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<SEC-DOCUMENT>0001169232-05-002630.txt : 20061004
<SEC-HEADER>0001169232-05-002630.hdr.sgml : 20061004
<ACCEPTANCE-DATETIME>20050512124623
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001169232-05-002630
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20050512

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:		CORRESP

	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>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
                      [LETTERHEAD OF MILESTONE SCIENTIFIC]

                                                                  May 11, 2005

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Ms. Angela J. Crane, Branch Chief

                            Milestone Scientific Inc.
                Form 10-KSB for the year ended December 31, 2004
                                File No. 1-14053
Dear Sirs:

      This letter responds to the Staff's comment letter dated May 2, 2005
regarding the above-referenced periodic report filed by Milestone Scientific
Inc. ("Company" or "Milestone"). For ease of reference, your inquiries have been
incorporated in this letter and precede our responses. If you have any questions
regarding the responses to your comments, please feel free to call me at
973-535-2717 or Virginia Tillyard of Morse, Zelnick, Rose & Lander at
212-838-3089.

<PAGE>
[LOGO]                                                               Page 2 of 5


Form 10-KSB for the Year Ended December 31, 2004

Notes to Consolidated Financial Statements - Page F-8

Note B-8, Revenue Recognition -Page F-9

Question 1:

      We note that "revenue is recognized net of discounts and allowances when
      title passes at the time of shipment and collectibility is reasonably
      assured and the Company has no further performance obligations." Do
      post-shipment obligations, such as installation, set-up or customer
      acceptance, affect the timing of revenue recognition? Describe the
      significant terms of your agreements with independent sales
      representatives, including payment, price protection, return, exchange,
      and other significant matters. Explain and support when you believe it is
      appropriate to recognize revenue to independent sales representatives.
      Refer to SAB 104 and SFAS 48 as necessary.

Response:

Milestone Scientific Inc.'s revenue recognition policy is based on the following
four factors that are consistent with the criteria outlined in SAB 104:

      o     Persuasive evidence of an arrangement exists,

      o     Delivery has occurred,

      o     The price to the buyer is fixed and determinable, and

      o     Collectibility is reasonably assured.

A detailed discussion of all pricing options is provided in Response 2. Under
all pricing options revenue is recognized upon the shipment of goods. There is
no installation or set up or post-shipment maintenance required and customer
acceptance is considered made at delivery..

Our Sales Representative Agreement with our outside sales representatives
addresses the relationship the representative has with the Company as an
independent contractor who upon the completion of a Company training program is
assigned a sales territory to solicit sales on behalf of the Company. The
representative earns a commission for each sale upon the shipment of product to
the customer by the Company's fulfillment center. All shipments are initiated by
the completion and submission of a properly completed Sales Order from the Sales
Representative to our customer service department which processes the order with
the Company's fulfillment center. Commissions are paid to the representatives by
the fifteenth day of the month following the month the sales were made. Since
the Company does not sell product to the sales representatives, there are no
price protection concerns. We typically receive payment in advance of shipment.
Any collection follow up required is performed by the company finance personnel.

The company also has arrangements with independent distributors in international
markets where we offer exclusivity in each market. These distributors purchase
our products at wholesale prices and sell to the end user. All sales to
distributors are final and no returns are permitted. Payments from distributors
are required pursuant to our normal credit terms and are not dependent on sell

<PAGE>
[LOGO]                                                               Page 3 of 5


through. The Company has no maintenance or other post sale responsibilities for
sales to these distributors.

Question 2:

      Supplementally, tell us more about the purchase and pricing options
      available to your customers. Do contracts set forth fixed prices for
      purchases of products? Do these prices change over time? If so, how are
      changes in prices over the term of the contracts, if any, accounted for?
      Do prices charged vary between customers? Do you offer discounts? Consider
      SAB 104 when drafting your response as applicable.

Response:

Milestone Scientific, Inc.'s business model is similar to the razor and razor
blade concept. Except for sales to our distributors, we sell direct to the end
user, typically a dentist/dental practice, one or more Drive Units (razor) and
then over a continued period of time we sell a consumable Handpiece product
(razor blade). In order to maximize our market opportunities, Milestone
Scientific, Inc. offers pricing options to new and existing customers. These
options are summarized separately for Drive Units and Handpieces as follows:

Drive Units:

      Drive Unit only:

      Sell to new customer a Drive Unit for $2,195.

         Drive Unit (w/ Handpiece Bundled):

            Sell new customer a Drive Unit for $2,495 and customer receives 18
      boxes, each containing 50 handpieces shipped either all at once or over a
      twelve month period.

Handpieces:

      Milestone Savings Plan:

      Milestone Savings Plan (MSP) where the customer agrees to purchase
      handpieces on a recurring monthly basis at a discounted MSP price.
      Revenues are recognized as shipments are made.

      No Milestone Savings Plan:

      Customer orders handpieces as needed by placing an order through customer
      service at a full retail price that is subject to change without notice.

The price terms of each agreement are determined and agreed upon at the time of
sale.

Prices for Drive Units and handpieces are subject to change over time.
Subsequent changes in prices have no impact on previously contracted prices for
Drive Units or handpieces. Price changes do affect future Drive Unit sales and
non MSP Handpiece sales. Prices for MSP Handpiece sales are fixed until the
renewal date of the MSP at which time the new prices are applied to future MSP
sales transactions.

<PAGE>
[LOGO]                                                               Page 4 of 5


Since price changes do not affect contracted prices there is no accounting
treatment for price change required.

Prices do not vary between customers however sales of multiple Drive Units to
new customers are typically discounted up to 25% after the first unit. Similarly
subsequent sales of Drive Units to existing customers are discounted 25%. With
prior Sales Manager approval, sales representatives have the ability to discount
new customer and existing customer sales of Drive Units. Prices also change for
quarterly marketing promotions that target new customer and/or existing market
segments. All sales are recorded net of discount.

Question 3:

      In this regard, we note you implemented a sales program in the first
      quarter of 2005 which you will provide a one year supply of hand pieces
      free to customer that purchase a CompuDent unit. Supplementally, tell us
      how you are accounting for this program. Confirm that you are classifying
      the expense of the free disposables in cost of sales. Refer to EITF 00-22
      in your response.

Response:

In the first quarter 2005 the Company implemented a program where the purchase
of a Drive Unit for a certain price included a 1 year supply (18 boxes) of
Handpieces. The revenue and related expense for the Drive Unit is recorded at
time of delivery. We also record the cost of the Handpieces shipped with the
Drive Unit at time of delivery. We typically ship a minimum of 3 to 6 boxes of
Handpieces along with the Drive Unit at time of delivery. It is our policy to
recognize revenue as shipments are made. As of March 31, 2005 deferred revenues
associated with this program have been de-minimus. We confirm that the cost of
the free disposables is classified as cost of sales.

Question 4:

      Tell us how warranty costs are estimated at the time of shipment. If
      material, revise future filings comply with the disclosure requirements of
      paragraph 14 of FASB Interpretation No. 45.

Response:

The Company warranties its products for a one year period. Warranty returns are
monitored and thus far have been immaterial. During 2004 the Company had total
returns of 94 units under warranty. The related expense to the Company for
repair or replacement was less than $10,000 (less than 0.3% of revenue and less
than 0.4 % of net loss for the year). Accordingly,as units under warranty are
returned, the cost of repair or replacement is recorded to expense. We will
continue to monitor warranty experience on a quarterly or more frequent basis
and institute a policy of warranty reserves if return experience so dictates. We
will also provide in the future the disclosures required by paragraph 14 of FASB
Interpretation No. 45.

Note I. Stockholder's Equity - Page F-13

Question 5:

      In each transaction involving the issuance of warrants, please tell us and
      expand your disclosures in future filings to explain how each issuance was
      valued. Address both the method and the significant assumptions applied.

<PAGE>
[LOGO]                                                               Page 5 of 5


Response:

In February 2004, in payment of liabilities, the Company issued 335,614 warrants
as part of units consisting of two shares of common stock and one warrant at a
Public Offering Price of $6.52 per unit. The number of units issued was
determined by the recorded amount of the respective liabilities that the units
were issued to satisfy. Also in February 2004 the Company issued 1,440,000 units
including two shares and one warrant per unit as part of the public offering
which warrants were not required to be separately valued. In April 2004 the
Company issued 80,000 warrants in connection with services related to the Public
Offering and which therefore were not separately recorded in equity.

We will expand our disclosures in future filings to explain how each warrant
issuance was valued.

In connection with the above answers the Company hereby acknowledges that:

            o     The company is responsible for the adequacy and accuracy of
                  the disclosure in the filings;

            o     Staff comments or changes to disclosure in response to staff
                  comments in the filings reviewed by the staff do not foreclose
                  the Commission from taking any action with respect to the
                  filing; and

            o     The company may not assert staff comments as a defense in any
                  proceeding initiated by the Commission or any person under the
                  federal securities laws of the United States.

                                      Sincerely,


                                      Kevin T. Lusardi
                                      Vice President and Chief Financial Officer

cc:   Virginia Tillyard, Esq. (Morse, Zelnick, Rose & Lander)
      Dennis Hult, SEC
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