by its duly
authorized attorney, at the office of the Company at Milestone Scientific Inc.,
220 South Orange Ave., Livingston, New Jersey 07039, Attention: President; or at
such other office or agency as the Company may designate. The date on which such
instructions are received by the Company shall be the date of exercise. If the
Holder has elected a Cashless Exercise, such instructions shall so state. Upon
receipt of notice of exercise, the Company shall immediately instruct its
transfer agent to prepare certificates for the Securities to be received by the
Warrantholder upon completion of the Warrant exercise. When such certificates
are prepared,

<PAGE>

the Company shall notify the Warrantholder and deliver such certificates to the
Warrantholder or as per the Warrantholder's instructions immediately upon
payment in full by the Warrantholder, in lawful money of the United States, of
the Exercise Price payable with respect to the Securities being purchased, if
any. If the Warrantholder shall represent and warrant that all applicable
registration and prospectus delivery requirements for their sale have been
complied with upon sale of the Securities received upon exercise of the Warrant,
such certificates shall not bear a legend with respect to the Securities Act of
1933, as amended.

     If fewer than all the Securities purchasable under the Warrant are
purchased, the Company will, upon such partial exercise, execute and deliver to
the Warrantholder a new Warrant Certificate (dated the date hereof), in form and
tenor similar to this Warrant Certificate, evidencing that portion of the
Warrant not exercised. The Securities to be obtained on exercise of the Warrant
will be deemed to have been issued, and any person exercising the Warrants will
be deemed to have become a holder of record of those Securities, as of the date
of the payment of the Exercise Price.

     3. Adjustments in Certain Events. The number, class, and price of
Securities for which this Warrant Certificate may be exercised are subject to
adjustment from time to time upon the happening of certain events as follows:

          (a) If the outstanding shares of the Company's Common Stock are
divided into a greater number of shares or a dividend in stock is paid on the
Common Stock, the number of shares of Common Stock for which the Warrant is then
exercisable will be proportionately increased and the Exercise Price will be
proportionately reduced; and, conversely, if the outstanding shares of Common
Stock are combined into a smaller number of shares of Common Stock, the number
of shares of Common Stock for which the Warrant is then exercisable will be
proportionately reduced and the Exercise Price will be proportionately
increased. The increases and reductions provided for in this Section 3(a) will
be made with the intent and, as nearly as practicable, the effect that neither
the percentage of the total equity of the Company obtainable on exercise of the
Warrants nor the price payable for such percentage upon such exercise will be
affected by any event described in this Section 3(a).

          (b) In case of any change in the Common Stock through merger,
consolidation, reclassification, reorganization, partial or complete
liquidation, purchase of substantially all the assets of the Company, or other
change in the capital structure of the Company, then, as a condition of such
change, lawful and adequate provision will be made so that the holder of this
Warrant Certificate will have the right thereafter to receive upon the exercise
of the Warrant the kind and amount of shares of stock or other securities or
property to which he would have been entitled if, immediately prior to such
event, he had held the number of shares of Common Stock obtainable upon the
exercise of the Warrant. In any such case, appropriate adjustment will be made
in the application of the provisions set forth herein with respect to the rights
and interest thereafter of the Warrantholder, to the end that the provisions set
forth herein will thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the exercise of the Warrant. The Company will not permit any change in its
capital structure to occur unless the issuer of the shares of stock or other
securities to be received by the holder of this Warrant Certificate, if not the
Company, agrees to be bound by and comply with the provisions of this Warrant
Certificate.


<PAGE>

          (c) When any adjustment is required to be made in the number of shares
of Common Stock, other securities, or the property purchasable upon exercise of
the Warrant, the Company will promptly determine the new number of such shares
or other securities or property purchasable upon exercise of the Warrant and (i)
prepare and retain on file a statement describing in reasonable detail the
method used in arriving at the new number of such shares or other securities or
property purchasable upon exercise of the Warrant and (ii) cause a copy of such
statement to be mailed to the Warrantholder within thirty (30) days after the
date of the event giving rise to the adjustment.

          (d) No fractional shares of Common Stock or other securities will be
issued in connection with the exercise of the Warrant, but the Company will pay,
in lieu of fractional shares, a cash payment therefor on the basis of the mean
between the bid and asked prices of the Common Stock in the over-the-counter
market or the last sale price of the Common Stock on the principal exchange or
other trading facility on which the Common Stock is traded on the day
immediately prior to exercise.

          (e) If securities of the Company or securities of any subsidiary of
the Company are distributed pro rata to holders of Common Stock, such number of
securities will be distributed to the Warrantholder or its assignee upon
exercise of its rights hereunder as such Warrantholder or assignee would have
been entitled to if this Warrant Certificate had been exercised prior to the
record date for such distribution. The provisions with respect to adjustment of
the Common Stock provided in this Section 3 will also apply to the securities to
which the Warrantholder or its assignee is entitled under this Section 3(e).

          (f) Notwithstanding anything herein to the contrary, there will be no
adjustment made hereunder on account of the sale by the Company of the Common
Stock or other Securities purchasable upon exercise of the Warrant.

          (g) If, immediately prior to any exercise of Warrants, there shall be
outstanding no securities of a class or series that, but for the provisions of
this Section 3, would be issuable upon such exercise (the "Formerly Issuable
Securities"), then, upon such exercise, and in lieu of the Formerly Issuable
Securities, the Company shall issue that number and kind of other securities or
property for which the Formerly Issuable Securities were most recently
exercisable or into which the Formerly Issuable Securities were most recently
convertible, as the case may be.

     4. Reservation of Securities. The Company agrees that the number of shares
of Common Stock or other Securities sufficient to provide for the exercise of
the Warrant upon the basis set forth above will at all times during the term of
the Warrant be reserved for exercise.

     5. Validity of Securities. All Securities delivered upon the exercise of
the Warrant will be duly and validly issued in accordance with their terms, and
the Company will pay all documentary and transfer taxes, if any, in respect of
the original issuance thereof upon exercise of the Warrant.


<PAGE>

     6. Registration of Securities Issuable on Exercise of Warrant Certificate.

          (a) The Company will register the Securities with the Commission
pursuant to the Act so as to allow the unrestricted sale of the Securities to
the public from time to time commencing on the first anniversary of the
Effective Date and ending at 5:00 p.m. Pacific Time on the fifth anniversary of
the Effective Date (the "Registration Period"). The Company will also file such
applications and other documents necessary to permit the sale of the Securities
to the public during the Registration Period in those states in which the Units
were qualified for sale in the Offering or such other states as the Company and
the Warrantholder agree to. In order to comply with the provisions of this
Section 6(a), the Company is not required to file more than one registration
statement. No registration right of any kind, "piggyback" or otherwise, will
last longer than five years from the Effective Date.

          (b) The Company will pay all of the Company's Expenses and each
Warrantholder will pay its pro rata share of the Warrantholder's Expenses
relating to the registration, offer, and sale of the Securities.

          (c) Except as specifically provided herein, the manner and conduct of
the registration, including the contents of the registration, will be entirely
in the control and at the discretion of the Company. The Company will file such
post-effective amendments and supplements as may be necessary to maintain the
currency of the registration statement during the period of its use. In
addition, if the Warrantholder participating in the registration is advised by
counsel that the registration statement, in their opinion, is deficient in any
material respect, the Company will use its best efforts to cause the
registration statement to be amended to eliminate the concerns raised.

          (d) The Company will furnish to the Warrantholder the number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as it may reasonably request
in order to facilitate the disposition of Securities owned by it.

          (e) The Company will, at the request of Warrantholders holding at
least 50 percent of the then outstanding Warrants, (i) furnish an opinion of the
counsel representing the Company for the purposes of the registration pursuant
to this Section 6, addressed to the Warrantholders and any Participating
Underwriter, (ii) furnish an appropriate letter from the independent public
accountants of the Company, addressed to the Warrantholders and any
Participating Underwriter, and (iii) make representations and warranties to the
Warrantholders and any Participating Underwriter. A request pursuant to this
subsection (e) may be made on three occasions. The documents required to be
delivered pursuant to this subsection (e) will be dated within ten days of the
request and will be, in form and substance, equivalent to similar documents
furnished to the underwriters in connection with the Offering, with such changes
as may be appropriate in light of changed circumstances.

     7. Indemnification in Connection with Registration.

          (a) If any of the Securities are registered, the Company will
indemnify and hold harmless each selling Warrantholder, any person who controls
any selling Warrantholder

<PAGE>

within the meaning of the Act, and any Participating Underwriter against any
losses, claims, damages, or liabilities, joint or several, to which any
Warrantholder, controlling person, or Participating Underwriter may be subject
under the Act or otherwise; and it will reimburse each Warrantholder, each
controlling person, and each Participating Underwriter for any legal or other
expenses reasonably incurred by the Warrantholder, controlling person, or
Participating Underwriter in connection with investigating or defending any such
loss, claim, damage, liability, or action, insofar as such losses, claims,
damages, or liabilities, joint or several (or actions in respect thereof), arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any such registration
statement or any preliminary prospectus or final prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any case to the extent that any loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any
registration statement, preliminary prospectus, final prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished by a Warrantholder for use in the preparation thereof. The
indemnity agreement contained in this subparagraph (a) will not apply to amounts
paid to any claimant in settlement of any suit or claim unless such payment is
first approved by the Company, such approval not to be unreasonably withheld.

          (b) Each selling Warrantholder, as a condition of the Company's
registration obligation, will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed any registration statement
or other filing or any amendment or supplement thereto, and any person who
controls the Company within the meaning of the Act, against any losses, claims,
damages, or liabilities to which the Company or any such director, officer, or
controlling person may become subject under the Act or otherwise, and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, or controlling person in connection with investigating
or defending any such loss, claim, damage, liability, or action, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue or alleged untrue statement of any material
fact contained in said registration statement, any preliminary or final
prospectus, or other filing, or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in said
registration statement, preliminary or final prospectus, or other filing, or
amendment or supplement, in reliance upon and in conformity with written
information furnished by such Warrantholder for use in the preparation thereof;
provided, however, that the indemnity agreement contained in this subparagraph
(b) will not apply to amounts paid to any claimant in settlement of any suit or
claim unless such payment is first approved by the Warrantholder, such approval
not to be unreasonably withheld.

          (c) Promptly after receipt by an indemnified party under subparagraphs
(a) or (b) above of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, notify the indemnifying party of the commencement thereof; but the
omission to notify the indemnifying party will not relieve it

<PAGE>

from any liability that it may have to any indemnified party otherwise than
under subparagraphs (a) and (b).

          (d) If any such action is brought against any indemnified party and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party; and after
notice from the indemnifying party to such indemnified party of its election to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.

     8. Restrictions on Transfer. This Warrant Certificate and the Warrant may
not be sold, transferred, assigned or hypothecated for a one-year period after
the Effective Date except to underwriters of the Offering or to individuals who
are either a partner or an officer of such an underwriter or by will or by
operation of law. The Warrant may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates evidencing the
same aggregate number of Warrants.

     9. No Rights as a Shareholder. Except as otherwise provided herein, the
Warrantholder will not, by virtue of ownership of the Warrant, be entitled to
any rights of a shareholder of the Company but will, upon written request to the
Company, be entitled to receive such quarterly or annual reports as the Company
distributes to its shareholders.

     10. Notice. Any notices required or permitted to be given hereunder will be
in writing and may be served personally or by mail; and if served will be
addressed as follows:

     If to the Company:

          Milestone Scientific Inc.
          220 South Orange Ave.
          Livingston, New Jersey 07039
          Attention: President

     If to the Warrantholder:

          AT THE ADDRESS FURNISHED
          BY THE WARRANTHOLDER TO THE
          COMPANY FOR THE PURPOSE OF
          NOTICE.

     Any notice so given by mail will be deemed effectively given 48 hours after
mailing when deposited in the United States mail, registered or certified mail,
return receipt requested, postage prepaid and addressed as specified above. Any
party may by written notice to the other specify a different address for notice
purposes.

<PAGE>

     11. Applicable Law. This Warrant Certificate will be governed by and
construed in accordance with the laws of the State of Oregon, without reference
to conflict of laws principles thereunder. All disputes relating to this Warrant
Certificate shall be tried before the courts of Oregon located in Multnomah
County, Oregon to the exclusion of all other courts that might have
jurisdiction.

     Dated as of ______________, 2003

                                           MILESTONE SCIENTIFIC INC.


                                           By: _________________________________
                                                Name:
                                                Title:


     Agreed and Accepted as of ________________, 2003

                                           PAULSON INVESTMENT COMPANY, INC.


                                           By: _________________________________
                                                Name:
                                                Title:







# 1337338_v1


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>7
<FILENAME>file006.txt
<DESCRIPTION>AGREEMENT WITH DAVINCI SYSTEMS
<TEXT>
<PAGE>

                             [Milestone Letterhead]


Da Vinci Systems, Inc.


Attn: Alan A. Creamer, CEO

Dear Alan:

         This will confirm the agreement under which we will support your
development of a whitening system head (the "Product") and you will grant us
distribution rights to the Product and all pastes, gels or other disposables or
consumables ("Ancillary Products") and to your "Nova Cordless Curing Light" (the
"Curing Light").

         1. We will reimburse you for the development cost of the Product, up to
an aggregate of $25,500, as follows: $7,000 for the conceptual design and
prototype engineering and $18,500 for the development of CAD files, tooling and
proto-typing. You will bear any costs in excess of these amounts. If, at any
time, you cease work on the development project or if development is not
completed by ___________, then we shall have the option to assume control of the
development project at our expense. If we assume control of the development
project, you shall cooperate fully with us and shall turn over to us all work
previously completed, including the results of any tests or submissions to focus
groups. Any costs we incur, in excess of $25,500, shall be credited against our
obligations to pay for future units of Product, Ancillary Products and the
Curing Light.

         2. We shall be the exclusive worldwide distributor for the Product and
those Ancillary Products, if any, made exclusively for use with the Product. You
shall meet our requirements for Product and such Ancillary Products, including
related packaging, at a price per unit equal to the fully loaded manufacturing
costs thereof plus _____%. All orders shall be filled within _____ days of
scheduled delivery dates and shall be paid for ___% _____ days and net _____
days, F.O.B. manufacturer. In connection with our activities as a distributor,
you hereby grant us, a limited, exclusive worldwide license, to use your
intellectual property, including any patents, in connection with the marketing
and sale of the Product and any Ancillary Products made exclusively for use with
the Product.

         3. We shall also be a non-exclusive worldwide distributor of (i)
Ancillary Products not made exclusively for use with the Product and (ii) the
Curing Light. The Ancillary Products and the Curing Light shall be provided to
us at the fully loaded manufacturing costs thereof plus _____% and ________%,
respectively, provided that such price shall not be higher than the lowest price
at which such products are provided to other distributors or dealers. All orders
shall be filled within _____ days of scheduled delivery dates and shall be paid
for ___% _____ days and net _____ days, F.O.B. manufacturer.

<PAGE>

         4. You will prepare and submit to us, within 15 days after the end of
each calendar quarter, a report setting forth the fully loaded manufacturing
costs for all products sold to us in the previous quarter, broken down by types
of products and a calculation of the prices due and/or collected on such
products for such period (the "Report"). The Report shall be certified by an
officer of Da Vinci to be true and correct. We shall have the right to audit
your books and records, to the extent necessary to determine compliance with
this Section and Sections 2 and 3, during normal business hours and upon
reasonable notice. In the event the audit reveals any discrepancies, the price
paid for products shall be retroactively readjusted to reflect the audit results
and if the discrepancy is more than ____% of your cost, you shall reimburse us
for the cost of the audit.

         5. We shall have the right to use our own trademarks or brand names on
the Product and any Ancillary Product and you shall mark each unit and any
packaging utilized in connection therewith with such mark or marks as we direct.

         6. You will, at our reasonable request, provide us with reasonable
quantities of samples of the Product and Ancillary Products for the purpose of
performing quality control procedures and tests. We shall have the right to
inspect, not more than once every quarter, any of your manufacturing facilities
pertaining to the Product or Ancillary Products during regular business hours
and upon reasonable notice.

         7. You represent and warrant that all Product and Ancillary Product
units produced by you shall comply with all federal, state and local laws,
ordinances, rules, regulations and orders and shall be manufactured in
accordance with the FDA's GMP standards and comparable regulations of the
European Community. You further represent and warrant that all Product and
Ancillary Product units produced by you shall be of merchantable quality and
free from defects. You shall keep your manufacturing and packaging records and
data for the Products in accordance with G.M.P standards. We shall have access
to such information upon reasonable notice during business hours and we shall be
entitled to make copies thereof at our cost.

         8. You shall defend and indemnify us and hold us harmless against all
damages, claims, costs and expenses (including reasonable attorneys' fees)
arising out of or resulting from any product liability claims relating to
products produced by you. The obligation for indemnification set forth above
shall be contingent upon giving you timely notice of any claim or loss. You
shall carry and keep in force throughout the term of this Agreement
Comprehensive General Liability Insurance, including Products Liability combined
single limit in the amount of [$2,000,000], naming us as an additional insured
party:

         9. All data, inventions, discoveries, product designs, know-how,
formulae, studies, reports, documents, publications, software, computer
programs, source codes and the like relating to the Products or Ancillary
Products, as well as concepts and thoughts, shall be your sole and exclusive
property.

<PAGE>

         10. You shall disclose to us any intellectual property relating to the
Product or Ancillary Products and assist us in applying for, maintaining, or
otherwise securing legal protection for the same. We agree to execute any
papers, documents or letters necessary to vest title in these materials in your
name. You shall take all appropriate action to defend the intellectual property
and any patents issued with respect thereto.

         11. In the event of any dispute between us, we agree that it shall be
resolved through arbitration in New York under the regulations of the American
Arbitration Association, within ninety (90) days following termination of this
Agreement. Any award rendered shall be final and conclusive upon the parties.
This Agreement shall be construed under the laws of the State of New York.

         12. At all times during the term of this Agreement, we shall act as
independent contractor, and neither the making of this Agreement nor the
performance of any of the provisions hereof shall be construed to make us your
agent or legal representative of Da Vinci for any purpose, nor shall this
Agreement be deemed to establish a joint venture or partnership. Neither of us
shall have the power or authority to bind or obligate the other party in any way
by any of its acts.

         13. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be valid and sufficient if
dispatched by registered mail, postage prepaid, addressed to the address
indicated in this Agreement or to such other address as the addressee shall have
theretofore furnished to the addressor as indicated below

         14. This agreement represents the entire agreement between the parties
and may not be changed, amended or modified except by a writing signed by both
parties.

                                              Very truly yours,

                                              MILESTONE SCIENTIFIC INC.


                                              by:__________________________
                                                       Leonard Osser, CEO
Accepted and agreed to the
____ day of July 2003

DA VINCI SYSTEMS, INC.

by:___________________________
         Alan A. Creamer, CEO



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.30
<SEQUENCE>8
<FILENAME>file007.txt
<DESCRIPTION>THIRD AMENDMENT TO TECHNOLOGY SALE AGREEMENT
<TEXT>
<PAGE>

                  THIRD AMENDMENT TO TECHNOLOGY SALE AGREEMENT

         THIRD AMENDMENT TO TECHNOLOGY SALE AGREEMENT, dated October ___, 2002,
between MILESTONE SCIENTIFIC INC., a Delaware corporation ("Milestone") and
CLAUDIA HOCHMAN and MARK HOCHMAN (collectively the "Sellers").

                                   WITNESSETH
         WHEREAS, Milestone and Sellers entered into a Technology Sale Agreement
dated April 9, 1998, as amended on December 16, 1999 and November 28, 2001,
governing Sellers' sale to Milestone of their inventions, of (i) a
"Pressure/Force Computer Controlled Drug Delivery System", (ii) a "Universal
Syringe Holder Enhancement" consisting of a unique Disposable Syringe and a
Unique Syringe Holder, (iii) a Non-deflecting, Non-clogging Single Use
Disposable Hypodermic Needle for use as a separate drug delivery or aspiration
system or as an adjunct to Milestone's computer controlled anesthesia system
known as "The CompuMed/Wand(TM)", (iv) a Hand-piece For Injection Device With A
Retractable And Rotating Needle (U.S. Patent No. 6,428,517 B1), Anti-Deflection
/ Force Reduction Rotating Needle Handpiece device, Anti-Deflection/Force
Reduction Rotating Syringe (Reg No. 29,876), for use as separate drug delivery
or aspiration system or as an adjunct to Milestone's computer controlled
anesthesia system known as "The CompuMed/Wand(TM)", and (v) a Local Anesthetic
and Delivery Injection Unit with Automated Rate Control;

         WHEREAS, the Sellers have now invented a Safety IV Catheter Infusion
Device (U.S. Utility Patent App. Serial No. 10/174,246) ("IV Catheter") for use
as a

<PAGE>

separate drug delivery catheter device or as an adjunct to Milestone's
existing technologies;

         WHEREAS, subject to the conditions contained in the Technology Sale
Agreement, Sellers desire to sell and Milestone desires to purchase the IV
Catheter ; and

         WHEREAS, Sellers and Milestone desire to further amend the Technology
Sale Agreement to allow for the sale of the IV Catheter to be governed by the
terms of the Technology Sale Agreement and to effect such additional terms and
provisions that the parties deem necessary all as are set forth below.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Technology Sale Agreement as
previously amended is hereby further amended as follows:

    1. The definition of "Intellectual Property" shall include new subpoints
(vi) and (vii) set forth below:

              "(vi) the Safety IV Catheter Infusion Device (U.S. Utility Patent
              Application Serial No. 10/174,246); and (vii) any and all other
              patent submissions, past, present and future, that bear the name
              of one or both of the Sellers, including all divisional patents,
              primary patents and secondary patents."

    2. Section 4 shall be amended to read as follows:

              "4. ISSUANCE OF OPTIONS. Milestone agrees that for each future
              patent issued, relating to the Proprietary Rights, Milestone will,
              as soon as practicable thereafter, issue to Sellers, five year
              options to purchase an aggregate of 25,000 shares of Milestone
              Common Stock at an exercise price per share equal to the fair
              market value of a share on the date of grant."

                                       2
<PAGE>

    3. Section 11 shall be amended to read as follows:

              "11. BINDING EFFECT. This Technology Sale Agreement shall be
              binding upon and inure to the benefit of each of the parties
              hereto and their respective successors, assigns and/or legal
              representatives. In the event that the obligations under this
              Technology Sale Agreement, do not, for any reason, automatically
              survive a sale or transfer of all or a significant part of
              Milestone's business or assets to a third party (the
              "Transferee"), Milestone shall cause the Transferee to assume all
              of Milestone's obligations under this Technology Sale Agreement,
              as amended from time to time. If the undertaking of these
              obligations, whether by way of automatic survival or by way of
              assumption, in their entirety or in part, is impossible,
              impracticable or of significantly different economic impact on
              Sellers, Milestone shall use its best efforts to cause the
              Transferee to provide the Sellers with alternatives that are
              essentially equivalent in value to the existing obligations of
              Milestone under this Technology Sale Agreement, as amended."

         IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment to the Technology Sale Agreement as of the day and year first above
written;


MILESTONE SCIENTIFIC, INC.


By:____________________________________
        Leonard Osser, CEO

By:_____________________________________
        Mark N. Hochman, DDS

By:_____________________________________
        Claudia B. Hochman, DDS


                                       3


<PAGE>



                     AMENDMENT TO TECHNOLOGY SALE AGREEMENT

WHEREAS, MILESTONE SCIENTIFIC, INC., a Delaware corporation ("Milestone"), and
MARK HOCHMAN AND CLAUDIA HOCHMAN (collectively the "Sellers") entered into a
"Technology Sale Agreement" made as of the 9th of April 1998, governing Sellers
sale to Milestone of their invention of (i) a "Pressure/Force Computer
Controlled Drug Delivery System", (ii) a "Universal Syringe Holder Enhancement"
consisting of a unique Disposable Syringe and a Unique Syringe Holder and (iii)
a Non-deflecting, Non-clogging Single Use Disposable Hypodermic Needle for use
as a separate drug delivery or aspiration system or as an adjunct to Milestone's
computer controlled anesthesia system known as "The ComuMed/Wand(TM)"; and
amended as of the 16th of December, 1999, to include a Hand-piece For Injection
Device With A Retractable And Rotating Needle (U.S. Patent No. 6,428,517 B1),
Anti-Deflection / Force Reduction Rotating Needle Handpiece device,
Anti-Deflection/Force Reduction Rotating Syringe (Reg No. 29,876), for use as
separate drug delivery or aspiration system or as an adjunct to Milestone's
computer controlled anesthesia system known as "The ComuMed/Wand(TM)"; be
governed by the terms of the Technology Sale Agreement;

         WHEREAS, the Sellers also invented a Safety IV Catheter Infusion Device
(U.S. Utility Patent App. Serial No. 10/174,246) for use as a separate drug
delivery catheter device or as an adjunct to Milestone's existing technologies;

<PAGE>

         WHEREAS, subject to the conditions contained in the Technology Sale
Agreement made as of the 9th of April, 1998, Sellers desire to sell and
Milestone desires to purchase the Safety IV Catheter Infusion Device (U.S.
Utility Patent App. Serial No. 10/174,246).

         WHEREAS, Sellers and Milestone desire to amend the Technology Sale
Agreement made as of the 9th of April, 1998, so that the sale by Sellers to
Milestone of Safety IV Catheter Infusion Device (U.S. Utility Patent App. Serial
No. 10/174,246) be governed by the terms of the Technology Sale Agreement dated
9th of April, 1998.

         WHEREAS, the terms governed by the Technology Sale Agreement dated 9th,
of April, 1998 Milestone gives further consideration of the sales transaction of
a Safety IV Catheter Infusion Device (U.S. Utility Patent App. Serial No.
10/174,246), to include the following transaction and agreements set forth below
between the parties herein entered the following:

         Issuance of Options Upon Grant of Patent: Milestone agrees that if one
or more patents issues with respect to pending or future patent application
relating to said Safety IV Catheter Infusion Device (U.S. Utility Patent App.
Serial No. 10/174,246) and the Proprietary Rights of this technology, Milestone
will, as soon as practicably thereafter, issue Sellers five year options to
purchase 25,000 shares of Milestone Common Stock at an exercise price per share
equal to the fair market value of a share on the date of grant.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the definition of "Intellectual
Property" under the Technology Sale Agreement made as of the 9th of April, 1998,
amended as of the 16th of December, 1999, is hereby subsequently amended to
include the Safety IV


                                        2

<PAGE>

Catheter Infusion Device (U.S. Utility Patent App. Serial No. 10/174,246),
Hand-piece For Injection Device With A Retractable And Rotating Needle (U.S.
Patent No. 6,428,517 B1), Anti-Deflection / Force Reduction Rotating Needle
Handpiece device, Anti-Deflection/Force Reduction Rotating Syringe,
"Pressure/Force Computer Controlled Drug Delivery System (U.S. Patent No.
6,200,289), "Universal Syringe Holder Enhancement", "Non-deflecting,
Non-clogging Single Use Disposable Hypodermic Needle.

         IN WITNESS WHEREOF, the parties hereto have executed the Amendment to
the Technology Sale Agreement as of the day and year first above written;


MILESTONE SCIENTIFIC, INC.


By:__________________________________________    _____________
                    Leonard Osser, CEO                Date



ACKNOWLEDGEMENT TAKEN IN NEW YORK STATE

State of New York
County of :

On the _____Day of _________ in the year 2002 before me, _____________________
the, undersigned, personally appeared OSSER, LEONARD personally know to me or
proved to me on the basis of satisfactory evidence to be the individual whose
name is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s) or the person
upon behalf of which the individual(s) acted, executed the instrument.


- -----------------------
NOTARY PUBLIC


                                        3

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have exexcuted the Amendment to
the Technology Sale Agreement as of the day and year first above written;

SELLERS


By:_____________________________________    _____________
         Mark N. Hochman, DDS                    Date



By:_____________________________________    _____________
         Claudia B. Hochman, DDS                 Date


ACKNOWLEDGEMENT TAKEN IN NEW YORK STATE

State of New York
County of :

On the _____Day of _________ in the year 2002 before me, _____________________
the, undersigned, personally appeared HOCHMAN, MARK and HOCHMAN, CLAUDIA
personally know to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s) or the person upon behalf of which the individual(s) acted,
executed the instrument.


- -----------------------
NOTARY PUBLIC


                                        4





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>file008.txt
<DESCRIPTION>CONSENT
<TEXT>
<PAGE>



                                                                    Exhibit 23.1




                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    -----------------------------------------



We consent to the inclusion in this registration statement on Form S-2 (File No.
333-____) of our report dated April 1, 2003, except for Notes B and H which are
as of April 15, 2003, on our audits of the consolidated financial statements of
Milestone Scientific, Inc. and Subsidiaries as of December 31, 2002 and for the
years ended December 31, 2002 and 2001. We also consent to the reference to our
Firm under the caption "Experts."


                                       /s/  J.H. COHN LLP


Roseland, New Jersey
November 10, 2003







</TEXT>
</DOCUMENT>
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