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<SEC-DOCUMENT>0001169232-05-002003.txt : 20050405
<SEC-HEADER>0001169232-05-002003.hdr.sgml : 20050405
<ACCEPTANCE-DATETIME>20050405133303
ACCESSION NUMBER:		0001169232-05-002003
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20050401
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20050405
DATE AS OF CHANGE:		20050405

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:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14053
		FILM NUMBER:		05733130

	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>8-K
<SEQUENCE>1
<FILENAME>d63251_8-k.htm
<DESCRIPTION>CURRENT REPORT
<TEXT>

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     <!-- Project:        X:\JOBS\05-63251\d05-63251.eep                                   -->
     <!-- Control Number: 05-63251                                                         -->
     <!-- Rev Number:     1.0                                                              -->
     <!-- Client Name:    Milestone Scientific, Inc.                                       -->
     <!-- Project Name:   Form Type: 8-K                                                   -->
     <!-- Firm Name:      Milestone Scientific, Inc.                                       -->
     <TITLE>8-K</TITLE>
</HEAD>
<BODY>

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<DIV STYLE="WIDTH:600">
<BR>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECURITIES AND
EXCHANGE COMMISSION<BR>Washington, D.C. 20549</FONT></H1>

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<HR SIZE=1 NOSHADE WIDTH=15% ALIGN=CENTER>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORM 8-K</FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CURRENT
REPORT</FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major 10" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Section 13
or 15(d) of the<BR>Securities Exchange Act of 1934</FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Date of
Report (Date of earliest event reported) <U>April 1, 2005</U> </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>MILESTONE SCIENTIFIC
INC.</U><BR>(Exact name of Registrant as specified in its charter) </FONT></H1>

<table border="0" cellspacing="0" cellpadding="0" width="600">
  <tr align="center" valign="bottom">
    <td nowrap width="30%"><b><font face="Times New Roman, Times, serif" size="2">Delaware</font></b></td>
    <td nowrap><b><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></b></td>
    <td nowrap width="25%"><b><font face="Times New Roman, Times, serif" size="2">001-14053</font></b></td>
    <td nowrap><b><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></b></td>
    <td nowrap width="25%"><b><font face="Times New Roman, Times, serif" size="2">13-3545623</font></b></td>
  </tr>
  <tr>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr align="center" valign="top">
    <td nowrap><b><font face="Times New Roman, Times, serif" size="2">(State or
      other jurisdiction<br>
      of incorporation) <br>
      </font></b></td>
    <td nowrap><b><font face="Times New Roman, Times, serif" size="2"></font></b></td>
    <td nowrap><b><font face="Times New Roman, Times, serif" size="2"> (Commission<br>
      File Number)<br>
      </font></b></td>
    <td nowrap><b><font face="Times New Roman, Times, serif" size="2"></font></b></td>
    <td nowrap><b><font face="Times New Roman, Times, serif" size="2"> (IRS Employer
      <br>
      Identification No.)</font></b></td>
  </tr>
</table>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major 10" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>220 South Orange
Avenue, Livingston Corporate Park, Livingston, New Jersey 07034</U><BR>(Address of principal
executive office) (Zip Code) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Registrant&#146;s
telephone number, including area code <U>(973) 535-2717</U> </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major 10" FSL="Project" -->
<H1 ALIGN=CENTER>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N/A&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
<BR>(Former
name or former address, if changed since last report) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Check the appropriate box below if
the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><img src="ballot.jpg">  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><img src="ballot.jpg">  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><img src="ballot.jpg">  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act<BR>(17 CFR 240.14d-2(b))</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><img src="ballot.jpg">  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act<BR>(17 CFR 240.13e-4(c))</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Page Number Center" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></P>
<HR SIZE=5 NOSHADE>

<P STYLE="page-break-after:always"> </P><PAGE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Item
2.02: Results of Operations and Financial Condition.</B> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April 1, 2005, the registrant issued a press release announcing its financial results for
the fiscal year ended December 31, 2004. A copy of the press release is attached as
Exhibit 99.1 this report.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Item
9.01: Financial Statements, Pro Forma Financial Information and Exhibits</B> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
Exhibits: </FONT></P>

<table width=600 cellpadding=0 cellspacing=0>
  <tr valign=bottom>
    <td width=15%><FONT FACE="Times New Roman, Times, serif" SIZE="2"><B>Exhibit<br>
<U>Number </U></B> </FONT>
</td>
    <td><b><font face="Times New Roman, Times, serif" size="2"></font></b></td>
    <td width=85% align="center"><FONT FACE="Times New Roman, Times, serif" SIZE="2"><U><B>Description</B></U> </FONT></td>
  </tr>
  <tr valign=TOP>
    <td width=15%><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td width=85%><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=TOP>
    <td width=15%><font face="Times New Roman, Times, serif" size="2"><A HREF="#d1">99.1</A></font></td>
    <td><font face="Times New Roman, Times, serif" size="2">&nbsp; </font></td>
    <td width=85%><font face="Times New Roman, Times, serif" size="2"><A HREF="#d1">Press release,
      dated April 1, 2005, announcing Milestone&#146;s financial results for
      the fiscal year ended December 31, 2004.</A></font></td>
  </tr>
</table>
<BR>



<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with General Instruction B.2 of Form 8-K, the information in this Current
Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be &#147;filed&#148;
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
&#147;Exchange Act&#148;), or otherwise subject to the liability of that section, and
shall not be incorporated by reference into any registration statement or other document
filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall
be expressly set forth by specific reference in such filing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major 10" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES</FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto
duly authorized. </FONT></P>

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<TABLE WIDTH=600 CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>MILESTONE SCIENTIFIC INC.</B><BR><BR>
<BR>By: /s/ Leonard Osser<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leonard Osser<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman and Chief Executive Officer</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated:  April 4, 2005 </FONT></P>

<!-- MARKER FORMAT-SHEET="Page Number Center" FSL="Project" -->
<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>
<HR SIZE=5 NOSHADE>

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</TEXT>
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<SEQUENCE>2
<FILENAME>ballot.jpg
<DESCRIPTION>GRAPHIC
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<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>d63251_ex99-1.htm
<DESCRIPTION>PRESS RELEASE
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 3.2 Final//EN">
<HTML>
<HEAD>
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     <!-- Project:        X:\JOBS\05-63251\d05-63251.eep                                   -->
     <!-- Control Number: 05-63251                                                         -->
     <!-- Rev Number:     1.0                                                              -->
     <!-- Client Name:    Milestone Scientific, Inc.                                       -->
     <!-- Project Name:   Form Type: 8-K                                                   -->
     <!-- Firm Name:      Milestone Scientific, Inc.                                       -->
     <TITLE>EX-99.1</TITLE>
</HEAD>
<BODY>

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<DIV STYLE="WIDTH:600" ALIGN=JUSTIFY>
<BR>

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<P ALIGN="RIGHT"><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><A NAME="d1">Exhibit 99.1</A></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" FSL="Project" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>FOR IMMEDIATE RELEASE</FONT></H2>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONTACT</B><BR>Leonard Osser, Chairman and
CEO<BR>Stuart J. Wildhorn &#150; President<BR><B>Milestone Scientific Inc.</B><BR>(973) 535-2717; (973)
535-2829 (Fax)<BR>Web site: <U>www.milesci.com</U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major 10" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MILESTONE SCIENTIFIC,
INC. ANNOUNCES YEAR END<BR>RESULTS, INCLUDING 20% REVENUE INCREASE AND<BR>IMPROVED FINANCIAL
POSITION</FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>LIVINGSTON, New Jersey, April 1,
2005 &#151; Milestone Scientific Inc. (AMEX: MS)</B>, a developer, manufacturer and
marketer of computer controlled local anesthetic delivery systems for medical and dental
markets, today announced that 2004 net sales increased 20% to $4,751,186, compared with
$3,971,707 in 2003. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This increase was primarily driven by
a 25% expansion in domestic sales of <I>CompuDent<SUP>&reg;</SUP></I> systems
and a 21% increase in worldwide sales of <I>The Wand<SUP>&reg;</SUP> </I>handpieces. Gross
profit remained strong at approximately 49% of sales despite some bundled pricing
initiatives that were offered to customers towards the end of the year at lower margins.
Net loss for the year ended December 31, 2004 increased to ($2,996,864), or $(0.33) per
share, compared with a 2003 net loss of ($2,412,908), or $(0.52) per share. Working
capital increased to $3,866,838 as of December 31, 2004, from $(2,921,737) at the end of
2003, as a result of a public offering of common stock and the issuance of equity
securities in satisfaction of short-term debt, trade payables and accrued compensation in
the first quarter of 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Our revenue growth in 2004,
fueled by a fourth quarter sales increase of 56% over the comparable period in 2003,
reflects the initial success of our expanded domestic sales force and heightened marketing
activities,&#148; commented Leonard Osser, Chairman and Chief Executive Officer of
Milestone Scientific Inc. &#147;These increased sales generated a gross margin of more
than 60% in the fourth quarter. However, our net loss increased in 2004 as we incurred
greater sales and marketing expenses in order to lay the groundwork for higher levels of
future sales activity. It is our belief that 2005 and future years will benefit from the
expenses incurred during 2004.&#148; </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></P>
<HR SIZE=5 NOSHADE>

<P STYLE="page-break-after:always"> </P><PAGE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Since the end of the year, we
have announced the very successful initial launch of our <I>Ionic White&#153;</I> enhanced
technology consumer tooth whitening system through an infomercial program that our
marketing partner aired regionally in 23 television markets throughout the U.S. We
received an initial order for 500,000 <I>Ionic White</I> starter kits in March, and the
infomercial program is scheduled to roll out nationwide in the second quarter.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;When the <I>Ionic White</I>
launch is combined with an improving sales outlook for our computer controlled dental
injection products and our ongoing efforts to commercialize new products, including our
<I>CompuFlo&#153;</I> technology for safely administering injections of local anesthetics
and other medications, the outlook for 2005 is exciting to us,&#148; continued Osser.
&#147;In order to assure adequate capital to pursue these various strategic initiatives in
the most effective manner, we recently announced a $3 million private placement of common
stock units (including warrants). Once all funds from this capital raise have been
received, Milestone&#146;s cash position should exceed $4.7 million.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Milestone also announced that filing
of its Annual Report on form 10-KSB for the year ended December 31, 2004 would be delayed
a few days to allow subsequent event disclosure to be made of its previously announced
$3.0 million private placement to institutional investors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>About
Milestone Scientific, Inc.</FONT></H2>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Milestone Scientific </B>is the
developer, manufacturer and marketer of <I>CompuMed<SUP>&reg; </SUP></I>and <I>CompuDent<SUP>&reg;
</SUP></I>computer controlled local anesthetic delivery systems for medical and dental applications.
These systems are comprised of a microprocessor controlled drive unit and single patient
use disposable handpieces. The Company recently announced its entry into the tooth
whitening market through a third party mass-marketing organization. The consumer product
is being marketed under the distributor&#146;s trademark <I>Ionic White&#153; </I>and
<I>Stay White&#153;. </I>Milestone has also developed and patented its <I>CompuFlo&#153;
</I>technology, which advances the delivery and removal of a wide array of fluids from the
human body by providing real time displays of pressures, fluid densities and flow rates.
In 2002, Milestone Scientific received United States patent protection on a safety
engineered sharps technology that allows for fully automated true single-handed activation
with needle anti-deflection and force-reduction capability. In 2003, Milestone received
FDA Clearance to market <I>SafetyWand<SUP>&reg;</SUP></I>, which incorporates engineered sharps
injury protection features to aid in the prevention of accidental needlesticks. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is headquartered in
Livingston, New Jersey, and its common stock trades on the American Stock Exchange under
the symbol &#147;MS&#148;. For additional information, please visit the Company&#146;s
website at www.milesci.com. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>This press release contains
forward-looking statements regarding the timing and financial impact of the Milestone&#146;s
ability to implement its business plan, expected revenues and future success. These
statements involve a number of risks and uncertainties and are based on assumptions
involving judgments with respect to future  </I></FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>economic, competitive and market
conditions and future business decisions, all of which are difficult or impossible to
predict accurately and many of which are beyond Milestone&#146;s control. Some of the
important factors that could cause actual results to differ materially from those
indicated by the forward-looking statements are general economic conditions, failure to
achieve expected revenue growth, changes in our operating expenses, adverse patent
rulings, FDA or legal developments, competitive pressures, changes in customer and market
requirements and standards, and the risk factors detailed from time to time in Milestone&#146;s
periodic filings with the Securities and Exchange Commission, including without
limitation, Milestone&#146;s Annual Report on Form 10-KSB for the year ended December 31,
2003. The forward looking-statements in this press release are based upon management&#146;s
reasonable belief as of the date hereof. Milestone undertakes no obligation to revise or
update publicly any forward-looking statements for any reason.</I> </FONT></P>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>MILESTONE
SCIENTIFIC INC. AND SUBSIDIARIES<BR>CONSOLIDATED BALANCE SHEET<BR>December 31, 2004
</FONT></P>


<table cellpadding=0 cellspacing=0 border=0 width=600>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=center><font face="Times New Roman, Times, serif" size="2"><u>ASSETS</u></font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Current
      Assets:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Cash
      and cash equivalents</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 3,041,306</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT width="100%"><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Accounts
      receivable , net of allowance for doubtful accounts of $24,903</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">421,339</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Inventories</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">936,221</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Advances
      to contract manufacturer</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">62,034</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Prepaid
      expenses</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">104,562</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      current assets</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,565,462</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Investment
      in distributor, at cost</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">69,956</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Equipment,
      net</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">612,263</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Patents,
      net</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">101,242</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Other
      assets</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">20,408</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      assets</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 5,369,331</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center><font face="Times New Roman, Times, serif" size="2"><u>LIABILITIES
      AND STOCKHOLDERS&#146; EQUITY</u></font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Current
      Liabilities:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Accounts
      payable</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 474,075</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Accrued
      expenses</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">224,549</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      current liabilities</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">698,624</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Deferred
      compensation payable to officer</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">150,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      liabilities</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">848,624</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Commitments
      and contingencies</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=center><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Stockholders&#146;
      Equity</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Preferred
      stock, par value $.001; authorized 5,000,000 shares</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8%
      Cumulative convertible preferred stock, par value $.001; authorized,</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued
      and outstanding, 25,365 shares</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">25</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Common
      stock, par value $.001; authorized 50,000,000 shares; 9,824,287 shares</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued
      and 9,790,954 shares outstanding</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,824</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Additional
      paid-in capital</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">52,618,913</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Accumulated
      deficit</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(47,196,539</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Treasury
      stock, at cost, 33,333 shares</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(911,516</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      stockholders&#146; equity</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,520,707</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      liabilities and stockholders&#146; equity</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 5,369,331</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
</table>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See Notes to Consolidated Financial
Statements </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></P>
<HR SIZE=5 NOSHADE>

<P STYLE="page-break-after:always"> </P><PAGE>
<BR>


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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>MILESTONE
SCIENTIFIC INC. AND SUBSIDIARIES<BR>CONSOLIDATED STATEMENTS OF OPERATIONS<BR>YEARS ENDED DECEMBER 31, 2004 AND 2003
</FONT></P>


<table cellpadding=0 cellspacing=0 border=0 width=600>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td colspan="2" align=center><b><font face="Times New Roman, Times, Serif" size="1">&nbsp;2004</font></b></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td colspan="2" align=center><b><font face="Times New Roman, Times, Serif" size="1">&nbsp;2003</font></b></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT width="100%"><font face="Times New Roman, Times, serif" size="2">Net
      sales</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 4,751,186</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 3,971,707</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cost of
      sales</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,415,826</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,003,139</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Gross profit</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,335,360</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,968,568</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Selling,
      general and administrative expenses</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,155,569</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,483,439</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Closing
      of Deerfield, IL facility</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">86,165</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Research
      and development expenses</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">187,992</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">131,015</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">5,343,561</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,700,619</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Loss from
      operations</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(3,008,201</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(1,732,051</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Other income
      (expense)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Interest
      income</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">80,867</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Interest
      expense</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(69,530</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(680,857</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Other
      income (expense), net</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">11,337</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(680,857</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Net loss</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(2,996,864</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(2,412,908</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Dividends
      applicable to preferred stock</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(2,029</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Net loss
      applicable to common stockholders</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (2,998,893</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (2,412,908</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Loss per
      share applicable to common stockholders - basic and diluted</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (0.33</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (0.52</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Weighted
      average shares outstanding - basic</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;and
      diluted</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,147,634</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,672,266</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
</table>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See Notes to Consolidated Financial
Statements </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></P>
<HR SIZE=5 NOSHADE>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>MILESTONE SCIENTIFIC
INC. AND SUBSIDIARIES<BR>CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>YEARS ENDED DECEMBER 31, 2004
AND 2003 </FONT></P>



<table cellpadding=0 cellspacing=0 border=0 width=600>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td colspan="2" align=center><b><font face="Times New Roman, Times, Serif" size="1">&nbsp;2004</font></b></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td colspan="2" align=center><b><font face="Times New Roman, Times, Serif" size="1">&nbsp;2003</font></b></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td></td>
    <td colspan=2 align=RIGHT>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cash flows
      from operating activities:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Net loss</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (2,996,864</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> (2,412,908</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT width="100%"><font face="Times New Roman, Times, serif" size="2">Adjustments
      to reconcile net loss to net cash used in operating activities:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Depreciation</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">50,920</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">26,101</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Amortization
      of debt discount and deferred financing costs</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">51,003</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">289,119</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Amortization
      of unearned advertising cost</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">20,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Stock
      and options issued for compensation and consulting</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">29,048</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Stock
      issued for interest on notes payable</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">2,700</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Bad
      debt expense</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">1,593</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Loss
      on disposal of fixed assets</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">11,248</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Changes
      in operating assets and liabilities:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase)
      in accounts receivable</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(34,032</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(149,465</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase)
      in inventories</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(509,510</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(307,420</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease
      in advances to contract manufacturer</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">166,463</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">159,438</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease
      (increase) in prepaid expenses</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">12,622</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(52,232</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease
      in other assets</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">6,933</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">4,992</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease)
      increase in accounts payable</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(1,015,516</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">905,750</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease)
      increase in accrued interest</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(83,532</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">391,738</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase
      (decrease) in accrued expenses</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">139,303</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(26,952</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease)
      increase in deferred compensation</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(106,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">320,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash used in operating activities</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(4,284,869</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(820,591</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cash flows
      from investing activities:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Payment
      for capital expenditures</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(350,529</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(35,268</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Payment
      for intangible assets</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(75,536</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Payment
      for investment in distributor</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(69,956</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash used in investing activities</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(496,021</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(35,268</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cash flows
      from financing activities:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Expenses
      relating to registering shares</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(22,500</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Proceeds
      from (payment for) equity financing, net</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7,868,919</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(248,815</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Proceeds
      from note payable - officer/stockholder</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">180,537</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Payments
      of note payable - officer/stockholder</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(50,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(122,322</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Proceeds
      from issuance of notes payable</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">900,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Proceeds
      from exercised options</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">57,750</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Proceeds
      from exercise of equity line, net of expenses</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">191,481</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Payments
      for deferred financing activities</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(86,678</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash provided by financing activities</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">7,818,919</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">849,453</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">NET INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,038,029</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">(6,406</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cash and
      cash equivalents at beginning of year</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">3,277</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2">9,683</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=1>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Cash and
      cash equivalents at end of year</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 3,041,306</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 3,277</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">Supplemental
      disclosure of cash flow information:</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> </font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Cash
      paid during the year for interest</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> 99,359</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> &#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;Cash
      paid during the year for taxes</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> &#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
    <td align=left><font face="Times New Roman, Times, serif" size="2">$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, serif" size="2"> &#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, serif" size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
    <td colspan=2 align=left>
      <hr NOSHADE color=#808080 size=2>
    </td>
    <td><font face="Times New Roman, Times, serif" size="2"></font></td>
  </tr>
</table>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See Notes to Consolidated Financial
Statements </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></P>
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