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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0001125282-05-005918.txt : 20051114
<SEC-HEADER>0001125282-05-005918.hdr.sgml : 20051111
<ACCEPTANCE-DATETIME>20051114114419
ACCESSION NUMBER:		0001125282-05-005918
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20050930
FILED AS OF DATE:		20051114
DATE AS OF CHANGE:		20051114

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:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14053
		FILM NUMBER:		051197916

	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>10QSB
<SEQUENCE>1
<FILENAME>b409788_ten-qsb.htm
<DESCRIPTION>FORM 10-QSB
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<title>Prepared and filed by St Ives Burrups</title>
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<div><a name=cover></a><font size="2" face="Times New Roman"><b><a  href="#index">Click here to Index</a></b></font></div>

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<div  align="center"><font size="4" face="Times New Roman"><b>SECURITIES AND EXCHANGE COMMISSION</b><font  size="4"><br>  <b>Washington, D.C. 20549</b></font></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="4" face="Times New Roman"><b>FORM 10-QSB</b></font></div>

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  <div><font size="2" face="Times New Roman"><b>Mark One</b></font></div>
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  <div><font size="3" face="Times New Roman"><b>QUARTERLY REPORT PURSUANT TO    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></font></div>
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  <div><font size="2" face="Times New Roman"><b>For the Quarterly Period Ended September 30, 2005</b></font></div>
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  <div  align="center"><font size="2" face="Times New Roman"><b>OR</b></font></div>
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  <div><font size="3" face=Wingdings>o</font></div>
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  <div><font size="3" face="Times New Roman"><b>TRANSITION    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></font></div>
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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>For the transition period from _________ to  _________</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>Commission File Number 001-14053</b></font></div>

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  <div  align="center"><font size="3" face="Times New Roman"><b>MILESTONE SCIENTIFIC, INC.</b></font></div>
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  <div  align="center"><font size="1" face="Times New Roman"><b>(Exact name    of Registrant as specified in its charter)</b></font></div>
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  <div  align="center"><font size="2" face="Times New Roman"><b>13-3545623</b></font></div>
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  <div  align="center"><font size="1" face="Times New Roman"><b>State or    other jurisdiction<br>    or organization)</b></font></div>
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  <div  align="center"><font size="1" face="Times New Roman"><b>(I.R.S.    Employer<br>    Identification No.)</b></font></div>
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  <div  align="center"><font size="2" face="Times New Roman"><b>220 South Orange Avenue, Livingston, New Jersey 07039</b></font></div>
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  <div  align="center"><font size="2" face="Times New Roman"><b>(973) 535-2717</b></font></div>
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  <div  align="center"><font size="1" face="Times New Roman"><b>(Registrant&#146;s    telephone number, including area code)</b></font></div>
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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Indicate by  check mark whether the Registrant (1) has filed all reports required to be  filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the  preceding 12 months (or for such shorter period that the Registrant was  required to file such reports), and (2) has been subject to such filing  requirements for the past 90 days.</b></font></div>

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<div><font size="2" face="Times New Roman"><b>Yes&nbsp;&nbsp;</b><b><img src="tickedbox.gif" title="checked box">&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;</b><b><img src="emptybox.gif" title="checked box"></b></font></div>

<div><font size="2" face="Times New Roman"><b>&nbsp;</b></font></div>

<div><font size="2" face="Times New Roman"><b>As of November 14, 2005, the Registrant had a  total of 11,510,072 shares of Common Stock, $.001 par value, outstanding.</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>


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<div><font size="2" face="Times New Roman"><b><a  href="#cover">Click here to Cover</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman"><b>FORWARD LOOKING STATEMENTS</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><i>When used in this Quarterly Report on Form 10-QSB, the words &#147;may&#148;,  &#147;will&#148;, &#147;should&#148;, &#147;expect&#148;, &#147;believe&#148;, &#147;anticipate&#148;, &#147;continue&#148;, &#147;estimate&#148;,  &#147;project&#148;, &#147;intend&#148; and similar expressions are intended to identify  forward-looking statements within the meaning of Section 27A of the Securities  Act and Section 21E of the Exchange Act regarding events, conditions and  financial trends that may affect Milestone&#146;s future plans of operations,  business strategy, results of operations and financial condition. Milestone  wishes to ensure that such statements are accompanied by meaningful cautionary  statements pursuant to the safe harbor established in the Private Securities  Litigation Reform Act of 1995. Prospective investors are cautioned that any  forward-looking statements are not guarantees of future performance and are  subject to risks and
uncertainties and that actual results may differ  materially from those included within the forward-looking statements as a  result of various factors. Such forward-looking statements should, therefore,  be considered in light of various important factors, including those set forth  herein and others set forth from time to time in Milestone&#146;s reports and  registration statements filed with the Securities and Exchange Commission (the  &#147;Commission&#148;). Milestone disclaims any intent or obligation to update such  forward-looking statements.</i></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">2</font></div>

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<div><font size="2" face="Times New Roman"><b><a  href="#cover">Click here to Cover</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><a name=index></a><font  size="2" face="Times New Roman"><u>I N D E X</u></font></div>

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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">PART I</font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">FINANCIAL    INFORMATION</font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">ITEM 1</font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Condensed    Consolidated Financial Statements (unaudited)</font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_4">Condensed Consolidated Balance Sheets September 30, 2005 (Unaudited)    and December 31, 2004</a></font></div>
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  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_4">4</a></font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_5">Condensed Consolidated Statements of Operations Three and Nine Months    Ended September 30, 2005 and 2004 (Unaudited)</a></font></div>
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  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_5">5</a></font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_6">Condensed Consolidated Statement of Changes in Stockholders&#146; Equity    (Deficiency) - Nine Months Ended September 30, 2005 (Unaudited)</a></font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_7">Condensed Consolidated Statements of Cash Flows Nine Months Ended    September 30, 2005 and 2004 (Unaudited)</a></font></div>
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  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_10">Notes to Condensed Consolidated Financial Statements</a></font></div>
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  <td width="5%" valign="top">
  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_10">10</a></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_14">ITEM 2</a></font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_14">Management&#146;s Discussion and Analysis or Plan of Operation</a></font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_14">14</a></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_21">ITEM 3</a></font></div>
  </td>
  <td width="81%" valign="top">
  <div><font size="2" face="Times New Roman"><a href="#pg_21">Controls and Procedures</a></font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_21">21</a></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_22">PART II</a></font></div>
  </td>
  <td width="88%" colspan="2" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_22">OTHER INFORMATION</a></font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="88%" colspan="2" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_22">ITEM 2</a></font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_22">Unregistered Sales of Equity Securities and Use of Proceeds</a></font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_22">22</a></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_23">ITEM 6</a></font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_23">Exhibits</a></font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_23">23</a></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  colspan="3"  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman"><a href="#pg_24">SIGNATURES</a></font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center"><font size="2" face="Times New Roman"><a href="#pg_24">24</a></font></div>
  </td>
 </tr>
 <tr>
  <td  colspan="2" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="81%" valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  colspan="3"  valign="top">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">CERTIFICATIONS</font></div>
  </td>
  <td width="5%" valign="top">
  <div  align="center"><font size="2" face="Times New Roman">25</font></div>
  </td>
 </tr>
</table>

<div  align="center"><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">3</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><a name="pg_4"></a><font  size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">MILESTONE  SCIENTIFIC INC. AND SUBSIDIARIES<br>  CONDENSED CONSOLIDATED BALANCE SHEETS</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
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  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30,<br>    2005</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>December    31,<br>    2004 *</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
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 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
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  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
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 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>(Unaudited)</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr bgcolor="#ffffff">
  <td  valign="bottom">
  <div  align="center"><font size="2" face="Times New Roman"><u>ASSETS</u></font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Current Assets:</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Cash    and cash equivalents</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">3,651,943</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">3,041,306</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Accounts    receivable, net of allowance for doubtful accounts of $31,720 in 2005 and<br>
$24,903 in 2004</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">633,035</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">421,339</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Royalty    receivable</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">252,842</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Inventories</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,309,940</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">936,221</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Advances    to contract manufacturer</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">320,216</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">62,034</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Prepaid    expenses</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">102,755</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">104,562</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:9%; text-indent:-3%"><font size="2" face="Times New Roman">Total    current assets</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">6,270,731</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">4,565,462</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Investment    in distributor, at cost</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">76,319</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">69,956</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Equipment,    net</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">559,358</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">612,263</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Patents,    net</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">419,709</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">101,242</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Other    assets</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">26,711</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">20,408</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:9%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:12%; text-indent:-3%"><font size="2" face="Times New Roman">Totals</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">7,352,828</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">5,369,331</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:9%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr bgcolor="#FFFFFF">
  <td  valign="bottom">
  <div  align="center"><font size="2" face="Times New Roman"><u>LIABILITIES    AND STOCKHOLDERS&#146; EQUITY</u></font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Current Liabilities:</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Accounts    payable</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">550,741</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">474,075</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Accrued    expenses</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">256,185</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">224,549</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:9%; text-indent:-3%"><font size="2" face="Times New Roman">Total    current liabilities</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">806,926</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">698,624</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Deferred    compensation payable to officer</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">262,500</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">150,000</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:9%; text-indent:-3%"><font size="2" face="Times New Roman">Total    liabilities</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,069,426</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">848,624</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Stockholders&#146; Equity:</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Preferred    stock, par value $.001; authorized 5,000,000 shares 8% cumulative convertible    preferred stock, par value $.001; authorized, issued and outstanding, 25,365    shares</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">25</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">25</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Common    stock, par value $.001; authorized 50,000,000 shares; 11,466,024 shares    issued<br>
and 11,432,691 shares outstanding in 2005, and 9,824,287 shares issued    and<br>
9,790,954 shares outstanding in 2004</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">11,466</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">9,824</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Additional    paid-in capital</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">56,661,074</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">52,618,913</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Accumulated    deficit</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(49,477,647</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(47,196,539</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Treasury    stock, at cost, 33,333 shares</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(911,516</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(911,516</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:9%; text-indent:-3%"><font size="2" face="Times New Roman">Total    stockholders&#146; equity (deficiency)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">6,283,402</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">4,520,707</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:12%; text-indent:-3%"><font size="2" face="Times New Roman">Totals</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">7,352,828</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">5,369,331</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">See notes to Condensed Consolidated Financial  Statements</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td  valign="top">
  <hr size="1" width="25%" noshade color=black align=left>


  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><font size="2" face="Times New Roman">*Derived from the audited    financial statements as of December 31, 2004.</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">4</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><a name="pg_5"></a><font  size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">MILESTONE  SCIENTIFIC INC. AND SUBSIDIARIES<br>  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<br>  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004<br>  (Unaudited)</font></div>

<div  align="center"><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="26%" colspan="5"  valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Three    Months Ended</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="26%" colspan="5"  valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Nine    Months Ended</b></font></div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="26%" colspan="5"  valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="26%" colspan="5"  valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30,<br>    2005</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30,<br>    2004</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30,<br>    2005</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30,<br>    2004 </b></font></div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Products sales, net</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,567,382</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,110,043</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">4,482,016</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">3,392,288    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Royalty income</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">252,842</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">472,052</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Total revenue</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,820,224</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,110,043</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">4,954,068</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">3,392,288    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
   <td  valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Cost of products sold</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">643,426</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">563,730</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,896,736</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,879,414    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Royalty expense</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">30,341</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">56,646</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Total cost of revenue</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">673,767</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">563,730</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,953,382</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,879,414    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr bgcolor="#FFFFFF">
   <td  valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Gross profit</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,146,457</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">546,313</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">3,000,686</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,512,874    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
   <td  valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Selling, general and    administrative expenses</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,738,286</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,608,176</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">5,194,541</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">3,804,961    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Research and development    expenses</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">53,678</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">41,679</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">155,067</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">135,300    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,791,964</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,649,855</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">5,349,608</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">3,940,261    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr bgcolor="#FFFFFF">
   <td  valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Loss from operations</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(645,507</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(1,103,542</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(2,348,922</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(2,427,387</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
   <td  valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Other income (expense)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Interest    income</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">33,132</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">23,942</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">67,814</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">64,952    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Interest    expense</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(3,576</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(67,213</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Other    income (expense) net</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">33,132</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">20,366</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">67,814</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(2,261</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Net Loss</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(612,375</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(1,083,176</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(2,281,108</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(2,429,648</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr bgcolor="#FFFFFF">
   <td  valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
   <td valign="bottom">&nbsp;</td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Dividends applicable to    preferred stock</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(507</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(1,544</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(1,522</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(1,544</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Net loss applicable to    common stockholders</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(612,882</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(1,084,720</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(2,282,630</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(2,431,192</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:3%; text-indent:-3%"><font size="2" face="Times New Roman">Loss    per share applicable to common stockholders - basic and diluted</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(0.05</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(0.11</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(0.21</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(0.27</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='margin-left:2%; text-indent:-.2%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:3%; text-indent:-3%"><font size="2" face="Times New Roman">Weighted    average shares outstanding - basic and diluted</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">11,366,617</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">9,667,381</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">10,738,396</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">8,952,598    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='margin-left:2%; text-indent:-.2%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">See Notes to Condensed Consolidated Financial  Statements</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">5</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><a name="pg_6"></a><font  size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">MILESTONE  SCIENTIFIC, INC. AND SUBSIDIARIES<br>  CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS&#146; EQUITY  (DEFICIENCY)<br>  NINE MONTHS ENDED SEPTEMBER 30, 2005<br>  (Unaudited)</font></div>

<div  align="center"><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5"  valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Preferred Stock</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5"  valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Common Stock</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" rowspan="3"  valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Additional<br>    Paid-in Capital</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5"  valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5"  valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" rowspan="2"  valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Accumulated Deficit</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" rowspan="2"  valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Treasury Stock</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Shares</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Amount</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Shares</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Amount</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="8%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>Total</b></font></div>
  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Balance, January 1, 2005</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">25,365</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">25</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">9,824,287</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">9,824</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">52,618,913</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">(47,196,539</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">(911,516</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">4,520,707    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Common stock and options    issued for payments of patent rights acquired</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">43,424</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">44</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">87,289</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">87,333    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Common stock issued for    payment of vendor services</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">78,717</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">79</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">176,296</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">176,375    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Common stock and options    issued for payment of consulting services</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">139,362</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">140</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">211,917</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">212,057    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Common stock issued for    payment of employee compensation</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">23,461</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">23</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">39,978</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">40,001    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Common stock issued for    exercised option</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">333</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">0</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">749</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">749    </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Proceeds from equity    financings, net</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,356,440</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,356</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3,525,932</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3,527,288    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Net loss</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">(2,281,108</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom">
  <div  align="right"><font size="1" face="Times New Roman">(2,281,108</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Balance, September 30, 2005</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">25,365</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">25</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">11,466,024</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">11,466</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">56,661,074</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">(49,477,647</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">(911,516</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">6,283,402    </font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="7%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="1%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
</table>




<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">See Notes to Condensed Consolidated Financial  Statements</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">6</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><a name="pg_7"></a><font  size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">MILESTONE  SCIENTIFIC INC. AND SUBSIDIARIES<br>  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<br>  NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004<br>  (Unaudited)</font></div>

<div  align="center"><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>2005</b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <div  align="center"><font size="1" face="Times New Roman"><b>2004 </b></font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="12%" colspan="2" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Cash flows from operating    activities:</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Net loss</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(2,281,108</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(2,429,648</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Adjustments to reconcile    net loss to net cash used in operating activities:</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Depreciation</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">74,457</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">28,481    </font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Amortization    of debt discount and deferred financing costs</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">49,119    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Amortization    of patents</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">13,468</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Common    stock and options issued for compensation and consulting services</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">428,433</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">1,548    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Bad    debt expense</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">6,817</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Changes    in operating assets and liabilities:</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">(Increase)    in accounts receivable</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(218,513</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(93,881</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">(Increase)    in royalty receivable</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(252,842</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">(Increase)    in inventories</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(373,719</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(341,982</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">(Increase)    decrease in advances to contract manufacturer</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(258,182</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">227,630    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">Decrease    in prepaid expenses</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">1,807</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">7,202    </font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">(Increase)    decrease in other assets</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(6,303</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">5,364    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">Increase    (decrease) in accounts payable</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">76,666</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(675,643</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">(Decrease)    in accrued interest</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(81,265</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">Increase    in accrued expenses</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">31,636</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">250,199    </font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">Increase    (decrease) in deferred compensation</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">112,500</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(143,500</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:9%'><font size="2" face="Times New Roman">Net    cash used in operating activities</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(2,644,883</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(3,196,376</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:9%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Cash flows from investing    activities:</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Payment    for capital expenditures</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(21,552</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(354,888</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Payment    for patent rights</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(244,602</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Payment    for investment in distributor</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">(6,363</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:9%'><font size="2" face="Times New Roman">Net    cash used in investing activities:</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(272,517</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(354,888</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Cash flows from financing    activities:</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Proceeds    from equity financings, net</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">3,527,288</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">7,620,104    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Proceeds    from exercise of option</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">749</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Payments    of note payable - officer/stockholder</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">(50,000</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'><font size="2" face="Times New Roman">Net    cash provided by financing activities</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">3,528,037</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">7,570,104    </font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:6%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">NET INCREASE IN CASH AND    CASH EQUIVALENTS</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">610,637</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">4,018,840    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Cash and cash equivalents    beginning of period</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">3,041,306</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right"><font size="2" face="Times New Roman">3,277    </font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Cash and cash equivalents    end of period</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">3,651,943</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">4,022,117    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">Supplemental disclosure of    cash flow information:</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
  <div style='text-indent:3%'><font size="2" face="Times New Roman">Cash    paid during the period for interest</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><font size="2" face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right"><font size="2" face="Times New Roman">99,359    </font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">See Notes to Condensed Consolidated Financial  Statements </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman"> 7 </font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><a name="pg_10"></a><font size="2" face="Times New Roman"><b><a href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">MILESTONE SCIENTIFIC INC. AND SUBSIDIARIES<br>  CONSOLIDATED STATEMENTS OF CASH FLOWS <br>  NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004<br>(Unaudited) </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">Supplemental schedule of non-cash investing  and financing activities: </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant  to a technology agreement to provide Milestone with patent rights, in the first  quarter of 2005, Milestone issued 43,424 shares valued at $70,000 to the  Company&#146;s outside director of clinical affairs.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  the first quarter of 2005, Milestone issued a total of 29,043 shares valued at  $72,000 (of which $53,666 was expensed in the nine months ended September 30,  2005) to five consultants in satisfaction of various consulting agreements.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  the first quarter of 2005, we issued a total of 16,026 shares valued at $33,333  to a former employee as part of a severance agreement and a current employee as  bonus.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  the three months ended March 31, 2005, Milestone issued 38,730 shares to a  vendor in satisfaction of $100,000 of payables owed in connection with  warehousing and fulfillment services rendered.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  April 4, 2005, Milestone completed a $2,999,996 private placement of 101,044  units to accredited investors. Each unit consists of 10 shares of common stock  and two warrants.&#160; Proceeds from the  private placements were recorded net of a 7% placement agent fee of $209,978  and other offering expenses totaling $59,784.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  June 27, 2005 Milestone issued 7,435 shares valued at $20,000 to an employee as  part of annual compensation (of which $6,668 was expensed in the nine-month  period ended September 30, 2005).In the second quarter of 2005, Milestone  issued a total of 70,319 shares valued at $200,000 to two consultants (of which  $90,929 was expensed in the nine months ended September 30, 2005) for  professional service rendered in April and for advertising and marketing  services to be rendered in a twelve-month period ending March 30, 2006.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  June 16, 2005 Milestone issued 8,333 options valued at $17,333 to the Company&#146;s  outside director of clinical affairs in consideration of newly granted patent  rights.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  June 30, 2005, Milestone completed an $847,960 private placement of 34,000  units to accredited investors. Each unit consists of 10 shares of common stock  and two warrants.&#160; Proceeds from this private  placement were recorded net of a fee of $50,878 and 600 identical units to the  investment adviser. Dynamic Decisions acted as investment adviser to Milestone  in this transaction and received a fee of $50,878 and 600 Units, which are  substantially the same form as those issued to the investors.&#160; Total proceeds from this private placement,  after commissions and other expenses, were $797,054.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  August 31, 2005 we issued 40,000 shares valued at $100,000 (of which $4,167 was  expensed in the nine months ended September 30, 2005) to a marketing and sales  consultant to aid in the international sale and distribution of <i>CoolBlue&#153;  Wand </i>dental enhancement system.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  the third quarter of 2005, Milestone issued a total of 39,987 shares to two  vendors in satisfaction of $76,375 of payables owed in connection with  exhibition facilities and warehousing services rendered.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operations  for the nine months ended September 30, 2005 include an expense of $63,295 for  amortization of options issued in 2002 and 2004.</font></div>

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<div  align="center"><font size="2" face="Times New Roman">8</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  February 2004, Milestone issued 335,614 units in consideration for notes  payable and accrued interest due to an officer and a shareholder of $1,604,204,  accounts payable due to outside legal counsel of $200,000 and deferred  compensation to an officer of $384,000. Each unit consisted of 2 shares of  Milestone&#146;s common stock (671,228 shares of common stock) and a warrant. </font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As  part of its payment for services in connection with the February 2004 public  offering, Milestone issued  to its outside general counsel 5-year options to purchase 160,000 shares of  common stock at an exercise price of $3.26 per share and warrants to purchase  80,000 shares of common stock at an exercise price of $4.89.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  April 2004, pursuant to an agreement to purchase media placement services, the  Company issued 1,106 shares of common stock valued at $2,500.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  May 2004, the Company issued 1,133 options for consulting services valued at  $1,548 which was recognized as expense during the period.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  September 2004, in consideration for payment of $70,411 of accounts payable,  the Company issued 36,331 shares of common stock to L. C. Mold Inc.</font></div>

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<div  align="center"><font size="2" face="Times New Roman">9</font></div>

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<div  align="center"><font size="2" face="Times New Roman"><b>MILESTONE SCIENTIFIC  INC. AND SUBSIDIARIES<br>NOTES TO CONDENSED CONSOLIDATED  FINANCIAL STATEMENTS <br>(Unaudited)</b></font></div>

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  <div><font size="2" face="Times New Roman">Note    1 - Summary of accounting policies: </font></div>
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  <div><font size="2" face="Times New Roman">The unaudited condensed    consolidated financial statements of Milestone Scientific Inc. and    Subsidiaries (the &#147;Company&#148;) have been prepared in accordance with accounting    principles generally accepted in the United States of America for interim    financial information. Accordingly, they do not include all of the    information and footnotes required by accounting principles generally    accepted in the United States of America for complete financial statements.</font></div>
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  <div><font size="2" face="Times New Roman">These unaudited condensed    consolidated financial statements should be read in conjunction with the    consolidated financial statements and notes thereto for the year ended    December 31, 2004 included in Milestone&#146;s Annual Report on Form 10-KSB. The    accounting policies used in preparing these unaudited condensed consolidated    financial statements are the same as those described in the December 31, 2004    consolidated financial statements.</font></div>
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  <div><font size="2" face="Times New Roman">In the opinion of    Milestone, the accompanying unaudited condensed consolidated financial    statements contain all adjustments (consisting of normal recurring entries)    necessary to present fairly Milestone&#146;s financial position as of September    30, 2005 and the results of its operations for the three and nine months    ended September 30, 2005 and 2004.</font></div>
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  <div><font size="2" face="Times New Roman">The results reported for    the three and nine months ended September 30, 2005 are not necessarily    indicative of the results of operations which may be expected for a full    year.</font></div>
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  <div><font size="2" face="Times New Roman">On    April 4, 2005 Milestone completed a $2,999,996 private placement of 101,044    Units to accredited investors. Each Unit consisted of 10 shares of Common    Stock and two Warrants.&#160; Each Warrant    entitles the holder to purchase a share of Common Stock at $4.89 per share    through the close of business on February 16, 2009.&#160; I-Bankers Securities, Inc. acted as placement agent for    Milestone in this transaction and received a fee of $209,978 and 101,044    Warrants identical in terms to those issued to the investors. Total proceeds    to Milestone after commissions and other expenses were $2,730,234.</font></div>
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  <div><font size="2" face="Times New Roman">On June 30, 2005 Milestone    completed an $847,960 private    placement of 34,000 Units to accredited investors. Each Unit consists of 10    shares of Common Stock and two Warrants.&#160;    Each Warrant entitles the holder to purchase a share of Common Stock    at $4.89 per share through the close of business on February 16, 2009.&#160; Dynamic Decisions acted as investment    adviser to Milestone in this transaction and received a fee of $50,878 and    600 Units, which are substantially the same form as those issued to the    investors.&#160; Total proceeds from this    private placement, after commissions and other expenses, were $797,054.</font></div>
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  <div><font size="2" face="Times New Roman">Royalty    receivable represents the royalty due from United Systems, Inc, the licensee    of Milestone&#146;s proprietary consumer dental whitening product, which is sold    under Milestone&#146;s distributor&#146;s trademark, <i>Ionic White&#153;.</i>&#160; The royalty receivable of $252,842 was    collected on November 7, 2005.</font></div>
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  <div><font size="2" face="Times New Roman">Inventories principally consist of finished goods and component parts    stated at the lower of cost (first-in, first-out method) or market.</font></div>
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<div  align="center"><font size="2" face="Times New Roman">10</font></div>

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  <div><font size="2" face="Times New Roman">Milestone    presents basic earnings (loss) per common share and, if applicable, diluted    earnings per common share pursuant to the provisions of Statement of    Financial Accounting Standards No. 128, &#147;Earnings per Share&#148; (&#147;SFAS    128&#148;).&#160; Basic earnings (loss) per    common shares is calculated by dividing net income or loss applicable to    common stock by the weighted average number of common shares outstanding    during each period. The calculation of diluted earnings per common share is    similar to that of basic earnings per common share, except that the    denominator is increased to include the number of additional common shares    that would have been outstanding if all potentially dilutive common shares,    such as those issuable upon the exercise of stock options, warrants, and the    conversion of notes payable were issued during the period. Milestone has not    included the common shares issuable upon conversion of
the outstanding 25,365    preferred shares in the weighted average number of shares outstanding in the    computation of basic loss per share because their effect would have been    anti-dilutive. This treatment is in accordance with the &#147;two class&#148; method of    computing earnings (loss) per share set forth in SFAS 128.</font></div>
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  <div><font size="2" face="Times New Roman">Since    Milestone had net losses for the three and nine months ended September 30,    2005 and 2004, the assumed effects of the exercise of 3,517,809 and 3,249,692    outstanding stock options and warrants, and the conversion of preferred stock    into common stock at September 30, 2005 and 2004, were not included as their    effect would have been anti-dilutive.</font></div>
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  <div><font size="2" face="Times New Roman">Milestone had one foreign    customer who accounted for approximately 12% and 14% of its net sales    (excluding royalty income) for the three and nine months ended September 30,    2005, respectively and approximately 24% and 22% for the three and nine    months ended September 30, 2004, respectively.&#160; At September 30, 2005, receivables from this customer were    approximately 64% of Milestone&#146;s total accounts receivable.</font></div>
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  <div><font size="2" face="Times New Roman">As of September 30, 2005,    there were 261,167 outstanding options granted under the Milestone 1997 Stock    Option Plan and no option grants had been made under the Milestone 2004 Stock    Option Plan. Milestone accounts for these plans under the recognition and    measurement principles of APB Opinion No. 25, <i>Accounting for Stock Issued to Employees</i>, and related    Interpretations.&#160; No stock-based    employee compensation cost is reflected in net loss, as all options granted    under these plans had an exercise price equal to the market value of the    underlying common stock on the dates of grant.&#160; The following table illustrates net loss and net loss per share    if Milestone had applied the fair value recognition provisions of FASB    Statement No. 123, <i>Accounting for    Stock-Based Compensation</i>, to stock-based employee compensation.</font></div>
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  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:3%; text-indent:-3%"><font size="2" face="Times New Roman">Net loss applicable to common    stockholders, as reported</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(612,882</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(1,084,720</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(2,282,630</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(2,431,192</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:3%; text-indent:-3%"><font size="2" face="Times New Roman">Deduct total stock-based employee    compensation expenses determined under the fair value based method for all    awards</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">615</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">12,687</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">228,803</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">38,060 </font></div>
  </td>
  <td width="1%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:3%; text-indent:-3%"><font size="2" face="Times New Roman">Net loss applicable to common    stockholders, pro forma</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(613,497</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(1,097,407</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(2,511,433</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(2,469,252</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="1%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:3%; text-indent:-3%"><font size="2" face="Times New Roman">Loss per share applicable to common stockholders:</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="1%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:3%; text-indent:-3%"><font size="2" face="Times New Roman">Basic and diluted</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'>&nbsp;</div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">As reported</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.05</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.11</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.21</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.27</font></div>
  </td>
  <td width="1%" valign="bottom">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="2">


  </td>
  <td width="1%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom" bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="2" face="Times New Roman">Pro forma</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.05</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.11</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.23</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
  <td width="2%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">$</font></div>
  </td>
  <td width="10%" valign="bottom" bgcolor="#eeeeee">
  <div  align="right" style='text-align:right'><font size="2" color=black face="Times New Roman">(0.28</font></div>
  </td>
  <td width="1%" valign="bottom" bgcolor="#eeeeee">
  <div  ><font    size="2" color=black face="Times New Roman">)</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="bottom">
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="2%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
  <td width="2%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="10%" valign="bottom">
  <hr noshade size="1">


  </td>
  <td width="1%" valign="bottom">
  <div  >&nbsp;</div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td width="6%"  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">The fair value of each    option granted is estimated on the date of the grant using the Black-Scholes    option pricing model with the following assumptions used for the grants in    the quarters ended September 30, 2005 and 2004, respectively: dividend yield    of 0%; expected volatility of 149.29% and 90%; risk free interest rate of    4.02% and 2.5%; and expected lives of 8 years and 3 years.</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">During the nine months    ended September 30, 2005, Milestone issued 80,000 stock options to employees    at an exercise price of $3.27.</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">Note 8 &#150; Agreements to    Issue Common Stock and Stock Option</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On    May 18, 2005, Milestone issued to Ionic White, Inc., its marketing partner    for a consumer tooth whitening product, 3-year options to purchase 100,000    shares of Milestone common stock at $4.89 per share.&#160; The options are not exercisable unless the    marketing partner purchases at least 2,000,000 starter kits for the    registrant&#146;s consumer tooth whitening system during the twelve month period    beginning July 1, 2005.&#160; If 2,000,000    starter kits are purchased during that period, options to purchase 10,000    shares become exercisable.&#160; If    2,500,000 starter kits are purchased during that period, options to purchase    an aggregate of 50,000 shares become exercisable.&#160; If 3,000,000 starter kits are purchased during that period,    options to purchase all 100,000 shares become exercisable.</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under    a previous agreement, Ionic White, Inc., agreed to purchase 500,000 shares of    Milestone common stock in quarterly installments of 125,000 shares within 10    days after the end of each of the four fiscal quarters commencing July 1,    2005.&#160; Milestone is not required to    sell these shares unless Ionic White has purchased at least 625,000 starter    kits in the first quarter, at least 1,250,000 starter kits in the first two    quarters and at least 1,875,000 starter kits in the first three    quarters.&#160; Further, at Milestone&#146;s    option, all shares previously purchased must be returned to Milestone and all    monies paid to Milestone returned to Ionic White if it has not purchased an    aggregate of at least 3,000,000 starter kits for the twelve-month period    ending June 30, 2006.&#160; </font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On    September 30, 2005 this agreement was amended to defer for an additional    quarter the commencement date for Ionic White&#146;s commitment to purchase    stock.&#160; </font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On    August 12, 2005 Milestone engaged a special marketing and sales consultant to    aid in the international sale and distribution of<i> CoolBlue&#153; Wand </i>dental    enhancement system, particularly in its applications for professional tooth    whitening.&#160; As part of the    compensation for a two-year consulting service, Milestone issued 40,000    shares of common stock valued at $100,000 to the consultant.&#160; </font></div>
  </td>
 </tr>
</table>

<div  align="center"><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">12</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><font size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td width="6%"  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In    addition, if as a result of the consultant&#146;s efforts, Milestone is able to    establish distribution relationships, on terms and conditions satisfactory to    Milestone, with one of the four top world-wide distributors of dental    products, or other major distributors as are acceptable to Milestone, and    Milestone sells such distributors $3,000,000 of product within 18 months    commencing August 12, 2005, Milestone will pay the consultant a $20,000    bonus, in shares of Milestone common stock, valued based on the then current    market value.&#160; Furthermore, at    Milestone&#146;s option, all shares of common stock issued to the consultant must    be returned to Milestone if the consultant has not arranged a meeting with a    major distributor within a specified period.</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">13</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><a name="pg_14"></a><font  size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>ITEM  2.&#160; Management&#146;s Discussion and Analysis  or Plan of Operation.</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>OVERVIEW </b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You  should read the following discussions of our financial condition and results of  operations in conjunction with the financial statements and the notes to those  statements included elsewhere in this Form 10-QSB. This discussion may contain  forward-looking statements that involve risks and uncertainties. Our actual  results may differ materially from those anticipated in these forward-looking  statements as a result of certain factors, such as those set forth in our Form  10K-SB for the year ended December 31, 2004. </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Milestone  has succeeded in improving its liquidity by acquiring the capital necessary to  grow our business and seize the market opportunity that our proprietary  products have created. During 2004 and continuing through the first three  quarters of 2005, we have grown our revenue base both with our existing product  line and the introduction of new products.&#160;  </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our
revenues continue to be generated through sales of our <i>CompuDent</i> system
and <i>The Wand</i> disposable handpiece used with that system. Revenues have
been earned domestically and internationally through sales in more than 25
countries.&#160; While worldwide revenues are growing, domestic <i>CompuDent</i>
and handpiece sales have provided an increasingly large portion of our revenues.
This is an important metric as it validates the investment made in our domestic
sales distribution organization. Additionally, we enjoy significantly higher
margins on domestic sales compared to the lower per unit and handpiece margins
we receive from our wholesale based international distribution network. We
anticipate that this growing base of new customers will generate increased
future sales of our disposable handpiece products. We also believe that our
ownership of the <i>SafetyWand</i> technology in light of OSHA regulations
issued pursuant to recent federal and state government legislation mandating
needle stick safety standards positions us to become a leading provider for
dentists and other health care professionals in the administration of local
anesthesia, thereby providing further revenue growth opportunities.
</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  late March we launched, through widely broadcast infomercials, our consumer  tooth whitening product sold under our distributor&#146;s trademark,<i> Ionic White</i>&#153;.&#160; Our consumer tooth whitening product and the  <i>CoolBlue</i>&#153;  Professional Tooth Whitening System, complement our existing product line.&#160; The tooth whitening market is a fast growing  dental segment and we believe that it will provide significant additional revenue  opportunities. Revenues for the second and third quarters reflect sales of <i>Ionic White</i>&#153;.  During the second quarter a competitor launched a confusingly similar tooth  whitening product through infomercials and retail distribution.&#160; In April 2004, Milestone commenced an  infringement of trade dress action and the defendant has counterclaimed against  Milestone for a declaratory judgment of non-infringement.&#160; The introduction of
this competitive product  has caused our distributor to focus its near-term marketing efforts on retail  sales.&#160; Subsequent to the end of the  quarter, the defendant brought an action against us and our distributor to  enjoin alleged false advertising claims.&#160;  On October 31, 2005, we entered into a non-monetary Stipulation and  Order which: a) dismissed with prejudice our infringement of trade dress  claims, and b) dismissed with prejudice the false advertising claims filed by  the competitor against us and others involving the Ionic White tooth-whitening  product, and the distributor of the Ionic White product agreed to remove  certain claims from the packaging of the product.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling,  general and administrative expenses for the third quarter increased from last  year, reflecting our continuing enhancement of our domestic dental sales  capability and increased marketing and promotional efforts, including trade  show appearances, for our dental products. In August, we launched a consumer  focused marketing campaign through radio advertising in a test market. The  increase also reflects our continuing efforts to complete development of, and  find marketing partners for, medical devices using our advanced technology,  particularly our <i>CompuFlo&#153;</i> syringe pump technology.&#160; </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">14</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><font size="2" face="Times New Roman"><b><a href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The  following table shows a breakdown of our product sales in each product  category, domestically and internationally, and the percentage of sales to  total product sales:</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="38%" colspan="11">
  <div  align="center"><font size="1" face="Times New Roman"><b>Three    Months Ended</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="37%" colspan="11">
  <div  align="center"><font size="1" face="Times New Roman"><b>Nine    Months Ended</b></font></div>
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="38%" colspan="11">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="37%" colspan="11">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2005</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2004</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2005</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2004</b></font></div>
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"><b>DOMESTIC</b></font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
<Div style="margin-left:6%; text-indent:-3%"><font size="1" face="Times New Roman"><i>CompuDent</i></font></div>
  </td>
  <td width="2%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">365,306</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">31.6%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">155,959</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">20.1%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,070,070</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">32.6%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">431,712</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">18.6%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="1" face="Times New Roman">Handpieces</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">749,800</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">65.0%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">587,840</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">75.5%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">2,053,295</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">62.5%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,744,609</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">75.3%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
<Div style="margin-left:6%; text-indent:-3%"><font size="1" face="Times New Roman">Other</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">39,624</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">3.4%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">34,016</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">4.4%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">162,433</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">4.9%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">140,494</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">6.1%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Total Domestic</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,154,730</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">777,815</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3,285,798</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">2,316,815</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"><b>INTERNATIONAL</b></font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="1" face="Times New Roman"><i>CompuDent</i></font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100,103</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">24.3%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">202,029</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">60.8%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">392,311</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">32.8%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">527,278</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">49.0%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 6%; text-indent:-3%"><font size="1" face="Times New Roman">Handpieces</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">273,353</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">66.2%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">116,177</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">35.0%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">706,519</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">59.1%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">508,823</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">47.3%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
  <Div style="margin-left: 6%; text-indent:-3%"><font size="1" face="Times New Roman">Other</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">39,196</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">9.5%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">14,022</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">4.2%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">97,388</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">8.1%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">39,372</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3.7%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Total International</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">412,652</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">332,228</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,196,218</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,075,473</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td  colspan="10" bgcolor="#eeeeee">
<Div style="margin-left:3%; text-indent:-3%"><font size="1" face="Times New Roman"><b>DOMESTIC/INTERNATIONAL    ANALYSIS</b></font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right">&nbsp;</div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 6%; text-indent:-3%"><font size="1" face="Times New Roman">Domestic</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,154,730</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">73.7%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">777,815</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">70.1%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">3,285,798</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">73.3%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">2,316,815</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">68.3%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="1" face="Times New Roman">International</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">412,652</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">26.3%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">332,228</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">29.9%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,196,218</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">26.7%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,075,473</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">31.7%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Total Product Sales</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,567,382</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,110,043</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">4,482,016</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">3,392,288</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">100.0%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">15</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><font size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td  colspan="2" valign="top">
  <div><font size="2" face="Times New Roman"><b>Summary of    Significant Accounting Policies</b></font></div>
  </td>
 </tr>
 <tr>
  <td width="6%"  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">Our discussion and analysis of our financial condition and results of    operations are based upon our consolidated financial statements, which have    been prepared in accordance with accounting principles generally accepted in    the United States of America.&#160; The    preparation of these consolidated financial statements requires us to make    estimates and judgments that affect the reported amounts of assets, liabilities,    revenues and expenses, and related disclosure of contingent assets and    liabilities.&#160; On an on-going basis, we    evaluate our estimates, including those related to accounts receivable,    inventories, stock based compensation and contingencies.&#160; We base our estimates on historical    experience and on various other assumptions that are believed to be    reasonable under the circumstances, the results of which form the basis for    making judgments about the carrying values of assets and liabilities that are    not
readily apparent from other sources.&#160;    Actual results may differ from those estimates under different    assumptions or conditions.</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  colspan="2" valign="top">
  <div><font size="2" face="Times New Roman"><i>Inventory </i></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">Inventories principally consist of finished goods and component parts    stated at the lower of cost (first-in, first-out method) or market. </font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  colspan="2" valign="top">
  <div><font size="2" face="Times New Roman"><i>Impairment of Long-Lived Assets </i></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">We review long-lived assets for impairment whenever circumstances and    situations change such that there is an indication that the carrying amounts    may not be recovered. </font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  colspan="2" valign="top">
  <div><font size="2" face="Times New Roman"><i>Revenue Recognition </i></font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr>
  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="94%" valign="top">
  <div><font size="2" face="Times New Roman">Revenue is recognized when title passes at the time of shipment and    collectibility based on a sales arrangement and the agreed upon price is    reasonably assured.</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>Results of Operations</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The  consolidated results of operations for the nine months ended September 30, 2005  reflect growth of our user base and the initial additional expenditures  necessary to further expand our customer base both domestically and abroad. </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">The  following table sets forth, for the periods presented, statement of operations  data as a percentage of revenues.&#160; The  trends suggested by this table may not be indicative of future operating  results.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">16</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><font size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="38%" colspan="11">
  <div  align="center"><font size="1" face="Times New Roman"><b>Three    Months Ended</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="37%" colspan="11">
  <div  align="center"><font size="1" face="Times New Roman"><b>Nine    Months Ended</b></font></div>
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="38%" colspan="11">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="37%" colspan="11">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2005</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2004</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2005</b></font></div>
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <div  align="center"><font size="1" face="Times New Roman"><b>September    30, 2004</b></font></div>
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div  align="center">&nbsp;</div>
  </td>
  <td width="2%">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
  <td width="18%" colspan="5">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div  align="center">&nbsp;</div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Products sales, net</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,567,382</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">86%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,110,043</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">4,482,016</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">90%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3,392,288</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Royalty income</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">252,842</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">14%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">0%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">472,052</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">10%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
<Div style="margin-left:6%; text-indent:-3%"><font size="1" face="Times New Roman">Total    revenue</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,820,224</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,110,043</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">4,954,068</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3,392,288</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">100%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Cost of products sold</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">643,426</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">35%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">563,730</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">51%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,896,736</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">38%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,879,414</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">55%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Royalty expense</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">30,341</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">2%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">56,646</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">&#151;</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
<Div style="margin-left:6%; text-indent:-3%"><font size="1" face="Times New Roman">Total    costs</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">673,767</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">37%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">563,730</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">51%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,953,382</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">39%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,879,414</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">55%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <div style='text-indent:3%'>&nbsp;</div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Gross Profit</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,146,457</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">63%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">546,313</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">49%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3,000,686</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">61%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">1,512,874</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">45%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Selling, general and    administrative expenses</font></div>
  </td>
  <td width="2%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,738,286</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">95%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">1,608,176</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">145%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">5,194,541</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">105%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">3,804,961</font></div>
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">112%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Research and development    expenses</font></div>
  </td>
  <td width="2%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">53,678</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">41,679</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">4%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">155,067</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">3%</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">135,300</font></div>
  </td>
  <td width="2%" align="left" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%" bgcolor="#eeeeee">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%" bgcolor="#eeeeee">
  <div  align="right"><font size="1" face="Times New Roman">4%</font></div>
  </td>
  <td width="1%" align="left" bgcolor="#eeeeee">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">Loss from operations</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">(645,507</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">-35%</font></div>
  </td>
  <td width="2%" align="left">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <Div style="margin-left: 3%; text-indent:-3%"><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">(1,103,542</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">-100%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">(2,348,922</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">-47%</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
  <td width="1%">
  <div><font size="1" face="Times New Roman">$</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">(2,427,387</font></div>
  </td>
  <td width="2%" align="left">
  <div><font size="1" face="Times New Roman">)</font></div>
  </td>
  <td width="1%">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="7%">
  <div  align="right"><font size="1" face="Times New Roman">-71%</font></div>
  </td>
  <td width="1%" align="left">
  <div><font size="1" face="Times New Roman"></font></div>
  </td>
 </tr>
 <tr valign="bottom">
  <td>
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="2%">
  <Div style="margin-left: 3%; text-indent:-3%"><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="2%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="1%">
  <hr noshade size="1">
  </td>
  <td width="7%">
  <hr noshade size="1">
  </td>
  <td width="1%" align="left">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
 </tr>
</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><i>Three Months ended September 30, 2005 compared to three months ended  September 30, 2004 </i></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
revenues for the three months ended September 30, 2005 and 2004 were $1,820,224
(product sales of $1,567,382 and royalty income of $252,842) and $1,110,043,
respectively. The amount of $252,842 or 14% of total revenues is royalty income
from granting United Systems Inc. a license to manufacture, market, and
sublicense the <i>Ionic White&#153; </i>to the consumer market.&#160; The
$457,339 or 41% increase in net product sales is primarily related to a 134% or
$209,347 increase in domestic <i>CompuDent&#174;</i> sales and the increase in
handpiece sales of $319,136, offset by a decrease of $101,926 or 51% in
international units sales. This increase shows the effect of our investment in
our domestic sales force and marketing initiatives while maintaining a strong
presence internationally. Domestic handpiece sales increased $161,960 or 28%,
while international handpiece sales increased by $157,176 or 135%. This is the
result of innovative domestic sales programs where handpieces are bundled with
<i>CompuDent&#174;</i> units at the point of sale as well as the success of the
bonded handpiece in international markets.&#160; We believe that this will
ultimately result in a growing monthly order for handpieces as the initial
supply runs out. </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For  the three months ended September 30, 2005, Milestone generated a gross profit  of $1,146,457 or 63% as compared to a gross profit of $546,313 or 49% for the  three months ended September 30, 2004. Excluding the net royalty income of  $222,501, improvement in gross profit was due to higher domestic sales in this  period, which has higher profit margins than international sales.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling,  general and administrative expenses for the three months ended September 30,  2005 and 2004 were $1,738,286 and $1,608,176, respectively.&#160; The $130,110 or 8% increase is attributable  primarily to Milestone&#146;s continued execution of its strategy to develop our  domestic sales force and distribution capacity.&#160; Sales headcount increased from 4 managers, 4 inside sales  representatives, 9 sales support representatives, and 8 independent contractors  at September 30, 2004 to 2 sales managers, 20 inside sales representatives, 3  sales support representatives, and 7 independent contractors at September 30,  2005.&#160; Accordingly, hiring and related  employee expenses including sales commissions increased by $102,074 or 16%.&#160; Selling, marketing and advertising expenses  including related travel and tradeshows increased by $96,234 or 77%.&#160; This reflects our aggressive
marketing  strategy to expand the domestic markets.&#160;  Legal fees increased by $89,514 or 67% primarily because of the  litigation expenses related to the action against the competitor to the <i>Ionic White&#153;</i>  .&#160; Consulting expense increased by  $48,013 or 200% due to the engagement of several consultants for market  development services.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">17</font></div>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<PAGE>

<div><font size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and
development expenses for the three months ended September 30, 2005 and 2004 were
$53,678 and $41,679, respectively. These costs are associated with the continued
development of our<i> CoolBlue&#153; </i> Tooth Whitening Systems
and <i>CompuFlo&#153;</i> products, and our consumer tooth whitening product sold
under our distributor&#146;s<i> Ionic</i> <i>White&#153;
</i>trademark<i>.</i></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest  income of $33,132 was earned in the three months ended September 30, 2005  compared to $23,942 earned for the same period of the prior year due to  increased average cash balances.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There  was no interest expense for the three months ended September 30, 2005 compared  to interest expense of $3,576 for the three months ended September 30, 2004.  The difference is attributable to the completion of the amortization of debt  discount and deferred financing costs in 2004.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net  loss for the three months ended September 30, 2005 and 2004 was $612,375 and  $1,083,176, respectively.&#160; The decrease  of $470,801 or 43% is primarily because of the increase in total revenue, which  is moderately offset by the increase in operating expenses.</font></div>

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<div  align="center"><font size="2" face="Times New Roman">18</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><i>Nine months ended September 30, 2005 compared to the nine months ended  September 30, 2004 </i></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total  revenues for the nine months ended September 30, 2005 and 2004 were $4,954,068  and $3,392,288, respectively.&#160; The 2005  total revenues include product sales of $4,482,016 and royalty income of  $472,052.&#160; Total revenues increased by  $1,561,780 or 46%.&#160; Contributing to this  increase was a $638,358 or 148% increase in domestic sales of <i>CompuDent&#174; </i>units. </font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit
for the nine months ended September 30, 2005 and 2004 was $3,000,686 or 61% and
$1,512,874 or 45%, respectively.&#160; The $1,487,812 or 98% increase in gross
profit was due principally to an increase in sales of domestic
<i>CompuDent&#174; </i>units which has higher profit margins than international
sales, as well as the net royalty income generated by sales of<i> Ionic
White&#153; </i>consumer whitening products and the effect of a $101,608
inventory valuation write down in 2004 which did not recur in the 2005
period.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling,  general and administrative expenses for the nine months ended September 30,  2005 and 2004 were $5,194,541 and $3,804,961, respectively. The increase of  $1,389,580 or 37% in these expenses was anticipated and is consistent with  management&#146;s stated strategy of investing in revenue generating areas of the  business. Contributing to the increase was hiring and employee related expenses  related to the development of Milestone&#146;s national sales force which will  benefit Milestone with additional revenues. Legal fees increased by  $170,328 or 46% primarily because of the litigation expenses related to the  action against the competitor to the <i>Ionic White&#153;</i> .&#160; The increase of $52,582 or 21% in accounting fees was essentially  a result of requirements of the Sarbanes-Oxley Act. Professional fees related  to consulting services and investor relations increased by $181,936
or 78%  primarily related to the vested portion of stock options granted to outside  consultants and the engagement of several outside consultants for marketing  services.&#160;&#160; Selling, marketing and  advertising expenses including related travel and tradeshows increased by  $235,991 or 90%.&#160; This reflects our  aggressive marketing strategy to expand the domestic markets.&#160; </font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and
development expenses for the nine months ended September 30, 2005 and 2004 were
$155,067 and $135,300, respectively.&#160; These costs are associated with the
continued development of our <i> CoolBlue&#153; </i>Tooth Whitening Systems
and <i>CompuFlo&#153;</i> products and our consumer tooth whitening product sold
under our distributor&#146;s <i>Ionic White&#153;
</i>trademark<i>.</i></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest  income of $67,814 was earned for the nine months ended September 30, 2005  compared to $64,952 interest income for the same period of the prior year.&#160; This difference was due to the increased  average cash balances. </font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There  was no interest expense for the nine months ended September 30, 2005 compared  to interest expense of $67,213 for the nine months ended September 30, 2004.  The difference is attributable to the extinguishment of debt related to the  February 2004 equity placement.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For  the reasons explained above, net loss for the nine months ended September 30,  2005 decreased by $148,540 or 6% from the net loss for the nine month period  ended September 30, 2004.&#160; The  difference is primarily a result of the increase in total revenue which is  partially offset by the increase in operating expenses.</font></div>

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<div  align="center"><font size="2" face="Times New Roman">19</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>Liquidity and Capital Resources </b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Milestone  incurred net losses of approximately $2,281,000 and $2,430,000 and negative  cash flows from operating activities of approximately $2,645,000 and $3,196,000  during the nine months ended September 30, 2005 and 2004, respectively.&#160; Milestone  improved its liquidity position with the private placement of Units completed  in April, and June, 2005, as discussed below.&#160;  We have maintained our net worth at $6,000,000 for the three consecutive  quarters ended September 30, 2005.&#160; On  August 23, 2005, we announced that we had received notice from the American  Stock Exchange that we had regained compliance with all continued listing  requirements.&#160;&#160; The American Stock  Exchange has removed the special symbol indicating that we were below continued  listing standards, although it will continue to monitor our compliance with  continued listing standards.&#160; We will
continue to seek new sources of equity funding.&#160; </font></div>

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<div><font size="2" face="Times New Roman">Private Placements</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  April 4, 2005 Milestone completed a $2,999,996 private placement of 101,044  Units to accredited investors. Each Unit consisted of 10 shares of Common Stock  and two Warrants.&#160; Each Warrant entitles  the holder to purchase a share of Common Stock at $4.89 per share through the  close of business on February 16, 2009. I-Bankers Securities, Inc. acted as  Placement Agent for Milestone in this transaction and received a fee of  $209,978 and 101,044 Warrants identical in terms to those issued to the  investors.&#160; The Units, which are  restricted securities and bear a restrictive legend, are subject to stop  transfer restrictions.&#160; Total proceeds  to Milestone after commissions and other expenses were $2,730,234. </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  June 30, 2005 Milestone completed an  $847,960 private placement of 34,000 Units. Each Unit consists of 10 shares of  Common Stock and two Warrants.&#160; Each  Warrant entitles the holder to purchase a share of Common Stock at $4.89 per  share through the close of business on February 16, 2009.&#160; Dynamic Decisions acted as Placement Agent  for Milestone in this transaction and received a fee of $50,878 and 600 Units,  which are substantially the same form as those issued to the investors.&#160; Total proceeds from this private placement,  after commissions and other expenses, were $797,054.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>Cash flow results </b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of  September 30, 2005, Milestone had cash and cash equivalents of $3,651,943 and  working capital of $5,463,805.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the nine months ended September 30, 2005, Milestone&#146;s net cash used in  operating activities was $2,644,883. This was attributable to a net loss of  $2,281,108 adjusted for noncash items totaling $523,175 and an increase in  operating assets net of operating liabilities of $886,950. </font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the nine months ended September 30, 2005, Milestone used $272,517 in  investing activities. This was primarily attributable to the purchase of patent  rights for $145,000and $99,602 of legal fees related to new patent applications.&#160; Capital expenditures of $21,552 were  primarily for the purchase of molds and tooling for new products.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For  the nine months ended September 30, 2005, Milestone generated $3,528,037 from  financing activities relating to the private placements discussed above and an  employee option exercise.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management  believes that it has sufficient resources to meet its obligations over the next  twelve months.</font></div>

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<div  align="center"><font size="2" face="Times New Roman">20</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>ITEM 3.  CONTROLS AND PROCEDURES </b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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  <div><font size="2" face="Times New Roman"><i>Evaluation of    Disclosure Controls and Procedures</i>. &#160;Milestone&#146;s management, with the participation of our chief    executive officer and the chief financial officer, carried out an evaluation    of the effectiveness of our &#147;disclosure controls and procedures&#148; (as defined    in the Securities Exchange Act of 1934 (the &#147;Exchange Act&#148;) Rules 13a-15(e)    as of the end of the period covered by this report (the &#147;Evaluation    Date&#148;).&#160; Based upon that evaluation,    the chief executive officer and chief financial officer concluded that, as of    the Evaluation Date, our disclosure controls and procedures are effective to    ensure that information required to be disclosed by us in the reports that we    file or submit under the Exchange Act is recorded, processed, summarized and    reported, within the time periods specified in the SEC&#146;s rules and    forms.&#160; Information required to be    disclosed by
us in the reports we file or submit under the Exchange Act is    accumulated and communicated to our management, including our principal    executive and principal financial officers, as appropriate to allow timely    decisions regarding required disclosure.</font></div>
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  <div><font size="2" face="Times New Roman"><i>Changes in Internal Control over Financial Reporting.&#160; </i>There were no changes in our internal controls over financial    reporting that occurred during the period covered by this report that have    materially affected, or are reasonably likely to materially affect,    Milestone&#146;s internal control over financial reporting.</font></div>
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<div  align="center"><font size="2" face="Times New Roman">21</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman"><b>PART II</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>ITEM  2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;UNREGISTERED SALES  OF EQUITY SECURITIES AND USE OF PROCEEDS </b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">Recent Sales of  Unregistered Securities</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  August 12, 2005, we issued to a nominee of certain partners of Milestone&#146;s  legal counsel, 8-year options to buy shares of our common stock at an exercise  price of $4.37 per share for services.&#160;  The options are exercisable in accordance with their terms for up to a  maximum of 1/3 of the shares covered commencing on January 1, 2006 and for an  additional 1/3 of the shares covered on each of the first two anniversaries  thereof.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  August 31, 2005 we issued 40,000 shares valued at $100,000 to a marketing and  sales consultant to aid in the international sale and distribution of <i>CoolBlue&#153;  Wand </i>dental enhancement system.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On  September 30, 2005 we issued a total of 39,987 shares valued at $76,375 to two  vendors in satisfaction of payables owed in connection with exhibition  facilities and warehousing services rendered.</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All  the above issuances were acquired for investment by accredited investors and  were issued without registration under the Securities Act of 1933, as amended,  pursuant to the exemptions provided under sections 4(6), 4(2).&#160; All the securities are restricted securities  and bear a restrictive legend and are subject to stop transfer  restrictions.&#160; </font></div>

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<div  align="center"><font size="2" face="Times New Roman">22</font></div>

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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman"><b>ITEM 6.  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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  <div  align="center"><font size="1" face="Times New Roman"><b>DESCRIPTION</b></font></div>
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  <div><font size="2" face="Times New Roman">3.1</font></div>
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  <div><font size="2" face="Times New Roman">Certificate of    Incorporation of Milestone (1)</font></div>
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  <div><font size="2" face="Times New Roman">3.2</font></div>
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  <div><font size="2" face="Times New Roman">Certificate of Amendment    filed July 13, 1995 (2)</font></div>
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  <div><font size="2" face="Times New Roman">3.3</font></div>
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  <div><font size="2" face="Times New Roman">Certificate of Amendment    filed December 6, 1996 (3)</font></div>
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  <div><font size="2" face="Times New Roman">3.4</font></div>
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  <div><font size="2" face="Times New Roman">Certificate of Amendment    filed December 17, 1997 (4)</font></div>
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  <div><font size="2" face="Times New Roman">3.5</font></div>
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  <div><font size="2" face="Times New Roman">Certificate of Amendment    filed July 23, 2003 (5)</font></div>
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  <div><font size="2" face="Times New Roman">3.6</font></div>
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  <div><font size="2" face="Times New Roman">Certificate of Amendment    filed January 8, 2004. (5)</font></div>
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  <div><font size="2" face="Times New Roman">3.7</font></div>
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  <div><font size="2" face="Times New Roman">Certificate of Designation    filed January 15, 2004 (5)</font></div>
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  <div><font size="2" face="Times New Roman">3.8</font></div>
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  <div><font size="2" face="Times New Roman">By-laws of Milestone (1)</font></div>
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  <div><font size="2" face="Times New Roman">Specimen stock certificate    (2)</font></div>
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  <div><font size="2" face="Times New Roman">4.2</font></div>
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  <div><font size="2" face="Times New Roman">Intentionally Left Blank</font></div>
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  <div><font size="2" face="Times New Roman">Form of warrant agreement,    including form of warrant (6)</font></div>
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  <div><font size="2" face="Times New Roman">Chief Executive Officer    Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.*</font></div>
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  <div><font size="2" face="Times New Roman">31.2</font></div>
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  <div><font size="2" face="Times New Roman">Chief Financial Officer    Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.*</font></div>
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  <div><font size="2" face="Times New Roman">32.1</font></div>
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  <div><font size="2" face="Times New Roman">Chief Executive Officer    Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.*</font></div>
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  <div><font size="2" face="Times New Roman">32.2</font></div>
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  <div><font size="2" face="Times New Roman">Chief Financial Officer    Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.*</font></div>
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  <div><font size="2" face="Times New Roman">*&#160; Filed herewith.</font></div>
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  <div><font size="2" face="Times New Roman">(1)</font></div>
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  <div><font size="2" face="Times New Roman">Incorporated by reference    to Milestone&#146;s Registration Statement on Form SB-2 No. 33-92324.</font></div>
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  <div><font size="2" face="Times New Roman">(2)</font></div>
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  <div><font size="2" face="Times New Roman">Incorporated by reference    to Amendment No. 1 to Milestone&#146;s Registration Statement on Form SB-2 No.    333-92324.</font></div>
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  <div><font size="2" face="Times New Roman">(3)</font></div>
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  <div><font size="2" face="Times New Roman">Incorporated by reference    to Milestone&#146;s Form 10-KSB for the year ended December 31, 1996.</font></div>
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  <div><font size="2" face="Times New Roman">(4)</font></div>
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  <div><font size="2" face="Times New Roman">Incorporated by reference    to Milestone&#146;s Form 10-KSB for the year ended December 31, 1999.</font></div>
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  <div><font size="2" face="Times New Roman">(5)</font></div>
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  <div><font size="2" face="Times New Roman">Incorporated by reference    to Milestone&#146;s Registration Statement on Form S-2 No. 333-110376, Amendment    No. 3.</font></div>
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  <div><font size="2" face="Times New Roman">(6)</font></div>
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  <div><font size="2" face="Times New Roman">Incorporated by reference    to Milestone&#146;s Registration Statement on Form S-2 No. 333-110376, Amendment    No. 5.</font></div>
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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">23</font></div>

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<div style="page-break-before:always"></div>
<PAGE>

<div><a name="pg_24"></a><font  size="2" face="Times New Roman"><b><a  href="#Index">Back to Index</a></b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman"><b>SIGNATURES</b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In  accordance with the requirements of the Exchange Act, the registrant caused  this report to be signed on its behalf by the undersigned, thereunto duly  authorized.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<table border="0" cellspacing="0" cellpadding="0" width="100%">
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  <div><font size="2" face="Times New Roman"><u>MILESTONE SCIENTIFIC INC.</u></font></div>
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  <td width="40%" valign="top">
  <div><font size="2" face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Registrant</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <div><font size="2" face="Times New Roman">/s/Leonard Osser</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <td width="40%" valign="top">
  <div><font size="2" face="Times New Roman">Leonard Osser Chairman and    </font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <div><font size="2" face="Times New Roman">Chief Executive Officer</font></div>
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  <div><font size="2" face="Times New Roman">/s/Rosaline Shau</font></div>
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  <div><font size="2" face="Times New Roman">Rosaline Shau </font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <div><font size="2" face="Times New Roman">Chief Financial Officer</font></div>
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  <div><font size="2" face="Times New Roman">Dated: November 14, 2005</font></div>
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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">24</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>
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<title>Prepared and filed by St Ives Burrups</title>
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<PAGE>
<div  align="right"><font size="2" face="Times New Roman">Exhibit  31.1</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">CERTIFICATION</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">I, Leonard Osser, certify that:</font></div>

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  <div><font size="2" face="Times New Roman">1.</font></div>
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  <td width="90%" colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">I have reviewed this    quarterly report on Form 10-QSB of Milestone Scientific, Inc. (&#147;the    registrant&#148;).</font></div>
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  <div><font size="2" face="Times New Roman">2.</font></div>
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  <div><font size="2" face="Times New Roman">Based on my knowledge,    this quarterly report does not contain any untrue statement of a material    fact or omit to state a material fact necessary to make the statements made,    in light of the circumstances under which such statements were made, not    misleading with respect to the period covered by this quarterly report;</font></div>
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  <div><font size="2" face="Times New Roman">3.</font></div>
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  <div><font size="2" face="Times New Roman">Based on my knowledge, the    financial statements, and other financial information included in this    quarterly report, fairly present in all material respects the financial    condition, results of operations and cash flows of the small business issuer    as of, and for, the periods presented in this quarterly report;</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <div><font size="2" face="Times New Roman">4.</font></div>
  </td>
  <td width="90%" colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">The small business    issuer&#146;s other certifying officer and I are responsible for establishing and    maintaining disclosure controls and procedures (as defined in Exchange Act    Rules 13a-15(e) and 15d-15(e) for the small business issuer and have:</font></div>
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  <div><font size="2" face="Times New Roman">a)</font></div>
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  <div><font size="2" face="Times New Roman">Designed such disclosure    controls and procedures, or caused such disclosure controls and procedures to    be designed under our supervision, to ensure that material information    relating to the small business issuer is made known to us by others within    those entities, particularly during the period in which this report is being    prepared;</font></div>
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  <div><font size="2" face="Times New Roman">b)</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">Evaluated the effectiveness    of the small business issuer&#146;s disclosure controls and procedures and    presented in this report our conclusions about the effectiveness of the    disclosure controls and procedures, as of the end of the period covered by    this report based on such evaluation; and</font></div>
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  </td>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="85%" valign="top">
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  </td>
  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">c)</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">Disclosed in this report    any change in the small business issuer&#146;s internal control over financial    reporting that occurred during the small business issuer&#146;s most recent fiscal    quarter (the small business issuer&#146;s fourth fiscal quarter in the case of an    annual report) that has materially affected, or is reasonably likely to    materially affect, the small business issuer&#146;s internal control over    financial reporting; and</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <div><font size="2" face="Times New Roman">5.</font></div>
  </td>
  <td width="90%" colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">The small    business issuer&#146;s other certifying officer(s) and I have disclosed, based on    our most recent evaluation of internal control over financial reporting, to the small business    issuer&#146;s auditors and the audit committee of the small business issuer&#146;s    board of directors (or persons performing the equivalent functions):</font></div>
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  <td width="5%" valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">a)</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">All significant    deficiencies and material weaknesses in the design or operation of internal    controls which are reasonably likely to adversely affect the small business    issuer&#146;s ability to record, process, summarize and report financial    information; and</font></div>
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  </td>
  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">b)</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">Any fraud, whether or not    material, that involves management or other employees who have a significant    role in the small business issuer&#146;s internal control over financial    reporting.</font></div>
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</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">Date: November 14, 2005</font></div>

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  <div><font size="2" face="Times New Roman">/s/ Leonard Osser</font></div>
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  <div><font size="2" face="Times New Roman">Leonard Osser</font></div>
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  <div><font size="2" face="Times New Roman">Chairman and Chief    Executive Officer</font></div>
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</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>b409788_ex31-2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
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<head>
<title>Prepared and filed by St Ives Burrups</title>
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<body link=blue vlink=purple>
<PAGE>
<div  align="right"><font size="2" face="Times New Roman">Exhibit  31.2</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div  align="center"><font size="2" face="Times New Roman">CERTIFICATION</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">I, Rosaline Shau, certify that:</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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  <div><font size="2" face="Times New Roman">1.</font></div>
  </td>
  <td width="90%" colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">I have reviewed this    quarterly report on Form 10-QSB of Milestone Scientific, Inc. (&#147;the    registrant&#148;).</font></div>
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  <div><font size="2" face="Times New Roman">2.</font></div>
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  <td width="90%" colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">Based on my knowledge,    this quarterly report does not contain any untrue statement of a material    fact or omit to state a material fact necessary to make the statements made,    in light of the circumstances under which such statements were made, not    misleading with respect to the period covered by this quarterly report;</font></div>
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  <div><font size="2" face="Times New Roman">3.</font></div>
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  <div><font size="2" face="Times New Roman">Based on my knowledge, the    financial statements, and other financial information included in this    quarterly report, fairly present in all material respects the financial    condition, results of operations and cash flows of the small business issuer    as of, and for, the periods presented in this quarterly report;</font></div>
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  <div><font size="2" face="Times New Roman">4.</font></div>
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  <td width="90%" colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">The small business    issuer&#146;s other certifying officers and I are responsible for establishing and    maintaining disclosure controls and procedures (as defined in Exchange Act    Rules 13a-14 and 15d-14) for the small business issuer and have:</font></div>
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  <div><font size="2" face="Times New Roman">a)</font></div>
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  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">Designed such disclosure    controls and procedures, or caused such disclosure controls and procedures to    be designed under our supervision, to ensure that material information    relating to the small business issuer is made known to us by others within    those entities, particularly during the period in which this report is being    prepared;</font></div>
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  </td>
  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">b)</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">Evaluated the effectiveness    of the small business issuer&#146;s disclosure controls and procedures and    presented in this report our conclusions about the effectiveness of the    disclosure controls and procedures, as of the end of the period covered by    this report based on such evaluation; and</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">c)</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">Disclosed in this report    any change in the small business issuer&#146;s internal control over financial    reporting that occurred during the small business issuer&#146;s most recent fiscal    quarter (the small business issuer&#146;s fourth fiscal quarter in the case of an    annual report) that has materially affected, or is reasonably likely to    materially affect, the small business issuer&#146;s internal control over    financial reporting; and</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
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  <td width="85%" valign="top">
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  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">5.</font></div>
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  <td width="90%" colspan="2" valign="top">
  <div><font size="2" face="Times New Roman">The small    business issuer&#146;s other certifying officer(s) and I have disclosed, based on    our most recent evaluation of internal control over financial reporting, to the small business    issuer&#146;s auditors and the audit committee of the small business issuer&#146;s    board of directors (or persons performing the equivalent functions):</font></div>
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  </td>
  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">a.</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">All significant    deficiencies and material weaknesses in the design or operation of internal    control over financial reporting which are reasonably likely to adversely    affect the small business issuer&#146;s ability to record, process, summarize and    report financial information; and</font></div>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="5%" valign="top">
  <div><font size="2" face="Times New Roman">b.</font></div>
  </td>
  <td width="85%" valign="top">
  <div><font size="2" face="Times New Roman">Any fraud, whether or not    material, that involves management or other employees who have a significant    role in the small business issuer&#146;s internal control over financial    reporting. </font></div>
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</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">Date: November 14, 2005</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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  <div><font size="2" face="Times New Roman">/s/&#160; Rosaline Shau</font></div>
  </td>
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  <hr noshade size="1">


  </td>
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  <div><font size="2" face="Times New Roman">Rosaline Shau</font></div>
  </td>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="40%" valign="top">
  <div><font size="2" face="Times New Roman">Chief Financial Officer</font></div>
  </td>
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</table>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>6
<FILENAME>b409788_ex32-1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
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<head>
<title>Prepared and filed by St Ives Burrups</title>
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<body link=blue vlink=purple>
<PAGE>

<div  align="center"><font size="2" face="Times New Roman"><b>Exhibit 32.1<br>  CERTIFICATION PURSUANT TO <br>  18 U.S.C. SECTION 1350, <br>  AS ADOPTED PURSUANT TO </b></font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">In connection with the Quarterly Report of  Milestone Scientific, Inc. on Form 10-QSB for the nine months ended September  30, 2005 as filed with the Securities and Exchange Commission on the date  hereof (the &#147;Report&#148;), I, Leonard Osser, Chief Executive Officer of Milestone,  certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the  Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the  requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;  and (2) The information contained in the Report fairly presents, in all  material respects, the financial condition and result of operations of  Milestone. </font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

<div><font size="2" face="Times New Roman">A signed original of this  written statement  has been provided to the Company and will be retained by the Company and  furnished to the SEC or its staff upon request.</font></div>

<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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  <div><font size="2" face="Times New Roman">/s/ Leonard    Osser</font></div>
  </td>
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  <hr noshade size="1">


  </td>
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  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="40%" valign="top">
  <div><font size="2" face="Times New Roman">Leonard    Osser</font></div>
  </td>
 </tr>
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  <td  valign="top">
  <div><Font size="2" face="Times New Roman">&nbsp;</font></div>
  </td>
  <td width="40%" valign="top">
  <div><font size="2" face="Times New Roman">Chief    Executive Officer</font></div>
  </td>
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  <div><font size="2" face="Times New Roman">November 14,    2005</font></div>
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<div><font size="2" face="Times New Roman">&nbsp;</font></div>

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<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>7
<FILENAME>b409788_ex32-2.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
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<title>Prepared and filed by St Ives Burrups</title>
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<PAGE>
<div  align="center"><font size="2" face="Times New Roman"><b>Exhibit 32.2 <br>  CERTIFICATION PURSUANT TO <br>  18 U.S.C. SECTION 1350, <br>  AS ADOPTED PURSUANT TO</b></font></div>

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<div><font size="2" face="Times New Roman">SECTION 906 OF THE  SARBANES-OXLEY ACT OF 2002 </font></div>

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<div><font size="2" face="Times New Roman">In connection with the Quarterly  Report of Milestone Scientific, Inc. on Form 10-QSB for the nine months ended  September 30, 2005 as filed with the Securities and Exchange Commission on the  date hereof (the &#147;Report&#148;), I, Rosaline Shau, Acting Chief Financial Officer of  Milestone, certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.  906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with  the requirements of section 13(a) or 15(d) of the Securities Exchange Act of  1934; and (2) The information contained in the Report fairly presents, in all  material respects, the financial condition and result of operations of  Milestone.</font></div>

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<div><font size="2" face="Times New Roman">A signed original of this  written statement  has been provided to the Company and will be retained by the Company and  furnished to the SEC or its staff upon request.</font></div>

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  <div><font size="2" face="Times New Roman">/s/ Rosaline    Shau</font></div>
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  <div><font size="2" face="Times New Roman">Rosaline    Shau</font></div>
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  <div><font size="2" face="Times New Roman">Chief    Financial Officer</font></div>
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  <div><font size="2" face="Times New Roman">November 14,    2005</font></div>
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